Dragging the ‘public’ into PPPs

One problem with getting governments to the table on nation-building projects is their three-to-five year electoral cycle, compared with what Weaven calls the “proven patience” of superannuation fund investors.

“Through IFM we’re already doing 30 year deals and our super fund investors are comfortable…as long as there are contracts in place to take the output or service, and the project can be valued annually with a high degree of certainty, funds are willing and able to wait a long time for a return. “Our forbears invested huge amounts in rail, projects like the Snowy Hydro scheme, and they weren’t thinking about immediate economic or electoral returns, they were thinking 100 years ahead…we won’t know how many economic deals there are out there right now, until we have real government leadership.

“If you have a very small vision, you don’t need public/private partnerships because governments can do whatever they like off their own balance sheet and still have a surplus. If you have a vision worthy of the nation of Australia, a vision worthy of our asset base in super, then it is inevitable that you should have public/private partnerships to realise part of that vision.” There is a dizzying array of potential nation-building projects out there, and the prospects for super funds to invest in some of them are explored in this story.

Weaven, not surprisingly, has a couple of ideas about where to start. The future of Australia’s power supply is one, an infrastructure need which Weaven says has finally been given real impetus by the Rudd Government’s pledge to have 20 per cent of Australia’s energy come from renewable sources by 2020, and the certainty that a national emissions trading scheme will be in place by 2010. Those incentives could make it feasible for super funds to invest in geothermal power, for example. “There are huge reserves in the Cooper Basin in the north of South Australia which could be connected to the national grid, albeit at a cost,” Weaven says.

“There’s already a lot of speculative investment from people mapping geothermal sites and carrying out test drilling.” For instance Geodynamics, a company in which Tim Flannery is on record as being a shareholder through his self-managed super fund, is among those drilling for ‘hot rocks’ which can be used to generate extremely hot water capable of driving electric turbines. In the same region, Pacific Hydro is prospecting for a more conventional source of geothermal power: hot water from aquifers.