Last week the firm co-hosted with the Chartered Alternative Investment Analyst Association a very topical panel event discussing UK government assets and infrastructure investment.
Our high-calibre and senior panel represented a wide range of infrastructure industry participants including financiers, concessionaires, contractors, strategic consultants and public policy experts. The panel shared experience and insights from a wide range of sectors such as rail, ports, energy, nuclear and defence.
The panel looked at a variety of topics including: (a) investing into government infrastructure assets, the logic, attractiveness, risks, and current government policy for investing across different sectors; (b) the models for infrastructure investment, such as PFI/PF2, privatisation and other concession models and the outlook in light of recent market developments; and (c) future trends for 2018 including technology impacts.
In particular, the key messages from the panel were:
- With the increasing interest in infrastructure projects from financial institutions (especially pension funds) seeking long-term asset liability matching, there is now a large amount of capital chasing fewer opportunities.
- Last year saw most activity in secondary market and re-financings (ie recycling of money rather than new projects).
- The sector was more often labelled by its failures, rather than promoted by the successes (HS1 being a primary example of a success), and that this should be changed and the successes promoted.
- The panel discussed the shift in mind-set it would like to see in government’s decision making: going from number crunching to getting the risk and reward balance right, as focus on reducing the deficit hinders the value for money analysis.
- The UK must continue to invest in infrastructure, as it is currently behind many of its OECD peers in terms of percentage GDP spend on infrastructure.
- UK Government are well placed to bridge the gap in the greenfield project pipeline by providing development capital to steward viable projects through the planning stage (taking the risk of public sector consents), following which there is ample private capital to repay their investment.
- Whilst Whitehall focus on managing the exit from the EU, the UK must capitalise on its competitive advantage as the global leader in PFI/PPP and recognise the value in exporting our professional services.
- The panel reinforced the need to keep elected officials accountable and that industry should talk to government - the political will to engage on infrastructure is at an all-time low but this is often more a reflection of popular opinion, sometimes influenced by one-sided views expressed in the media, taking precedence. However, by engaging with MPs and reminding them of the ways in which PPP models have worked successfully, there is scope to shift the political attitude.
- Investment in renewables is not currently viable (unless the project has a long-term PPA) as there is no fixed/index linked market price and investors will not take a long term view on power price.
- UK Government need to create outcomes to accelerate infrastructure investment opportunities.
The event was attended by a variety of private sector investors ranging from financial institutions such as infrastructure funds and pensions funds, to asset managers and operations managers. The event was moderated by Juliet Reingold.
Infrastructure Funds AMIF factsheet
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