DENMARK – Pension funds in Denmark have welcomed a report on the potential for public-private partnerships (PPPs) in the country as a means of financing infrastructure projects, saying they hope it paves the way for new investment opportunities.
The report – commissioned by five of the pension funds – acknowledged a clash of attitudes in Denmark towards PPPs, but it said conditions could be improved to facilitate cooperation.
ATP, PFA, PKA, SamPension and PensionDanmark set up a working group last autumn to report on the organisation and funding of public infrastructure projects, to clarify the rationale for authorities and institutional investors entering into PPPs.
Anders Eldrup, former chief executive at DONG Energy, and Peter Schütze, former chief executive at Nordea Bank Denmark, headed the working group.
Eldrup and Schütze said they hoped the analyses "contributed to softening the somewhat inflexible views characterising the current debate about PPPs in Denmark".
While some parties preferred PPPs to the public sector acting as developer, others believed the extra financing costs of PPPs made it cheaper for the public sector to act as developer, they said.
"Throughout the project, we have noted that it is possible to improve the basis, the structure and the processes for public sector investment decisions, as well as the competences in this area," they said.
Pensions administrator PKA said it hoped the report would pave the way for PPPs in Denmark, adding that it was ready to invest billions in suitable projects.
Peter Damgaard Jensen, managing director at PKA, said its experiences with PPP projects in Denmark and particularly abroad showed that the economics benefited the community.
"So we hope the report will help to emphasise this fact strongly," he said.
"When you think about design, engineering, operation and maintenance right from the start, it not only ensures construction of better and long-lasting quality but also gives you better value for money."
Torben Möger Pedersen, chief executive at PensionDanmark, said: "The report confirms that public-private partnerships have a large potential, as our own projects based on this model have also shown – for example, in connection with the offshore wind farms at Anholt and Nysted."
Möger Pedersen said potential PPP projects were a harbour tunnel in Copenhagen, school construction projects and the upgrading of the motorway from Næstved to Rønnede.
"And as an investor, we find these projects very interesting because they can provide a stable return for members many years ahead," he said, adding that PensionDanmark was ready for more infrastructure investments via PPPs over the next few years.
But if PPPs really were to take root in Denmark, there must be greater political will to apply the model, he said.
"This report provides a thorough analysis of the PPP potential and should be taken into account in the coming years when decisions are made on how to implement major Danish infrastructure projects," he said.
The report noted that, in Denmark, the experience with PPP projects was limited and so far quite positive.
"Investment in infrastructure, characterised by predictable, stable, long-term cash flows, matches the pension funds' needs well," it said.
The Danish pension system was still accumulating funds as the reforms of the late 1980s and early 1990s take full effect, it said.
"In consequence, Danish pension funds are investing significant amounts in assets in Denmark and abroad – Danish infrastructure could be included in those assets," it said.
The report says that whether a PPP project offers maximum value for money depended on the individual project.