UK Guarantees Scheme Could Be a ‘game-changer’
Last week’s announcement of UK Government guarantees for up to £40bn of infrastructure projects could be a game-changer for infrastructure financing, according to KPMG.
Richard Threlfall, KPMG’s UK head of infrastructure, building and construction comments: “Some commentators have rushed to say it won’t be a big deal but they need to step back and see what it might unlock. We are promised the creation of the Pension Infrastructure Platform in January, providing potentially significant amounts of institutional liquidity for infrastructure projects. Pension funds don’t like Greenfield construction risks, but UK Guarantees provides a basis to take that problem away. Put UK Guarantees and the Pension Infrastructure Platform together and you have the basis for a radically new financing model.”
KPMG has published a note ‘Summary and comment on implications for UK Infrastructure’ outlining the key components of the UK Guarantees scheme which was announced by the Government on July 18, 2012 with the intention to ‘kick start critical infrastructure projects that may have stalled because of adverse credit conditions’.
The document outlines the three key elements of UK Guarantees – a guarantee scheme, a co-lending scheme and an export guarantee scheme – and discusses potential implications for project promoters and bidders.
Richard Threlfall comments: “KPMG is aware of considerable debate in the market as to what precisely is intended by the Treasury, and the implications for project promoters and bidders of UK Guarantees. Our summary note is to help inform that discussion and provide initial guidance to project promoters and bidders.”