Tower pushes PPPs for KiwiSaver funds

Tower is pushing for KiwiSaver schemes to be able to invest funds in infrastructure public private partnerships - that would then build things like new motorways. Photo / Paul Estcourt

Tower Investments is pushing for KiwiSaver schemes to be able to invest funds in infrastructure public private partnerships (PPPs).

Tower Investments chief executive Sam Stubbs said KiwiSaver schemes were natural investors in infrastructure PPPs because they had long term investment horizons that matched the long term nature of investing in infrastructure.

In its National Infrastructure Plan, published on Tuesday, the Government said it intended to use PPPs where they represented value for money to taxpayers.

While private finance was usually provided in a PPP, the potential advantages of PPPs were not about finance, the national plan said.

PPPs typically allocated all construction and operating risks to a private sector party. That reduced the risks faced by the Crown, while providing stronger incentives to minimise whole-of-life costs and improve service quality than was possible within the public sector.

The main disadvantages of PPPs were the reduced flexibility due to the long term nature of the contract, and the cost from unanticipated contract variations.

Stubbs said KiwiSavers were collectively building up a huge and growing pool of funds under management that could help provide a substantial proportion of the capital the PPPs would need. What was missing was an available supply of suitable infrastructure PPPs to invest some of that capital in.

Some of the priorities in the infrastructure plan were potentially attractive from a KiwiSaver investment point of view, including broadband, electricity, and roads of national significance, Stubbs said.

With only New Zealanders able to invest in KiwiSaver, infrastructure funded through the scheme could stay in New Zealand hands.

The Government was clearly interested in exploring PPPs, and it and the business community needed to agree on what could happen.

They had the advantage that PPPs were well developed internationally, said Stubbs.

PPPs could provide benefits for both investors and the Government, with a big attraction being that they were longer term and government guaranteed.

PPPs produced lower returns than alternatives, but were more secure.

- NZPA