USA: An Introduction to Projects: PPP

US PPPs: Overview

The ushering in of the new administration has brought with it rapid changes, including a comprehensive review of federal spending and the rollover of new trade policies. Many of these changes are expected to have political and economic impacts for a number of industries in 2025.

While there is ongoing uncertainty regarding the administration’s plans for infrastructure policy and priority sectors, the outlook for P3 projects appears hopeful – particularly given the current administration’s general amenability to private investment and to clearing regulatory barriers to securing permits.

Although the administration’s initial pause on federal funding foreshadows a slowing of progress for certain infrastructure projects, federal funding only makes up approximately 25% of infrastructure funding in the US. Meanwhile, the need for infrastructure investment remains acute, and P3s have become a proven model for the development and long-term operation of US infrastructure assets – one that has evolved over the years to adapt to different sectors and public priorities. This flexibility has enabled the development of innovative procurement methodologies as well as tailored risk allocation and funding mechanisms to deliver infrastructure across the US.

For many State and local governments, infrastructure P3s have become an established tool in their procurement toolkit. California and Florida were the most prolific States in terms of P3 activity in 2024, but increased P3 activity was observed in States such as Missouri, Arizona and Illinois. 

Further, while political uncertainty could deter private investment, this may be counteracted by macroeconomic conditions favorable to the infrastructure sector, such as sustained economic growth and declining interest rates.

Below are highlights of near-term trends in key sectors.

Transportation

Much of the transportation P3 activity in 2024 was the result of strong federal support, including through Infrastructure Investment and Jobs Act (IIJA) funding and Transportation Infrastructure Finance and Innovation Act (TIFIA) loans. The launch of the Innovative Finance and Asset Concession Grant Program (IFACGP) in March 2024 further incentivised State and local governments to pursue P3s.

The Trump administration’s comprehensive review of federal assistance programs creates uncertainty as to whether 2025 will see the same level of federal investment in transportation as 2024. However, transportation is the one sector infrastructure specialists agree is expected to continue to receive attention from the federal government.

In addition, economic growth, persistent inflation, and declining interest rates suggest favorable conditions for transportation P3 investment in 2025. Airports requiring an estimated USD151 billion in capital expenditures over the next decade are expected to lead growth, while managed lanes and toll roads are expected to continue to see steady development, with large express toll lane procurements in Georgia, Tennessee, and North Carolina driving significant activity.

The rail sector is also expected to see deal activity, with marquee projects such as the Brightline West receiving substantial amounts of financing. Brightline West is a USD12 billion, 218-mile all-electric passenger rail line that will connect Last Vegas and Southern California and become the first high-speed passenger rail system in the US.

Water

The US water sector saw P3 projects double in 2023, with this number decreasing in 2024. As a vital element for multiple industries, we expect that investment in water utilities and projects will resume growth in 2025.

The water sector continues to face many of the same challenges as last year. Water infrastructure assets across the US have aged past their useful lives and face serial deferral of capital maintenance expenses. Extreme weather events such as the wildfires in Los Angeles, strict proposed per- and polyfluoroalkyl substances (PFAS) regulation by the US EPA and growing populations in areas of water scarcity highlight the need for increased investment in water supply, treatment and resilience.

State and local water authorities are attuned to these challenges and seeking solutions. An example is Arizona’s Water Infrastructure Finance Authority’s ongoing water augmentation P3 procurement, which seeks to identify projects that will increase the State’s water supply.

The rise of AI is also adding pressure on already stretched water assets. The rapid development of data centers driven by AI processing requirements increases the demand for water both directly, as water is used to cool processors in server rooms, as well as indirectly – since significant volumes of water are needed to produce the electricity and lithium utilised by data centers.

Public-private partnerships are expected to contribute to the development and funding of large-scale water projects and will be important to help address the increased water demand across the country.

The expected higher levels of domestic industrial development under the current administration will further stress water supply. Water projects that support growth in the microelectronics and energy industries, and that rationalise water consumption in the upstream processes supporting AI development, including reuse water projects, are likely to require increased capital investment in 2025.

Fiber and Broadband Deployment to Bridge the Digital Divide and Support Data Centers

Recognising the importance of broadband access as the “fourth utility”, the IIJA allocated $42.25 billion to the Broadband Equity, Access, and Deployment (BEAD) funding program to support broadband expansion in underserved communities. By the time the new administration took office, all eligible State entities had submitted Initial Proposals to the National Telecommunications and Information Administration (NTIA), the agency managing the BEAD program, and received approvals. Among them, three State entities had completed the final stage before receiving the funds, pending only the disbursement of funds and implementation of the project.

As the new administration’s policies unfold, uncertainty remains as to what will happen to the IIJA funding, including the BEAD program. However, with the growing demand in the private sector to build data centers, deployment of fiber backbone networks that can provide high-bandwidth and reliable connections to data centers will continue to be supported by the State and municipal governments to open opportunities and attract investment to local communities.

There are significant challenges to scaling broadband infrastructure implementation and unlocking private financing in the sector. However, the P3 model and its concession approach could provide a powerful method to minimize utilisation of public subsidy dollars while delivering long term, stable service delivery.

Given the undisputed need for closing the broadband divides among communities and the demand in the private sector, fiber and broadband buildout are expected to maintain high levels of investment.

Electrification and Decarbonisation

Early in 2025, the Trump administration revoked a non-binding target set by the Biden administration that, by 2030, 50% of new vehicles sold in the U.S. would be battery-powered. In addition, it is speculated that the current administration could attempt to repeal the existing USD7,500 tax credit for new electric vehicles. Whether these and other actions will impact the availability of government incentives to support decarbonisation remains unclear.

Despite this uncertainty, many States and counties are likely to remain committed to decarbonisation and there are projects in the pipeline that signal opportunity in the sector. One of these projects is the Montgomery County, Maryland Jeremiah Park Zero Emissions Bus Depot that will deliver a 500-capacity electric bus depot featuring pioneering renewable energy technologies, such as hydrogen. Montgomery County has a goal to achieve net zero carbon emissions by 2035.