Unlocking the benefits of Private Finance 2 (PF2) to maximise value for taxpayers
16 February 2017
Balfour Beatty, the international infrastructure group, has today published its “Unlocking the Benefits of PF2” paper. This lays out the Group’s recommendations to enhance the benefit of the new Private Finance 2 (PF2) approach for public private partnerships (PPP) to maximise value for taxpayers and aid delivery of the Government’s industrial strategy.
The paper’s key recommendations include:
- Having a clear, sizeable and steady pipeline of projects to attract the scale and variety of market interest to create a competitive environment of funding bids
- Policy consistency across political cycles to help provide certainty and stability so that participants can plan over the longer term and make corresponding investment decisions
- A streamlined procurement process with projects fully developed including output specification, planning and licences prior to tender
- Certain flexibilities to be included in specifications in terms of design and service delivery to incentivise the private sector to develop innovative solutions for public services
- Allowing the markets to determine the gearing (debt to equity ratio) level as part of the competitive procurement process enabling the private sector to have more freedom in how it structures projects from a broad range of options
- Greater transparency to compare how PPP projects perform in comparison to those operated and maintained exclusively by the public sector, so as to assess value for money for the tax payer
The paper draws on Balfour Beatty Investments strong track-record of financing public infrastructure projects in the UK and abroad. Having closed projects with over £10bn of private capital, Balfour Beatty Investments has established itself as one of the largest investors in the PPP industry, building a portfolio of more than 70 projects worldwide, predominantly in the UK and North America.
The full paper is available to read here.
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Notes to editors:
• Balfour Beatty (www.balfourbeatty.com) is a leading international infrastructure group. With 34,000 employees, we provide innovative and efficient infrastructure that underpins our daily lives, supports communities and enables economic growth. We finance, develop, build and maintain complex infrastructure such as transportation, power and utility systems, social and commercial buildings.
Our main geographies are the UK, US, Middle East and South East Asia. Over the last 100 years we have created iconic buildings and infrastructure all over the world including the London Olympics’ Aquatic Centre, Hong Kong’s first Zero Carbon building, the world’s biggest shopping mall in Dubai, the National Museum of the Marine Corps in the US and the Channel Tunnel Rail Link.
• Balfour Beatty Investments is a global infrastructure investor operating in the UK, US and Canada providing the investment capability required to deliver complex infrastructure projects. Over the past 17 years, Balfour Beatty Investments has established itself as one of the largest investors in the PPP industry, building a portfolio of more than 70 projects worldwide, predominantly in the UK and North America.
In recent years, Balfour Beatty Investments has diversified into new markets including student accommodation, private rental sector housing (multi-family housing in the US) and generation and transmission of renewable energy. The company recently expanded its approach from a PPP contractor to a broader developer and investor.
• Balfour Beatty Investments is at the forefront of developing novel financing solutions as new providers of finance enter the infrastructure market. For example, Balfour Beatty Investments and its partners successfully raised £351 million of financing for the acquisition of the Greater Gabbard Offshore Transmission Owner (OFTO). This was the first OFTO to access financing via the public bond market and the first UK bond issuance to utilise the European Investment Bank’s project bond credit enhancement scheme. Previously, Balfour Beatty Investments has worked with a multinational financial services company to deliver an innovative pension fund solution to finance a £45m student accommodation project for Aberystwyth University. The company also closed a £78m student accommodation project for the University of Edinburgh which was financed through bond issuance, one of the first UK greenfield transactions to be supported by a monoline insurer after the global financial crisis.
• Public Private Partnerships (PPP), developed in the UK over 20 years ago, are now globally established as a model for channelling private sector skills, knowledge and financing into public infrastructure. Public Finance 2 (PF2) represents a revised and more efficient approach to PPP that seeks to learn from and improve on previous procurement experience. Balfour Beatty welcomes the 2016 Autumn Statement briefing paper and expects that the March 2017 Budget will see a list of new projects suitable for delivery through PF2 to stimulate market engagement and allow potential participants to start to plan their involvement and to allocate resources accordingly.