ENDORSING
PARTNERS

Unlocking the infrastructure
and funding impasse

The following are confirmed contributors to the busi...
pwc.com.au

Unlocking the
Infrastructure Funding
Impasse
ISNGI Australia 2013
30 September 2013
Pension Fund Investment in Infrastructure

Australia

Canada

A$30bn

C$50bn

5-6%

7-8%

A$75-85bn

C$48bn

Infrastructur...
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%...
Long Term Canadian PPP Debt Financing

Source: PPP Canada (2012)

PwC

5
Messages from Canadian Infrastructure investors

Lack of investment opportunities at home
Canadian Paradox
Regulatory and ...
Without changes in government spending,
combined annual deficits of Australian
governments will rise
Primary balance: Comm...
Capital Recycling
Realise Capital from
Brownfield Infrastructure

Investment in Priority
New Infrastructure

User Pays Rev...
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SMART Infrastructure Business and Policy Dialogue Event: Unlocking the infrastructure and funding impasse

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A presentation conducted by Mr Martin Locke, Partner, PwC, Presented on Monday the 30th of September 2013.

Real progress has been made in addressing the infrastructure challenge. Federal and State Governments have embraced the need to prioritise infrastructure investment, adopt sound economic projects in accordance with an integrated State and national plan and establish agencies, like Infrastructure Australia and Infrastructure NSW, to catalyse action. However, the call
for more rigorous policy enforcement without political interference continues. And in a capital constrained environment, the onus on the State Governments is to look for better and more effective ways to partner with the Federal Government and the private sector. There is a real opportunity for the new Federal Government to drive momentum through:
• Improved infrastructure planning and co-ordination which is collaborative, open, integrated and early;
• More efficient delivery of complex economic infrastructure partnerships with Government combining clear policy goals
with transparent regulation;
• Optimisation of funding sources through universal adoption of user-pays;
• Structuring of “hybrid” economic partnerships to keep projects “off balance sheet”;
• Structuring commercial support for projects with strong economic justification even if initial financial viability is marginal;
• Hypothecating the sales proceeds for existing brownfield infrastructure for investment in critical new infrastructure;
• Removal of tax impediments to facilitate capital recycling and investment in new infrastructure.

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SMART Infrastructure Business and Policy Dialogue Event: Unlocking the infrastructure and funding impasse

  1. 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. 2. pwc.com.au Unlocking the Infrastructure Funding Impasse ISNGI Australia 2013 30 September 2013
  3. 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. 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. 5. Long Term Canadian PPP Debt Financing Source: PPP Canada (2012) PwC 5
  6. 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. 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. 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

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