SMART Infrastructure Business and Policy Dialogue Event: Unlocking the infrastructure and funding impasse
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The document discusses the infrastructure funding challenges faced in Australia, emphasizing contributions from partners in a business and policy dialogue. It highlights investment gaps and the preference of Canadian infrastructure investors for stable, lower-risk brownfield assets. The piece outlines potential solutions such as capital recycling and hybrid partnerships to enhance investment opportunities and address funding deficits.
SMART Infrastructure Business and Policy Dialogue Event: Unlocking the infrastructure and funding impasse
- 1. ENDORSING PARTNERS Unlocking the infrastructure and funding impasse The following are confirmed contributors to the business and policy dialogue in Sydney: • Rick Sawers (National Australia Bank) • Nick Greiner (Chairman (Infrastructure NSW) Monday, 30th September 2013: Business & policy Dialogue Tuesday 1 October to Thursday, Dialogue 3rd October: Academic and Policy Presented by: Mr Martin Locke, Partner, PwC PwC www.isngi.or www.isngi.org
- 2. pwc.com.au Unlocking the Infrastructure Funding Impasse ISNGI Australia 2013 30 September 2013
- 3. Pension Fund Investment in Infrastructure Australia Canada A$30bn C$50bn 5-6% 7-8% A$75-85bn C$48bn Infrastructure Fund Managers 61 65 Investment Vehicle Open-ended Funds Direct Investing Infrastructure Investment Gap (p.a) Asset Allocation Total Invested Source: OECD Report, July 2013 PwC 3
- 4. Canadian Infrastructure Allocation 5.0% 60 4.5% 4.5% 4.2% 50 3.6% 40 3.8% 48 3.5% 42.1 3.0% 35 30 20 20.9 2.5% 29.3 2.4% 4.0% 2.0% 1.9% 1.5% 15.9 1.0% 10 0.5% 0 0.0% 2006 2007 2008 2009 Source: PIAC (asset mix of plans of sponsor organisations represented by members) PwC 2010 2011 Assets in %
- 5. Long Term Canadian PPP Debt Financing Source: PPP Canada (2012) PwC 5
- 6. Messages from Canadian Infrastructure investors Lack of investment opportunities at home Canadian Paradox Regulatory and political uncertainty overseas Overseas capital migration given lack of largescale privatisations of public infrastructure assets Intensifying competition for assets Well functioning PPP model but projects too small and highly leveraged Looking for stable investment environment around Government infrastructure, tax and regulation Preference for brownfield assets, stable inflationlinked income streams at moderate risk Source: OECD Report, July 2013 PwC 6
- 7. Without changes in government spending, combined annual deficits of Australian governments will rise Primary balance: Commonwealth and State/Territory Governments, % of GDP 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 2001-02 2005-06 2009-10 2013-14 2017-18 2021-22 States 2025-26 2029-30 2033-34 2037-38 2041-42 2045-46 2049-50 Commonwealth Source: PwC Report - Protecting prosperity • Why we need to talk about tax PwC 7
- 8. Capital Recycling Realise Capital from Brownfield Infrastructure Investment in Priority New Infrastructure User Pays Revenues Hybrid partnerships with Government taking more risk Community Support Build now and future sale Leverage existing assets Revenue securitisation Investor Certainty PwC 8