The government has set aside a target of £50bn for privately investable infrastructure projects before 2020.
In a National Infrastructure Plan Finance Update published alongside today’s Budget, the Treasury said there may be £52bn of potential privately funded project-finance opportunities available to investors before 2020.
It said this represents around 14% of the overall £375bn pipeline of public and private investment identified by the Chief Secretary to the Treasury, Danny Alexander, in December 2013.
It said: “The main opportunities for project-specific investment (both debt and equity) are currently likely to be in the electricity generation sector. Together with a handful of potential opportunities that have been identified in other sectors, this may represent up to c. £52bn of investment before 2020.”
Elsewhere the update said: “In the aftermath of the global financial crisis, new regulations (Basel III) and a greater drive towards recapitalisation meant that commercial banks, previously a key source of long-term debt for infrastructure projects, were less willing or able to lend. The government recognised that new and diverse sources of finance would be required – both in terms of new forms of debt to replace bank lending, and measures to stimulate demand for infrastructure projects from equity investors.
“In addition to directly financing projects through a strong public funding commitment and supporting a world – class regulatory regime, the government has therefore taken a number of steps to stimulate a range of different types of private investment.”
These have included the creation of the £40bn UK Guarantees Scheme; the Green Investment Bank; the European Investment Bank; the Pensions Infrastructure Platform (PIP), and the Insurers’ Infrastructure Investment Platform.
In addition, the government has dedicated additional resources in UK Trade & Investment to the relationship management of major overseas financial institutions and has developed relationships with key investors holding combined global assets of more than $5trn. Since 2010, it said, the UK had attracted more than £15bn of foreign capital investment into infrastructure.
Allianz Global Investors CIO infrastructure debt Deborah Zurkow said: “The earmarking of around £50bn of infrastructure projects open to private investment, detailed alongside today’s Budget, underlines the critical role that private capital is set to play in modernising the UK’s infrastructure.
“With infrastructure a priority but the public purse strings still tight, additional sources of investment will help ensure major infrastructure projects become a reality. As understanding of the attractiveness of infrastructure as a long-term asset class continues to grow among investment managers, we expect private investors to play an increasingly important part in the capital mix backing big infrastructure”.
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