Infrastructure Investors Hungry For Opportunities In New Zealand: New Research

International and domestic infrastructure investors are eager for opportunities in New Zealand, and the onus is on the Government to bring a pipeline of high-quality projects to the market.

That’s the main take-out from new market sounding research commissioned by policy and advocacy organisation the Northern Infrastructure Forum (NIF), and delivered by consultants WSP.

The research consisted of in-depth interviews with a dozen infrastructure investment companies and investment funds, all of whom have an existing presence in Australia and New Zealand. The purpose was to help inform policy-making by shedding light on levels of interest in the New Zealand infrastructure market, and on how and where efforts to attract private capital might be best directed.

NIF Executive Director Barney Irvine says there’s currently a positive glow around New Zealand in the eyes of the international investment community.

“The Government’s efforts to show that New Zealand is open for business have been very well received. Investors are attracted by New Zealand’s strong governance framework, and they’re very open to investing in a range of different assets, through a range of different commercial structures. If there’s a compelling deal on offer, they’re up for it.”

The key thing now, Mr Irvine says, is for the Government to ‘walk the walk’.

“Investors want to see the positive signals backed up by a series of well-structured, high-quality projects. If the projects don’t materialise, or if the procurement processes aren’t up to scratch, the glow around New Zealand could steadily fade. Doing the first set of projects well will be critical.”

Mr Irvine says that the benefits of private capital go well beyond dollars, though this is still not widely understood by the public.

“Ultimately, it’s about getting better outcomes from the money we invest as a country in infrastructure: greater innovation; greater accountability; and greater transfer of skills to the local market. At the same time as engaging with investors, the Government needs to work hard to communicate and demonstrate these benefits to the public, to ensure the programme secures a strong social licence.”

Vinny Minett, Director of Investments at WSP, says that scale remains a challenge with the New Zealand market.

“Compared to larger markets around the world, the ‘business as usual’ opportunities in New Zealand are smaller. Investors who are geared to work with smaller projects and/or are already set up in Australasia can often work around the scale issue. But for the heavy-hitting global pension and sovereign wealth funds, it could be tough to overcome. While the less frequent mega-projects, like the proposed additional Waitemata Harbour Crossing, might attract these parties, the market sounding suggests they are unlikely to be enticed to set up shop here on an ongoing basis.”

Mr Irvine says it’s critical for the Government to get creative around how it creates scale, potentially aggregating smaller projects together into single procurement where it makes sense, and to put its energy into attracting the right sorts of investors.

The report puts forward five recommendations to policy-makers, to support efforts to attract private capital into New Zealand infrastructure:

1. Empower NIFFCo as the leader when it comes to engaging with the market, and take every opportunity to articulate NIFFCo’s role vis-à-vis the other agencies, to avoid uncertainty

2. Deliver an exemplar programme of bundled projects, as a proof-of-concept

3. Launch a well-resourced campaign to sell the New Zealand story, ensuring a strong degree of continuity across government agencies, and targeted at the right area of the market

4. Develop a national strategy for private infrastructure investment; secure bipartisan commitment to the strategy, to minimise political risk

5. Commit to post-implementation reviews for infrastructure projects, with a strong focus on non-financial benefits. This will help to strengthen the legitimacy of the programme in the public mind

About the NIF:

The NIF is a policy and advocacy organisation formed to help raise the standard of infrastructure planning and decision-making across the Upper North Island, and maximise the contribution that infrastructure can make to productivity and liveability. Its membership consists of:

• AECOM
• Auckland Business Chamber
• Civil Contractors New Zealand
• Employers and Manufacturers Association (Northern)
• KiwiRail
• Maven
• National Road Carriers Association
• NZ Automobile Association
• Waikato Chamber of Commerce
• WSP
• Vector Ltd

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