James Gill says well-designed public-private partnerships will be critical if New Zealand wants to address its infrastructure deficit, including transport links. Pictured: the Wainui Saddle area of the Transmission Gully motorway. Photo / Mark Mitchell
James Gill says well-designed public-private partnerships will be critical if New Zealand wants to address its infrastructure deficit, including transport links. Pictured: the Wainui Saddle area of the Transmission Gully motorway. Photo / Mark Mitchell
New Zealand’s ambitious infrastructure plans for the coming decade will require substantial contributions from the private sector.
The recent impact of Cyclone Gabrielle on transportation and infrastructure has resulted in the re-evaluation of previously agreed-upon priorities. Additionally, major projects such as Auckland Light Rail and the proposed second harbour crossing will require significant resources.
ICBC NZ says well-designed public-private partnerships (PPPs) will be critical if New Zealand wants to address its infrastructure deficit.
As the world’s largest bank by total assets, the Industrial and Commercial Bank of China (ICBC) knows the importance of PPPs. The year 2023 marks ICBC’s 10th anniversary of operating in New Zealand. Over the past years, ICBC’s New Zealand subsidiary (ICBC NZ) has already been involved in several major infrastructure projects in the country.
ICBC NZ’s stated commitment to be a “hundred-year” bank for New Zealand means it is well placed to support long-term projects in its favoured sector of infrastructure.
The bank has already played a significant role in funding New Zealand’s major infrastructure projects over the past decade, including the Transmission Gully PPP project, in which ICBC provided around NZ$90 million in banking syndication.
In the “Golden Triangle” region (the area bound up by Auckland, Hamilton and Tauranga), ICBC NZ participated in a banking syndication to support local iwi Tainui to fulfil its development of the Ruakura Superhub.
The Superhub is a project of national significance and one of New Zealand’s largest multi-use developments. Anchored by an inland port, the Superhub will include logistics, industrial, commercial, retail, residential, and green space. Once fully developed, it is expected to deliver about 4500 homes and create 6000 to 12,000 jobs for the region.
Additionally, ICBC NZ and Hong Kong-based ICBC Asia provided funding to assist Napier Port with its capital investment programme, which involved the development of a multi-purpose 350m wharf, 6 Wharf, located along the northern face of the existing container terminal.
James Gill. Photo / Supplied
ICBC NZ is also the sole lender to the Hobsonville Point schools public-private partnership project supporting New Zealand’s crucial education sector. The Hobsonville Point schools include both primary and secondary with the capacity to accommodate more than 2000 students.
A model to deliver: Build, operate, transfer
There are a range of funding models available to help in delivering infrastructure projects. The “BOT model” (build-operate-transfer) — a popular PPP model used in China for major infrastructure projects — could offer a solution to New Zealand’s financing needs.
This model involves the Government engaging the private sector to design, build, and operate an infrastructure project. The asset is transferred back to the Government after a set period.
By supporting the private sector in overcoming regulatory hurdles and ensuring a worthwhile return on investment, the Government can help make these major projects financially viable.
For instance, when constructing an underground railway, the repayment of the investment can be built into the project’s cost from the outset. If the underground railway alone is insufficient to repay the investment, other related developments such as commercial areas can be used to contribute towards repayment, lowering the risk and making it easier to secure financing for infrastructure projects.
The Infrastructure and Financing Act
The Government has sent a clear message that it intends to address NZ’s infrastructure challenges and continues to increase its support of infrastructure investments.
ICBC NZ is excited about the progress in the New Zealand market following the passing into law of the Infrastructure and Financing Act 2020. This novel piece of legislation provides another tool for councils to fund future projects in conjunction with the private sector.
The first project utilising this structure started in late 2022. The market expects that similar opportunities will follow, leading to increased funding demands in the banking sector from these infrastructure projects.
ICBC NZ looks forward to working with all stakeholders to provide solutions to satisfy New Zealand’s infrastructure ambitions.
· James Gill is director of corporate & institutional banking at ICBC NZ.
· ICBC NZ is an advertising sponsor of the Herald’s Infrastructure report.
