Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 2 Contents futurebuilding 41
Volume 3 Number 2
I think you've seen a fairly healthy interest from
our pension plans here in Australia, and particularly
in the United Kingdom. It's both an interest on the
part of our plans, and a huge interest on the part of the
British Government to attract them into the market.
There's more opportunity there, and I would
encourage you to work hard to market Australia
because there are competitors out there. As you
know, it's not just our pension plans, but also our
companies that have developed a bit of a base of
expertise in the PPP space that are now keen to take
that capability international.
The industry in Canada is looking very carefully at
what's happening in Australia, and is very interested
in pursuing more opportunities. I think you'll see
it from both the nancial side -- the pension plan
interest -- and also from the industry's interest in
partnering with local rms in Australia, and making a
contribution to infrastructure development here.
JS: From a European developed markets point
of view, I wouldn't be nearly so bullish. There is
a fundamental problem. Compare Canada and
the United Kingdom, for example. In Canada,
infrastructure projects tend to be rated single A. In the
United Kingdom they are rated double B-plus, which
is below the pension fund risk-rating threshold.
So, in the United Kingdom, pension funds will
not invest in projects during the construction phase
at the moment.
The British Government has made quite a
dramatic move. The government has offered -- if there
isn't private nance available -- to guarantee the debt
on any infrastructure project. And when I say any
infrastructure project, this ranges from government-
funded projects, like roads, right through to a port
development, which a private sector port operator
would be developing completely on its own.
The reason for this is that the government is worried
that the availability of debt nance is constraining
the private sector from actually developing projects.
And so they are saying, 'We will stand behind these
projects should you not get private nance.'
One of the big advantages is that if the debt is
guaranteed by the British Government with its
triple-A rating, then pension funds will be able to
take the debt right from the outset.
The United Kingdom is not alone in pursuing
this kind of intervention. If you take Brazil as an
example, the state bank, funded by tax revenues,
nances pretty much 100 per cent of all of Brazil's
infrastructure projects at the moment.
MB: Give us some sense of your optimism about
Britain. Have you got a more upbeat assessment?
JS: I'm very upbeat. There's been a lot of press
about the Private Finance Initiative (PFI), but to me
it's a lot of political hot air. It has been politically
advantageous for various politicians, particularly
some of the backbenchers, to have a go at PFI -- it's
career-enhancing for them.
The reality is, if you look at the PFI market, deals
continue to be done. I remain very optimistic, not
only for the publicly funded infrastructure, but also
because most of the infrastructure in the United
Kingdom -- £40 billion a year -- is delivered through
the regulated utilities and they have an extremely
The industry in Canada is looking very
carefully at what's happening in Australia,
and is very interested in pursuing more
opportunities. I think you'll see it from both the
nancial side -- the pension plan interest -- and
also from the industry's interest in partnering
with local rms in Australia
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