Utility Week

16 | 27TH MARCH - 2ND APRIL 2020 | UTILITY WEEK Finance & Investment Event Utility Week Investor Summit, 5 March, London Infrastructure and investment and climate change The importance of the nation's criti- cal infrastructure and how to pay for it was already high on the agenda on the day the Investor Summit convened. With a Budget and National Infra- structure Strategy (NIS) due within days, utility leaders and investors were actively awaiting the new govern- ment's spending plans and policies for addressing climate change, levelling up the country and the investment opportunities this would bring. The release of the NIS has since been delayed and the wait continues, but there was agreement among both utilities and investors on the key areas that must be tackled to take the coun- try and consumers forward, reassure investors and attract the levels of pri- vate • nancing that will be needed. As chair of the National Infrastruc- ture Commission, keynote speaker Sir John Armitt (see "Asking the right questions", p20) had a ra† of hard- hitting messages to share, two years on from the publication of the govern- ment advisory body's National Infra- structure Assessment in 2018. He told delegates how the urgent need to decarbonise the economy and level-up all parts of the UK can be eŒ ected only by "asking the right questions" and "deciding on the exact outcomes". "Individual announcements from government without a cohesive long- term strategy creates a risk in terms of delivery, including attracting the private sector investment that is neces- sary to action them," he said. And this was not all about invest- ment, he warned. "Consumers need to be positively brought along the journey. To do this, they need to see leadership." Regulators, too, had a key role to play in this, he said. "Good infrastructure supported by public O ver recent decades, UK plc has facilitated material amounts of private sector capital for infrastructure invest- ment delivering improved outcomes for consumers. Much of this capital has been mobilised through the government's PFI/ PPP model (funding over 700 projects) and economic regulation of water, energy and telecoms in the UK. In addition to PFI and economic regu- lation, UK plc has delivered large-scale infra- structure projects through bespoke models such as Channel Tunnel Rail Link, which became High-Speed 1 (HS1), and Thames Tideway Tunnel. In the March Budget, the government set out a £600 billion commit- ment to invest in infrastructure, including roads, broadband and electric vehicle charg- ing over the next • ve years. While the private sector's involvement in this £600 billion is not clear, it highlights that the need for infrastructure investment is high. So how does the government "get Brit- ain building"? One solution may be to take advantage of all-time low government bor- rowing and invest public funds in infrastruc- ture. The infrastructure could be privatised once the asset is built in whole or part and a bankable revenue model overlaid making the asset investable by the private sector. This model would allow risk to be allo- cated to the party best able to bear it until an asset can be invested in by the private sector. HS1 is a potential example. A† er several restructurings, the government suc- cessfully monetised a 30-year concession to own, operate and maintain HS1. For large economic assets, the government may not recover its investment, but the broader eco- nomic bene• t should be taken into account, and once de-risked (in whole or part) the asset could be partially monetised for re- investment into other much-needed projects. Bronte Somes, managing director, head of infrastructure equity Europe , Real Estate & Private Markets, UBS Asset Management Money well spent? Utility Week's Investor Summit heard how climate change and legitimacy are reshaping investment models. A gainst the ongoing backdrop of policy and market uncertainty and their impact on investor con• dence, Utility Week's • rst ever Investor Summit, sponsored by Fitch Ratings, Oliver Wyman, and Oxera, brought together leading • gures from across the utilities and investment communities. The well-received event at 99 City Road, London, saw power and water com- panies gather in the City with regulators, government advisers and analysts to talk regulation and legitimacy; infrastructure, investment and climate change; M&A activity; and emerging business models. Utility Week's session chairs share their thoughts on the standout issues and key takeaways from the day. "Key projects could be built with public money, then sold on" Expert view Bronte Somes, UBS Asset Management continued overleaf

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