Content area
Full Text
The Dutch government is moving aggressively to encourage pension fund involvement in infrastructure debt. But pension fund activity is still highest in equity. By Antony Collins.
While the UK government struggles to explain how its pension funds can invest in infrastructure, the Netherlands has made substantial progress in attracting institutional capital to its PPP programme. The independent Dutch Infrastructure Fund, which runs an infrastructure fund, a PPP fund and a renewables fund, numbers domestic institutions ABP and DSM among its investors. Two domestic construction companies have now struck bilateral deals with pension funds to form ventures to invest in infrastructure assets.
The Netherlands Ministerie van Financien, or finance ministry, and Rijkswaterstaat, part of the Dutch ministry of environment and infrastructure, have now structured the bidding for the N33 road project to include a Eu140 million stapled financing from ABP. The staple, which benefits from inflation protection from the finance ministry, is the first time that institutional infrastructure debt has been so closely integrated into a concession.
Market participants are enthusiastic about the pilot deal, though nervous about the ability of private bidders to adapt the staple on offer to their own requirements. ABP has indicated that a lot of its enthusiasm for the deal is down to a straightforward availability-based risk profile, but details of how the structure would mitigate issues with construction and interest rate risk are few. Given the halting progress that Europe has made towards developing project bonds, the deal will attract attention out of all proportion to its Eu190 million size.
Spinning out
The funds have a longer exposure to infrastructure equity, and so recent activity in PPP has been concentrated on that part of projects' capital structures. In May Royal BAM Group and pension fund PGGB created a 50/50 joint venture, named BAM PPP PGGM Infrastructure Cooperatie, to focus on PPP projects in the Netherlands, Belgium, the United Kingdom, Ireland, Germany and Switzerland. The target value of the JV's portfolio is Eu390 million ($522.2 million), with BAM PPP transferring Eu150 million of its PPP assets into the vehicle and the rest earmarked for new projects.
The JV is novel for the Dutch market because it establishes an indication of how differing market participants might carve up project roles as...