They also note that New Zealand’s infrastructure market faces a number of hurdles, including relatively small-scale opportunities compared to other jurisdictions, political uncertainty, historical challenges in procurement processes and the need to build public support for private investment in infrastructure.
Those on WSP’s survey list were: Amber Infrastructure, Egis Group, Macquarie, Morrison, Natixis, Octopus Energy, Plenary, Queensland Investment Corporation (QIC), Simplicity, Société Générale and the New Zealand Superannunation Fund. They are all invested in either New Zealand or Australia and many are attending the summit.
WSP says the increased visibility of the New Zealand market has been linked to high-profile private-sector transactions, such as the sales of Spark and the former Vodafone’s mobile tower assets in 2022, which drew significant international interest.
The report says although these were private deals, the investors noted that they highlighted the market’s potential and signalled opportunities for scaleable investments. Past procurement challenges, such as the issues surrounding Transmission Gully and iReX (the KiwiRail ferry issue) did not appear to have left a lasting negative impression.
Global funds not interested?
Several large-scale international investment and pension funds were approached by WSP but declined interviews.
Vinny Minett, director of investments at WSP, said 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 Waitematā 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.”
Investors were keen to explore a diverse range of infrastructure opportunities in the New Zealand market. This includes asset classes like transport, energy, water and telecommunications and commercial structures ranging from Public Private Partnerships (PPPs) to models with a higher element of ownership and demand risk, such as Build, Own, Operate and Transfer (Boot) models.
WSP noted that interviewees were clear that for certain types of projects, such as toll roads, taking on demand or revenue risk is unlikely to be desirable due to New Zealand’s relatively small population base and low density.
Closing the infrastructure gap
Recent initiatives such as the announcement of a new agency aimed at attracting foreign direct investment and streamlining the investment process (Invest New Zealand), the establishment of National Infrastructure Funding and Financing Limited – New Zealand’s “shop front” for infrastructure investment – and global advocacy efforts led by the Prime Minister and senior officials have signalled a serious intent to engage with private investors.
Selling the story
Infrastructure Minister Chris Bishop said the companies attending this week’s summit, which gets under way with a social function on Wednesday, manage funds worth around $6 trillion of capital and come from 14 countries, including the United States, China, Britain, Canada, France and Japan.
But while promoting New Zealand infrastructure opportunities to international investors is key, WSP notes it will be important for the Government to communicate its vision for private capital to the New Zealand public.
Interviewees highlighted a degree of scepticism and mistrust towards private capital in some areas of society.
The Northern Infrastructure Forum’s Barney Irvine said 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.”
Five recommendations
1. Empower the National Infrastructure Funding and Finance company to engage with the market and take every opportunity to articulate its role, to avoid uncertainty;
2. Deliver an exemplar programme of bundled projects;
3. Launch a well-resourced campaign to sell the New Zealand story on infrastructure investment;
4. Develop a national strategy for private infrastructure investment and secure bipartisan commitment to minimise political risk;
5. Commit to post-implementation reviews with a strong focus on non-financial benefits to strengthen the legitimacy of the programme in the public mind.
