Super to solve infrastructure woes
Superannuation funds could ease governments’ budgetary pressures by financing major infrastructure projects around the world, IFM Investors and Industry Super Australia claim.
However, IFM Investors and ISA said the processes used by many governments to tender for infrastructure projects needed to be reversed so that equity finance would be secured ahead of tenders for construction, management and debt.
IFM Investors chief executive, Brett Himbury, told a G20/OECD forum in Singapore that the Inverted Bid Model report - published by IFM Investors and ISA - indicated that the reversed tender process could cut bid costs in half by eliminating fee leakage, and accelerate the delivery of greenfield infrastructure projects by 30 per cent.
The report said that the Inverted Bid Model removed “cumbersome barriers to entry for long-term equity investors like pension funds from getting in on the ground floor of greenfield projects”, and “at a time when governments across the world want pension funds to deploy greater amounts of capital into infrastructure, the Inverted Bid Model provides an opportunity to rectify the current system”.
“The Inverted Bid Model is based on market-tested, best-of-breed precedents to provide better value-for-money outcomes for governments,” they said. “In this model, those asked to take the greatest risk are also responsible for pricing that risk over the life of the investment.
“The current system is imperfect in this regard because short-term bidders are building long-term infrastructure. The Inverted Bid Model corrects that misalignment and ensures that infrastructure is built, owned and operated by genuine long-term investors seeking to make a reasonable return over the economic life of the asset, not through the initial bidding, structuring and build of the asset.”
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