An uncertain political climate effecting the surety of supply combined with increasing demand for infrastructure assets continues to put pressure on demand/supply dynamics, two leading Australian infrastructure investors agree.
AustralianSuper and HOSTPLUS, who will be speaking at the Private Asset Conference in March, confirmed that low interest rates and a move away from equities has caused institutions across the globe to increase their portfolios’ infrastructure allocation, with Australia’s mature market seen as an attractive investment option.
With a conservative estimate of $30 billion assets no longer being privatised in Queensland, Jordan Kraiten, investment manager, HOSTPLUS, says the impact of that election could have a magnifying effect, potentially pushing up the price of remaining assets in other states.
“It’s fantastic for the other state governments, but unfortunate for members of super funds. We believe infrastructure assets have a strong place in our portfolio, but we are not going to be over aggressive and pay too much for them,” Kraiten said.
AustralianSuper echoed the outlook saying they would assess any potential infrastructure asset to make sure members were getting a good deal.
Nik Kemp, senior investment manager, infrastructure, AustralianSuper, said: “Before the Queensland election result global funds had the opportunity to deploy capital there. Now, with the increased competition, returns for new infrastructure assets will be compressed.”
Kemp doesn’t believe more consortiums will form to bid on large public/private partnerships (PPP) infrastructure projects, such as the Port of Melbourne development, but “the ones bidding will be more eager for the asset, putting a higher price on them.”
The reduced availability of infrastructure will make investors keen to secure the assets on offer, as they won’t have as many back-up options, particularly in an uncertain political climate.
“We’re at a point where the federal government is in favour of infrastructure asset sales, but some states are providing mixed messages. People relocated their families Brisbane, but now they are having to move back,” Kraiten said.
The Labour government in Victoria has scrapped one infrastructure project, the politically controversial East West Link, while New South Wales’ Liberal government is putting forward a strong case for infrastructure asset sales to fund new builds, such as a new transport tunnel under the harbour, ahead of next months’ election.
Jordan Kraiten and Nik Kemp, along with other panel members, will be talking on the subject of ‘Infrastructure case studies’ at the Private Assets Conference on March 2.
To register for the conference visit the following page www.privateassetsconference.com.au