This discussion group presentation from the British High Commissioner to Australia summarized opportunities for UK infrastructure investment. It highlighted the UK's competitive tax and growth environment and experience with over 730 private finance initiative projects. It outlined the national infrastructure plan's vision and £250 billion pipeline of projects seeking private capital. Examples were provided of Australian institutional investors already active in UK infrastructure. Additional funding routes and policy measures like the UK Guarantees Scheme and Green Investment Bank were also summarized.

1. Discussion Group
Infrastructure: UK Opportunities
Investment
H.E. Paul Madden
British High Commissioner to Australia

2. The UK Economy (1)
Positioned for Growth
22%
Corporation tax 1%
(by 2014) Return to GDP
growth in Q3 1,000,000
£ Jobs created in
last 2 years
Competitive
currency
0.5% 25%
Interest rates Cut in UK deficit
already
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3. The UK Experience (1)
UK PFI Projects (Source: HMT)
9000 80
8000 70
7000
60
6000
50
5000
Capital Value (£mn)
Number of Projects
40
4000
30
3000
20
2000
1000 10
0 0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Capital Value (£m) Number of Deals
Data for current projects is for all those still under contract; projects which have expired or terminated are not included.
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4. 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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5. The UK Experience (3) Academics
PFI Reform, Call for Evidence 3%
Services
12% Advisors
15%
Over 150 Public Sector
submissions, with 15% Construction
around 100
10%
bilateral
engagements and Other
roundtables 4%
Insurance Finance
Industry 15%
2% Bodies
Individuals
14%
10%
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6. The UK Experience (4)
PFI Reform
National Audit Office and
Call for evidence
Parliamentary concerns
• Procurement: unnecessarily long,
complex and expensive • Lack of transparency
• Services: in need of reform • Returns too high
• Transparency: existing provisions • Contracts too inflexible
are adequate • Inappropriate transference of risk
• Equity returns: favoured the sharing between public and private sector
of equity returns
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7. The National Infrastructure Plan (1)
2. Funding & financing
1. A vision for the UK’s
infrastructure 3. Focusing on delivery
infrastructure
investment
• Extensive • New approach to • Prioritising major
performance and cost private investment projects through
analysis • UK Guarantees Cabinet Committee
• Long-term ambitions Scheme • Bringing down costs
for each sector in planning and
through the
Infrastructure Cost
Review
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8. The National Infrastructure Plan (2)
UK Infrastructure Pipeline: sector overview
140
Infrastructure investment, £ billion, 2010-11 prices
120
100
Sets out over
500 public and 80
private
60
infrastructure
projects worth 40
over £250 billion 20
0
Energy Waste Flood
Transport Communications Water
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9. Offshore Wind Example, Scotland
UK Offshore
Round 3
Projects
Seeking £4bn
of capital
9
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10. 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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11. 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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12. Foreign Ownership in the UK (1)
Foreign Ownership
Europe -
18%
Approximately
40 per cent of
mapped
infrastructure is Rest of UK -
held by foreign 62%
World - 20%
investors
Source: OFT
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13. Foreign Ownerships in the UK (2)
Macquarie
(Aus), AustralianSuper
(Aus), QIC (Aus), Macquarie (Aus),
QSuper (Aus), et. al. AMP (Aus)
IFM (Aus) Macquarie (Aus)
Future Fund (Aus)
Colonial First State (Aus),
IFM (Aus)
Future Fund (Aus)
AMP (Aus),
Access Capital (Aus)
Infratil (NZ) Infratil (NZ)
Future Fund (Aus)
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14. 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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15. Funding Routes
2. UK Pension Funds
1. UK Guarantees Scheme
Infrastructure Platform
• £40bn of Guarantees • UK Pension Funds pool and
• Non patronage/demand risk diversify their infrastructure
• Over 60 expressions of investments
interest • A wide range of projects and
• Case by case approvals sectors
process • £700m / £2bn raised
already
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16. Additional Measures
1. Green Investment Bank 2. Energy Reform Bill
• Capitalised with £3bn • £110bn power infrastructure
(£15bn by 2015) needed
• Accelerates capital flow into • Contracts for Difference
green/sustainable • Capacity market
infrastructure • Consumer levy
• Lends a percentage of the
total capital sought
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17. 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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18. 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 Zealand
paul.webster@fco.gov.uk
02 8247 2234
Craig O’Kane, Head of Institutional Investment
craig.okane@fco.gov.uk
07 3223 3205
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