Infrastructure: UK OpportunitiesH.E. Paul MaddenBritish High Commissioner to Australia
Investment
Discussion Group
The UK Economy (1)
Interest rates
Jobs created in last 2 years
0.5%
1,000,000Competitive
currency
£
22%Corporation tax
(by 2014)
25%Cut in UK deficit
already
Positioned for Growth
Return to GDP growth in Q3
2
1%
The UK Experience (1)UK PFI Projects (Source: HMT)
Data for current projects is for all those still under contract; projects which have expired or terminated are not included.
3
19911992199319941995199619971998199920002001200220032004200520062007200820092010201120120
1000
2000
3000
4000
5000
6000
7000
8000
9000
0
10
20
30
40
50
60
70
80
Capital Value (£m) Number of Deals
Capi
tal V
alue
(£m
n)
Num
ber o
f Pro
ject
s
The UK Experience (2)Development of PFI in the UK
1989 Government begins to actively promote private finance in public services
1990 First PPP-style project reaches financial close
1992 Private Finance Initiative (PFI) is launched
1997 New Government elected: continues and increases the use of PFI
2009 Treasury establishes an Infrastructure Finance Unit (TIFU) to support PFI’s impacted by the Credit Crisis
2010 New Government elected
2011 – July Government announces a plan to make £1.5bn in savings from the existing stock of operational PFI contracts
2011 - November Intention to reform PFI is announced
2012 – December Conclusions of the PFI review announced
• The UK has closed over 730 PFI projects worth more than £54bn.
• Projects have been delivered across a number of sectors including schools, hospitals, roads, prisons, housing, defence and waste facilities.
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The UK Experience (3)PFI Reform, Call for Evidence
Over 150 submissions, with
around 100 bilateral
engagements and roundtables
Academics3%
Advisors15%
Construction10%
Finance15%
Individuals10%
Industry Bodies14%
Insurance2%
Other4%
Public Sector15%
Services12%
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The UK Experience (4)PFI Reform
• Procurement: unnecessarily long, complex and expensive
• Services: in need of reform• Transparency: existing provisions
are adequate• Equity returns: favoured the sharing
of equity returns
• Lack of transparency• Returns too high• Contracts too inflexible• Inappropriate transference of risk
between public and private sector
Call for evidence National Audit Office and Parliamentary concerns
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The National Infrastructure Plan (1)
1. A vision for the UK’s infrastructure
• Extensive performance and cost analysis
• Long-term ambitions for each sector
2. Funding & financing infrastructure
investment
• New approach to private investment
• UK Guarantees Scheme
3. Focusing on delivery
• Prioritising major projects through Cabinet Committee
• Bringing down costs in planning and through the Infrastructure Cost Review
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The National Infrastructure Plan (2)
TransportEnergy
Commu-nications
WasteWater
Flood0
20
40
60
80
100
120
140
Infr
astr
uctu
re in
vest
men
t, £
billi
on, 2
010-
11 p
rices
UK Infrastructure Pipeline: sector overview
Sets out over 500 public and
private infrastructure projects worth
over £250 billion
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9
UK Offshore Round 3 Projects
Seeking £4bn of capital
Offshore Wind Example, Scotland
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The National Infrastructure Plan (3)UK Infrastructure Pipeline: sector overview
60% of UK infrastructure investment is
already funded by the private
sector
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The National Infrastructure Plan (4)Detailed performance and Cost Analysis
Transport• Service quality and reliability have markedly improved
Energy• The UK has one of the most reliable electricity transmission networks in the world
Communications• Broadband coverage, speed and cost compare well to Western European
economies
Environmental networks• All water performance indicators have continued to improve
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Foreign Ownership in the UK (1)
Approximately 40 per cent of
mapped infrastructure is held by foreign
investors UK - 62%
Rest of World - 20%
Europe - 18%
Foreign Ownership
Source: OFT
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Foreign Ownerships in the UK (2)
Colonial First State (Aus),IFM (Aus)
Macquarie (Aus), AustralianSuper (Aus), QIC (Aus), QSuper (Aus), et. al.
Macquarie (Aus), AMP (Aus) IFM (Aus) Macquarie (Aus)
AMP (Aus),Access Capital (Aus)
Infratil (NZ)
Future Fund (Aus)
Future Fund (Aus)
Future Fund (Aus)
Infratil (NZ)
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Foreign Ownerships in the UK (3)
• Inward investment into the UK economy created or secured more than 100,000 jobs in 2011/12
• The UK attracted FDI from 58 source countries in 2011/12
• The UK attracted more foreign direct investment (FDI) than any other EU country.
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Funding Routes
1. UK Guarantees Scheme
•£40bn of Guarantees•Non patronage/demand risk•Over 60 expressions of interest•Case by case approvals process
2. UK Pension Funds Infrastructure
Platform
•UK Pension Funds pool and diversify their infrastructure investments•A wide range of projects and sectors•£700m / £2bn raised already
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Additional Measures
1. Green Investment Bank•Capitalised with £3bn (£15bn by 2015)•Accelerates capital flow into green/sustainable infrastructure•Lends a percentage of the total capital sought
2. Energy Reform Bill
•£110bn power infrastructure needed•Contracts for Difference•Capacity market•Consumer levy
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Conclusion
1. The UK welcomes more institutional investment in infrastructure
2. A strong pipeline of high quality UK projects
3. A robust and stable investment environment
4. Innovative approaches and support to foster investment
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UK Policy Specialists visiting 1st Quarter 2013
If you would like to register your interest to meet the team, please contact us:
Paul Webster, Director of Investment Australia and New [email protected] 8247 2234
Craig O’Kane, Head of Institutional [email protected] 3223 3205