The finance expert TrustCo advises Britain to re-examine its infrastructure pipeline so that it can determine which projects could be accelerated or re-financed with long term capital.
The report written by the Infrastructure Forum group recommends that the new private finance initiative models should adopt governance arrangements that will build confidence within the company so that it can be trusted to deliver its social objectives and to invest on a long term sustainable basis.
An example of such an approach is represented by the TrustCo model that implements a project vehicle with governance that preserves the social purpose of the company right from the beginning. It also sets voluntary limits on its actions, such as a commitment to invest on a sustainable basis as well as to sustain certain credit ratings, voting rights that will give bigger power to long term investors and a representation of its employees or customers on the board.
“While in theory it might be feared that investors would be uneasy imposing such constraints on project companies, in practice such goals are wholly consistent with the purpose of delivering long term infrastructure, and will result in long term stable cash flows, reducing the need for frequent regulatory intervention,” says the report.
In the means of the current infrastructure pipeline, there is a bank of low cost capital that could finance new and existing projects. This capital is found in people’s pension money; including the pension of about 5 million public sector workers that need long term and low risk investment methods, therefore it is not distant, profit maximising capital.
“A more radical examination of the infrastructure project pipeline and existing assets, with the mindset of what could be accelerated or refinanced with such long-term capital, may well lead to both an acceleration of some projects that otherwise may stay on the back burner for too long and the freeing up of public capital to invest in other projects,” suggests the report by The Infrastructure Forum.