NETHERLANDS - Dutch asset manager APG has made its first-ever inflation-related loan for a local road-building project and said it expected the market to develop into a new asset class.

APG spokesman Harmen Geers said: "In the coming years, approximately €10bn is needed for infrastructure project in the Netherlands, and the chosen set-up can serve as an alternative for inflation-related government loans."

The Dutch Treasury has not issued inflation-related bonds to date.

The €261bn civil service pension scheme expects to finance €80m of debt in the reconstruction of the N33.

The €145m project in the north of the country is to be carried out by building company BAM.

According to Geers, the transaction follows a Dutch Treasury pilot programme that allowed building companies to attract a maximum of 70% of the necessary leverage against an inflation-related compensation.

Last year, finance minister Jan Kees de Jager said he would look into the options for institutional parties to invest in infrastructure against inflation-related returns.

"Under the agreed conditions," Geers said, "the debt will be increased with the full inflation of the previous year, but the interest paid by BAM will be less than the going rate."

BAM will not only finance the upgraded N33, but also handle maintenance over a 20-year period.

However, the final contracts not yet been signed, as the two other subscribers to the tender can appeal against the tender procedure.

The €122bn asset manager PGGM is also involved in the project, as a partner in a joint venture with BAM for financing infrastructure projects through PPPs that was established last year.

According to spokesman David Uitdenbogaard, PGGM expects to generate profits through the inflation component from the Treasury.