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The Potential for Shared-Use Infrastructure

Oct 05, 2015

Jim Woodsome, Glen Ireland, and Staci Warden

Publisher: Milken Institute

The need among natural resource companies and governments to use capital more efficiently is creating opportunities for commercial shared-use infrastructure in emerging and frontier markets.

Shared-use infrastructure is financed, constructed, owned, and operated independently of its users through a special-purpose vehicle, and backed by at least one investment-grade anchor client. Infrastructure built to support natural resource extraction often can be shared among industry users operating close to one another. In some circumstances, infrastructure can also be shared with other users to the benefit of local industries and communities.

Historically, natural resource companies operating in emerging and frontier markets have favored vertically-integrated infrastructure solutions for which they provide most of the capital and over which they maintain exclusive control and use. This contrasts with the practice in developed countries, where an “open-access” model dominates. Today, however, the integrated model is becoming less viable in emerging markets. In the future, it is likely that more natural resource infrastructure will be shared.