Technological disruption picked its next target: roads, bridges and highways. These traditional ‘hard’ infrastructure assets are entering a new wave of development, as traditionally risk-averse investors and operators alike are actively eyeing the market for opportunities.
“How do we futureproof our asset such that you are not making a big bet today, because you really don’t know where the technology is going to go,” says a technology executive with one of the largest global road operator companies.
A multi-billion dollar market of investment opportunities in the US alone awaits, says the source.
Investments are being identified for road networks in Europe and the US in data analytics and monetisation, digital payments, insurtech and smart cities. Some of the smaller tech companies that have recent caught the attention of infrastructure funds include:
Wintics, a French AI firm relying on algorithms from data on fixed cameras to manage traffic.
Waze, a traffic flow management application.
A-to-Be by Brisa, a tolling solution provider.
Private investors realise that the amount of capital needed to drive change is just a sliver of the traditional investment in a toll road. Sources claims the average investment size can be well below USD 1m, with the end-goal of unlocking a new revenue-generating platform from the road asset and its users.
“This understanding around technology is not only to manage resilience and mitigate accidents, but really to generate revenue,” says a portfolio manager at one of the world’s largest pension funds.
No turning back
Technology risk has not disappeared, but is seen as both a blessing and a curse. Some investors are mitigating this by launching partnerships through their portfolio companies. Other barriers need to be addressed, too. Entrepreneurial talent is one of them, so are regulations.
“Anybody shying away from investing in these capital-light projects are the laggards,” says one source, who has invested in the sector.
On regulations, Europe is seen as less flexible when compared with the US market, especially in getting approvals in place for sharing data and trying out various kinds of tolls and congestion charges, while Latin America is considered to be still catching up.
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