Although public-private partnerships (PPP) should be flexible enough to appeal to a variety of investors, superannuation funds were the natural owners of those assets, Infrastructure NSW chairman Nick Greiner said yesterday.
There was no magic formula to make PPPs for infrastructure projects work, but the model in which investment banks were the owners of the projects was no longer appropriate, Greiner said.
"In the early days, these models were driven by investment banks, who were, of course, not the natural owners of these long-term assets," he told a Sydney Financial Forum.
"This model is ... no longer appropriate.
"Over the long term, these assets will gravitate towards long-term holders, pension funds, superannuation funds, which are, of course, the natural holders."
But he said that so far state governments had not done a good job of making PPPs attractive for super funds or other asset managers to invest in.
This was the result of a number of factors, including a lack of procurement skills in government departments and an almost universal optimism bias on user-level estimates, he said.
"It is not an asset management or super fund problem; it is a government problem," he said.
To make projects more appealing to super funds, governments needed to develop flexible solutions that would cater to investors' different risk appetites, he said.
"There is no such thing as the perfect PPP. There are hundreds of models, but it is about how do you find the right model for the project you want?" he said.
"It is about sharing the risk in a sensible way."
He also stressed the need for a proper pipeline of projects. "It is not a useful model to have a wish list without any cost/benefit estimates," he said.
Infrastructure NSW was established last year to advise the NSW government on infrastructure spending.
It is currently working on a report that will include a list of projects the organisation believes should have priority.
"We are not deciding what should be built; we just give a list of what we think should be prioritised," Greiner said.
