EUROPE – The €133bn asset manager PGGM is to participate in a €282m road-building project in Ireland in a public private partnership.
The Dutch manager said it reached an agreement for the design, construction, financing and maintenance of the N11/N7 between Arklow and Rathnew in a joint venture with construction company Royal BAM.
The project for the National Roads Authority includes the construction of a service station near Gorey and an intersection with overpass junctions near Newlands Cross.
The joint venture – the BAM PPP PGGM Infrastructure Cooperation – is to participate for an amount of more than €20m on a 50/50 basis for both partners, according to Han Claessens, senior investment manager for infrastructure at PGGM.
The construction work is to start in July, and the project is scheduled for completion in 2015.
PGGM plans to keep participating in the project for at least 25 years.
"Our contract with the Irish government would guarantee a stable and inflation-linked cash-flow during this period, " said Claessens, who added that payments would be based on the availability of the road after completion.
He made clear that the expected returns would be above the average of approximately 10% for infrastructure projects, due to the risk profile of the Irish state.
Claessens added that PGGM had now committed itself to 11 projects in its joint venture with BAM.
"Currently, we have €240m committed to infrastructure investments, and we are likely to increase this amount, as we are very satisfied about the results of the cooperation with BAM," he said.
In Claessens' opinion, PGGM is leading in its approach of directly investing in infrastructure rather than through infrastructure funds.
He estimated the costs savings at 2% of the total amount of investments in the asset class, adding that this amounted to yearly savings of approximately €60m.
Claessens said PGGM also preferred direct investments in infrastructure, "as it also offers more grip on the portfolio and makes selecting for ESG criteria easier".
BAM PPP is a holding company of the Royal BAM Group, a worldwide construction company, focusing on utility projects. The PPP previously committed €15m to the construction of eight schools in Ireland.
Since 2006, PGGM has invested or committed itself to more than €3bn in infrastructure projects, including the Walney wind farm in the Irish Sea.
PGGM is the pensions provider for the large healthcare pension fund PFZW and four other pension plans in the Netherlands.