Fund gets ready for PPP projects

Peter Coman. Photo / Supplied

Fund manager Peter Coman says the PIP Fund is interested in investing in the new Wiri prison public-private partnership but not if it includes managing prisoners as part of the package.

Coman says custodial management, which might include drug-testing of inmates, is outside the scope of the PIP Fund, set up by Morrison & Co last year to invest in infrastructure partnerships such as schools and hospitals.

"There are certain things that the private sector can provide and there are certain things the State can provide," he says.

Ngai Tahu chairman Mark Solomon recently praised the standard of private management of inmates in Australian prisons, saying it was better than New Zealand at handling the cultural aspects of prisoners' lives

But Coman, who is managing director of the PIP Fund, says custodial management has a different risk profile than private investment in public assets and is beyond the "bricks-and-mortar design, build and maintain elements" of public-private partnerships. "It depends whether you bundle [the concession] into one contract involving the asset and one involving the custodial services."

Coman says the Treasury's new National Infrastructure Unit is providing a welcome boost for the fledgling public-private partnership market.

"We are genuinely positive about the market opportunities ... We are very positive about where the Government has got to to date."

The PIP Fund, officially Public Infrastructure Partners Limited Partnership, has two partners - the New Zealand Superannuation Fund, which has committed $100 million as a cornerstone investor, and the New Zealand Social Infrastructure Fund, which raised $41 million in an initial public offering this year, has $100 million in committed funds from several large investors and a further $9 million in "soft" commitments.

Coman says the New Zealand Social Infrastructure Fund, with about 750 investors to date, hopes to have $200 million in committed funds by October.

The challenge, he says, is to find projects to invest in.

"Treasury's National Infrastructure Unit has a good plan to bring projects to market and they are doing it in an orderly fashion.

"We are very much in our infancy compared with Australia. Victoria is probably the most well-advanced and sophisticated in terms of the process of PPP procurement."

The New Zealand Social Infrastructure Fund defines social infrastructure as typically including assets that accommodate social services such as schools, universities, hospitals, prisons and community housing, but not typically the provision of social services, such as teachers or custodial services.

"In contrast, economic infrastructure supports economic activity and is often characterised by 'user-pays' or demand-based revenue streams (such as tolls on toll roads or landing fees for an airport)," the fund says.

By the fund's definition, social infrastructure does not include toll roads, bridges or tunnels - the earliest examples of PPPs in New Zealand.

However, the fund notes that user tolls have been used to fund the Auckland Harbour Bridge, the Lyttelton Tunnel, the Tauranga Harbour Bridge, the Northern Gateway road (between Orewa and Puhoi) and an expressway in Tauranga.