Capital projects scheduled by infrastructure-related issuers like transportation and utility entities will keep the sector busy despite expected low issuance this year, investors and issuers said at a JPMorgan conference.
"When you look at infrastructure in the U.S., you see bridges that need to be repaired and roads that need to be widened," Paul Palmeri, head of public finance at JPMorgan, said in an interview. "When you combine that with the continued aging of our infrastructure, it's the area of the market that's probably going to have some of the greatest demand in the coming year."
Attendance by issuers and investors at the firm's conference, held from April 2 to April 3, was up this year compared to four years ago, Palmeri said, as transportation and utility issuers prepare to move ahead with projects scheduled in the coming year.
"Capital projects are out there and need to be done," said John Murphy, a research analyst at Fidelity Investments who attended the conference.
With signs of an improving economy, issuers and investors anticipate a fair amount of infrastructure-related deals, even as underwriters surveyed by The Bond Buyer expect total municipal bond volume to dip below $300 billion in the coming year.
"Some of it is just budgeted maintenance and repairs and some of it is scheduled capital expenditures," Palmeri said. "There are some issuers that have massive capital plans and things that are planned that have to be bonded for," he said.
"Volume is likely to be higher compared to last year depending in part on final approval," Michael McDermott, a managing director at AIG, said in an interview. "The timing of projects is a little harder to ballpark."
The annual conference, held at the firm's New York office, provides market participants with access to various public-sector issuers from sectors that include sustainable energy, gas, water, electrical, sewer, and surface and air transportation. There were 535 participants this year, with 67 issuers and 160 investor firms attending, up from 180 participants in 2010, which included 15 issuers and 63 investor firms.
Investors are able to meet with issuers through open panel presentations and one-on-one sessions at the event.
"It's a great way to get our story out to a lot of investors at one time," Dan Sullivan, chief executive officer at Grand River Dam Authority, said in an interview. "The one-on-one meetings helped give investors the opportunity to drill further into what their future plans are."
Sullivan said that the GRDA plans to issue tax-exempt bonds later this year by the fourth quarter to fund a natural gas combined cycle unit.
The conference held 360 one-on-one meetings this year, compared with 100 meetings during the event's inaugural run in 2010. The meetings are less about the structure of deals, but rather about how the issuer plans to execute the project.
"The rationale was to bring issuers and investors together," Palmeri said. "Often times, investors are kept separate from issuers, and we feel we can serve both stakeholders better if we get together and facilitate what their needs and questions are."
The sector isn't immune to interest rate concerns, though, according to Melissa Dykes, chief financial officer of Jacksonville Electric Authority.
"It depends on whether it's new money or refunding," Dykes said in an interview. "Refunding volumes may be strong depending on where interest rates go, while new money is expected to remain low."
