Building the Future - Investing in Sustainable and Integrated by hcj

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									Building the Future –
Investing in Sustainable and Integrated
Infrastructure Development in the UK -
National Infrastructure Plan

Geoffrey Spence, CEO Infrastructure UK
06 December 2012




                          UNCLASSIFIED
National Infrastructure
Plan:
update 2012

December 2012




                    UNCLASSIFIED
National Infrastructure Plan: update 2012

                                                                                                   Overview
                                            Annual average infrastructure investment, 2005-10 and 2010-12


                                     • Progress in all areas implementing the 
                                           40




                                     Annual average infrastructure investment, £ billion,
                                       National Infrastructure Plan 2011
                                     • Economic infrastructure investment 
                                           35

                                       across the public and private sectors is 
                                                                      £33 billion
                                           30
                                       increasing
                                                    £29 billion
                                     • Infrastructure investment pipeline has 
                                           25
                                       increased to £330 billion




                                                      2011/12 prices
                                     • Additional public investment in 
                                           20
                                       infrastructure as part of Autumn 
                                       Statement 2012 – and continued delivery 
                                           15
                                       of existing commitments
                                     • Updated performance and cost indices
                                           10
                                     • Strengthened mandate for Infrastructure 
                                       UK and increase in commercial expertise 
                                            5
                                       to boost delivery
                                                                                            0
                                                                                                2005-2010     2010-2012


                      UNCLASSIFIED                                                                                        3
Infrastructure investment pipeline – 2012 update

                                                                                            2012 Infrastructure pipeline by
                                                                                             Update investment pipeline
                                                                                                         sector
                                     • Over 550 projects and programmes – over 
                                         200 
                                       50 more than 2011 
                                     • Estimated value of over £330 billion in 2011-




                                     Infrastructure investment, £ billion, 2011-12 prices
                                       12 prices from 2012 to 2015 and beyond.
                                     • Increase of over £70 billion in real terms over 
                                       2011 pipeline
                                         150 

                                     • This increase is driven by:
                                        • Better data: including information on 
                                          nuclear decommissioning investment (29 
                                          projects, £14 billion)
                                         100 
                                        • Government decisions: estimate for High 
                                          Speed 2 phase 2 (£16.4 billion)
                                        • Increased energy investment: greater 
                                          certainty on future regulatory settlements 
                                          50 
                                          and continuing substantial pipeline of 
                                          electricity generation projects (approx 
                                          £66 billion increase)
                                     • Over 85 per cent of the expected investment 
                                           0 
                                       private or part-private funded
                                                      Energy        Waste         Flood
                                                                                                           Communi    Water
                                                                                               Transport
                                                                                                            cations



                      UNCLASSIFIED                                                                                            4
Delivering new and
existing projects

Update on delivery of infrastructure,
including:
• Roads programme and local projects 
  (M4/M5, M6, M62, A11)
• Rail upgrades (East Coast Mainline, 
  Thameslink)
• Rural broadband (State aid approval and 
  completed procurements)
• Energy projects (Carrington power 
  station)
New funding in the Autumn Statement:
• £1.5 billion for roads including upgrades 
  to the A1, A30 and M25 J30
• £120 million for new flood defences
• Winners of second round of super-
  connected cities funding
• £600 million for science and research 
  infrastructure and facilities


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    A new approach to public private partnerships

•    Last year, the Government initiated a fundamental
     reassessment of PFI. The Government conducted a 
     broad based engagement process, which invited all 
     interested parties to respond to a call for evidence on 
     the reform of PFI.

•    155 responses to the call for evidence were 
     received in total. These have been published in full.

•    Yesterday, the Government concluded its review
     of PFI and published full details of a new
     approach to public private partnerships, PF2. The 
     Government remains committed to private sector 
     involvement in delivering infrastructure and services, 
     but has recognised the need to address the 
     widespread concerns with Private Finance Initiative 
     and the recent changes in the economic context.

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A new approach to public private partnerships

PF2 will:
•    Strengthen significantly the partnership between the public and private sector by 
     Government looking to act as a minority public equity co-investor in PF2 projects.
•    Widen sources of debt and equity finance by:
       •    introducing funding competitions for a proportion of equity to attract long-term 
            investors into projects prior to financial close
       •    requiring bidders to develop a long-term financing solution where bank debt does 
            not provide the majority of the financing requirement, this will:
             •    facilitate access to the capital markets, capitalising on the appetite of 
                  institutional investors and of other sources of long-term debt finance. 
             •    enable a deleveraged capital structures with better risk allocation and the 
                  removal of certain operational risks which are expected to facilitate access to 
                  institutional investor capital
             •    continue to encourage alternative financing sources including loan, 
                  guarantee and credit support products provided by commercial banks, the 
                  EIB and other financial institutions.

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A new approach to public private partnerships

Ensure that procurement is much faster and cheaper by:
 •   improving public sector procurement capability by strengthening the mandate of 
     Infrastructure UK and supporting departmental centralised procurement units;
•    committing that the competitive tendering 
     phase of PF2 projects will not be allowed 
     to take longer than 18 months unless an 
     exemption from the Chief Secretary is 
     agreed (measured from project tender to 
     the appointment of a preferred bidder);
•    introducing a standardised and efficient 
     approach to PF2 procurement and 
     launching a comprehensive suite of 
     standard documentation; and
•    strengthening the scrutiny of project 
     preparation by introducing additional 
     Treasury checks at the pre-procurement 
     stage.                                               Average procurement times have stubbornly
                                                              remained around 35 months.

                                           UNCLASSIFIED                                               8
A new approach to public private partnerships

•   Transform the approach taken to transparency by:
     •     introducing a control total for all commitments arising from off-balance sheet PF2 
           contracts signed;
     •     requiring the private sector to provide equity return information for publication;
     •     publishing an annual report detailing project and financial information on all projects 
           where Government holds a public sector equity stake;
     •     introducing a business case approval tracker on the Treasury website;
     •     introducing an open book approach and a gain share mechanism for the lifecycle 
           fund to facilitate the sharing of any surplus lifecycle fund at the end of the contract

         Approval process tracker:




                                           UNCLASSIFIED                                               9
A new approach to public private partnerships

Improve the flexibility of services 
by:

 •  removing soft services, such as 
 cleaning and catering, from projects 

 • providing procuring authorities with 
  discretion on the inclusion of certain 
 minor maintenance activities at the 
 project outset and additional flexibility 
 to add or remove certain elective 
 services once a contract is in 
 operation; 

 • introducing periodic reviews of 
 service provision.




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UK Guarantees Scheme

•   The Government will use the UK’s sovereign credit rating to avoid delays 
    to nationally significant infrastructure projects caused by shortage of 
    financing
•   The scheme is open for a 2-year window to 31 December 2014 and will 
    offer financial guarantees on commercial terms to give projects access to 
    a wider range of investors
•   Up to £40 billion is initially available under the Infrastructure (Financial 
    Assistance) Act 2012
•   Over 75 enquiries have been received to date and projects with a capital 
    value of £10 billion have been pre-qualified for further consideration
•   A guarantee will be available to support £1 billion of GLA borrowing to 
    fund the extension of the Northern Line and unlock the redevelopment of 
    the Battersea Power Station site

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