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EuropeanServicesStrategyUnit:ResearchReportNo.
8ThefinancialcommodificationofpublicinfrastructureThegrowthofoffshorePFI/PPPsecondarymarketinfrastructurefundsDexterWhitfieldBuyingandselling:hospitals,healthcentres,mentalhealthfacilities,schools,colleges,carehomes,libraries,trams/lightrail,motorways,roads,streetlighting,counciloffices,policestations,courts,prisons,firestations,defenceequipment,socialhousing,studentaccommodation,leisurecentres,governmentoffices,wastedisposalplants,waterandwastewaterplants.
2ListofESSUResearchReportsNo.
1:ATypologyofPrivatisationandMarketisation(2006).
No.
2:OptionsAppraisalCriteriaMatrix(2007).
No.
3:CostOverruns,DelaysandTerminationsin105OutsourcedPublicSectorICTContracts(2007).
No.
4:The10bnSaleofSharesinPPPCompanies:Newsourceofprofitsforbuildersandbanks-replacedbyNo.
6(2011).
No.
5:TheMutationofPrivatisation:Acriticalassessmentofnewcommunityandindividualrights(2012).
No.
6:PPPWealthMachine:UKandGlobaltrendsintradingprojectownership(2012).
No.
7:AlternativetoPrivateFinanceoftheWelfareState:Aglobalanalysisofsocialimpactbond,pay-for-successanddevelopmentimpactbondprojects,AustralianWorkplaceInnovationandSocialResearchCentre,UniversityofAdelaideandEuropeanServicesStrategyUnit(2015).
No.
8:Thefinancialcommodificationofpublicinfrastructure:Thegrowthofoffshoresecondarymarketinfrastructurefunds(2016).
No.
9:PFI/PPPBuyouts,TerminatedandMajorProblemContractsintheUK(forthcoming).
Downloadfrom:http://www.
european-services-strategy.
org.
uk/publications/essu-research-reports/October2016AcknowledgementsManythankstoStewartSmyth,SheffieldUniversityManagementSchool,fordiscussionandcommentsandtoStephenMageeandFionaWalker,BBCScotlandTelevision,forcommissioningresearchfortheScotlandInvestigatesprogrammeonEdinburghschoolsPFIproject.
DexterWhitfield,DirectorAdjunctAssociateProfessor,AustralianIndustrialTransformationInstitute,FlindersUniversity,AdelaideMobile+353877055509Tel.
+353667130225Email:dexter.
whitfield@gmail.
comWeb:www.
european-services-strategy.
org.
ukTheEuropeanServicesStrategyUnitiscommittedtosocialjustice,bytheprovisionofgoodqualitypublicservicesbydemocraticallyaccountablepublicbodies.
TheUnitcontinuestheworkoftheCentreforPublicServices,whichbeganin1973.
Researchandstrategicadviceforpublicbodies,tradeunionsandcommunityorganisationsincludesanalysisofregional/cityeconomiesandpublicsectorprovision,jobsandemploymentstrategies,impactassessmentandtheeffectsofmarketisation,privatisation,publicprivatepartnershipsandtransformation.
3ContentsKeyfindings5Part1:Context10Part2:Rapidgrowthofoffshoresecondarymarketinfrastructurefunds12SpecialpurposecompaniesandPFI/PPPfinanceJustifyingthesaleofPFI/PPPequityWhyPFI/PPPprojectownershipmattersValuecreationandvaluecapturePublicmoneybutprivatecontrolThejourneyofPFIfinanceTypesofinfrastructurefundsListedandunlistedfundsHowsecondarymarketfundsoperateTimelinePart3:Takeoversofsecondarymarketinfrastructurefunds203iGroupconsolidatesScaleofoffshoringTypesofacquisitionsSectoranalysisEdinburghcasestudyScottishPFI/PPPschoolsfullyorpartlyownedoffshoreFlawedvalueformoneyPart4:Thedriversofequitytransactions28PrimaryandsecondarysectorsintheeconomyPublicsectortransformationNeoliberalismandthestate-businesspartnershipPFI/PPPmodelErosionofdemocraticaccountabilityIncreasedinequalitiesGlobalexpansionofPPPmodelDrivetoincreasepensionfundinvestmentinPFI/PPPPFI/PPPmodelwillincreaseprivatisationPart5:Offshoringandtaxation34OffshoringroutePFIprojectcompaniesbenefitfromoffshoretaxhavensLarge-scaletaxavoidanceReducedUKcorporatetaxationincreasedPFIprofitsShareholdersinlistedinfrastructurefundsScaleofPFI/PPPequityandsecondaryfundtransactionsHMTreasuryPFIequityownedintaxhavensHighlyprofitablelistedfundsInfrastructurefundsmanagedoffshoreWebofsecrecyOECDplanstoaddresstaxhavensInnisfree'smajorshareholderdividendstransferredoffshorePart6:Globaltransactions40Changessince2012globalanalysisDifferencesbetweenUKandGlobalinfrastructuresectorsPart7:Conclusionandrecommendations42NeoliberalmoralityRecommendationsNewcontrolstorestrictoffshoringpublicassetsImprovedaccountabilityandtransparencyTerminatethePFI/PPPprogrammeSelectedbuyoutsandcontractterminationsThecaseforthenationalisationofSPVsIncreasedpublicinvestment4RadicalpublicmanagementOpposefreetradeagreementsAppendixA45Table16:PFI/PPPprojectswith50%-100%equityownedbyinfrastructurefundsintaxhavens(June2016)AppendixBTable17:SaleofUKSecondaryMarketInfrastructureFunds2003-201647Sourcesandreferences55BoxesWhyPFI/PPPprojectownershipmatters13Innisfree'smajorshareholderdividendstransferredtooffshorecompany38Tables1.
Typesandexamplesofprivateequityinfrastructurefunds2.
Timelineofkeydevelopments3.
Barclay'sinfrastructurefundsacquiredby3iGroupplc.
4.
PFI/PPPInfrastructurefundslocatedintaxhavens5.
TotalequitysalesinPFI/PPPprojectcompanies2000-20166.
Saleofsecondarymarketinfrastructurefunds7.
Purchasersofsecondarymarketinfrastructurefunds8.
Sectoranalysisofoffshoreequityownership9.
AveragecostofPFI/PPPequity10.
EdinburghPPP1schoolssold13times11.
NumberofScottishPFI/PPPschoolsfullyorpartiallyownedoffshore12.
Annualprofitandtaxationoflistedinfrastructurefunds2011-201513.
ShareholdersofInfrastructurefunds14.
Listedinfrastructurefundsvaluationandnetprofitsin201515.
InnisfreePFI/PPPprojectsinUK16.
Asampleofglobalsecondarymarketfundtransactions17.
PFI/PPPprojectswith50%-100%equityownedbyinfrastructurefundsintaxhavens18.
SaleofUKSecondaryMarketInfrastructureFunds2003-2016Figures1.
ThejourneyofPFI/PPPfinance2.
FinancialisationofPFI/PPPprojects3.
Webofsecrecy5AbbreviationsAAMAberdeenAssetManagementARAnnualReportBBCBritishBroadcastingCorporationBBGIBilfingerBergerGlobalInfrastructureBEIFBarclaysEuropeanInfrastructureFundBIIFBarclaysIntegratedInfrastructureFundBSFBuildingSchoolsfortheFutureCETACanadian-EuropeanComprehensiveEconomicandTradeAgreementCIHLConsolidatedInvestmentHoldingsLimitedCo.
CompanyCRSCommonReportingStandardCRCCommunityResourceCentreDBFODesign,Build,FinanceandOperateDIFDutchInfrastructureFundDLRDocklandsLightRailwayEFSIEuropeanFundforStrategicInvestmentsEPECEuropeanPPPExpertiseCentreESSUEuropeanServicesStrategyUnitEUEuropeanUnionEIBEuropeanInvestmentBankFTTFinancialTransactionTaxG20GroupoftwentymajoreconomiesGCPGravisCapitalPartnersHBOSHalifaxBankofScotlandHICLHICLInfrastructureCompanyLimitedHMPHerMajesty'sPrisonHQHeadquartersHSBCHongkongandShanghaiBankingCorporationII2InfrastructureInvestorsIMFInternationalMonetaryFundInc.
IncorporatedINPPInternationalPublicPartnershipsIRRInternalRateofReturnJLIFJohnLaingInfrastructureFundLIFTLocalImprovementFinanceTrustLtdLimitedLPLimitedPartnershipLLPLimitedLiabilityPartnershipLSELondonStockExchangeNAONationalAuditOfficeNHSNationalHealthServiceNPDNon-ProfitDistributingOECDOrganisationforEconomicCo-operation&DevelopmentPFIPrivateFinanceInitiativePF2RevisedPrivateFinancemodelPLCPublicListedCompanyPCPrimaryCarePPPPublicPrivatePartnershipREITRealEstateInvestmentTrustRNSRegulatoryNewsServiceSMIFSecondaryMarketInfrastructureFundSPVSpecialPurposeVehicle(usuallyacompany)TISATradeinServicesAgreementTPPTrans-PacificPartnershipTTIPTransatlanticTradeandInvestmentPartnershipVCTVentureCapitalTrustUKUnitedKingdomUMEUnitedMedicalEnterprisesUPPUniversityPartnershipsProgrammeUSUnitedStates6KeyfindingsThesaleofequityinPFI/PPPprojectstooffshoresecondarymarketinfrastructurefundscontinuestoincrease.
EquityinPFI/PPPprojectsisboughtandsoldintwoways:Firstly,shareholdersinPFI/PPPcompanies,suchasconstructioncompanies,banksandfacilitiesmanagementcontractors,decidetosellpartoralloftheirshareholdinginoneorabundleofprojects.
Secondly,offshoreinfrastructurefundsacquireequityinPFI/PPPprojectsprimarilybythetakeoverofsecondarymarketinfrastructurefunds.
NewPFI/PPPsecondarymarketinfrastructurefundshaveacceleratedthesaleofequityinprojectcompaniessince2003withownershipconcentratedinasmallernumberofoffshorefunds.
TherearenineimportantreasonswhytheownershipofPFI/PPPcompaniesiscriticalforgovernmentsandpublicbodies,localauthorities,serviceusers,communityorganisations,staffandtradeunions(page12).
ThesaleofsecondarymarketinfrastructurefundsandassetsTherehavebeenmoresalesofequityinPFI/PPPprojectcompaniesthroughthesaleofsecondarymarketinfrastructurefundsthantherehasbeenthroughthesaleofindividualorsmallbundlesofPFI/PPPprojects.
Thefullorpart-saleof33secondarymarketinfrastructurefunds2003-2016involvedthepurchaseofequityin1,151PFI/PPPprojectcompanies(includesmultipletransactionsinsomeprojects)atacostof7.
4bn(8.
7bn).
Thecostexcludedsixtransactions,115projects,wherecostswerenotdisclosed.
Assumingthesameaveragecostperproject,thetotalcostwas8.
1bn(9.
5bn).
Offshoreinfrastructurefundscurrentlyhaveequityin547PFI/PPPprojects.
Allowingforasmalldegreeofduplicateownership,thetotalnumberofprojectsisestimatedtobe500.
Twelveoffshoreinfrastructurefundshaveequityin74%ofthe735currentUKPFI/PPPprojects.
Furthermore,theoffshorefundshaveasignificantinfluencewhentheyownamajorityoftheequityinanSPV.
Ninefundsown50%-100%oftheequityin334PFI/PPPprojectsor45.
4%ofPFIprojectsintheUKEducationandhealthprojectsaccountfortwothirdsofPFI/PPPprojectsinwhichoffshoreinfrastructurefundshave50%-100%oftheprojectequity.
IndividualandsmallbundlessalesofPFI/PPPequityInaddition,equityin980PFI/PPPprojectcompanies(SPVs)hasbeensoldinindividualorsmallbundletransactionssince1998atacostof9bn(10.
6bn)(updatedESSUPFI/PPPDatabasetobepublishedearly2017).
Theaverageannualrateofreturnonthesaleofindividual/smallbundlesis28%(basedon110transactionsinvolving277PFI/PPPprojectsbetween1998-2016),amarginalreductioninthe29%averageratefor1998-2012.
Thethree-wayspeculativegaininequitytransactions:firstlybytheoriginalSPVshareholders,secondly,therateofreturnfromthesaleofsecondarymarketfundassetsisassumedtobe12%-25%;thirdly,shareholdersofsecondarymarketfundsreceiveannualdividendsof6%-8%.
Thusthetotalannualrateofreturncouldbebetween45%-60%-threetofivetimestherateofreturninPFI/PPPfinalbusinesscases.
7The877m(1,031.
3m)HMTreasuryOfficesPFIprojectis100%ownedbysecondarymarketfundslocatedinoffshoretaxhavens–75%inGuernseyand25%inJersey.
17.
1bninequitytransactionsThetotalvalueofPFI/PPPequitytransactions(individual/smallbundlesandviasecondarymarketinfrastructurefunds)was12bn(14.
1bn)in1998-2012,buthadreached17.
1bn(20.
1bn)bymid2016,a42.
5%increaseinlessthanfouryears.
The17.
1bnobtainedbyspeculatinginPFI/PPPequitytransactionsisadditionaltotheprofitsmadeinconstruction,bankdebtandinterestrateswapsandprovisionoffacilitiesmanagementservices,plustheplethoraofconsultants,financialadvisersandlawyers.
Meanwhile,publicsectorPFI/PPPcontractualcommitmentsforcapitalrepayments,interestandservicechargestotal232.
4bn(273.
3bn),undiscounted,between2014-15and2049-50.
Valueformoneyassessmentsnevertookaccountofthefinancialimpactofafuturesaleofequity,evenwhenitwasevidentthatPFI/PPPequitytransactionswerefrequentlyobtainingsuperprofitsforSPVshareholders.
Thiswouldhavemadethevalueformoneyassessmentnullandvoid.
ThePFI/PPPmodelofpublicinfrastructureisveryexpensive,exploitative,increasesinequalitiesanddeskillsthepublicsector.
Claimsaboutachieving'valueformoney','socialvalue'and'commissioningforoutcomes'aremeaningless.
PFI/PPPinScotland87.
5%(280)ofScotland's320PFIschoolsarecurrentlypartlyorwhollyownedbyoffshoreinfrastructurefunds.
EquityinEdinburghSchoolsPPP1projectwassold13timesbetween2003-2014(Table10).
ScotlandhasahigherratioofPFI/PPPprojectsperonemillionofpopulation–18.
0comparedtotheUKaverageof12.
4.
TaxavoidanceThefivelargestlistedoffshoreinfrastructurefundsmadeatotalprofitof1.
8bn(2.
1bn)inthefive-period2011-2015butpaidZEROtax.
SemperianPPPInvestmentPartnersHoldingsLimitedisaJerseyregisteredpartnership,notalistedcompany.
Significantly,AberdeenAssetManagementhasa31.
3%stakethroughtwosubsidiarycompanies(AberdeenSidecarLLPisownedbyAberdeenInfrastructureFinanceGPLimited,registeredinGuernsey).
TransportforLondonPensionFundhasa29.
1%stake.
InnisfreeLimitedisaUKregisteredprivatecompanythathasfunded55PFI/PPPprojectsintheUK.
ItisownedbytheUKregisteredInnisfreeGroupLimitedwithCoutts&CoTrustees(Jersey)Limitedasashareholder.
TheInnisfreeGroupLimited'sannualreport2015givesDavidMetter,adirectorofthecompanyandleadingadvocateofPFI,a72.
2%shareholding.
WhilstInnisfreeisnotanoffshoresecondarymarketinfrastructurefund,72.
2%ofitsannualdividends,47.
4m(55.
7m)inthelastdecade,weretransferredtotheJerseyoffshorecompany.
ThewebofsecrecyhasincreasedrelativetothegrowthofsecondarymarketfundtransactionsbybothUKandoffshorefunds.
WiderimpactsThedevelopmentofPFI/PPPprojects,inparticulartheDesign,Build,FinanceandOperate(DBFO)model,combinesstateandcapitalinterestswitha'corporatewelfare'8approachthatincreasesthecommodificationandfinancialisationofpublicinfrastructureandultimatelywidensthepotentialforprivatisation.
Inequalitiesareincreasedinfourways:financialgainsfromPFI/PPPequitytrading;primarilywealthyinvestorsusenomineecompaniesandinvestoffshore;professionalclassesgainfromfacilitatingPFI/PPPequitytrading;whereasfacilitiesmanagementcompanieshaveachequeredemploymenttrackrecord.
NewguidestoTheStatisticalTreatmentofPPPsinEurope(Eurostat,EPECandEIB,2016)andtheWorldBank'sBenchmarkingPPPProcurement2017makenoreferencetoPFI/PPPprofiteeringfromthesaleofSPVequityortooffshoring.
Theseorganisationsareeitherignorantoftheseissuesorchoosetoignorethem.
Eitherway,itdemonstratesabiased,self-servingandpoliticallyselectiveapproachtostatisticsandprocurement,designedtoaidthePPPindustryandevadekeymattersofpublicinterest.
GlobalsaleofsecondarymarketfundsAsampleoftheglobalsaleofsecondarymarketfunds2013-2016providesdetailsof14transactionsthatinvolved107PPPandpublicinfrastructureprojects.
Thesampleillustratestheaveragetransactionincreasedtoanaverageof7.
6projectsinthe3.
5yearsin2013-2016,comparedtoanaverageof2projectsinthe15yearsto2012.
RecommendationsNewUKcontrolstorestrictoffshoringpublicassetsMakeitillegaltotransferequityownershipofPFI/PPPassetsfromUKregisteredcompaniestooffshoreinfrastructurefunds,solelyforthepurposesoftaxavoidance.
MakeitillegaltoestablishoffshorePFI/PPPholdingcompaniesofSPVassetssuchastheLendLeaseBirminghamandSheffieldexamples.
RepatriateequityownershipofPFI/PPPSPVcompaniestoUKregisteredcompanies.
PreventtheflotationontheLondonStockExchangeofPFI/PPPinfrastructurefundsbycompaniesregisteredinoffshoretaxhavens.
AmendthestandardPFI/PPPcontracttorestrictthetransferofPFI/PPPassetstoregisteredcompaniesinoffshoretaxhavens.
ImprovedaccountabilityandtransparencyEstablishmorerigorousmonitoringandcontractmanagementarrangements.
RevisegovernancearrangementstoincreasedemocraticaccountabilityandscrutinyofPFIprojectsincludingannualorbi-annualreviewstoassessperformance,contractmanagementandcosts/affordability.
PublicbodiesshouldmonitorchangesintheownershipoftheirPFI/PPPprojectsasanintegralpartofperformancemonitoring.
EachchangeofequityownershipofPFI/PPPprojectcompanies(bySPVshareholdersandsecondarymarketfunds)mustbedisclosedwiththenameofthevendorandpurchaser,thedateoftransferofownership,thepercentageofshareholding,thecostandtheexpectedprofit.
CompaniesandPartnershipsowningequityinPFI/PPPprojectsshouldberequiredtoidentifyeveryprojectandthepercentageofequityownedintheirannualreport.
EachchangeofequityownershipofPFI/PPshouldrequiretheapprovaloflocalauthoritiesandsuchnotificationsshouldberequiredtoincludethefulldetailsofultimateownershipandplaceofregistration.
FreedomofInformationlegislationshouldbeextendedtotheprivatesectorsoitisapplicabletoprivatesectorandsocialenterprisesengagedinthedeliveryofpublicservices,infrastructureprovisionandconsultancyservicestogovernment,localauthorities,theNHSandotherpublicbodies.
9TerminationofthePFI/PPPprogrammeThescaleofprofiteeringevidencedinthisreport,combinedwiththedetailedcriticismofPFIbythinkstanks,tradeunions,academicsandothers,makesapowerfulcaseforterminationoftheprogramme.
Itshouldbereplacedbydirectpublicinvestment.
SelectedbuyoutsandcontractterminationsPublicbodiesshoulddevelopastrategicapproachtothebuyoutofPFI/PPPprojectsortheterminationofcontractswheretheyarenotmeetingperformancerequirementsand/oruser/communityneedsarenotbeingmet.
ThecaseforthenationalisationofSPVsNationalisationofthelocalPFIprojectcompanies(SPVs)isthemosteffectivewayofstoppingthetradeinPFI/PPPequityandsecondarymarketfundsandreturningtopublicownership.
IncreasedpublicinvestmentThePFI/PPPprogrammeshouldbereplacedbyincreasedpublicinvestment–"…theaveragecostofallgovernmentborrowingis3%to4%,comparedwithanestimatedfinancingcostof7%to8%forallprivatefinanceprojects"(NAO,2015).
RadicalpublicmanagementNationalisationaloneisinadequate.
Anewpublicinvestmentinfrastructuremodelisrequired,togetherwithradicalpublicmanagementtorebuildthecapabilityandcapacityofthepublicsectortoplan,design,financeandmanageschools,hospitalsandotherpublicbuildingsandpublicservices.
OpposefreetradeagreementsTheabilitytoimplementtheaboverecommendationsisgravelythreatenedbyfreetradeagreementscurrentlybeingnegotiated,namelytheTradeinServicesAgreement(TISA),theTransatlanticTradeandInvestmentPartnership(TTIP),Trans-PacificPartnership(TPP)andtheCanadian-EuropeanComprehensiveEconomicandTradeAgreement(CETA).
Continuingoppositioniscriticallyimportant.
(1GBP=1.
176Euroor1Euro=0.
85GBPcurrencyconverterisusedinKeyFindings)TheKeyFindingsisalsoavailableinaseparatepdfontheESSUwebsite:10Part1ContextThisresearchreportisadetailedanalysisoftherapidgrowthofOffshorePFI/PPPsecondarymarketinfrastructurefundsthathavetakenoverormergedwithsmallerfunds,sothattheynowhaveadominantpositionintheownershipofPFI/PPPprojects.
SecondarymarketinfrastructurefundsareatypeofprivateequityfundowningtheequityinalargenumberofPFI/PPPprojectsthathavebeensoldbytheoriginalSPVequityowners.
EachfundhasaportfolioofequitystakesinprojectsindifferentsectorswithawideUKgeographicspread–andinsomecasesoverseas.
ThesaleofequityviasecondarymarketinfrastructurefundshasoutstrippedtransactionsofindividualorsmallbundlesofPFIprojects.
Thisdemonstratestheincreasingpoweroftheoffshoresecondarymarket.
TheESSUPPPEquityDatabasetrackedtransactions1998-2012andthePublicWealthMachinereportedonUKandglobaltrendsinprojectownership(Whitfield2012).
TheDatabaseiscurrentlybeingupdated.
StructureofthereportPart2examinesthegrowthofthesecondarymarketinfrastructurefundsandtheiracquisitionofPFI/PPPequity.
ItexplainswhytheownershipofPFI/PPPequityisimportantandconcludeswithasummaryoftheequityassetsofsecondarymarketinfrastructurefunds.
AppendixBhasadatabaseofthirty-threetakeoversofsecondarymarketfunds2003-2016.
Part3ofthereportdiscussestheimpactofneoliberalism,accumulationandthestate-businesspartnershipthatdevelopedtosustainthePFI/PPPmodelasaclassicmodelofcorporatewelfare.
Part4examineshowSPVsarefinanced,thejourneyofPFI/PPPfinanceandthelimitsofvalueformoneyassessments.
Itsummarisesdataonequitytransactions1998-2016andconcludeswiththeEdinburghSchoolsPPP1projectcasestudyrevealinghowequitywassold13timesbetween2001-2016.
OffshoresecondarymarketinfrastructurefundsnowdominatePFI/PPPequitytransactions.
MostsecondarymarketinfrastructurefundsarelistedontheLondonStockExchange,butregisteredinoffshoretaxhavens.
Part5examineshowthesecondaryfundsraisecapitaltoacquiretheequityinPFI/PPPprojectsandthescaleoftaxavoidance.
ItidentifiesthemajorshareholdersinsecondarymarketfundsandhowequityinthePFIprojectfortheHMTreasurybuildinginLondonis100%ownedbyoffshorefunds!
Part6describeshowdemocraticaccountabilityandtransparencyhasbeensystematicallyeroded.
Awebofsecrecyhasbeenwoventoconcealbasicdetailsofequitytransactionsandthesaleofsecondarymarketfunds.
Successivegovernmentshaveclaimedtheyareprivatemattersbetweenprivatecompanies,despitethefacttheyaretradinginpublicassetsultimatelyfinancedbypublicmoney.
ThepenultimatesectionhighlightsrecentglobalPPPequitytransactionsfollowingreportedtransactions1998-2012inAppendix5ofthePublicWealthMachinereport.
Finally,Part7makesaseriesofrecommendationstoaddressfutureownershipofPFI/PPPprojects,theneedfornewregulatoryregimesandtoremovethewebofsecrecyandmaketransparencyrealandeffective.
Publicinfrastructure'Publicinfrastructure'consistsofthenetworks,buildings,landandequipmentrequiredtosustainandimprovetheeconomyandqualityoflife.
Itincludesthefacilitiesneededforeducation,healthandsocialcare,recreationandculture,publichousingandcommunityamenities,thenaturalhabitat,environmentalprotection,transportation,utilitiesandcommunicationnetworks,publicsafety,democraticandpublicadministrationanddefence.
It11encompassesorganisationalstructures,intellectualknowledge,atrainedandskilledworkforceandoperationalsystemsinadditiontobuildings.
TheConservativeGovernmentintroducedthePFI/PPPmodelin1992.
Successivegovernments–Labour(1997-2010),Coalition–ConservativeandLiberalDemocrat(2010-2015),Conservative(2015-)andtheScottishNationalParty(2007-)haveimplementedthisprogramme.
TheslightlyamendedPF2modelwasintroducedinlate2012,butitdidnothingtoaddresstheprofiteeringandgrowthofthePFI/PPPsecondarymarketdespitewidespreadcriticism.
Itchangedthedebt/equityfroma90/10to80/20ratioandencouragedpublicbodiestobecomeminorityshareholdersinPFI/PPPprojects–basicallyencouragingpublicsectorbodiestojoinintheprofiteeringinsteadoftacklingthecoreissue.
ThisreportreferstoPFI/PPPprojectsasagenerictermthatincludesPF2projectssincetheyeffectivelyretainthePFIoriginalmodel.
Equityownershipcantransferintwoways–adirecttransactionwhenitissoldindividuallyoraspartofasmallbundleofprojectsbytheconstructioncompany,bank/financialinstitutionandfacilitiesmanagementcontractor.
Thesecondtypeoftransactionoccurswhenaninfrastructurefundsellssomeofitsassets,oracquiresanotherfund,andequityownershiptransferstothepurchaser.
Asecondarymarketinfrastructurefundisacompanyorlimitedpartnership,whosemainobjectiveistoacquireequityinPFI/PPPprojects.
FundsareoftenaprimaryinvestorinnewPFI/PPPprojects.
TheESSUdatabaseiscurrentlybeingupdatedandanewESSUResearchReportonbuyouts,terminationsandmajorproblemsinPFI/PPPprojectswillbepublishedshortly.
TwoacademicpaperswithStewartSmyth,SheffieldUniversityManagementSchool,havebeenpublished:'PPPequitysales–extendingfinancialisation'and'Maintainingmarketprinciples:Governmentauditors,PPPequitysalesandhegemony'.
Anhour-longBBCTVScotlandprogrammetelevision'ScotlandInvestigates'broadcaston22August2016revealedevidencethatover80%ofScotland'sPFIschoolsarepartlyorwhollyownedinoffshoretaxhavens.
Theprogrammeinvestigatedthecauseoftheclosureof17Edinburghschoolsforrepairsafterconstructionfaultswerefound.
Equityinthisprojecthadbeensold13times.
http://www.
bbc.
com/news/uk-scotland-3713561112Part2RapidgrowthofoffshoresecondarymarketinfrastructurefundsThissectionexplainsequityownershipinSPVs,whyequityownershipmatters,thedifferenttypesofinfrastructurefunds,theflowofPFImoneyandhowsecondarymarketfundsoperate.
SpecialpurposecompaniesandPFI/PPPfinancePFI/PPPprojectsareprimarilyfinancedbybankloansandequity(andsubordinatedebtprovidedbyequityholders)intheprojectcompany.
Thedebt/equityratiowasusually90/10until2013,whenitchangedtoan80/20splitwiththeintroductionofthePF2model.
APFI/PPPcompanypaysforconstructionandhardfacilitiesmanagement(repairsandmaintenance,utilitiesandenergy)overthecontractperiod.
Softfacilitiesmanagementservices(suchascleaning,catering,groundsmaintenance)maybeincluded.
Thelocalauthority,NHSTrustorgovernmentdepartmentpaysamonthlyunitarychargetothePFI/PPPprojectcompany,whichcoverstheconstructioncosts,thecostofprivatefinanceandtheprovisionofservicesbasedontheperformanceofthecontract.
PFI/PPPfinalbusinesscasesandcontractsdonotmakeanyassumptionsorforecastsaboutthepotentialchangeofownershipthroughthesaleofequityinthePFI/PPPprojectcompany.
Theexpectedrateofreturntoinvestorsisbetween12%and15%whenPFIcontractsaresigned(NationalAuditOffice,2012).
PFI/PPPprojectsusuallyhavetwocompanies–oneresponsiblefordeliveringthecontractplusaholdingcompanythatownstheprojectcompanyandanylaterprojects.
EquityinPFISPVcompaniesisusuallydividedbetweenthebankorfinancialinstitution,theconstructioncompanyandthefacilitiesmanagementcontractor.
PFISPVcompaniesareprivateUKregisteredcompaniesandareliabletopayUKcorporatetax.
Equitytransactionsincludethesaleofsubordinatedebtandarereleasedfromanyunfundedcapitalcommitments.
PFI/PPPprojectcompanyshareholdersnormallyagreetooffertheirco-shareholdersthefirstoptiontopurchasetheirshareswhentheywanttosellpartoralloftheirshareholding–thisalegalrequirementinthePF2contract.
Ifothershareholdersdonotwishtopurchasetheshares,thevendorwillseektosellinthesecondarymarket.
CompetitivetenderingisincreasinglyusedtosellPFI/PPPequity.
PublicsectorbodiesarenotifiedofachangeinPFI/PPPequityownership,butthisisusuallyastandardprocess.
Thereisnoevidencethatlocalauthorities,NHStrustsorgovernmentdepartmentshaveinvestigatedthesuitabilityoftheproposednewshareholderordeterminedtheirobjectiveandplans.
JustifyingthesaleofPFI/PPPequityPFI/PPPcompaniesandfinancialadvisersjustifythesaleofprojectequityratherdifferently.
Theriskprofileofaprojectreducesonceconstructioniscompletedandfacilitiesareoperational"…therebyincreasingthevalueoftheoriginalequityinvestment,makingdivestmentanattractiveoption"(CameronMcKenna,undated).
"Asaleofequityallowsoriginalprojectsponsorstorealisetheirinitialinvestmentandsofreeupcapitalfornewprojects,thusintroducingmuch-neededliquidityintothemarketandreducingthestrainresultingfromthelock-upofcapitalinprojectswhichareintheoperationalphase"(SempleFraser,2006).
ThisviewisreinforcedbyDeloitte(2013),NortonRose(2010)andPublicInfrastructureBulletin(2005).
13WhyPFI/PPPprojectownershipmattersTherearenineimportantreasonswhytheownershipofPFI/PPPcompaniesiscriticalforgovernmentsandpublicbodies,localauthorities,serviceusers,communityorganisations,staffandtradeunions:1.
Revenuefromthesaleofequitygoestotheparentcompanythatownstheequity,nottheSPV.
NoneofthegainsflowbacktoPFIschoolsandhospitalsortolocalauthorities,NHSTrustsandgovernmentdepartmentsthatultimatelypayforPFI/PPPprojects.
Nordoesthesecondarymarketgenerateadditionalvaluefortheeconomy.
2.
Annualprofits(orlosses)enabletheSPVtopaydividendstotheequityowners.
Whentheyareoffshoreinfrastructurefunds,theultimatebeneficiariesaretheirshareholders.
3.
TheownershipofequityiscriticallyimportantbecausetheSPVshareholdershavetheresponsibilityforimplementingthePFI/PPPcontract,projectperformanceandlong-termfacilitiesmanagementsuchasrepairsandmaintenance,provisionofutilities,respondingtoproblems,healthandsafety,managementofsub-contractorsandemploymentpoliciesandpractices.
Theyarealsoresponsibleforchargingpoliciesforinternalchangesandcommunityuseoffacilities.
4.
DemocraticaccountabilityiserodedbecausethesaleofPFI/PPPequitytransfersownershipoftheSPVfromtheoriginalcontractor,banksandfacilitiesmanagementcontractortosecondarymarketinfrastructurefunds,mostofwhicharelocatedinoffshoretaxhavens.
Fundslistedonstockexchangesareultimatelyaccountabletotheirshareholders.
Unlistedfundsareprivateequityfundsorpartnershipsaccountabletotheirinvestors.
Inbothcasesthechainofaccountabilityisconsiderablyextendedandweakenedineachlink.
ThesaleofequityisnotsubjecttodemocraticaccountabilityandpublicbodieshavenocontroloverwhichPFI/PPPassetsaresold,whenorwhoacquiresthem.
5.
ThemoreprofitthatisobtainedfromPFIprojectcompaniesthemorelikelythattheywilltakeaharderlineinmeetingtheircontractualobligationsintheremainderoftheproject,suchasmeetingrepairandmaintenancerequirementsandcarryingoutlifecyclereplacement.
Theymayalsotrytoincreaseincomeofcommunity/thirdpartyuseoffacilities.
6.
SweatingtheassetscouldleadtocontractualdisputestowardstheendofPFIcontractsifSPVcompaniesfailtomeettheircontractualobligationstofulfillifecycleandplannedmaintenanceinvestmentandhandoverbuildingsingoodcondition.
7.
Thescaleofprofiteeringinvalidatestheoriginalvalueformoneyassessment.
MostPFI/PPPprojectswouldnothaveproceededhadthisbeentakenintoaccount.
8.
Thesecondarymarketinfrastructurefundsareunlikelyto'accept'theconclusionofPFIprojectcontractsandforthemtoceasetobepartofthefundsassets.
TheyarelikelytotrytopersuadelocalauthoritiesandNHSTruststohaveafurthercontracttodealwithchangesintheuseofbuildings,additionalfacilitiesand/orpropertymanagementofotherpublicbuildings.
Theshareholdersofsecondarymarketfundsdemandhigherannualdividendsandtheexpectationisthatthisisachievedbygrowth,notareductioninassets.
9.
AstherateofPFI/PPPequitytransactionsincreases,itacceleratesfinancialisation,sothatmorepublicbuildingsbecomecommoditiestobeboughtandsold.
Theintrinsicvalueisnotinthehospitalorschool,butintheprofitanddividendsthatcanbeextracted.
Thismarketmakesnoreferencetotheneedsofpupils,parents,patientsandstaffortopublicpoliciesorpublicinvestment.
"Secondarytradinginprojectswillreinforcethepowerofcapitalovertherentierstateandwillhaveprofoundimplicationsforservicesanddemocraticaccountability.
Schoolsandhospitalswillbetradedlikeothercommodities"(Whitfield,2001).
14ValuecreationandvaluecaptureWithover17bnspenttradingSPVequity,whatisfuellingthisscaleofprofiteeringFirstly,riskusuallyaccountsforasignificantpercentageofthePFI/PPPcontract(forexampleriskaccountedfor16.
5%-70.
6%insixhospitalcontracts,Shaoul,2005)andthepricingofrisktransferisusuallycriticalindeterminingvalue-for-moneyandtoensurethePFIoptionischeaperthanthepublicsectorcomparator.
Onceconstructioniscompletedandbuildingsornetworksareoperational,thedegreeofriskissignificantlyreduced.
Inamajorityofcasestheprivatesectorhasonlyhadtodrawonpartoftheconstructionriskasaresultofdelaysandconstructionproblems.
Consequently,thevalueofequityincreases.
Constructioncompaniesfrequentlyre-valuetheirPFI/PPPassetsinannualreportsandaccounts,whichnormallysupportstheirshareprice.
Secondly,newschools,hospitalsandotherpublicbuildingsbecomeanintegralpartofpublicserviceprovisionandmeetsocialneedsandare,therefore,highlyvaluedaspublicgoods.
ThePFI/PPPsecondarymarketrecognisesthis'additional'value,butbecauseschoolsandhospitalsareconsideredfinancialcommodities,thisisreflectedinincreasedfinancialvalue.
'Valuecreation','valuecapture'and'valuemanipulation'arecoreelementsofabusinessmodel(Haslametal,2015)applicabletothePFI/PPPmodel,butundertakenbydifferentcompaniesratherthanasinglebusiness.
Thirdly,competitioninthesecondarymarketgeneratedhighratesofreturnintheearlytransactionsleadingtoanaverage29%rateofreturn1998-2012.
EvidencefromtheupdatedESSUPPPEquityDatabasetodateindicatesonlyamarginalreductionintheaveragerateofreturn.
Ofcourse,thereisnoguaranteethatthiswillbesustainedasmarketsriseandfall.
Finally,profit-seekingbytheoriginalSPVshareholderscontributedtohigherprices.
TheNationalAuditOfficesanctionedtherecyclingcapitalandmarketliquiditymodel:"ThedevelopmentofasecondarymarketforPFIequityhasbeenhelpfultoinvestorswhofundPFIdealsandmayalsobringbenefitstothepublicsector.
Furthermore,thesaleofequitycanalsohelpfuturePFIprojectswheretheproceedsarereinvestedinotherPFIdeals.
AsthesupplyofPFIequityincreasesthisshoulddrivedownthecostofequityandimprovethepricingofPFIdeals"(NAO,2006).
ThemajorconstructioncompaniessuchasJohnLaing,BalfourBeatty,Interserve,Carillion,Kier,Amey,LendLeaseandBilfingerhaveplayedaleadingroleindevelopingandbiddingforPFI/PPPprojects.
TheneedtorecycleinvestmenthasbeenwidelyusedasajustificationforthesaleofequityinPFI/PPPprojects.
However,constructioncompaniesandbankshavebeenselling,ratherthanacquiring,PFI/PPPequitystakes.
Threeexamplesillustratethisdevelopment.
Inautumn2012,Interserveplcsoldequitystakesin19projectstoDalmoreCapitalfollowedbyfurtherequitystakesinthesame19assetstoitspensionfundearlythefollowingyear.
Interservehadequityinonly6PFI/PPPprojectsbythe31December2015(InterserveAnnualReport,2015).
JohnLaingplcandtheJohnLaingInfrastructureFundhavebeeninvolvedintheacquisitionorsaleofPFI/PPPprojectequityin73instancesbetween2001-2016(includesmultipletransactionsinsomeprojects).
TheprimaryfocuswastheacquisitionofassetsbytheJLIFfromJohnLaingplc.
Bymid2016thelatterhadfewerthantenUKPFI/PPPprojectinvestments,buthadincreasedthenumberofoverseasprojects(JohnLaingplcAnnualReport2015andESSUDatabase).
BalfourBeattyplcwasinvolvedin30instancesofthesale/purchaseofequityinPFI/PPPprojectcompaniesbetween2003-2016,initiallypurchasingassets,butprimarilysellingprojectequityafter2006.
ByMarch2016ithadsignificantlyfewerPFI/PPPassetswiththreehealthcare,seveneducationandthirteenhighwaysprojects.
OtherconstructioncompaniessuchCarillionplc,KierGroupplc,Ameyplc,LendLeaseandBilfingerhavealsosignificantlyreduceddirectownershipofPFI/PPPprojectcompaniesthroughacollectivetotalof120transactions.
InfrastructurefundsoccasionallysellPFIproject15equityiftheydeterminethereisnorealisticscopeofincreasingitsstakeintheproject;itmayperceivesecondarymarketconditionsmaydeteriorateandhencedecidetosell.
SeveralconstructioncompanieshavetransferredPFIequitytotheirpensionfundinlieuofacashcontribution(Interserve,Costain,JohnLaing,Kier,AmecandVinci).
Inaddition,PFI/PPPshareholdingsownedbybanks,suchasBarclaysandLloyds,havebeensoldtolistedinfrastructureandprivateequitycompanies'3iandAberdeenAssetManagementrespectively.
ThereisnoevidencethatpublicsectorcostsofPFIprojectshavebeenreducedbythesaleofequityandanychangeinmarketliquidityismorelikelytohavebeenasaresultofsuperprofitgainsratherthanthenumberoftransactions.
Thesecondarymarketreflectstheshort-termismofconstructioncompaniesandfinancialinstitutions,whichwasnotevidentinthehypewhenPFIwaslaunchedin1992.
OnceSercoGroupcompletedthefirstequitytransactionin1998,theyacceleratedafter2003sothatbytheendof2005therehadbeen110transactionscosting1.
6bninvolving212PFIprojects.
TheESSUPPPEquityDatabaseidentified57PPPprojectswhereprofitdatawasavailable,whichrevealedanaverageannualrateofreturnof44.
5%(Whitfield,2012).
YettheNationalAuditOfficereportonthesecondarymarketthesameyearconsistedofblandstatementssupportingthesaleofPFIequityandthesecondarymarketandrevealednothingaboutthesuperprofitsintheearlytransactions(NAO,2012).
PublicmoneybutprivatecontrolTheHMTreasuryconsidersthesaleofPFI/PPPequitytobeatransactionsolelybetweentwoprivatecompaniesinwhichthegovernmenthasnoinvolvement.
Itclaimsthatachangeintheequityownershipoftheprojectispartofthenormaltakeoverormergerofcompaniesandisdifferentfromrefinancingprojects.
TheNationalAuditOffice(NAO)positionissummarisedintheirevidencetotheHouseofLordsinvestigationintoPPPprojectsandoff-balancesheetfinance:"Ingeneral,theshareholdersofaprojectcompanyareallowedtotradetheirPFIsharesfreely,astheywouldanynormalsharesofalimitedcompany.
Onlyoccasionallywouldapublicauthorityhaveasayinsuchtrades,suchasarighttoconsent(notunreasonablywithheld)incertainDefencecontracts.
Thepublicauthorityisnotapartytosuchtradesanddoesnotshareinanyproceeds.
Itisthereforeimportantthattheexpectedreturntotheshareholdersoverthecourseofthewholecontractbecarefullyscrutinisedduringthecontracttendering"(HouseofLords,2010).
Thelatterpartofthisstatementisunrealisticbecauseitwasimpossibleforprojectsthatreachedfinancialclosebefore2003totakeaccountofthesecondarymarketbecauseitonlyeffectivelyemergedafterthatdate.
Inaddition,itisvirtuallyimpossibletopredictwhichprojectsmaybeengagedinfutureequitymarkettransactionsoverthecourseofa25-40yearcontract.
ThejourneyofPFIfinanceTheflowofpublicmoneyisillustratedinFigure1,whichcommenceswithadecision,byapublicbodyorgovernmentdepartmenttousedirectpublicinvestmentortochoosethePFI/PPPoption.
ThelatterleadstoaPFI/PPPcompany,privatefinance,thesaleofequityandthegrowthofasecondarymarketwiththeemergenceofnewinfrastructurefunds.
Dependingonthelevelofprofitability,SPVcompaniespayannualdividendstotheirshareholders.
ThisleadstoanincreasingflowofdividendpaymentstooffshoreinfrastructurefundsastheyacquireSPVequity.
Theultimatebeneficiariesofthisprocessarethecorporateandwealthyindividualshareholdersofsecondarymarketinfrastructurefunds.
NoneoftheincreasedvalueofneitherPFI/PPPassetsnortheprofitsarereturned,orevensharedwiththepublicsector,whichisultimatelythefunder.
16Figure1:TheJourneyofPFI/PPPfinanceTypesofinfrastructurefundsTherearethreetypesofinfrastructurefunds,whicharefurtherdistinguishedbytheirstructure.
Firstly,infrastructurefundsthatspecialiseinPFI/PPPprojectsbothinprimaryinvestmentinnewprojectsandinacquiringprojectequityinthesecondarymarket.
Thesefundsaredividedintotwocategories–listedfundsthatarelistedontheLondonStockExchange(LSE)andraisecapitalbyissuingadditionalsharesontheLSE;andunlistedfunds;privatepartnershipfundsthatraisecapitalfromtheirpartnersandotherinstitutionalinvestors.
TheoriginsofsecondarymarketfundsarediscussedinPPPWealthMachinep15-16(Whitfield,2012).
Secondly,privateequityinfrastructurefundsthatareeitherpartofglobalprivateequitycompaniesthathaveotherdivisionssuchasproperty,energy,andprivateequity–companiesinavarietyofsectorswhichareacquiredto'turn-around',sellandprofit(Hall,2006),ortheyaresubsidiariesofbanks.
Somearelistedcompaniessuchas3i,AberdeenAssetManagementandTetragon,butothersareprivatecompaniesthatraisecapitalthroughequityfunds(Table1).
Thirdly,listedcompaniesinvolvedinLocalImprovementFinanceTrust(LIFT)projects,aPPPprogrammetodeveloptheUKprimaryhealthcareinfrastructure.
SomesecondarymarketinfrastructurefundshaveacquiredequityinLIFTprojects,butmostcompaniesthathavetradedLIFTequityareprimaryhealth/housing/socialcarecompaniesandpropertycompanies(oftenRealEstateInvestmentTrusts(REITs)thatprovidetaxbenefitsif90%ofaREIT'staxableincomeisdistributedinannualdividendstoshareholders).
Thesecompanieshave17alsobeeninvolvedinbuildingandacquiringportfoliosofprivatelydevelopedsurgeriesandmedicalcentres.
Table1:TypesandexamplesofprivateequityinfrastructurefundsPFI/PPPInfrastructurefunds:predominatelysecondary,plusprimaryinvestmentListedfundsHICLInfrastructureCompanyLtdJohnLaingInfrastructureFundLtdBBGISICAVS.
A.
InternationalPublicPartnershipsLimitedUnlistedfundsSemperianPPPInvestmentPartnersHoldingsLtdDalmoreCapitalPartnersPrivateEquityInfrastructureFunds:usuallyoperateglobally,investinlargerprojectsandhaveprimaryandsecondaryinvestmentsPrivateequitycompaniesorlimitedpartnerships3iGroupplcAberdeenAssetManagementTetragonFinancialGroupBrookfieldAssetManagementGlobalInfrastructurePartnersBlackstoneGroupSubsidiariesofbanksGoldmanSachsInfrastructurePartnersMorganStanleyInfrastructurePartnersUBSInfrastructureFundDeutscheGlobalInfrastructureFundMacquarieInfrastructurefundsLIFTcompanyconsortia:rangefromsecondarymarketinfrastructurefunds,primaryhealth/housing/socialcarecompaniesandpropertycompanies(RealEstateInvestmentTrusts–REITs)AshleyHouseplc,FulcrumInfrastructure(Meridiam)AssuraGroupLtdListedandunlistedfundsListedfundsaretradedonstockexchanges,usuallyLondon,followingapublicflotationofshares.
Theyusuallyhavesomeshareholderswithmorethana5%shareholding,butmostshareholdershaverelativelysmallstakes.
SecondarymarketinfrastructurefundslistedontheLondonStockExchangearelaunchedviaaninitialshareoffertopotentialinvestors.
Forexample,HSBCbanklaunchedtheHICLInfrastructureFundwitha250mshareofferin2006,whichsubsequentlyraisedafurther949.
4mintwelvefurthershareoffersuptomid2016tofundthecontinuedacquisitionofPFI/PPPassetsandexcludednumeroussmallshareofferstoraisecapitalfortherunningofthefund(HICLRegulatoryNews).
TheJohnLaingInfrastructureFund(JLIF)waslaunchedinNovember2010witha290msharelistingfollowedbya27.
4mnewshareplacementinApril2011anda130.
7missueofnewsharesinOctober2011.
Furtherissuesofnewshareshaveraisedadditionalcapital.
TwoyearslatertheBilfingerBergerGlobalInfrastructure(BBGI)waslistedontheLondonStockExchangebytheBilfingerGroup,Germany,raising270.
0mwithacapitalgainof50.
0m(BilfingerBergerGlobalInfrastructure,RNS15/11/2013).
Unlistedfundsareusuallylimitedpartnershipsthatdonottradeonthestockexchange.
Theyare,ineffect,privateequityfundswithcorporateandwealthyinvestorsthatinvestinPFI/PPPprojects.
SemperianPPPInvestmentPartnersHoldingsLimitedandInnisfreeLimited(seepage36)areexamplesofunlistedfunds.
ThePFI/PPPsecondarymarkethasexpandedthroughincreasedinvestment,thecontinuedsaleofPFIequitystakesandtheestablishmentofnewsecondarymarketfundsbecauseinfrastructureassetsareregardedas:"attractivereturnslowsensitivitytoswingsintheeconomyandmarketslowcorrelationofreturnswithotherassetclasses18long-term,stableandpredictablecashflowsgoodinflationhedgelowdefaultrates"(Investec,2012)HowsecondarymarketfundsoperateThesecondarymarketinPFIassetshascertainuniquecharacteristics.
Theassethasalimitedlifedictatedbythecontractperiod,usually25-30years.
Thecontractusuallyincludesarequirementtodeliverhardfacilitiesmanagementservicessuchasrepairsandmaintenance,provisionofutilitiesandfrequentlysoftfacilitiesmanagementservices,suchascleaning,cateringandgroundsmaintenance.
Secondarymarketinfrastructurefundsraisecapitalfromtheirexistingornewshareholderstoacquireadditionalassets.
Theyissueashareprospectus,oftenannually,whichsetsouttheamountofcapitalrequiredandtheassetswhichitintendstoacquire,particularlysecondaryfundsthatderivedfromPFI/PPPconstructionorfinancecompaniessuchasJohnLaingInfrastructurefundandHICLinfrastructure.
SecondarymarketinfrastructurefundsmaysellequityinPFI/PPPprojectsiftheydecidetofocusondifferentsectors,iftheyconcludethattheassetwillnotdeliveradequatelong-termprofitsand/ortheydeterminethatareunabletoincreasetheirstaketoobtainmajorityorfullcontrol.
Secondarymarketinfrastructurefundfinancehasseveralkeyelements.
Firstly,privateequityinpublicinfrastructurereplacespublicfinanceofpublicinfrastructure.
Thisincreasedtheroleoffinancialadvisersandlawyersinundertakingduediligence,valuationofassetsandtheroleofconsultantsinpreparingoutlineandfullbusinesscasesandtheprocurementprocess,particularlyevaluationandjustifying'valueformoney'.
Thisisonasignificantlylargerscalethaniftheprojecthadbeenfinancedthroughpublicinvestment.
Secondly,thetradingofPFIequityintheexpandingsecondarymarketandfrequenttransfertooffshoreinfrastructurefundsfortaxreasons.
Thirdly,thesaleofsecondarymarketfundswithlargebundlesofPFIequityholdingstradedsince2003hasgrownintoakeysectionofthesecondarymarket.
"TheInvestmentAdvisergeneratedsignificantvaluethroughthesaleoftheCompany'sholdingsinAlmaMater,I2andAlphaSchoolsatmaterialupliftsovercostin2008,2009and2013respectively,generatinganaggregateIRRof30%"(3iInfrastructureFund,2015).
Fourthly,PFIequityholderssoughtinterestratetotrytoreducetheirriskofinterestrises,whichturnedintoanothersourceoffeesforbanksandfinancialinstitutions(Hildyard,2016).
Swapsprotectagainstincreasedinterestrates,buttheypenalisethepurchaserofswapsifinterestratesfall,astheydidsincethefinancialcrisisin2008.
Swapsincludeterminationpenaltieswhenapurchaserseekstoterminatethemandgainthebenefitofmuchlowerinterestratesthathaveprevailedformanyyears.
Fifthly,refinancingofPFI/PPPprojectsmayoccuronceconstructionhasbeencompletedandbuildingsareoperationalandriskshavebeensignificantlyreduced.
Financialgainsfromrefinancinghavetobesharedwiththepublicsector,butnosuchlegalobligationappliestothesaleofSPVequity.
Refinancingprovidesanothersourceoffinancialandlegalfees.
SomeSPVcompanieshaveimposedneworincreasedchargescontractsforcommunityuseoffacilitiesinadditiontooften-punitivechargesforchangingtheuseofrooms,movingfurniture,providingmoreelectricalpowerpointsforincreasedcomputeruse,whereitexceedsthespecification.
ThisanalysisexcludesthetradingofPFIprojectcompaniesbetweensubsidiarycompaniesofthesameparentcompany.
TheextentofthisinternaltradingofPFIcompaniesisdifficulttoquantifybecauseoftheveilofsecrecy.
TheUKCoalitionandConservativegovernmentssoughttorenegotiatePFIcontractstoobtainsavingsatthepeakoftheausterityprogramme,butequityownerswereveryreluctant,andrelativelysmallchangeswereachieved.
19Adegreeofsecondarytradingispresentinmostmarketstoallowequityownerstosellaninvestmentforfinancialand/oroperationalreasons.
Thisisfacilitatedbyhavingrelativelylowtransactioncosts,adegreeofcompetitiontoachieveafairpriceandtoprovidelegallegitimacytochangesinownershipthroughthetransactionprocess.
Exceptfortheinitialpostconstruction-earlyoperationalstagewhenconstructionriskissignificantlyreducedandSPVequitywillhaveincreasedinvalue,thereisnofurtherstageofthecontractthatcouldincreasethevalueoftheequity.
Therefore,theincreasedvalueofequitydemonstratedinsecondarymarkettransactionshasbeenobtainedprimarilythroughafinancialmodelofaccountingandtaxavoidancemeasuresdesignedtomaximiseprofits.
TimelineKeyeventsinthegrowthofthesecondarymarketaresummarisedinTable2.
Table2:TimelineofkeydevelopmentsYearKeydevelopments1995InnisfreeLimitedestablished2001SecondaryMarketInfrastructureFund(SMIF)formed2003SMIFsoldtoStarCapitalpartners,BanksofScotlandandAMPCapitalInvestors2006HICLInfrastructureFundlistedonLondonStockExchange2007SMIFsoldtoLandSecuritiesGroupLimited2007FirstacquisitionsbyEquitixLtd2008LandSecuritiesestablishesTrilliumInvestmentPartnersretaining10%equity2009TelerealacquiresLandSecurities'Trilliumstake&sellsittoSemperianInvestmentPartners2009LiquidationofBabcockBrownPublicPartnerships–assetssoldtoINPP2009DalmoreCapitalfounded2010JohnLaingInfrastructureFundlistedonLondonStockExchange2011BilfingerBergerGlobalInfrastructureFundlistedonLondonStockExchange2013BarclaysBanksellsinfrastructurefundsto3i2014ScottishWidowsInvestment(Lloydsbank)soldtoAberdeenAssetManagement2015TetragonFinancialGroupacquiresEquitixHoldingsSource:Table18.
20Part3TakeoversofsecondarymarketinfrastructurefundsThissectionidentifiesthefundsengagedinthesaleandacquisitionofsecondarymarketinfrastructurefunds2003-2016.
IthighlightsthehighconcentrationofoffshoreownershipofPFI/PPPschoolsinScotlandandhowequityintheEdinburghPPP1projectwassoldthirteentimesbetween2003-2014.
3iGroupconsolidatesDetailsof33takeoversofsecondarymarketinfrastructurefundssince2003,involvingthepurchaseofequityin1,151PFI/PPPprojectcompaniesatacostof7.
4bn,areprovidedinTable17(AppendixB).
3iInfrastructureplcsignificantlyincreaseditsroleinthePFI/PPPsecondarymarketwiththeacquisitionofBarclaysBankinfrastructurefundsandjointventureswithElginInfrastructureFundandDalmoreCapitalFund.
TheBarclayBankassetstotalled331investmentsof17bnbysixfunds(Table3).
Projectdetailswerenotdisclosed,but3icurrentlyhadanestimated100PFI/PPPassetsintheUKaftertheacquisitions.
Table3:Barclaysinfrastructurefundsacquiredby3iGroupplcFundDescriptionVintageNumberofinvestmentsTotalcommittedBII(1)Buyandholdyield-basedfundfocusingonequity/subordinateddebtinvestmentsinPPPandotherinfrastructure200896680mBEIFII(2)CapitalgrowthfundfocusingonPrimaryandSecondaryPPP200650280mAlmaMaterFundCapitalgrowthfundfocusingonstudentaccommodationprojects20031181mInfrastructureInvestors("I2")CapitalgrowthfundfocusingonSecondaryPPP200385450mBarclaysEuropeanInfrastructureFundCapitalgrowthfundfocusingonPrimaryPPP200168178mBarclaysUKInfrastructureFundCapitalgrowthfundfocusingonPrimaryPPP19982173mSource:3iGroupplcNotes:1.
FormerlyBarclaysIntegratedInfrastructureFund:2.
FormerlyBarclaysEuropeanInfrastructureFundII3iInfrastructureplchasasecondarymarketfundstrategy:"strategiesforinvestmentintheassetbasetosupportprofitablegrowthoverthelongterm;continuedimprovementsinoperationalperformance;disciplinedcashmanagementtodriveyieldforshareholders;efficientcapitalstructurestooptimisefundingcostsandfinancialrisk;andgrowththroughacquisitionsifsuitableopportunitiesarise.
Wewillsellinvestmentsfromtimetotimewherethisgeneratessignificantadditionalvalueforshareholders"(3iInfrastructureplcAnnualReport,2015).
OthersignificanttransactionsofsecondarymarketfundsincludedtheTetragonFinancialGroupLimitedacquisitionofEquitixHoldingsCabotSquareCapitalLPinFebruary2015,whichisregisteredinGuernseyandtradedontheEuronextAmsterdamexchange.
Ayearearlier,AberdeenAssetManagementacquireScottishWidowsInvestmentPartnershipfromLloydsBankingGroup.
ScaleofoffshoringTwelveoffshoreinfrastructurefundshaveequityownershipin547PFI/PPPprojectsintheUKbymid-2016(Table4).
Takingaccountthatsomeprojectshaveequityownedbymorethanoneoffshorefund,thetotalnumberofprojectsisestimatedtobe500.
Therefore,twelveoffshorefundshaveequityin74%ofthe735currentUKPFI/PPPprojects.
21Furthermore,theoffshorefundshaveasignificantinfluencewhentheyownamajorityoftheequityinanSPV.
Ninefundsown50%-100%oftheequityin334PFI/PPPprojectsor45.
4%ofPFIprojectsintheUK(AppendixA,Table17).
Table4:PFI/PPPInfrastructurefundslocatedintaxhavens(September2016)CompanyRegistrationinTaxhavenNo.
ofUKPPPassetsNo.
ofPPPinScotland(includedinUKtotal)No.
ofPPPinothercountriesNotesSemperianPPPInvestmentPartnersHoldingsLimited(Unlistedfund)Jersey8641PreviouslyLandSecuritiesTrilliumandtheSecondaryMarketInfrastructureFundHICLInfrastructureCompanyLimited(Listed:London)Guernsey911012LaunchedbyHSBCBank,whichisnolongerasignificantshareholder.
TetragonFinancialGroupLimited(Listed:NYSEEuronext,Amsterdam)Guernsey8152EquitixHoldings.
Excludes10energyprojects.
3iInfrastructureplc(3iGroupowns34.
1%)(Listed:London)Jersey65195Includesprimaryinvestmentin5PPPprojectsinScotland,NetherlandsandFrance,pluslargeinfrastructureprojects.
InternationalPublicPartnershipsLimited(INPP)(Listed:London)Guernsey60217Excludestransportandenergytransmissionprojects.
(formerlyBabcockBrownPublicPartnershipsLtd2006-09)JohnLaingInfrastructureFundLimited(JLIF)(Listed:London)Guernsey5257JohnLaingGroup(HendersonGlobalInvestors)reducedits18.
2%shareholdinginJLIFtounder3%by2014.
AberdeenAssetManagement(Listed:London)AberdeenInfrastructurePartnersLP(registeredinGuernsey)Guernsey4830PreviouslyUberiorInfrastructureInvestments&BankofScotlandInfrastructureInvestments,acquiredbyAberdeenAssetManagementfromLloydsBankin2013.
BBGISICAVS.
A.
(Listed:London)Luxembourg22315PreviouslyBilfingerBergerGlobalInfrastructurebutBilfingerSEsolditsstakeinBBGIin2013.
LendLeasePFI/PPPInfrastructureCIHLHoldingsLimited(Unlistedsubsidiary)Jersey1900Ultimateparentundertaking:LendLeaseCorporationLimited,AustraliaGCPInfrastructureInvestmentsLimited(GravisCapitalPartnersLLP,advisers)(Listed:London)Jersey1420InvestmentsinGrosvenorPFIHoldingsLimited,CivicPFIHoldingsLtdandCardaleInfrastructureInvestmentsLtd(3)UnitedMedicalEnterprisesGroupLimitedBC343764(registeredinBritishVirginIslands)BritishVirginIslands510UMEGroupLimitedLiabilityPartnership(UnlistedfundregisteredUKMeridiamInfrastructureFinances.
a.
r.
lLuxembourg4041FulcrumInfrastructureGroupLimitedequityinLIFTprojectsTotal54754100Source:ESSUGlobalPPPEquityDatabase2016(forthcoming),AnnualReports,RNS&infrastructurefundwebsites,June2016.
Note:Thetotalnumberofprojectsincludesasmallnumberwithequityownershipbymorethanonefund.
Equityin979PFI/PPPprojectcompanieshasbeensoldbetween1998andmid2016inindividualandsmallbundles.
Equityinafurther1,151projectshasbeensoldasaresultofthesaleofsecondarymarketinfrastructurefunds.
Therearecurrentlyabout735PFI/PPPprojectsintheUK(HMTreasury,2015andScottishGovernment2016data).
Afurther100projectshaveconcluded,orbeensubjectofabuyoutorterminationgivingatotalof835projects.
Ifthesaleofequityin979projectsinindividualorsmallbundlescitedintheESSUdatabaseiscombinedwiththesaleofequityinsecondarymarketfundtakeoversthatinvolved1,151PFI22projects,therehavebeen2,130PFIequitytransactions(Table5).
Onaverage,equityineveryPFIprojecthasbeensold2.
5times.
Inpractice,equityinsomeprojectshasnotyetbeensold,butthismeansthatsomeprojectshavebeensoldmorefrequently(seetheEdinburghschoolscasestudybelow).
Table5:TotalequitysalesinPFI/PPPprojectcompanies2000-2016YearSaleofequityinPFI/PPPprojectcompaniesinESSUdatabase(includingamendmentsto2012editionSaleofequityinPFI/PPPprojectcompaniesasaresultofthesaleofsecondarymarketinfrastructurefunds(seeTable18)CombinedTotalofthetwotypesofequitysalesNumberofPFIprojectsCostofequitytransactionsmNumberofPFIprojectsCostofequitytransactionsmNumberofPFIprojectsCostofequitytransactionsm20007n/a007n/a200126205.
40026205.
420023n/a003n/a200331286.
023123.
854409.
8200494372.
30n/a94372.
3200555756.
431150.
086906.
420061121,234.
31020.
01221,254.
3200766594.
91131,084.
71791,679.
9200847252.
21541,083.
02011,335.
2200966514.
63881,580.
94542,095.
5201080790.
20080790.
22011110440.
426143.
4136583.
82012**98**1,210.
3261,437.
81242,648.
12013**84**560.
6131933.
02151,493.
62014**67**1,176.
639629.
01061,805.
62015**24**487.
676160.
4100648.
02016***9**112.
8**19**18.
4**28**131.
2Subtotal**979**8,994.
6*1,036*7,364.
4*2,015*16,359.
0***115***736.
0***115***736.
0Total**979**8.
994.
61,1518,100.
42,13017,095.
0Sources:Table4,PPPWealthMachine,2012;*excludes6transactionsinvolving115PFI/PPPprojectswherethecostwasnotdisclosed.
Includessalesofequityinsomeprojects.
**Draftdatafortheseyears.
***estimatebasedonaveragecostof6.
4mperprojectinthesaleofequityin1,036projects.
SeealsoTable18.
TherateofreturnreportedintheESSUPPPDatabaseconcerningPFI/PPPequitytransactionsiscalculatedfromcorporatedata.
Itisnotbasedonbusinessoracademicforecasts.
Therateofreturndataisbasedon'valuationoncommitment',whichtreatsthewholecommitmentasifitwasinvestedwhenaPPPissignedandaspecialpurposecompanybeginsoperation(NAO,2012).
Itassumesthattheentirecommittedinvestmentisatriskfromthetimethecompanybeginsoperating.
Thisisawidelyusedmethodandisusedinthisstudy.
The'valuationoncommitment'underestimatestherateofreturnby5%-7%(NAO,2012).
Therateofreturnfiguresinthisreportunderstatesthereallevelofprofitandreturn.
Therateofreturnisobtainedwiththeequation:(return–capital)dividedbycapitalx100%dividedbythenumberofyearsbetweenthedateoffinancialcloseandthesaleofequity.
EquityownersinPFI/PPPprojectsoftenmakeadditionalloanstotheSPVcompany,termedsubordinatedebt,whicharesupplementaltothemainloansmadebyfinancialinstitutions.
Thesubordinatedebtisusuallysoldaspartofequitytransactions,butthelackofdatameansthatisnotpossibletoidentifytheeffectofthisdebtontherateofreturn.
Draftanalysisof110transactionsintheESSUPPPEquityDatabaseincludes277PFI/PPPprojectsbetween1998-2016,whichhadanaverage28%rateofreturn,amarginalreductionfromthe29%rateofreturn1998-2012.
Thereisscantinformationabouttheprofitsgainedinthesaleofsecondarymarketinfrastructurefundswithdataavailablefromtwooutof33transactions.
TheLendLeaseandAssuratransactionsin2016and2014resultedin24.
5%and46.
9%profitsrespectively,butarateofreturncouldnotbecalculatedbecauseofthelackofdata.
23Thethree-wayprofitgainequitytransactions:Firstly,theaverage28%rateofreturnfromthesaleofequitybytheoriginalSPVshareholders,Secondly,therateofreturnfromthesaleofsecondarymarketfundassetsisassumedtobe12%-25%.
Thirdly,shareholdersofsecondarymarketfundsreceiveannualdividendsof6%-8%.
Thusthetotalannualrateofreturncouldbebetween45%-60%-threetofivetimestherateofreturninPFI/PPPfinalbusinesscases.
TypesofacquisitionsNinesecondarymarketinfrastructurefundtransactions(thesaleofsixsecondarymarketinfrastructurefundsandthreebank-ownedinfrastructurefunds)accountedfor75%ofthecostoffundtransactions2003-2016(Table6).
Privateequityfirmsacquiredthelargestnumberofinfrastructurefunds(5)andthelargestnumberofPFI/PPPprojects(217).
Althoughbank-ownedinfrastructurefundsacquiredothersmallerfundsuntil2009,thisprocesslaterreversedwhenbankssoldtheirinfrastructurefundsafterthefinancialcrisis.
Newbankingregulationsrequiredbankstobemoreresilienttofinancialshocks,improveriskmanagement,governanceandtransparency(Tables6and7).
Table6:SaleofsecondarymarketinfrastructurefundsTypesofsecondarymarketfundtransactionsNoofprojectsTotalcost(m)EntireinfrastructurefundsEquitixSecondaryMarketInfrastructureFund/Trillium(4)PFIInfrastructureCompanyUniversityPartnershipsInvestorsintheCommunityNoblePFIFund*540*3,824.
4Bank-ownedInfrastructurefundsBarclaysIntegratedInfrastructureFundandotherfundsHalifaxBankofScotlandScottishWidows(Lloyds)1891,667.
1ConstructionCompanyRobertsonCapitalProjects/ElginInfrastructure2173.
0Flotationofinfrastructuresubsidiary3iInfrastructure8660.
8ReceivershipBabcockBrown50n/a21othertakeovers2652,474.
7Total1,1518,100.
0Source:AppendixB,Table10;*includesmultipletransactionsofsomeprojectsTable7:PurchasersofsecondarymarketinfrastructurefundsCategoryofacquiringcompanyNooftransactionsNoofprojectsTotalcost(m)Privateequityfirm2165*975.
4Pensionfund42171,905.
1Listedoffshoreinfrastructurefund340*288.
8Bankinfrastructurefund5197*1,667.
1Propertycompany42971,887.
4Financialinvestmentcompany176160.
4Otherinfrastructurefunds14159**1,215.
8Total331,1518,100.
0Source:AppendixB,Table10;*onetakeovercostnotdisclosed;**twotakeovercostsnotdisclosedSectoranalysisTwothirdsoftheprojectsthathave50%-100%oftheirequityownedbyoffshoreinfrastructurefundsareeducationandhealthprojects(Table17).
Educationandhealthprojectsaccountfor67%ofPFI/PPPprojectsinwhichoffshoreinfrastructurefundshave50%-100%oftheprojectequity(Table8).
Theyaccountfor41%ofallcurrentPFIprojects(HMTreasury,2016).
Differencesemergeintheothersectors,forexampleonlyTetragonandJLIFhavesignificant24equityinstreetlightingcontracts,JLIFdominateinsocialhousingprojects,andthreefunds–HICL,3iandINPP-havesignificantequityincriminaljusticeprojects.
Table8:SectoranalysisofoffshoreequityownershipSectorNoofprojectsSectorNoofprojectsHealth116Otheraccommodation10Education108Leisure9Criminaljustice33Fire&Rescue7Streetlighting18Libraries5Roads14Defence3Socialhousing10Water1Total334Source:Table17inAppendixATwofunds,GCPandINPP,have100%and84%oftheirequityholdingsrespectivelywithonehundredpercentequityownership.
OftheotherfundsJLIFhas65%inthiscategory,Semperian55%,3i53%,BBGI47%,HICL39%andTetragonwith38%.
Table8alsoillustratesthatthesaleofequityisspreadacrossvirtuallyalltypesofpublicbuildings.
ThereisawidevariationintheaveragecostofeachPFI/PPPequity,becausedifferentpercentagesofequityweresold,someinvolvedjointventures,projectshadbeenoperatingforavariedlengthoftimeandtransactionsrangedfromthepartsaleofaninfrastructurefundsPFI/PPPassetstothetakeoveroftheentirefund,whichinsomecasesincludedstaff.
The'maturity'orstageofdevelopmentofthesecondarymarketmightbeanotherfactor.
CostcomparisonsarealsodifficultbecauseofthelackoffinancialdisclosureresultingingapsinTable17.
However,acomparisonofthreereasonablycomparabletransactionsrevealeda114%increaseintheaveragepricebetween2003and2013(Table9).
Table9:AveragecostofPFI/PPPequityYearVendorSoldtoNo.
ofprojectsPrice(m)Averagecostperproject2013InvestorsintheCommunityJohnLaingInfrastructureFund1112311.
182007PFIinfrastructureCompanyInfrastructureInvestorsLP221567.
092003BabcockBrownLtdStarCapitalPartners,BanksofScotland&CapitalInvestments231205.
22Source:Table17.
TransactioncostsThe455SPVtransactions,involvingnearlyathousandPFI/PPPprojectsand33secondarymarketfundtransactions2000-2016,incurfeesforbuyingandsellingequity,suchasduediligence,financialadvisers,lawyersandfeestoSPVmanagementcompanies.
ThereislittleinformationpubliclyavailableonthescaleoftransactioncostsandwhethertheyareincludedorexcludedfromRNSandAnnualReportstatements.
Assumingamodest2%feeforeachofthe455transactions(2%of8,994m)andanaverage3%feeforthe33largersecondarymarkettransactions(3%of7,945m)thisgivesatotalof420m.
ItisanothersourcefortheextractionofprofitfromPFI/PPPprojects.
EdinburghschoolscasestudyEquityintheEdinburghSchoolsPPP1project(17schoolsclosedforseveralweeksin2016duetoconstructionfaults)hasbeensold13timesbetween2003and2014.
Fivetransactions(shadedinTable10)ledtothesaleofequitywhenasecondarymarketfundwassoldtoanotherfundorabundleofPFIequitywassoldthatincludedtheEdinburghPPP1project.
25Table10:EdinburghPPP1schoolssold13timesSaleNo.
YearVendorPurchaser%equitysoldPrice2001Originalshareholders:AmeyVentures,MillerConstruction,QuayleMunroPFIFundandUberiorInfrastructureInvestments(BankofScotland)12003AmeyplcJohnLaingplc30.
0n/a(1)22004QuayleMunroHoldingsPFIFundPFIInfrastructureCompany10.
0n/a(2)32005ExistingshareholdersJohnLaingplc11.
4n/a(3)42005MillerGroupSecondaryMarketInfrastructureFund30.
0n/a(4)52006n/aPFIInfrastructureCompany7.
11.
662006JohnLaingplc(HendersonGlobalInvestors)SecondaryMarketInfrastructureFund14.
2n/a(5)72007StarCapitalsellsSecondaryMarketInfrastructureFund(renamedTrillium)withshareholding100PFIprojectsLandSecuritiesn/a*927.
082007PFIInfrastructureCompanyplcsellsshareholdingsin22PFIprojectsBarclaysBank,SocieteGeneraleand3iplcjointventuren/a*156.
092008BankofScotlandsells49.
9%shareholdingin47projects4UKpensionfundsn/a*217.
1102009JohnLaingplcJohnLaingplcPensionFund10.
05.
9112009LandSecuritiessellsTrillium(Shareholdingsin108PFIprojectsTelereal(namechangedtoSemperianPPPinvestmentPartnership(Jersey)n/a*750.
0122011JohnLaingplcandJohnLaingPensionTrustLtdJohnLaingInfrastructureFund(Guernsey)20.
0n/a(6)132014LloydsBankssellsScottishWidowswith32PFIprojectsAberdeenAssetManagementplc(EdinburghprojectequityownedbyAberdeenInfrastructure(No.
3)LtdregisteredinGuernsey)n/a*606.
62016Shareholdersin2016:AlloffshoreSemperianPPPInvestmentPartners(Jersey)32.
9%AberdeenInfrastructure(No.
3)Ltd(Guernsey)30%JohnLaingInfrastructureFund(Guernsey)20%3iInfrastructureplc(Jersey)17.
1%Sources:ESSUPPPEquityDatabase2012&2016,CompaniesHousesearches,infrastructurefundwebsites,September2016.
Notes*TotalpricepaidforallPFIprojects.
(1)Partofabundleof8projectswith45.
2%averageannualrateofreturn(2)Partofabundleof10projectswith39.
2%averageannualrateofreturn(3)nodetailsavailable(4)Partofabundleof3projectsbutnodetailsavailable(5)Partofabundleof2projectswith5.
8%averageannualrateofreturn(6)Partofabundleof2projects,butnodetailsavailable.
ScottishPFI/PPPschoolsfullyorpartlyownedoffshoreAnalysisofequityownershipinScotland'sPFI/PPPeducationprojectsrevealsthat87.
5%(280)ofthe320schoolsarecurrentlypartlyorwhollyownedbyoffshoreinfrastructurefunds(Table11).
Equityinnearlyhalftheschoolsis100%ownedoffshore.
Equityisconcentratedinfourinfrastructurefunds-3iInfrastructureplchasequityin87schoolsfollowedbyJLIFwith65,HICLwith59andTetragonwith37.
Theremaining40PFIschoolsaredividedinto28operationalprojectsand12schoolsunderconstruction.
EquityintheBalfronandEastRenfrewshirePPP1projects(4schools)is100%ownedbyfundsmanagedbyLyceumCapitalPartnersLLP,aprivateequityandventurecapitalpartnership.
FiveotheroperationalPFIprojects-Dumfries&Galloway,EastRenfrewshirePPP2,FifeSchoolsPPP1,MidlothianPPP1andWestDunbartonshire–provide24schools.
Inaddition,afurther12projectstoprovide12schoolsareunderconstruction(ScottishGovernment,2016).
26Table11:NumberofScottishPFI/PPPschoolsfullyorpartiallyownedoffshorePFI/PPPprojectsandpercentageownership(%)OwnerNo.
ofschoolsPrimarySecondarySpecialCollegeAberdeenCitySchools(100)GCP72AberdeenshireSchoolsPPP1(100)3i22AberdeenshireSchoolsPPP2(70)3i51AngusSchools(100)3i61Argyll&ButeSchools(100)3i28AyrAcademy(56)Tetragon1AyrshireCollege,Kilmarnock(100)3i1ClackmannanshireSchools(100)BBGI3Dumfries&Galloway(36)Tetragon11DundeeSchools(100)3i62EastAyrshireSchools(45)3i4EastDunbartonshireSchools(50)Semperian6EastLothianSchools(90)3i6EdinburghSchoolsPPP1(20)&(30)JLIF&AAM1052EdinburghSchoolsPPP2(100)HICL26FalkirkSchoolsPPP1(100)Semperian5FalkirkNPDSchools(29.
3)HICL4FifeSchoolsPPP2(30)&(30)HICL&AAM91GlasgowSchools(20)JLIF29HighlandSchoolsPPP1(100)GCP22HighlandSchoolsPPP2(100)HICL641InverclydeSchools(85)Tetragon22InvernessCollege(50)Tetragon1MidlothianSchoolsPPP2(100)3i8MoraySchools(100)INPP11NorthAyrshireSchools(30)3i4NorthLanarkshire(50)Tetragon213NorthLanarkshire–Greenfaulds(42)Tetragon1Perth&KinrossSchools(100)HICL54RenfrewshireSchools(30)&(35)HICL&AAM64ScottishBordersSchools(100)BBGI3SouthAyrshireSchools(100)HICL32SouthLanarkshireSchools(15)&(42.
5)JLIF&Semperian19StirlingSchools(50)3i5WestLothianSchoolsPPP1(100)3i33WestLothianSchools(75)HICL2WilliamMcllvanneyCampus,EastAyrshire(56)Tetragon22Total37projects10716742Totalschools280schoolsSource:ESSUPPPEquityDatabase2012&2016draft,CompaniesHousesearches,infrastructurefundwebsites,September2016.
FlawedvalueformoneyDefendersofPFI/PPPclaimthatvalueformoneyassessmentsintheplanningstageofprojectsshowedconclusivelythatthisapproachwasthemostcosteffective,forexample,morerecentlybyAndrewKerr,chiefexecutiveofEdinburghCityCouncildefendingtheEdinburghSchoolsPPP1contract(BBCScotland,2016).
Butsuchclaimsareflawed,becausemostvalueformoneyassessmentswereconcoctedtoprovidethe'right'answerandwerenotatrueassessmentoftheoptions.
Equallyimportant,valueformoneyassessmentsnevertookaccountofthefinancialimpactofthefuturesaleofequityevenwhenitwasevidentthatPFI/PPPequitytransactionswerefrequentlyobtainingsuperprofitsforSPVshareholders.
Thiswouldhavemadethevalueformoneyassessmentnullandvoid.
ThechiefofexecutivealsoclaimedthattheCouncil'ssoleconcernwasthemanagementofthecontract.
Inotherwords,whathappensinPFI/PPPequitytransactionsisofnoconcerntothelocalauthority.
SincethefourshareholdersofEdinburghSchoolsPPP1arealloffshoreinfrastructurefundsoperatingfromtaxhavens,SPVprofits/dividendsareentirelyfinancedbytheCityCouncil.
Thisisashockingandcavalierabrogationofthepublicinterest.
Badlyplannedandinadequatelyresourcedcontractmonitoring,combinedwithover-relianceoncontractorself-certification,havebeenanotherproblem.
ThiswascausedbypublicauthoritiesstrippingbackthecostofmonitoringaspartofshowingPFI/PPPwasvaluefor27moneyandbelievingthatsincecontractorsandtheSPVwereresponsiblefor'whole-lifecosts'overthecontractperiodthattheynotcutcornersinconstruction.
Theclosureofthe17EdinburghPPP1schoolsduetobuildingdefectsdiscoveredafterstormdamagedoneschoolraisesimportantquestionsaboutthedegreeofrisktransferinthePFI/PPPmodel.
Theschoolswerenotavailableforuse,and,therefore,underthetermsofthecontract,theCityCouncilcanimposefinancialdeductions.
Inaddition,theCityCouncilcouldclaimthecostsoforganisingalternativebuildingsandtransporting7,500childrenforseveralweeks.
Theprocesscausedamajordisruptioninchildren'seducation,teachingpracticeandworryforparentsabouttheirchildren'ssafety.
SowasthisrisktransferredtotheprivatesectortooTheseissuesillustratethelimitationsof'risktransfer'plustheextensiveevidencethatthedegreeoftransferhasbeenconsistentlyexaggeratedandmis-priced(Shaoul,2005andPollockandPrice,2008).
ItexposesfurtherflawsinthePFI/PPPmodel,whichseparateresponsibilityfortheeducationinfrastructurefromteachingandeducationaldevelopment.
28Part4ThedriversofequitytransactionsThissectiondiscussestheunderlyingreasonsfortherapidgrowthofthePFI/PPPsecondarymarket,inparticularthesearchfornewsourcesofaccumulationandhowpublicprivatepartnershipshavebecomeamodelneoliberalstate-businesspartnership,heavilydependentoncorporatewelfare.
TheplanforaglobalexpansionofPPPs,theaccelerationoffinancialisation,marketisationandprivatisationofthepublicsectorandresultingincreasedinequalitiesarediscussed.
PrimaryandsecondarycircuitsintheeconomyThedistinctiveroleoftheprimaryandsecondarycircuitsofcapitalhasbeendetailedbyHarvey(1978),Lefebvre,(1970)Gotham(2009)andAalbers(2016).
Theprimarycircuitofcapitalcomprisesinvestmentinindustrialandmanufacturingsectorthatseekstomaximisesurplusvaluefromtheorganisationoflabour,workprocessesandnewequipment.
Paralleltotheproductionprocessisaconsumptionprocess,orsecondarycircuitofcapital,comprisinginvestmentinland,realestate,housingandthebuiltenvironment.
Someaspectsofthebuiltenvironment,functionforbothproductionandconsumption,suchasthetransportnetwork.
Investmentinthebuiltenvironment"…entailsthecreationofawholephysicallandscapeforpurposesofproduction,circulation,exchangeandconsumption"(Harvey,1978).
"Ageneralconditionfortheflowofcapitalintothesecondarycircuitis,therefore,theexistenceofafunctioningcapitalmarketand,perhaps,astatewillingtofinanceandguaranteelong-term,large-scaleprojectswithrespecttothecreationofthebuiltenvironment.
Attimesofover-accumulation,aswitchofflowsfromtheprimarytothesecondarycircuitcanbeaccomplishedonlyifthevariousmanifestationsofover-accumulationcanbetransformedintomoneycapital,whichcanmovefreelyandunhinderedintotheseformsofinvestment.
Thisswitchofresourcescannotbeaccomplishedwithoutamoneysupplyandcreditsystemwhichcreates'fictionalcapital'inadvanceofactualproductionandconsumption"(ibid).
The2008financialcrisisoriginatedprimarilyinthesecondarycircuitasresultofthesecuritisationofmortgagesandthecollapseofhousingandpropertymarkets,whichledtothecollapseofseveralfinancialinstitutions.
Threedecadesofneoliberalideologyhasaggressivelypromotedthecaseforfreetrade,competitionandmarketstoallocateresourcesanddeliverserviceswithstatecontrolofmoneysupply,whilstderegulationisintendedtocreatenewopportunitiesforcapitalaccumulation.
Thestateisreconfiguredtoreduceitsfunctionsandcuttaxes,withdemocraticaccountabilitylimitedtopartnershipsbetweenstateandbusinesswhilstensuringcostandpoweroflabourisreduced(Whitfield,2014).
"…neoliberalrationalitydisseminatesthemodelofthemarkettoalldomainsandactivities–evenwheremoneyisnotanissue"(Brown,2015).
Financialisationoftheeconomy,ormorespecificallytheglobalisationoffinancialmarkets,increasedincomefromfinancialinvestment,theshareholderrevolutionandthepenetrationoffinanceinallcommercialrelations(Cooper,2015).
PublicsectortransformationFinancialisationhas,ineffect,enabledbanksandfinancialinstitutionstosignificantlyinfluencewhichschoolsandhospitalsdo,ordonot,getbuiltandonwhatterms.
Itprovidesnewopportunitiesforcapitalaccumulationintheprovisionofpublicgoods.
Incomegenerationrequirementsincreasethepotentialviabilityofoutsourcingcontractsandfees,chargesandtollsimposecommercialattributesandvaluesinpublicservices.
However,financialisationispartofafour-partstrategytofinancialise,individualise,marketiseandprivatisepublicservicesandthewelfarestate(Whitfield,2012).
Neoliberal'transformation'isdependentontheparallelandinter-connectedimplementationofeachelementofthisstrategy,whichhasbeenassistedbysuccessiveUKgovernmentsprovidingahighdegreeofcontinuityandsupport.
29Nationstatescreatetheconditions,regulationsandfinancing,andprovidethelegitimacy,tocreateandsustainmarketsinpublicservices,particularlyintheprovisionofinfrastructure.
Embeddingmarketforces,competition,contestabilityandcommercialvalueswasidentifiableinafive-stageprocess-commodifyingservicesandlabourinparallel,restructuringthestateforcompetitionandmarketmechanisms,reorganisingdemocraticaccountabilityandembeddingbusinessinterests(Whitfield,2006).
Afurthertwostagesarenowevidentwiththeemergenceofnewmarketforcesininfrastructure–asecondarymarketforthesaleofequityinPFI/PPPprojectcompaniesandtheformationofnewinfrastructurefundsthathaveincreasedoffshoringofPFI/PPPequityandincreasedopportunitiesforwealthyandinstitutionalshareholders.
Thisapproachtoincreaseopportunitiesforshareholders,contrastswithanattempttoattractdirectretailinvestmentintheequityfinancingelementoftheA$4.
8bnBrisbane,Australia,airportlinkroadin2008.
ItwasunderwrittenbyMacquarieBankandDeutscheBank,butwasunder-subscribedleavingthebanksholdingalargestake.
Adramaticcollapseinthevalueofshares,courtcases,flawedtrafficforecastsandpoormanagementledtoafailedstrategy(Whitfield,2010).
Brisconnections,thePPPcompany,enteredintovoluntaryadministrationin2013following"…ananalysisoftrafficlevelsposttheintroductionoftollsandareviewwhichdeterminedthattheenterprisevalueofBrisConnectionsmaybelessthantheoutstandingdebt"(Brisconnections,2013).
AlthoughtherateofnewPFIprojectsslowedwiththeonsetofthefinancialcrisis,thereturn/profitofexistingprojectswerepracticallyguaranteed.
Despitethefinancialcrisisbeingrootedinthesecondarycircuit,neoliberalpoliciesprovidedtheopportunitytoconvertgoodquality,lowriskreturns,intosuperprofitsthroughthefinancialisationofpublicinfrastructureandtherapidgrowthofnewoffshoreinfrastructurefundsexploitingtax-freeaccumulation.
By2016twelveoffshoreinfrastructurefundshavesignificantequityownershipin547PFI/PPPUKprojects,representing74%ofcurrentprojects(seeTable4).
Thesecondarymarketoffshoreinfrastructurefundmodelhascreatedanewmechanismforshareholderstoachievea6%-8%annualdividendbyinvestinginsecondarymarketinfrastructurefunds.
Thisdividendisobtainedafterfinanceandconstructioncapitalhadachievedanaverageannual28-29%rateofreturnbysellingtheoriginalequityintheSPV-twicethelevelagreedinfinalPFIbusinesscases–andprofitsmadeinthefullorpartialsaleofsecondarymarketinfrastructurefundassets.
Meanwhile,austeritypoliciesareplannedtocontinueuntilatleast2020withfurtherpublicspendingcutsineducation,earlyyears,socialcareandsocialhousing,althoughnotassevereasthe2010-2015period(Reed,2016).
AlthoughPFI/PPPinfrastructureprojectsmaybepart,orfully,financedbyforeignbanksorfinancialinstitutions,theyareeffectivelyfixedlocalassets.
However,thesecondarymarketconvertsordelocalisestheequityininfrastructureprojectsintoliquidfinancialassetsthatareattractivetowealthyindividualsandglobalinvestors,suchaspensionfunds,insurancecompanies,sovereignwealthfundsandprivateequityfunds.
Secondarymarketfundsandtheirshareholdersareprimarily,ifnotexclusively,concernedabouttheoverallperformanceofthefundandthesizeoftheirannualdividend.
TheyshowlittleornointerestinhospitalsandschoolsinEdinburgh,Newcastle,NottinghamorLondonoranywhereelseaslongastheyareprovidingfinancialreturns.
Neoliberalismandthestate-businesspartnershipPFI/PPPmodelThesecondarycircuitdidabsorbmanyoftheeconomicconsequencesofthe2008financialcrisis,althoughneoliberalpoliciesovertheprecedingthreedecadeshadcreatedtheconditionsfornewopportunitiesforaccumulationinthesecondarycircuit.
Forexample,deregulationlegitimated'lighttouch',orself-monitoring,andtheabsenceofcontrolstopreventoffshoringandtaxavoidance;thecommodificationof'risktransfer'togetherwiththedesign,build,financeandoperatemodelledtomarketisationwithextensiveoutsourcing,useofconsultantsandsubsequentlossofpublicsectorcapability(Table2,Whitfield,2012,details25sourcesofprofitinPFI/PPPprojects);andprivatelyfinancedandbusiness-ledinfrastructureprojectswhichwerepartofthestate-capital'public-privatepartnership'model30thaterodeddemocraticaccountabilityandparticipation,withtransparencymadevirtuallymeaninglessby'commercialconfidentiality'.
Nationstates,andinternationalorganisationssuchastheWorldBank,IMFandOECD,haveplayedapivotalroleinsupportingandfinancingthePFI/PPPmodel,whichhadakeyroleintheimpositionofstructuraladjustmentpoliciesintheglobalsouthbeginningintheearly1990s.
Indevelopedeconomies"…theroleofthestateasanagentofrestructuringisparamount"inmarkets,financeandthetransformationofeconomicandsociallife(Fine,2010).
ThedevelopmentofPFI/PPPprojects,inparticulartheDesign,Build,FinanceandOperate(DBFO)model,combinesstateandcapitalinterestswitha'corporatewelfare'approachthatincreasesthecommodificationandfinancialisationofpublicinfrastructureandultimatelywidensthepotentialforprivatisation.
Thisapproachincludedfinancialsupportmechanismssuchastax,procurementandregulatoryframeworks,aidedbytherevolvingdoorofPFIadvisorsbetweenthepublicandprivatesectors(Whitfield,2012andFarnsworth,2013).
Since1992UKgovernmentshaveundertakenaseriesofpolicy,financialandpoliticalinitiativestounderpinthePFI/PPPprogramme.
TheinitiativesarenotexclusivetoUKcompanies,noraretheyexclusivetoaparticulartypeofpublicinfrastructure.
Consequently,theyarenotdeemedtobe'stateaid'undertheEUregulations(EuropeanCommission,2013).
However,PFI/PPPisaclassicexampleoftheneoliberalstate-businesspartnershipmodelthatisdependentoncorporatewelfare.
The'priceofpartnership'requiredthegovernmentto:legislatedtocreatealegalandfinancialframeworkforPFI/PPPcontractsandtoprovidetheconditionsforthePFI/PPPmarkettoexpandandconsolidate;theDBFOcontract,oravailabilitymodel,requiredthestatetoleasethelandtothePFI/PPPprojectcompany,which,inturn,leasedthecompletedbuildingtothepublicsectorwithpaymentdependentonavailabilityoffacilities.
Theuser-paymodelofchargingortollingwasusedforpublictransport(andmotorwaysinothercountries);establishedPFI/PPPunitswithingovernmenttoadviseandpromotethePFI/PPPmodelacrossthepublicsector;limitedpublicsectorcapitalexpendituretodrivelocalauthoritiesandotherpublicbodiesintobelievingthatPFI/PPPsaretheonlyoptiondespitetheeffectiveinterestrateofallprivatefinancedeals(7%-8%)beingdoublethatofallgovernmentborrowing(3%-4%)(NAO,2015);legitimatedoff-balancesheetfinancingsothatthestatering-fencedpubliccontractualdebtisconsidered'privatedebt'and,therefore,doesnotaffectthelevelofpublicdebt;permittedthecommodificationand'transfer'of'risk',whichisfrequentlyexaggeratedandmispriced;outsourcedthedesign,planning,projectmanagementandfacilitiesmanagementservices,thusreducingpublicsectorcapabilitytodeliverthesefunctionsandservices;guaranteedcontractualpaymentsbypublicsectorbodiessothatPFIrepaymentsarering-fenced/guaranteedbeforeallotherbudgetitems–publicsectorPFI/PPPcontractualcommitmentsforcapitalrepayments,interestandservicechargestotal232.
4bn(undiscounted)between2014-15and2049-50(InstituteforFiscalStudies,2016).
TheUKgovernmentalsoestablishedanInfrastructureFinanceUnitinMarch2009tofundanyshortfallsinbankfinanceonprivatelyfinancedinfrastructureprojectsduringthefinancialcrisis;ignoredtheerosionofdemocraticaccountability,transparencyandscrutinyalongsideincreasedself-monitoringandcertification;31requiredpublicsectorcomparatorandvalueformoneyevaluationofoptionsthatarenarrowlyfocused,whichexcludecomprehensivecostbenefitandimpactassessmentanddesignedtoeliminatepublicsectorcompetitionfromtheprocurementprocess;providedgovernmentsubsidiestoNHSHospitalTrustswhentheycannotmeetPFIrepaymentsand/ormeetthehealthneedoftheirlocalpopulation;permittedthetransferofequityinPFI/PPPprojectstooffshoretaxhavensdespitetheseprojectsbeingdependentonpublicfinance;sanctionedincreasedpublicsectordependencyonmanagementconsultants,financialadvisersandlawyers,thathasledtoasignificantlossofpublicsectorcapability;launchedanewinitiativewiththeG20,EU,OECD,WorldBank,IMFtoencourageinsurancecompanies,sovereignwealthfunds,andinparticularpensionfunds,toinvestinPFI/PPPprojectsintheUKandglobally.
ErosionofdemocraticaccountabilityThePFI/PPPprocesshasbeenwidelycriticisedforalackofdemocraticaccountability,participationandtransparency.
Onceprojectsareoperational,publicbodieshaveconsiderablylesscontroloverpublicbuildingsthantheywouldunderdirectpublicinvestment.
Theyarenotonlytiedintocontractualobligationstomakelargerepaymentsfor25-30years,butareconfrontedbyhigherchargeseverytimetheywanttovarytheuseofroomsormakeevenminorchanges.
PublicuseofbuildingscanreadilybecomeanothercashcowfortheSPV.
Thisincludeschargesforcommunityuseofbuildingsandsportsfields.
TheSPVisoperationallyresponsible,butultimateresponsibilityrestswiththeequityownersandtheyareincreasinglyoffshoresecondarymarketinfrastructurefunds.
Thisaddsanothertierofdecision-makingonstrategicissuesandfurtherextendsthewebofsecrecy(seePart5).
Thisaddsuptoafurthererosionofdemocraticaccountability.
IncreasedinequalitiesThePFI/PPPsecondarymarketincreasesinequalityinfourways.
Firstly,byprovidingameansoffinancialgainfromthetradingofequityintheprovisionofpublicgoods,suchasschools,hospitalsandpublictransport.
Secondly,itisprimarilywealthyindividualandinstitutionalshareholderswhousenomineecompaniestoinvestinoffshoreinfrastructurefundstoconcealownershipandreceiptofannualtax-freedividends.
Thirdly,theprofessionalclasses–lawyers,financialadvisers,accountants,managementconsultants-gainfeesandprofitsfromequitytransactions,settingupnewinfrastructurefundsandassistingfundtakeovers.
Finally,hardandsoftfacilitiesmanagementservicesprovidethebulkofemploymentinPFI/PPPprojectsoverthecontractperiod.
Facilitiesmanagementcontractorshaveachequeredemploymenttrackrecordwithregardtojobs,termsandconditions,meetingTUPE(stafftransferobligations)andworkforcedevelopmentpractices.
TheinvertedpyramidinFigure2illustrateshowequityinPFI/PPPprojectcompaniesissoldatdifferentstageswithprofessionalgroupsgainingfeesandprofitsintheprocess,culminatinginwealthyandinstitutionalshareholdersgaininganannualtax-freedividendof6%-8%.
32Figure2:FinancialisationofPFI/PPPprojectsWealthy&institutionalshareholdersinSecondaryMarketInfrastructureFundsreceiveannualdividendsof6%-8%Fees&profitsforlawyers,financialadvisersinduediligence&managementservicestoSPVsTakeoversofSecondaryMarketInfrastructureFundsNewSecondaryMarketInfrastructureFundsestablishedinoffshoretaxhavensFees&profitsforlawyers,financialadvisersinduediligence&managementservicestoSPVsSaleofPFI/PPPequity–average29%rateofreturn12%-15%rateofreturninfinalbusinesscaseEquityinPFI/PPPprojectcompanyThisupsidedownpyramidisanironictakeon'pyramidschemes',whichalsopromiseseasymoneyinreturnforacashsumiftheyenrolnewmembersintothescheme.
Theyareillegalanddesignedtoconmembersintoinvestingsignificantamountsofmoneythatcanneverberecovered.
ThePFI/PPPpyramidis:themostexpensivewayofdesigning,building,financingandoperatingpublicinfrastructure;aPrivateWealthMachinegiventhescaleofequitytransactionsandprofiteering;builtentirelyontaxpayersmoney.
GlobalexpansionofPPPmodelAnewsurgetoincreaseprivatelyfinancedinfrastructureisunderway,orchestratedbytheG20,WorldBank,OECD,thedevelopmentbanksandfinancecapital.
"Infrastructurefinancingwillneedtocomeincreasinglyfromtheprivatesector"(BankofInternationalSettlements,2014).
TheWorldBank,InternationalMonetaryFund(IMF),OECDandEUhavelaunchedaseriesofinitiativestoincreaseprivateinvestmentinpublicinfrastructure.
ForexampletheEuropeanFundforStrategicInvestments(EFSI),athree-year315bnPlan2015-2017togetherwithEUProjectBondinvestmentintrans-EuropeannetworksandtheWorldBank'sGlobalInfrastructureFacilitytohelpprepareanddesigninfrastructureprojects.
TheseinitiativeswillacceleratetheincreaseinthenumberofPFI/PPPprojects,(inparticularmegaprojects),andwidentheroleoftheprimaryandsecondaryglobalinfrastructuremarkets.
Privatelyfinancedinfrastructureisleadingtolarger,oftenmegaprojects,withincreasingdemandsforgovernmentguarantees,subsidies,insuranceandriskreductionwhilstglossingoverthenegativeimpactofPPPs.
ThismakesPPPprojectsmorecomplex,whilstincreasingglobalisationofinfrastructureprojectsfurtherempowerstransnationalinfrastructurefunds,privateinvestors,contractors,consultantsandlawyers.
Althoughpensionfunds,insurancecompaniesandmutualfundsareclassifiedas'privatefinancialinstitutions',theformerareinfactworkersdeferredwagesandpublicsectorpensionfundsareusuallypublicallycontrolledbodies.
Inaddition,ourpersonalsavingsformalargepartofthe'assets'ofotherfunds.
33Thewiderprivateequitysecondarymarketenablespensionfunds,investmentfundsandwealthyindividualstotradeininvestmentsinprivateequityfundsforsimilarreasonstotheinfrastructuresecondarymarketnotedearlier.
Thenumberofnewandsecondaryfundswithbetween1bn-2bnofcapitaltoacquireassetshasincreasedsince2010.
Theinfrastructuresectorofthesecondariesmarketgrew28.
5%toUS$614minthefirsthalfof2015.
However,thiswasasmallpartoftheUS$20.
6bnsecondariesmarketdominatedbyprivateequityfundtransactionsinNorthAmericaandEurope(SetterCapital,2015).
Increasinginternationalisationcanbeexpected,forexampleChina'sGingkoTreeInvestmentLtd(StateAdministrationofForeignExchangeInvestmentCompany)acquisitionofa40%stakeintheUniversityPartnershipsProgrammebuildingstudentaccommodationinUKuniversities,andcouldsignalwiderforeigninvestmentinPFI/PPPprojects.
DrivetoincreasepensionfundinvestmentinPFI/PPPTheUKPensionInfrastructurePlatform,managedbyDalmoreCapital,beganslowlyandachieveditsfirstinvestmentinApril2014.
Threeoftheinitialtenpensionfundswithdrew,butfurtherinvestmentshavesincebeenmade.
Engagingpensionfundsinprivateinfrastructureinvestment,isnotsimplyconcernedwithreplacingthewithdrawalofbankfinance,buthasideologicalobjectivestoembedworkerspensionsinterestsinPFI/PPPprogrammes.
Pensionfundshavetoaddresshigherrisks,whichcouldthreatentheirabilitytofundpensionsandraisescontradictionsbetweenthepoliticaleconomyinterestsofworkersandtheobjectives,sectorsandlocationsofPFI/PPPprojectsoftheirpensionfundinvestments.
SeveralcompanieshavetransferredPFI/PPPequityholdingstothecompanypensionfundinlieuofmakingtheirannualcashcontribution,whichagainraisesquestionsofshort-termcorporateinterestsoverridingmoresecurelonger-terminterestsofpensioners.
TheratioofPFI/PPPassetsownedbyoffshorefundsintaxhavensislikelytocontinuetoincreaseunlessradicalactionistakenaspartoftheG20andOECDactionagainsttaxhavensandtaxavoidance.
Pensionfunds,membersandtradeunionsarelikelytofacenewconflictsofinterestbetweenpublicpolicyandinvestmentstrategies.
PFI/PPPmodelwillincreaseprivatisationThecontinuedmarketisationofeducation,healthandotherwelfarestatefunctionswillfurtherdestabilisedirectpublicprovision.
Itwillcreateopportunitiesforprivateequityfirmstoacquireeducationandhealthcompaniesfor'turnaround',eitherbecausetheyexperienceoperationalproblemsorneedtofinancenewinvestment.
Secondly,SocialImpactBondsareanotherdriverofprivatisationofthewelfarestate(Whitfield,2015b).
Thedeveloping'socialinvestmentmarket'offersinvestorsarateofreturnof5%-30%primarilyinearlydevelopmentandpreventionservices.
"Theinvestorgetsareturnandthepersoninvestedingetsthedurableassetofamorenearlywholelife"(James,2016).
Thirdly,privateinvestmentineducationandhealthintheglobalsouthoftencombinesprovisionofservicesandinfrastructure.
Thiscouldleadtocombinedprovisiononawiderscale.
Finally,itshouldnotbeassumedthatfullcontrolofbuildingswouldautomaticallyreturntopublicsectorownershipwhenPFI/PPPcontractsareconcluded.
Infrastructurefundscouldproposenewcontractstotakeaccountofnewmethodsofservicedelivery,theprovisionofadditionalfacilities,orinsomecases,toaccommodatechangesofuse.
Insomecases'whole-lifecosts'maynotturnouttobewhatwasintendedinthecontractleadingtodisputesand/ortheneedforfurtherinvestment.
Furthermore,theoutsourcingoflocalauthorityandNHSTrustpropertymanagementcreatesthepotentialtocombinethesecontractswithPFI/PPPprojectsthatcombineinfrastructureandservicesonawiderscaletoprovideneweconomiesofscale.
Thecontinuationofausterityandneoliberalpolicieswillfurtherreducepublicsectorcapability.
Ifthisdeclineisnotradicallyreversed,thenpublicbodieswillbelessabletoinvestinandmanagepublicinfrastructure.
Inthesecircumstances,infrastructurefundsarelikelytoproposenewcontractsthatcombinePFI/PPPprojectswithareawidepropertymanagementcontracts.
34Part5OffshoringandtaxationThispartseekstoexplainthereasonswhysomanysecondarymarketinfrastructurefundsareregisteredinoffshoretaxhavens.
Taxavoidanceuseslegalmeanstoavoidpayingcorporatetaxonfinancialandbusinessactivities.
OffshoringtheownershipofPFIequityoccursinthreeways:Firstly,theacquisitionofequityinindividualorsmallbundlesofPFIprojectsbyoffshoreinfrastructurefundsasidentifiedintheESSUPFI/PPPDatabase;Secondly,theacquisitionofUKsecondarymarketfundsbyothersecondarymarketfundsalreadylocatedoffshore;Thirdly,investmentinnewPFI/PPPprojectsbyUKcompanieswithparentcompaniesregisteredinoffshorelocations.
OffshoringrouteJersey,Guernsey,BritishVirginIslandsandLuxembourgareclassifiedastaxhavensbytheOCED.
ThetwelveinfrastructurefundsidentifiedinTable4areregisteredinoneofthefourtaxhavens.
ManyotherUKregisteredinfrastructurefunds,suchasAberdeenAssetManagementandothercompanieshavesubsidiariesandpartnershipsregisteredinthesametaxhavens.
Thissectionshowsconclusivelythatfivelargeinfrastructurefunds,includingHICL,paidzerocorporatetaxon1.
8bnprofitsoverafive-yearperiod.
ThecommonstructureofoffshoreinfrastructurefundsisillustratedbelowcommencingwithinvestorsandculminatingwithSPVprojectcompanies.
Thisisacommonrouteusedbymanyoffshorefundsforinvestment(solidarrows)andthesaleofequity(outlinearrows).
Notetheuseofanothertaxhaventorouteassets.
Investors(wideuseofnomineecompanies)êInfrastructurefund(registeredanddomiciledoffshore,usuallyJersey&Guernsey)êLuxembourgSARL(subsidiary-limitedliabilitycompany)êLuxembourgSARL(limitedpartner)êLimitedPartnership(registeredUK)êSubsidiaryandholdingcompanies(registeredUK)êSPVs-projectcompanies(registeredUK)TheinfrastructurefundsinTable4areregisteredintaxhavenswherecorporatetaxratesareverylow,asdemonstratedbelow.
Whetherornotinvestorsininfrastructurefundsaresubjecttotaxationisadifferentmatter.
The1984taxregimeforUKinvestorsinoffshorefundswasreplacedbytheOffshoreFunds(Tax)Regulations2009(HMRevenue&Customs,2016).
Differentregulationswillapplytoinvestorsfromothercountries.
PFI/PPPprojectcompaniesbenefitfromoffshoretaxhavensPFI/PPPprojectcompaniesareUKregisteredcompaniesandliableforUKtaxation.
AlthoughthesharesoflistedinfrastructurefundsaretradedontheLondonStockExchange,the35companiesareregisteredinJersey,Guernsey,LuxembourgorBritishVirginIslandsfortaxreasons.
ThecompaniesmaintainheadofficesinLondonorelsewhere.
Theownersofunlistedinfrastructurecanalsobenefitfromthesameoffshoretaxregimes.
Bothtypesofinfrastructurefundsreceivetheannualprofit/loss,dependingontheirshareoftheequity,fromeachPFIprojecttheyhaveastakein,plustheyretaintheprofitsgeneratedbymanagingalargebundleofprojectcompanies.
Thisisacriticaladvantage.
CompaniesthatareregardedasresidentinJerseyfortaxpurposeswillbesubjecttothecurrentcorporateincometaxrateof0%.
Dividendsonordinaryshares,togetherwiththesaleofordinaryshares,aretaxexempt.
Stampdutyisnotleviedontheissueortransferofordinaryshares(exceptinthecaseofdeath),nordoesJerseylevytaxesoncapital,inheritances,capitalgainsorgifts.
CompaniesregisteredinGuernseyarealsoexemptfrompayingtaxesonincome,profitandcapitalgains.
UnderEUregulationsSICAVisalimitedliabilityinvestmentcompanywithvariablesharecapitalthatisexemptfrompayingincomeand/orcapitalgainstaxesinLuxembourg.
Acompanyis,however,liabletoannualsubscriptiontaxof0.
05%ofitsnetassetvaluecomputedandpayablequarterly.
ListedinfrastructurefundsraisecapitalbysellingshareswhenthecompanyisfirstlistedontheLSEandatvariouslaterdateswhenthecompanydecidestoraisecapitaltopurchasemorePFIassets.
Forexample,JohnLaingInfrastructureFund(JLIF)wasinitiallyfloatedontheLSEinNovember2010whenitraisedover900m.
Itissuednewsharesforadditionalcapitalin2011(twice),2012,2013,2014and2016thatraised651mfortheacquisitionofmorePFIprojects.
JohnLaingGroupplcoriginallyretained23.
14%ofJLIFshares,butsolditsentireshareholdinginMarch2014(JohnLaingInfrastructureFund,2010and2014).
Listedinfrastructurefundsaregearedtoachievingfinancialtargetsthatinturndeterminestheirsharepriceandthelevelofdividendstotheirshareholders.
SomeoftheoriginalcompaniesthatwerePFI/PPPprojectoriginators,suchasBilfingerBergerandJohnLaing,originallyhadbetween18-23%sharestakeinthelistedinfrastructurefunds.
Bothhavesincesoldtheirstakes.
Large-scaletaxavoidanceThefivelargestlistedoffshoreinfrastructurefundsmadeatotalprofitof1,828.
3minthefive-yearperiod2011-2015.
Theypaidatotalof11.
1mtaxesorataxrateof0.
61%,butwhen19.
4moftaxcreditsisincluded,theypaidZEROtaxforfiveyears–seeTable12.
Thisrepresentsapotentiallossofanestimated400minUKtaxrevenuehadthesecompaniesbeenregisteredintheUK(basedonUKcorporationtaxratesof26%,24%,23%,21%and20%respectivelyforthefiveyears2011-2015).
Table12:Annualprofitandtaxationoflistedinfrastructurefunds2011-2015(m)HICLInfrastructureCompanyLtdJohnLaingInfrastructureFundLtd3iInfrastructureplcInternationalPublicPartnershipsLtdBilfingerBergerGlobalInfraSICAVYearProfitmTaxmProfitmTaxmProfitmTaxmProfitmTaxmProfitmTaxm201146.
68.
3credit30.
05.
0106.
30.
316.
02.
9credit(0.
2)0.
0201284.
80.
632.
51.
056.
00.
370.
21.
8credit18.
80.
3201393.
10.
131.
11.
199.
20.
158.
62.
5credit19.
10.
62014153.
60.
267.
20.
071.
00.
073.
22.
0credit39.
10.
72015230.
80.
247.
00.
0266.
80.
081.
91.
9credit35.
60.
6Total608.
97.
2credit207.
87.
1599.
30.
7299.
911.
1credit112.
42.
2TotalProfit:1,828.
3mTotalTax:Credits19.
4mlesstaxpaid11.
1m=8.
3mtaxcreditSources:ConsolidatedFinancialStatementinAnnualReportandAccountsforeachcompanyfor2011-2015.
36ReducedUKcorporatetaxation-increasedPFIprofitsTheUKcorporatetaxmainratewas33%whenPFIwasfirstintroducedin1992,butithasbeencontinuouslyreducedto20%in2016.
TheEffectiveAverageTaxRateintheEUisusuallyabouttwopercentagepointslowerthanthemainratebecauseofvariousreliefsandallowances(Eurostat2013).
ThebulkofPFIprojectsweresignedbefore2008whenthecorporatetaxmainratewas30%andtheyhave,thus,benefitedfromtherapidreductioninthecorporatetaxmainrate.
Itisdifficulttoestimatethefinancialbenefit,butbasedonatotalof640projectssignedbetween1992-2008andthattheaverageanSPVbenefitedinreducedtaxationbyanaverage80,000perannuminthe8-yearperiod2008-2015,thetotaltaxlosswouldhavebeen410m.
ShareholdersinlistedinfrastructurefundsTheshareholdersofsecondarymarketinfrastructurefundsarethebeneficiariesofthetaxbenefitsoftheoffshorelocationoffunds.
Companiesnormallydisclosemajorshareholderswhohaveovera3%or5%shareholdinginthecompany–seeTable13.
ManyofthecompanieslistedinTable13arenomineecompanieswhosesingularpurposeistoholdsharesonbehalfofalargenumberofothernomineecompaniesinordertoconcealcorporateandindividualownershipofshares.
Unfortunately,somepublicbodiesareinvestorsinsecondarymarketinfrastructurefunds,forexample,BradfordCityCouncilhasa6.
87%stakeintheGCPInfrastructureInvestmentsLimitedandEastRidingofYorkshireCouncilhasa4.
84%shareholdinginMedicXFundLimited,locatedinJerseyandGuernseyrespectively.
SemperianPPPInvestmentPartnersHoldingsLimitedisapartnership,notalistedcompany.
Significantly,AberdeenAssetManagementhasa31.
3%stakethroughtwosubsidiarycompanies(AberdeenSidecarLLPisownedbyAberdeenInfrastructureFinanceGPLimited,registeredinGuernsey).
TransportforLondonPensionFundhasa29.
1%stake.
Table13:ShareholdersofInfrastructurefundsInfrastructureFundsNoofshares(m)InfrastructureFunds%shareholdingSemperianPPPInvestmentPartnersHoldingsLimitedHICLInfrastructureFundAberdeenInfrastructure(No.
2)LP15.
4InvestecWealth&InvestmentLimited6.
97AberdeenSidecarLLP15.
9NewtonInvestmentManagementLimited5.
08BosempFeederLP24.
4DailyMailandGeneralTrustplcSeniorExecutivesPensionFund0.
4AberdeenAssetManagementHarmsworthPensionScheme(DMGTplc)2.
6MitsubishiUFJTrust&BankingCorporation17.
16LondonPensionsFundAuthority12.
2LloydsBankingGroupplc9.
79TransportforLondonPensionFund29.
1CapitalResearch&Management7.
07Total100.
0Blackrock4.
43M&GInvestmentManagement3.
94%shareholdingJohnLaingInfrastructureFundBBGISICAVS.
A.
Schroder13.
28M&GInvestments16.
21NewtonInvestmentManagementLimited10.
05NewtonInvestmentManagement13.
78InsightInvestmentManagement(Global)Ltd5.
08SchroderInvestmentManagement10.
11ThirdNationalSwedishPensionFund4.
99HSBCGlobalAssetManagementUK6.
67Legal&GeneralGroupplcbelow3.
00InvestecWealth&InvestmentLimited2.
81GCPInfrastructureInvestmentsLimitedCityofBradfordMDC6.
873iInfrastructureplcThirdNationalSwedishPensionFund6.
373iGroupplc34.
0RathboneBrothersplc5.
75Schrodersplc5.
4InvestecWealth&InvestmentLimited5.
74InsightInvestmentManagement(Global)Ltd5.
07InternationalPublicPartnershipsGCPInfrastructureOEICLimited4.
95SchroderInvestmentManagementLtd13.
97CloseAssetManagementLimited4.
86InvestecWealth&InvestmentLtd10.
03BrewinDolphinLimited4.
58Prudentialplcbelow5.
00CheviotCapital(Nominees)Limited4.
05J.
M.
FinnNomineesLimited3.
81Sources:SemperianPPPInvestmentPartnersHoldingsLimitedAnnualReturnto1January2016,JerseyFinancialServicesCommission;INPPRegulatoryNewsonholdingsincompany2013-2016;GCPInfrastructureInvestmentsLimitedAnnualReport2015asat30September2015;JohnLaingInfrastructureFundRegulatoryNewsonholdingsincompany2015-2016;HICLAnnualReport2015;3iInfrastructureplcAnnualReport2016.
37HMTreasuryPFIequityownedintaxhavensThe877mHMTreasuryOfficesPFIproject,formerlyGovernmentOffices,GreatGeorgeStreet,hasanSPVnamedExchequerPartnershipplc.
ThiscompanyisownedbyExchequerPartnershipHoldingsLimited,whichisjointlyownedbyConsolidatedInvestmentHoldingsLimited(50%ownedbyLendLeasePFI/PPPInfrastructureCIHLHoldings(Jersey)andAberdeenInfrastructureInvestments(No.
3)LimitedwhoseparentcompanyisAberdeenInfrastructurePartnersLP(Guernsey).
Theother50%stakeinExchequerPartnershipHoldingsLimitedisownedbyAberdeenSidecarLLPwhichhastwopartners–AberdeenSidecarLPInc.
andAberdeenInfrastructureFinanceLPGPLimited,bothwiththesameaddressAdmiralPark,StPeterPort,Guernsey!
Inconclusion,theHMTreasuryOfficeprojectis100%ownedbysecondarymarketfundslocatedinoffshoretaxhavens–75%inGuernseyand25%inJersey.
HighlyprofitablelistedfundsSevenlistedinfrastructurefundswerevaluedat5.
2bnin2015withsixofthefundshavingnetprofitsof481.
4minthesameyear(Table14).
Proofoftheirformationinthelastdecade(andprofitabilityduringtheglobalfinancialcrisis)isevidentoftheprofitabilityoftheirassets.
Table14:Listedinfrastructurefundsvaluationandnetprofitsin2015InfrastructurefundValuation2015mNetprofit2015mHICLInfrastructureCompanyLimited1,732230.
8TetragonFinancialGroupLimited*13339.
4JohnLaingInfrastructureFundLimited86847.
03iInfrastructureplc(PPPportfolio)159**n/aInternationalPublicPartnershipsLimited1,20179.
9GCPInfrastructureInvestmentsLimited65848.
7BBGISICAVS.
A.
50535.
6Total5,256481.
4Sources:CompanyAnnualReports2015;*ResultsofEquitixHoldingsLimited;**notavailableforPPPportfolioInfrastructurefundsmanagedoffshoreSomeinfrastructurefundcompaniesareregisteredintheUK,butadministeredbyoffshoremanagementcompanies.
Forexample,Foresight2InfrastructureVentureCapitalTrust(mergedwithForesightVCTplcinearly2016),isregisteredintheUK,butmanagedbyForesightGroupCILimitedregisteredinGuernsey.
IthasaportfolioofPFIprojects:Stobhill&VictoriaHospitals,Glasgow50.
0%equityownershipMidArgyllCommunityHospital,Lochgilphead45.
0%dittoStirlingSchools12.
5%dittoWharfedaleHospital25.
0%dittoBishopAucklandHospital19.
9%dittoStaffordshireSchools50.
0%dittoSandwellFiveSchoolsproject50.
0%dittoDrumglassHighSchool,NI100.
0%dittoSimilarly,theBankofScotland'sinfrastructurefund–BankofScotlandInfrastructure(No.
3)Limited,renamedAberdeenInfrastructure(No.
3)Limited,isadministeredinGuernsey,butisregisteredintheUK.
However,it'sparentcompany,AberdeenInfrastructurePartnersLPInc.
,isregisteredinGuernsey,asareAberdeenSidecarLPInc.
andAberdeenInfrastructureFinanceGPLimited.
CapitafacilitatesoffshoringOutsourcingcontractorCapitaprovidesservicestooffshoreinfrastructurefundsandotherbusinessesthroughCapitaFinancialAdministrators(Jersey)Limited,awhollyownedsubsidiaryofCapitaGroupplc.
Forexample,thecompanyprovidedadministrator,secretaryandregisteredofficefortheGCPInfrastructureInvestmentsLimitedandCapitaRegisters(Jersey)Limitedwastheregistrarofthecompany(GCPInfrastructureInvestmentsLimited,2010).
38WebofsecrecyThelackoftransparencyofPFIequitytransactionshasbecomemoreevidentinthelastfouryearsasoffshoreinfrastructurefundsdominatethesecondarymarket(Whitfield2010and2012).
TheTreasury'sclaimthatequitytransactionsareprivatemattersbetweenprivatecompaniescontinuestocompoundtheproblem.
Thelackoftransparencyisevenstarkerinsecondarymarketfundtransactionsastheyrarelydisclosethepriceand/orprofitoftransactions.
OwnershipofPFISPVsisoftenburiedinsubsidiarycompanies.
Moreandmoreprojectequityisownedbyoffshoreinfrastructurefundsthatareultimatelyonlyanswerabletotheirshareholders.
Serviceusers,communityorganisations,staff,tradeunionsandmostelectedmembershavevirtuallynoknowledgeofthesaleofequityinlocalPFIprojects.
TheonlyexceptionsarewherededicatedjournalistshavetrackedlocalPFIprojects.
Butthefurthersaleofthesameassetsinsecondarymarketfundtransactions,usuallytooffshoretaxhavens,proceedswithoutpublicityorchallenge.
TheCommitteeofPublicAccountsrecentlyconcluded:"AccountabilitytoParliamentfortheuseofpublicfundshasbeenweakenedbythefailureofthegovernment'saccountabilityarrangementstokeeppacewithincreasinglycomplexwaysofdeliveringpoliciesandservices"(HouseofCommonsCommitteeofPublicAccounts,2016).
ThatreportdidnotmakeanyreferencetoPFIprojects.
ItwaslimitedtotheresponsibilityofDepartmental'AccountingOfficers',usuallyPermanentSecretaries,whoareresponsibleandaccountabletoParliamentfortheuseoftaxpayer'smoneyandexpectedto"…drawonsupportingaccountabilitysystems"(ibid).
Theneedtotackleoffshorecorporateandtaxsecrecyiscriticallyimportant,butthefundamentallackoftransparencyintransactionswithintheUK(andothercountries)isalsocritical.
TherecommendationsinPart7areintendedtoaddressmanyoftheseissues.
Figure3:WebofsecrecyTheleveloftransparencyhasdeclinedrelativetothegrowthofsecondarymarketfundtransactionsbybothUKandoffshorefunds.
Theproblemismostacutewithunlisted(private)secondarymarketfunds(suchasSemperian,InnisfreeandDalmore),which,atbest,issuebriefnewsstatementsthatarelargelydevoidoftransactioninformation.
Thisrequiresinternationalactionbecausemanysecondarymarketfundshaveassetsinseveralcountries.
OECDplantoaddresstaxhavensFollowingthe2009G20LondonSummit,theOECDlaunchedaninitiativetomeetstandardsontaxtransparencyandeffectiveexchangeofinformationtotackletaxevasionandavoidance(OECD,2010).
TheOECDhasanewCommonReportingStandard(CRS),whichcountriesarerequiredtoadopt(Guernsey,Jersey,LuxembourgandBritishVirginIslandsareingroupof3955countriesexpectedtoundertake'firstexchanges'in2017).
CountrieswillalsoberequiredtohavesignedtheMultilateralConventiononMutualAdministrativeAssistanceinTaxMatters.
JurisdictionsthatarenotcompliantwiththeCRSwillbeblacklisted.
TheOECDortheGlobalForumonTransparencyandExchangeofInformationforTaxPurposesclaimtheydonothavepowerstoimposesanctionsoncountriesthatdonotimplementthestandards(TaxJusticeNetwork,2010).
"TheOECDhasalongandverypatchyrecordofmis-identifyingtaxhavens"(TaxJusticeNetwork,2016).
FearsthatnewOECDregulationswouldrestrictinterestpaymentsbeingdeductedagainsttaxwerepartlyallayedwhenitwasreportedthattheOECDhasrecommendedcountriescouldexempt'publicbenefitprojects'(InfrastructureInvestor,2015).
Meanwhile,businessasusual.
Innisfree'smajorshareholderdividendstransferredoffshoreInnisfreeLimitedisaUKregisteredprivatecompanythathasfunded55PFI/PPPprojectsintheUK(seeTable15)plussevenhealthprojectsinCanada,oneinSwedenandtheHSL-Zuidhigh-speedrailprojectintheNetherlands.
Itmanagesfivelong-terminvestmentfunds(onejointlywithM&GInvestmentManagementLimited),whichinvestinPFIprojectsfromconstructiontotheoperationalstage.
ThecompanyisownedbytheUKregisteredInnisfreeGroupLimited,whichhasthesamedirectorsofInnisfreeLimited.
However,AnnualReturngivestheshareholdersofInnisfreeGroupLimitedareCoutts&CoTrustees(Jersey)Limited(72.
2%),TimPearsonandMatthewWebber,eachwith13.
9%.
TheJerseyCompanyRegistryrevealsthatCoutts&CoTrustees(Jersey)Ltd,(ownedbytheRoyalBankofScotlandInternational(Holdings)Ltd)hasasharecapitalofsixmillion1shares.
TheInnisfreeGroupLimited'sannualreport2015givesDavidMettera72.
2%shareholding.
WhilstInnisfreeisnotanoffshoresecondarymarketinfrastructurefundsuchasthosedescribedinTable1,72.
2%ofitsannualdividendsaretransferredtotheoffshorecompanyinJersey.
InnisfreeGroupLtdmade91.
5maftertaxprofitsinthedecadebetween2006-2015andpaid66.
2mdividendstoshareholdersinthisperiod.
TheCouttscompanyinJersey(ieDavidMetter)received72.
2%ofthedividends(exceptfor34.
7%in2006beforeothershareholderswereboughtout)-47.
4m.
ThequestionishowmanyotherUKregisteredinfrastructurecompaniesaretransferringprofitsordividendstooffshoretaxhavensTable15:InnisfreePFI/PPPprojectsinUKInnisfreePFIprojects(%equityownership)HealthEducationDefenceaccommodationBartsHospital,Hospital,London(50)SouthLanarkshireSchools(43)Allenby&Connaught(38)DerbyHospital(100)NorthLanarkshireSchools(50)MoDMainBuilding(74)WalsgroveHospital(100)Bassetlaw(100)NAPCheltenham(50)StHelens&KnowsleyHospital(100)EastDunbarton(50)Devonport(50)MansfieldHospital(100)Rotherham(100)TransformingNewcastleHospital(65)ExeterGroupSchools(100)OtherTunbridgeWells(38)BirminghamGroupSchools2(100)BridgendPrison(41)NorfolkandNorwichHospital(37)StokeSchoolsPFI(100)HanfordWasteToEnergy(31)JamesCookHosp,Middlesbrough(56)WalthamForestGroupSchools(100)DudleyWasteToEnergy(33)WalsallHospital(50)MertonGroupSchools(100)WolverhamptonWasteToEnergy(33)PrincessRoyalHosp.
Bromley(50)SheffieldGroupNDS/PPPPhase1(100)HumbersideCourts(50)Dartford&GraveshamHospital(30)BarnsleySchoolsPFI(100)EastAngliaCourts(50)QueenElizabethHosp.
Greenwich(73)BirminghamGroupSchools1(100)HairmyresHospital,Scotland(100)LeedsPrimarySchoolsPFI(100)TransportWythenshaweHospital,Manchester(25)ClactonSecondarySchools(100)ThameslinkRailPPP(33)Wycombe&AmershamHospital(100)TendringSchools(100)M6(67)WestBerkshireCommunityHosp.
(100)WalthamForestLammasPFI(100)TauntonHospital(100)SwanscombeCommunitySchools(100)Source:InnisfreewebsiteandHMTreasuryCurrentsProjectsMarch201540Part6GlobaltransactionsChangessince2012globalanalysisApproximately10ofthe146globalsecondarymarkettransactions(297PPPprojects)thatoccurredbetween1998-2012couldbecategorisedastakeoversofinfrastructurefunds(Whitfield,2012).
Asampleoftheglobalsaleofsecondarymarketfunds2013-2016providesdetailsof14transactions(107PPPandpublicinfrastructureprojects)mainlybyglobalprivateequityfirms(Table16).
Table16:AsampleofglobalsecondarymarketfundtransactionsYearVendorProjectsSoldtoCost(m)2016MacquarieGroup(Australia)MacquarieAtlasRoad(46%)tollroads:APPR(France),DullesGreenway(US),WarnowTunnel(Germany)&M6Toll(UK)Rangeofinstitutionalinvestors192.
02016AscendiPTII(AscendiGroup,Portugal)7motorways(850km)PPPsinPortugalincludingoperationalandmaintenancecompaniesArdianInfrastructure600.
02016ForumEquityPartners(Canada)5PPPs:SurreyPre-TrialServicesCentre,QuinteCourthouse,WindsorDetentionCentre,PedestrianTunnelatTorontoAirport&socialhousingWesternCanada.
FieraInfrastructure(FieraCapitalCorporationC$400.
02016AlbertaInvestmentManagementCorporation(Canada)AutopistaCentral(50%)givesAlbertisfullcontrolof6concessionsafteracquisitionsin2015GrupoAlbertis(Spain)948.
02016PlenaryGroupPlenaryGroupHoldings(20%)has13PPPineducation,health,transport&defenceinAustraliaCaissededéptetplacementduQuébec(Canada)n/a2015BankiaandFCC(Spain)GlobalviaInfraestructuras(100%)with29mainlyhighwayandrailPPPinSpain,Ireland,Portugal,Andorra,Mexico,CostsRica&ChileOPSEUPensionTrust(Canada),PGGM(Netherlands)&UniversitiesSuperannuationFund(UK)420.
02015PoliclinicoDiMonza(Italy)8acutecarehospitalsinPiedmontandLombardyregionsAXAInvestmentManagersandMedicalPropertiesTrust,NewYork180.
02015FieraCapitalCorporation35%equityinAxiumInfrastructureIncwithhealth,transport&detentionPPPspluspowerprojectsAxiumInfrastructureInc.
n/a2015Mitsui&CoLimited(Japan)GuaranaUrbanMobility(49.
9%shareofjointventureOdebrechtgroup)Brazil:suburbanrailinRiodeJaneiro(60%),No.
6subwaylineSaoPaulo(13.
7%),LRTsystemRio(24.
9%)&LRTinGolania(90%)WestJapanRailway&JapanOverseasInfrastructureInvestmentCorporationn/a2015EmpresasICA(Mexico)JointventureICAOperadoradeViasTerrestres(49%)tooperate4tollroadsandhighwayconcessions-433kmacrossMexico.
CaissededéptetplacementduQuébec(Canada)C$242.
02015GammonInfrastructureProjectsLtd(India)6highwayand3powerprojectsBrookfieldAssetManagement(Canada)andCoreInfrastructureIndiaFundPteLtd(India)903.
02015RBSSocialInfrastructureTrust(RoyalBankofScotland)PPPs-NorthShoreHospital,Sydney;11schoolsinNewSouthWales;DarwinConventionCentre;SouthbankInstituteRedevelopment,Queensland;EmergencyAlertingSystem,Victoria.
AMPCapitalA$1,300.
02014ActividadesdeConstrucciónyServicios(Spain)Iridium(80%)4transportationhubPPPsinMadrid&Barcelona,plushospitalinMadridDutchInfrastructureFundIIIn/a2013EmpresasIngenierosCivilesAsociadosIncreasedjointventureby19%to70%inReddeCarreterasdeOccidente–6projectsGoldmanSachsInfrastructurePartners290.
0Sources:Infrastructurefundwebsites.
41Thesampleillustratestheaveragetransactionincreasedtoanaverageof7.
6projectsinthe3.
5yearsin2013-2016comparedtoanaverageof2projectsinthe15yearsto2012.
Thegrowthofsecondarymarkettradinginothercountries,inparticulartheactivitiesofglobalprivateequityfundsraisesfurtherconcernsaboutsimilarlevelsofprofiteeringoccurringintheglobalsouth.
Exceptforsomehighlightedcases,thereappearstobelimitedtrackingoftheimpactoftradinginPPPassets.
DifferencesbetweenUKandGlobalinfrastructuresectorsAbout800PFI/PPPprojectshavebeenlaunchedintheUKsince1992whentheprogrammewaslaunchedwith735projectscurrentlyoperationalaftersomecontractshaveconcludedandothershavebeensubjecttobuyoutortermination(Whitfield,2016).
Inaddition49NHSLIFTcompaniesbuilt340newcommunityhealthfacilitieswith2.
4bninvestment,manybuiltandoperatedbyseparateSPVs.
ThescaleofprojectsandthesecondarymarkettradeinPFI/PPPequitytransactionsissignificantlylargerthanothercountries,whichisreflectedinthetypesofinfrastructurefunds.
NewoffshoreinfrastructurefundsareusuallylistedontheLondonstockexchange,butregisteredintaxhavens,suchasJerseyandGuernsey.
Akeydifferenceisthetransactionofwholeassets.
TheUKsecondarymarkethasfocusedonbuildingportfoliosofassetsbyacquiringpartialequitystakes.
Conversely,theglobalinfrastructurefundsectorisdominatedbyinfrastructurefundsoperatedbyprivateequityfirmsandglobalbanksthathavefrequentlyacquiredwholeassets.
42Part7ConclusionandrecommendationsNeoliberalmoralitySchools,hospitals,socialhousing,prisons,roadsandotherPFI/PPPprojectshavebeentransformedintomarketisedfinancialcommodities,whichhasalreadygenerated17bn.
Withanaverageannualrateofreturntwicethatcontainedinfinalbusinesscasesandifasimilarrateofreturnwasobtainedinsecondarymarkettransactions,thetotalaveragerateofreturncouldexceed50%perannum.
Itturnstheoriginalvalueformoneyassessmentintoatravesty.
Thecommodification,financialisationandscaleofprofiteeringfromtheprovisionofpublicinfrastructurereflectneoliberalmorality.
Austeritypoliciesdeeppublicspendingcuts,butthePFI/PPPsecondarymarketcontinueditsmomentumprotectedbythestate/businesspublicprivatepartnershipandcorporatewelfare.
Meanwhile,hospitalsandschoolsarelumberedwithhighdebtrepayments.
Thenumberofcontractterminations,buyoutsandprojectswithmajorproblemscontinuestoincrease(Whitfield,forthcoming).
Globalinstitutionsandsomegovernmentsaretryingtopersuadepensionfundstoincreasetheirinvestmentininfrastructure,inparticularPFI/PPPprojects.
Thiswillincreasetheirrisks.
Involvementinthesecondarymarketwillleadtogroupsofemployeesbenefitingattheexpenseofothersandwillonlyreinforceneoliberalmorality.
Ofcourse,therearequestionswhetherthe'super'ratesofreturnandhighvolumeofPFI/PPPequitytransactionsaresustainable,despitethefactthatUKtransactionsandpricesincreasedduringtheglobalfinancialcrisis.
Muchdependsonglobaleconomicconditions,andinthecaseoftheUK,theadditionalimpactoftheBrexitnegotiations.
Willtherelativelynewlistedsecondarymarketinfrastructurefundsbesubjecttotakeoverbylargerprivateequityfirms"…giventherecentsurgeindebtfinancingacrosspublicandprivatecapitalstructures,webelievereturnsonincrementalleverageinmanypartsoftheglobaleconomymayhavepeakedandmayactuallybedeclininginmanyinstances"(GlobalMacroTrends,KKRGlobalInstitute,June,2016).
ThenewGuidetotheStatisticalTreatmentofPPPsinEurope(Eurostat,EPECandEIB,2016)andtheWorldBank'sBenchmarkingPPPProcurement2017,makenoreferencetoPFI/PPPprofiteeringfromthesaleofSPVequityortooffshoring.
Thelattercoversthepreparation,procurementandcontractmanagementofprojects,producedincooperationwithlawyersfrom82economies!
GiventhescaleofPFI/PPPequitytransactionsandprofiteeringevidencedinPrivateWealthMachine(Whitfield,2012)andthisreportitisastarkrevelationthattheseorganisationsareeitherignorantoftheseissuesorchoosetoignorethem.
Eitherway,itdemonstratesabiased,self-servingandpoliticallyselectiveapproachtostatisticsandprocurementdesignedtoaidthePPPindustryandevadekeymattersofpublicinterest.
RecommendationsNewcontrolstorestrictoffshoringpublicassetsPFI/PPPequityassetsaretotallydependentonUKtaxpayerfundingofPFI/PPPprojects.
Infrastructurefundsrelyonthestableunitarypaymentsmadebygovernment,theNHSandlocalauthorities,whichfurtherfacilitatesincreasedvalueoftheassets.
Newregulationsshouldinclude:makeitillegaltotransferequityownershipofPFI/PPPassetsfromUKregisteredcompaniestooffshoreinfrastructurefunds,whichissolelyforthepurposesoftaxavoidance;makeitillegaltoestablishoffshorePFI/PPPholdingcompaniesofSPVassetssuchasLendLeaseBirminghamandSheffieldexamples;43repatriateequityownershipofPFI/PPPSPVcompaniestoUKregisteredcompanies;preventtheflotationontheLondonStockExchangeofPFI/PPPinfrastructurefundsbycompaniesregisteredinoffshoretaxhavens;amendthestandardPFI/PPPcontracttorestrictthetransferofPFI/PPPassetstoregisteredcompaniesinoffshoretaxhavens.
ImprovedaccountabilityandtransparencyThefollowingrecommendationswouldimprovetheaccountabilityandtransparencyofPFI/PPPprojects:establishmorerigorousmonitoringandcontractmanagementarrangements;revisegovernancearrangementstoincreasedemocraticaccountabilityandscrutinyofPFIprojectsincludingannualorbi-annualreviewstoassessperformance,contractmanagementandcosts/affordability;publicbodiesshouldmonitorchangesintheownershipoftheirPFI/PPPprojectsasanintegralpartofperformancemonitoring;eachchangeofequityownershipofPFI/PPPprojectcompanies(bySPVshareholdersandsecondarymarketfunds)mustbedisclosedwiththenameofthevendorandpurchaser,thedateoftransferofownership,thepercentageofshareholding,thecostandtheexpectedprofit.
ThisinformationshouldbeincludedintheLondonStockExchangeRegulatoryNewsServiceandconfirmedincompanyannualreports.
ThesechangesmayrequireamendmentstotherelevantCompaniesActandtotheLondonStockExchangeregulations;companiesandPartnershipsowningequityinPFI/PPPprojectsshouldberequiredtoidentifyeveryprojectandthepercentageofequityownedintheirannualreport;eachchangeofequityownershipofPFI/PPshouldrequiretheapprovaloflocalauthoritiesandsuchnotificationsshouldberequiredtoincludethefulldetailsofultimateownershipandplaceofregistration.
Proposalsthatinvolvetheoffshoringofassetsshouldbechallenged;freedomofinformationlegislationshouldbeextendedtotheprivatesectorsoitisapplicabletoprivatesectorandsocialenterprisesengagedinthedeliveryofpublicservices,infrastructureprovisionandconsultancyservicestogovernment,localauthorities,theNHSandotherpublicbodies.
ThegovernmentandthePFI/PPPindustryarelikelytoclaimthattheaboverecommendationsare'impossible'and'unacceptable'.
Thiswillonlyservetoillustratethefundamentalideologicalandpolicygapbetweenthegovernment/PFI/PPPindustryandaradicalalternativeapproachtopublicinfrastructureinvestment.
TerminatethePFI/PPPprogrammeThePFI/PPPmodelofpublicinfrastructureisveryexpensive,exploitative,increasesinequalitiesanddeskillsthepublicsector.
Claimsaboutachieving'valueformoney','socialvalue'and'commissioningforoutcomes'aremeaningless.
SelectedbuyoutsandcontractterminationsPublicbodiesshoulddevelopastrategicapproachtothebuyoutofPFI/PPPprojectsortheterminationofcontractswheretheyarenotmeetingperformancerequirementsand/oruser/communityneedsarenotbeingmet.
Savingsmaybeobtained,profiteeringiseliminatedandpublicbuildingsarereturnedtopublicsectorcontrol(Whitfield,forthcoming).
ThecaseforthenationalisationofSPVsNationalisationofthelocalPFIprojectcompanies(SPVs)isthemosteffectivewayofstoppingthetradeinPFI/PPPequityandsecondarymarketfundsandreturntopublicownership.
Itwouldsignificantlyreducethefinancialisationandmarketisationofpublicinfrastructure(PeoplevBartsPFI,2015).
ThePeoplevBartsPFIcampaignisdevelopingtheoriginalproposalincludingthelegalandcompensationissues.
44IncreasedpublicinvestmentThePFI/PPPprogrammeshouldbereplacedbyincreasedpublicinvestment-"…theaveragecostofallgovernmentborrowingis3%to4%,comparedwithanestimatedfinancingcostof7%to8%forallprivatefinanceprojects"(NAO,2015).
Sincerisktransferissystematicallyexaggeratedandmispriceditdoesnotoutweighthehighercost.
RadicalpublicmanagementNationalisationaloneisinadequate.
Anewpublicinvestmentinfrastructuremodelisrequiredtogetherwithradicalpublicmanagementtorebuildthecapabilityandcapacityofthepublicsectortoplan,design,financeandmanageschools,hospitalsandotherpublicbuildings.
Innovation,improvementandearlyinterventionandthecontinuousengagementofserviceusers,communityandcivilsocietyorganisations,staffandtradeunionswillbecriticallyimportanttoensurepublicserviceprinciplesandvaluesreplacethediscreditedandfailedneoliberalpublicmanagement.
OpposefreetradeagreementsTheabilitytoimplementtheaboverecommendationsisgravelythreatenedbyfreetradeagreementscurrentlybeingnegotiated,namelytheTradeinServicesAgreement(TISA),theTransatlanticTradeandInvestmentPartnership(TTIP),Trans-PacificPartnership(TPP)andtheCanadian-EuropeanComprehensiveEconomicandTradeAgreement(CETA).
Continuingoppositioniscriticallyimportant.
Theywillhavefarreachingimplications:allpublicserviceswillbesubjecttoliberalisation(deregulation,marketisationandprivatisation);restrictremunicipalisationandpublicownership;imposerestrictionsonuniversalserviceobligations;weakenlabourstandardsandregulations;imposeaninvestor-statedisputesettlement,whichwouldallowmultinationalcompaniestosuegovernmentsforcompensationwhenpublicpoliciesreducethevalueofaninvestmentand/orprofits(GlobalJustice&AttacNorge,2016,Fritz,2015andSinclairetal,2014).
Furthermore,aneconomicassessmentoftheimpactofTTIPinEuropeconcludedthatnorthernEuropeaneconomieswouldsufferlossesofnetexportsandGrossDomesticProduct;areductioninthelabourshareofnationalincome;600,000joblosses;alossofgovernmentrevenueinallEUcountries;andhigherfinancialinstability(Capaldo,2014).
Onamorepositivenote,theevidencecitedinthisresearchreportlendsweightforaFinancialTransactionTax(FTT).
TenMemberStates(Austria,Belgium,France,Germany,Italy,Portugal,Slovakia,SloveniaandSpain)haveagreedtoimplementanFTTandmorecountriesshouldbepersuadedtodoso.
45AppendixATaxhavenownershipofPFI/PPPprojectsTable17:UKPFI/PPPprojectswith50%-100%equityownedbynineinfrastructurefundsintaxhavens(June2016)PFI/PPPprojectswithbetween50%-100%ofSPVequityheldintaxhavensinJune2016HICLInfrastructureFund–69projectsBarnetHospital,London(100)GreaterManchesterPoliceAuthority(72.
9)QueenAlexandraHospital,Romford(66.
7)BarkingandDagenhamSchools(100)HaverstockSchool,Camden(50)RhonndaCynonTafSchools(100)BlackburnHospital(100)Health&SafetyLaboratory,Buxton(80)SheffieldHospital(75)BlackpoolPrimaryCareFacility(75)HighlandSchoolsPPP2(100)SouthAyrshireSchools(100)BoldonSchool(100)HomeOfficeHeadquarters,London(100)SouthEastLondonPoliceStations(50)BrentwoodCommunityHospital(75)KentSchools(50)StokeMandevilleHospital,Aylesbury(100)CentralMiddlesexHospital(100)LewishamHospital,London(100)SussexCustodialServices(100)QueenAlexandraHospital,Portsmouth(100)ManchesterSchool(50)SheffieldBSFSchools(59)ConwySchools,Wales(90)MedwayPolice(100)TyneandWearFireStations(100)CroydonSchools(100)MetropolitanPoliceTrainingCentre(72.
9)WestMiddlesexHospital(100)DarlingtonSchools(50)NewcastleCityLibrary(50)WillesdenHospital(100)DerbySchools(100)NewportSchools(100)WooldaleCentreforLearning(50)M80Scotland(50)NewtonAbbotHospital(100)A249Road(50)DoncasterMentalHealth(50)NorthTynesideSchools(50)A92Road,Angus(50)DorsetFire&Rescue(100)NorwichAreaSchools(75)Birmingham&SolihullLIFT(60)Redbridge&WalthamForestLIFT(60)OldhamSecondarySchools(75)StaffordshireLIFT(60)Durham/ClevelandPoliceTrainingCtre(73)OldhamLibrary(90)BrightonHospital(50)EalingCareHomes(84)OxfordJohnRatcliffeHospital(100)DarlingtonSchools(50)EalingSchools(50)PinderfieldsandPontefractHospitals(100)EdinburghSchoolsPPP2(100)ExeterCrownCourt(100)NorthwoodMoDHeadquarters(50)TamesideGeneralHospital(50)GloucesterFire&Rescue(75)MedwayLIFT(60)SalfordHospital(50)NewhamBSFSchools(80)Perth&KinrossSchools(100)HelicopterTrainingFacilityMoD(86.
6)MilePlattingHousing,Manchester(50)WestLothianSchools(75)Health&SafetyExecutiveMerseyside(50)JohnLaingInfrastructureFund-37projectsCamdenHousing(50)KingstonHospital(60)RoseberryParkHosp,Middlesbrough,(100)CanningTownSocialHousing(100)LeedsComb.
SecondarySchools(100)PeterboroughSchools(100)ClevelandPoliceStation&HQ(50)Manchesterstreetlighting(50)SirhowyWayRoad,Wales(100)BexleySchools(100)MilesPlattingHousing,Manchester(50)SouthEastLondonPoliceStations(50)BentileeHubCommunityCentre(100)M40(50)Wakefieldstreetlighting(50)BrockleySocialHousing,Lewisham(100)NewhamHospital(50)Walsallstreetlighting(100)EnfieldSchools(100)NewhamSchools(100)SurreyStreetLighting(50)ForthValleyHospital(100)NorthEastFireandRescue(100)LambethStreetLighting(100)TunbridgeWellsHospital(100)NorthamptonMentalHealth(100)EnfieldStreetLighting(100)HighlandSchool,Enfield(100)NorthSwindonSchools(100)Redcar&ClevelandStreetLight.
(100)NorthBirminghamMentalHealth(100)NorthStaffordshireHospital(75)BarnetStreetLighting(100)KirkleesSocialHousing(100)RealiseHealthLIFT,Colchester(60)BritishTransportPolicePPP(100)OldhamSocialHousing(95)InternationalPublicPartnerships–19projectsAbingdonPoliceStation,ThamesValleyPolice(100)Hereford&WorcesterMagistratesCourts(100)NorthWalesPoliceHeadquarters(100)BootleHMRCGovernmentOffices(100)LiverpoolLibrary(100)StThomasMoreSchool,W.
Midlands(100)CalderdaleSchoolsPartnership(100)MaestegSchools,Bridgend,Wales(100)StrathclydePoliceTrainingCentre(100)DerbyshireMagistratesCourts(100)MoraySchools,Scotland(100)TowerHamletsSchools(100)DerbyshireSchoolsl(100)NorfolkPoliceHeadquarters(100)KentSchoolsBSFWave3(58)DerbyshireSchoolsll(100)NorthamptonSchools(100)WolverhamptonBSFWave5(82)GreenwichBSFWave1(50)BilfingerBergerGlobalInfrastructure–19projectsAvon&SomersetPoliceHQ(64.
9)GloucesterRoyalHospital(50)MerseyCareHospital(76.
2)BarkingDagenham&HaveringLIFT(53.
3)KentSchools(50)TorBankSchool(100)ClackmannanshireSchools(100)LaganCollege(100)Barnet/HaringeyLIFT(53.
3)BedfordSchools(100)LisburnCollege(100)Liverpool&SeftonClinics(53.
3)CoventrySchools(100)M80Scotland(50)Stoke/StaffordshireFire&Rescue(85)EastDownColleges(66.
7)M1Westlink(100)ScottishBordersSchools(100)NorthWestRegionalcollege(100)SemperianPPPInvestmentPartnersHoldingsLimited–44projectsArmyFoundationCollege(51)EastDunbartonshireSchools(50)MiltonKeynesSecureTrainingCentre(50)A1Darrington-Disforth(50)DoncasterMentalHealth(50)NorthernGeneralHospital,Sheffield(50)M40Denham-Warwick(50)GloucesterRoyalHospital(50)PrincessRoyalHospital,Bromley(50)46NewcastleEstateHMRevenue(100)LeicesterBSFSchoolsPhase1(100)SandwellFiveSchoolsProject(50)AmbulatoryCareCentre,Birmingham(100)LeicesterBSFSchoolsPhase2(100)WythenshaweHospital,Manchester(50)FalkirkSchoolsPPP1(100)HerefordHospital(75)SandhillViewSchools,Sunderland(100)GreatWesternHospital,Swindon(100)HullRoyalInfirmary(100)WirralGroupSchools(100)EcclesSpecialSchools,Salford(100)KirkleesGroupSchools(90)RichmonduponThamesSchools(100)BridlingtonSchools(100)LiverpoolGroupSchools(50)StaffordshireChildren'sHomes(100)BrightonSchools(100)HaringeyGroupSchools(100)HMPAltcourse(50)DarentValleyHospital,Dartford(70)SalfordSpecialSchools(100)HMPRyeHill(Onley)(50)DaventryCommunityHospital(100)SheffieldGroupSchoolsPhase2(100)RotherhamMentalHealth(50)Avon&WiltshireMentalHealth(100)TorbaySchools(100)GoodmayesHospital,Redbridge(100)ManchesterMagistratesCourt(50)NorthYorkshireFire&Rescue(100)Herts&EssexCommunityHospital(100)NorthWiltshireSchools(83.
2)NeathPortTalbotHospital(100)TetragonFinancialGroupLimited(EquitixLtd)–68projectsNewburyCollege(100)EdinburghRoyalInfirmary(50)SurreyHealth(100)InvernessCollege(50)PapworthHospitalCardiothoracicCtr(50)LancasterHealth(100)InverclydeSchools(85)HubNorthScotland(50)DerbyHealthcare(50)CambridgeshireBSFPhase1(90)HubSouthWestScotlandLeicesterHealthcare(50)GreenwichBSF(50)CoventryLIFT(87.
5)LincolnshireHealthcare(50)PembrokeSchools(100)SouthEastEssexLIFT(78.
75)Durham&TeesideLIFT(60)DerbyshireBSFPhase1(80)SouthWestHampshireLIFT(77.
5)Bradford&AiredaleLIFT(60)EalingSchools(50)LeedsLIFT(100)LeedsMentalHealth(100)WestSussexStreetLighting(100)CleadonParkHealthCtr,S.
Shields(100)HengroveLeisure,Bristol(100)BlackpoolStreetLighting(50)MaSTLIFT(60%)PenzanceLeisure(100)OldhamStreetLighting(50)GreaterNottinghamLIFT(60)BrecklandLeisure(100)RochdaleStreetLighting(50)NorthNottinghamshireLIFT(60)WaterfrontLeisure,Crosby(50)A30/A35road(65)LeicesterLIFT(60)RivendellLeisure,Solihull(50)CNDRRoad,Carlisle(75)SandwellLIFT(60)BoxwoodLeisure,Bexley(50)KnowsleyStreetLighting(100)SouthDerbyshireLIFT(60)SheffieldCouncilOffices(100)HampshireStreetlighting(100)IpswichHospital(50)CopelandBCOffices(100)SouthamptonStreetLighting(100)WiganJointServicesCentre(50)BournemouthLibrary(100)EalingStreetLighting(100)DoncasterLIFT(100)WestYorkshirePolice(50)IslingtonStreetLighting(100)Bury,Tameside&GlossopLIFT(100)DalmuirWasteWaterTreatment(80)NottinghamStreetLighting(100)SolentLIFT(100)BarnsleyLIFT(100)Housingregen,Brunswick,Manchester(78)ReSoundPlymouthLIFT(100)RoehamptonHospital(50)NorthTynesideHousingolderpeople(70)Camden&IslingtonLIFT(100)ShropshireHealthcare(50)AyrAcademy(56)WilliamMcIlvanneyCampus,Ayrshire(56)3iInfrastructureplc–53projectsAyrshireCollege,Kilmarnock(100)FindlayHouse,Edinburgh(100)York4Schoolsproject(50)AberdeenshireSchoolsPPP2(70)StGeorgesParkHospital,Morpeth(70)Paragonschoolsproject,Dudley(100)AngusSchools(100)Redcar&ClevelandSchools(100)WhitecrossSchool,Hereford(90)ClackmannanshireCommunityHealth(100)WhitleyBayJointServiceCentreLIFT(60)BodminHospital(100)EasterRossPCCentre(50)Argyll&ButeSchools(100)(NDP)TivertonCommunityHospital(100)NewCraigHospital,Inverness(70)EdinburghRoyalHospital(50)CommunityHospital,Chester-le-Street(100)MidlothianCommunityHospital(100)Forfar&KirriemuirCRC(100)UniversityHospitalN.
Durham(50)GartnavelRoyalHospital,Glasgow(70)MidlothianSchools(100)KingsCollegeHospital,London(75)Dumfries&GallowayMaternityService(100)StirlingSchools(50)Luton&DunstableHospital(100)WishawHospital,Motherwell(60)WestLothianSchoolsPPP1(100)StGeorgesHospital,Tooting(100)MarineServicesMoD(100)PlymouthSchools(50)DorsetPoliceRegionalHQ(80)WorkingtonPoliceStation(100)CroydonAshburtonCentre(100)YsgolGyfunPenweddigSchool(100)HMRevenueOffices(50)WrightRobinsonSchoolManchester(50)GarthOlwegLearningCentre(100)OldhamLibrary(50)BoldonSchool,S.
Tyneside(100)HMPThameside,Belmarsh(100)A249Stockbury-Sheerness(50)InglebyBarwickSchool,Stockton(100)HMPAshfield(100)A50/A564Stoke-Derby(75)Medway,KentPolice(80)HMPDovegate,Burton(100)M1-A1Lofthouse-Bramham(50)EastAngliaCourts(50)HMPLowdhamGrange(100)HumbersideMagistratesCourts(50)KilmarnockPrison(100)AberdeenAssetManagement(AberdeenInfrastructure(No3)Ltd)–9projectsHMTreasuryOfficesPFIproject(75)CornwallFireStations(50)SouthamptonGroupSchools(50)CornwallGroupedSchoolsII(50)HattersleySchools,Tameside(50)HadleyLearningCentre,Telford(50)GloucesterPoliceHQ(100)LeedsGroupSchoolsI(50)ChalcotEstate,Camden,London(50)GCPInfrastructureInvestmentsLimited–GravisCapitalPartners–12projectsAberdeenCitySchools(100)(NDP)AmberValleyLeisure(100)RunwellCommunityHospital,S.
Essex(100)HighlandSchoolsPPP1(100)RotherhamLeisure(100)StanleyPrimaryCareCentre,Durham(100)SloughSchools(100)WolverhamptonLeisure(100)LanchesterRoadMentalHealthUnit,NorthDurham(100)KirkleesSpecialneedsschools(100)NorthYorkshireSchools(100)BraintreeCommunityHospital,Essex(100)UnitedMedicalEnterprisesGroupLimitedBC343764–4projectsCroydonCareHomes(50)NewVictoria&StobhillHospitals,Glasgow(25)plusHICL(25)YoungPersonFacilitiesHertfordshire(75)HealthsourceBromley(100)Total334(45.
4%ofPFIprojects)Source:ESSUPPPEquityDatabaseandinfrastructurefundwebsitesMay2016.
NPDprojectsinScotlandarenotincludedinHMTreasurycurrentprojectslistings.
47AppendixBSaleofUKSecondaryMarketInfrastructureFundsTable18:SaleofUKSecondaryMarketInfrastructureFunds2003-2016OwnerPFI/PPPassetsownedatthetimeoftheequitytransaction(%equityownership)No.
ofUKPFI/PPPSoldto%sharestakePricepaidmSource2016LendLeasePFI/PPPInfrastructureFundInvestorLtd(LendleaseCorporation,Australia)23/12/15LendLeasePFI/PPPInfrastructureFund–renamedCivisPFI/PPPInfrastructureFundLP(saleofremainingstakeinjointventure)19DalmoreCapital9.
018.
4(4.
5mprofit)LendLeasePFI/PPPInfrastructureFundInvestorLtdAR2015LimitedPartnershipchangeLP604/03/162015EquitixHoldingsLtd(CSCapitalPartnerslllLP–CabotSquareCapitalLLP)EducationNewburyCollege(100)InvernessCollegeInverclydeSchools(85)CambridgeshireBSFEssexBSFGreenwichBSF(50)PembrokeSchools(100)DerbyshireBSFEalingSchool(50)HealthBishopAucklandHospital(44)HubNorthScotland(50)HubSouthWestScotlandCoventryLIFT(87.
5)SouthEastEssexLIFT(78.
75)SouthWestHampshireLIFT(77.
5)DudleyLIFT(42.
8)IpswichHospitalWiganJointServicesCentreLeedsLIFT(100)ReSoundPlymouthLIFTSolentLIFTBury,Tameside&GlossopLIFTDoncasterLIFTCamden&IslingtonLIFTBarnsleyLIFTCleadonParkHealthCentre,SouthShields(100%)MaSTLIFT(60%)GreaterNottinghamLIFT(60)NorthNottinghamshireLIFT(60)LeicesterLIFT(60)SandwellLIFT(60)SouthDerbyshireLIFT(60)DerbyHealthcareLeicesterHealthcareLincolnshireHealthcareDurham&TeesideLIFTBradford&AiredaleLIFTRoehamptonHospitalShropshireHealthcareLeedsMentalHealthSurreyHealthLancasterHealthSocialHousingHousingregeneration,Brunswick,Manchester(78)Housingregeneration,LittleLondon,Leeds(40)NorthTynesideHousingforolderpeople(70)Highways&StreetLightingWestSussexStreetLighting(100%)76TetragonFinancialGroupLimited85.
0(restownedbymanage-ment)160.
4TetragonNews02/02/15and23/10/14TetragonFinancialGroupMasterFundLtdAR2015,p3048NottinghamStreetLighting(100)IslingtonStreetLighting(100)EalingStreetLighting(100)SouthamptonStreetLighting(100)HampshireStreetlighting(100)KnowsleyStreetLighting(100)CNDRRoad,Carlisle(75)A30/A35road(65)SheffieldHighwaysBirminghamHighwaysRochdaleStreetLighting(50)OldhamStreetLighting(50)BlackpoolStreetLighting(50)LeisureHengroveLeisure,Bristol(100)WaterfrontLeisure,CrosbyRivendellLeisure,SolihullPenzanceLeisureBrecklandLeisureBoxwoodLeisure,BexleyPolice&otheraccommodationSheffieldCouncilOffices(100)CopelandBCOffices(100)UnivofSalfordstudenthousingUnivofEssexstudenthousingBournemouthLibrary(100)WestYorkshirePoliceWaste&RenewablesWellandBiopowerNorthumberlandWasteAllertonWasteRecoveryDalmuirWasteWaterTreatment,Scotland(80)2014DutchInfrastructureFundDIFPPP16AberdeenAssetManagementplc100.
0n/aDIFNews20/11/14AssuraGroupLtdLiverpool&SeftonHealthPartnershipLIFT(20)MerseyCareMentalHealthHospital(28.
6)NorthLondonEstatesPartnership4otherLIFTprojects7BBGI(3projects)22.
4(10.
5profit)AssuraGroupRNS24/01/1425/11/13AssuraGroupAR2014LendLeasePFI/PPPInfrastructureFundInvestorLtd(LendleaseCorporation,Australia)ReductioninstakeinLendLeasePFI/PPPInfrastructureFund–nowCivIsPFI/PPPInfrastructureFund.
WorcesterHospital(66.
7)CalderdaleHospital(80)BurnleyGeneralHospital(100)StJamesOncology,Leeds(100)LincolnshireGroupedSchools(100)NewcastleGroupedSchools1(100)LilianBaylisSchool,Lambeth(100)LancashireBSFPhase3(80)ExchequerPartnership(No.
2)(50)GOGGSWest(HMTreasury)(50)LancashireBSFPhase1(80)LancashireBSFPhase2(80)LancashireBSFPhase2a(80)LancashireBSFPhase3(80)CentralManchesterUniversityHospitals(65)BirminghamBSFWave2Phase1(100)BirminghamBSFWave2Phase2(100)SouthTyne&WearWaste(35)UniversityofSheffieldstudentaccommodation(50)19PPDIAssetcoLimited(DalmoreCapital)9.
0n/aLendLeasePFI/PPPInfrastructureFundInvestorLtdAR2015ScottishWidowsInvestmentPartnership(LloydsBankingGroup)EdinburghSchoolsPPP1(30)FifeSchoolsPPP2(30)RenfrewshireSchools(35)NewCraigsHospital,Inverness(100)Dumfries&GallowayHospital(50)HadleyLearningCentre,Telford(50)32AberdeenAssetManagementplc100.
0606.
6(Lloydsreceived9.
9%stakeinAAMAberdeenRNS02/05/14,01/04/14and18/11/13.
LloydsBankingGroupRNS18/11/13AberdeenAsset49CalderdaleRoyalHospital(80JVCDFSuezCoffey)RussellsHallAcuteHospital,Dudley(33.
3)QueenMary'sHospital,Roehampton(25)GloucesterPoliceHQ(100)StGenevieve'sHighSchool,Belfast(33.
3)NorfolkPolice2CountiesCustody(42)BirminghamHighways(33.
3)LancashireBSFPhase1(40)LancashireBSFPhase3(40)LincolnshireGroupedSchools(50)IslingtonHousingstreetproperties1(45)IslingtonHousingstreetproperties2(45)QueensHospital,Romford(33)ClevelandPoliceCustody(50)DerbyshirePoliceDivisionalHQ(95)NorthKentPolice(50)Avon&SomersetMagistratesCourt(100JVAmey&JLIF)HattersleySchools,Tameside(50)CornwallFireStations(50)LeedsSwarcliffeSocialHousing(33)QueensMedicalCentre,Nottingham(40)WhittingtonHospital,London(100)HMTreasuryOffices–GOGGSWest(50)M8,M73,M74improvements(30)RoyalLiverpoolUniversityHospital(50)andpaid38.
3mcashplusa50.
7mstrategicagree-mentwithLloyds)ManagementAR20152013BarclaysBankplcBarclaysInfrastructureFundsManagementLimited:BarclaysIntegratedInfrastructureFund(BIIF);BarclaysEuropeanInfrastructureFundll;AlmaMaterFundInfrastructureInvestors(l2);BarclaysEuropeanInfrastructureFund;BarclaysUKInfrastructureFund;(Assetsvaluedat780m).
EdinburghRoyalHospital(50)Forfar&KirriemuirCRC(100)NorthAyrshireSchools(30)StirlingSchools(50)WestLothianSchoolsPPP1(100)EastAyrshireSchools(45)MidlothianSchools(100)SandwellBSFPhase1(40)PlymouthSchools(50)CroydonAshburtonCentre(100)WrightRobinsonSchoolManch(50)BoldonSchool,S.
Tyneside(100)InglebyBarwickSchoolCampus,Stockton(100)York4Schoolsproject(50)Paragonproject,Dudley(100)WhitecrossSchool,Hereford(90)BodminHospital(100)TivertonCommunityHospital(100)CommunityHospital,Chester-le-Street(100)UniversityHospitalN.
Durham(50)KingsCollegeHosp,London(75)Luton&DunstableHospital(100)StGeorgesHospital,Tooting(100)NuffieldOrthopedic,Oxford(25)Dumfries&GallowayMaternityServices(100)WishawHospital,Motherwell(60)YsgolGyfunPenweddigSchl(100)GarthOlwegLearningCentre(100)843iGroupplc100.
0700.
0estimateAssetsvaluedat780.
03iGroupplcRNS11/11/1350HMPThameside(Belmarsh((100)HMPAshfield(100)HMPDovegate,Burton(100)HMPLowdhamGrange(100)KilmarnockPrison(100)DorsetPoliceJointServices(33)DorsetPoliceRegionalHQ(80)WorkingtonPoliceStation(100)Medway,KentPolice(80)EastAngliaCourts(50)HumbersideMagistratesCourts(50)MarineServicesMoD(100)DocklandsLightRailLewisham(40)HMRevenueOffices(50)OldhamLibrary(50)A1Darrington-Dishforth(25)A1(M)Alconbury-Peterboro(41.
7)A249Stockbury-Sheerness(50)A30/A35Exeter-BereRegis(15)A417/A419Swindon-Glos(41.
7)A50/A564Stoke-Derby(75)M1-A1Lofthouse-Bramham(50)SevernRiverCrossings(15)StaffordshireStreetLighting(40)RobertsonGroupsellsits50.
1stakeinElginInfrastructureAberdeenshireSchoolsPPP2(70)AngusSchools(100)DundeeSchools(49.
25)ClackmannanshireCommunityHealthServices(100)EasterRossPCCentre(50)NewCraigHospital,Inverness(70)MidlothianCommunityHospital(100)GartnavelRoyalHospital,Glasgow(70)FindlayHouse,Edinburgh(100)StGeorgesParkHospital,Morpeth(70)Redcar&ClevelandGroupedSchools(100)WhitleyBayJointServiceCentre-LIFT(60)Newcastle&NorthTynesideLIFTCompany1(60)NewcastleBSFSchoolsPhase1(28.
9)NewcastleBSFSchoolsPhase2(28.
9)RobertsonCapitalProjectsLimited215DalmoreCapitalFund(managedbyDalmoreCapitalLimited)(3iInfrastructureFundown49.
9%ofElginInfrastructure)PFIequityinvestments50.
150.
173.
0DalmoreCapital23/10/2013RobertsonCapitalProjectsLimitedAR2014InvestorsintheCommunityLPLeedsCombinedSecondarySchools(100))BexleySchools(100)BristolBSF(37.
5)PeterboroughSchools(81)MilesPlattingHousing(33)RealiseHealthLIFT(Colchester)(60)NorthamptonMentalHealth(100)BarnetStreetLighting(85)EnfieldStreetLighting(85)LambethLighting(85)RedcarandClevelandStreetLighting(85)11JohnLaingInfrastructureFund100123.
0JohnLaingInfrastructureFundRNS12/07/13AmeyInvestmentsLimited(FerrovialS.
A.
,Spain)Dumfries&GallowaySchools(85)RenfrewshireSchools(35)BelfastSchoolsPartnership(100)BradfordBSFPhase1(25.
2)ManchesterStreetLighting(50)WakefieldStreetLighting(50)NorfolkStreetLighting(100)NorthernIrelandRoads2(50)Avon&SomersetCourts(20)MinistryofDefenceCVehicles(50)10DIFInfrastructureFundlllacquiresstakeinjointventureAmeyVenturesInvestmentsLimitedwhichDIFInfrastructurellalreadyhas50%stake.
Ameywillretain10%stake.
4037.
0DIFNews17/04/13FerrovialNewsReview2013,25/02/14AmeyVenturesInvestmentsLtdAR2014BarclaysPlymouthSchools8DalmoreCapital40-50n/aDalmoreCapital51EuropeanInfrastructureFundll(BarclaysBankplc)StHelensBSFSandwellBSFLeedsBSF1LeedsBSF2LeedsBSF3LeedsBSF4BangorAcademy/NendrumCollegePPPProjectFund40News22/03/132012CommunitySolutionsInvestmentPartners(JointventureofBarclaysEuropeanInfrastructureFundll&MorganSindallInvestments)BarnsleyLIFT(60)DoncasterLIFTBuryTameside&GlossopLIFT(60)Bradford&AiredaleLIFT(50)Camden&IslingtonLIFT(60)SolentLIFT(30)ReSoundPlymouthLIFT(18.
6)WestSussexLIFT(60)8EquitixLimited10047.
8MorganSindallreceived23.
9mEquitixNews20/07/2012MorganSindallGroupplcRNS23/07/12UniversityPartnershipsProgramme(UPPGroupHoldingsLimited,BarclaysBank)UPP(Alcuin)Limited(78)UPP(Lancaster)HoldingsLtd(100)UPP(BroadgatePark)Holdings(100)UPP(Nottingham)Limited(80)UPP(PlymouthThree)Ltd(100)UPP(KentStudentAccommodation)Ltd(100)UPP(LoughboroughStudentAccommodation)HoldingsLtd(100)UPPLeedsMetropolitanllLtd(100)UPPLoringHallLimited(100)UPP(OxfordBrookes)Ltd(100)UPP(Reading1)HoldingsLtd(80)UPP(KentStudentAccommodationll)HoldingsLtd(100)UPP(Clifton)HoldingsLtd(80)UPP(Exeter)HoldingsLtd(100)UPP(ByronHouse)HoldingsLtd(80)UPPProjectsLtd(100)UPPResidentialServicesLtd(100)UPPAssetFinanceLtd(100)18PGGMVermogenbeheerBV(PensionFund,Netherlands)GingkoTreeInvestmentLtd,China(StateAdministrationofForeignExchangeInvestmentCompany–SAFEIC)BothcompanieshavesameequityshareinStudentUKTopCoLimitedregisteredinJerseywhichownsUPPGroupHoldingsLimited6040840.
0550.
0UPPGroupHoldingsLimitedAnnualReport2012and2013.
SovereignWealthFundInstitute,News17/09/20122011BarclaysInfrastructureFundsManagementLtd,(BarclaysBankplc)A249Stockbury-Sheerness,Kent,A92ClaymoreRoads,Barking&DagenhamSchools,BoldonSchool,CroydonSchool,DerbySchools,DoncasterSchools,ManchesterSchool,NewportSchools,RhonddaCynonTafSchools,DoncasterMentalHealth,EalingCareHomes,GlasgowACAD,LewishamHospital,NewtonAbbotHospital,NuffieldHospital,OxfordChurchillOncology,WillesdenHospital,DorsetFire&Rescue,DorsetPolice,MedwayPolice,SwindonPolice,Tyne&WearFireStations,OldhamLibraryplus2projectsinIreland26HICLInfrastructureCompany25.
0to100.
0143.
4HICLRNS20/12/201120093iGroupplcNorfolk&NorwichUniversityHospitalHighlandSchoolsPPP2Plus84assetsthrough3i'sminority86Saleof77msharesinInfrastructureFund–reducing3iholdingto33.
3%9.
560.
83iPress19/2/20093iAR200852shareholdinginthesecondarymarketfund,InfrastructureInvestors.
Thisincludes:DLRLewishamextensionKingsCollegeHospital,LondonHighlandWasetwaterRAFLossiemouthFamilyQuartersHMRevenue&CustomsLondonofficesBabcock&BrownPublicPartnershipsLimited(Australia)Voluntaryadministration13/03/09andliquidationAugust2009AbingdonPoliceState(100)BootleIOffices(100)DerbyshireMagistratesCourts(100)DerbyshireSchoolsPhase1(100)Hereford&WorcesterMagistratesCourts(100)NorfolkPoliceHQ(100)NorthWalesPoliceHQ(100)StrathclydePoliceTrainingCtr(100)StThomasMoreSchools(100)DerbyshireSchoolsPhase2(100)CalderdaleSchools(100)NorthamptonshireSchools(100)TowerHamletsSchools(100)MaestegSchools(100)EastLondonLIFTDudleyInfracareLIFTBristolInfracareLIFTOxfordInfracareLIFTWolverhampton&WalsallLIFTBrent,Harrow&HillingdonLIFTPlus10PPPprojectsinAustralia,Canada,Italy,France,Belgium&Ireland50InternationalPublicPartnerships(listedonLondonStockExchange,registeredinGuernsey)100.
0n/aBabcock&BrownPublicPartnershipsAR2008ProjectFinanceJune2009TelerealTrillium(WilliamPearsGroupofCompaniesLimited)Sells10%equitystakeinTrilliumInvestmentPartnersPPP–renamedSemperianPPPInvestmentPartners108SemperianPPPInvestmentPartners:VictorianFundsManagementCorporation(Australia)andTransportforLondonPensionFund(had29.
1%stakein2015)10.
0115.
0estimatePropertyWeek30/1/2009TelerealTrillium2009LandSecuritiesGroupplcSaleofTrilliumpropertygroupincludingLandSecuritiesremaining10%equityinTrilliumInvestmentPartnersPPP108TelerealTrillium10.
0113.
5LandSecuritiesRN8/1/2009AR2009InfrastructureInvestorsI2LP–BarclaysacquireSocieteGeneraleBank,France,(31.
7%),3i(31.
7%)andFlemingFamily&Partners(4.
9%)stakesBarclaysBankbuysoutSocieteGeneraleand3ishareholdingintheI2fund.
84BarclayIntegratedInfrastructureFund(BarclaysBankplc)68.
3558.
6BarclaysCapitalPress9/1/2009,FinancialNews13/1/20093iInfrastructureplcAR2009p7and8.
PrivateEquityNews12/1/2009.
Reuters11/10/10MacquarieCommunicationsInfrastructureGroup(MacquarieGroup,Australia)Airwave(50.
0%)–nationalpoliceandemergencycommunications,plusotherassetsArqiva(48%)communicationsinfrastructureandmediaservicesBroadcastAustralia(100%)2CanadaPensionPlanInvestmentBoard100.
0733.
0CPPIBPress30/3/20092008HalifaxBankofScotlandPFIprojectsandoneinfrastructurefundinvestment.
IncludesschoolsinNewcastle,Edinburgh,Aberdeenshire,Lancashire,Fife:housinginLeeds,Camden&Islington;Varioushospitals,healthcentresandpolicestations,plusa20.
0%stakeinTrilliumPPPInvestmentPartnersLimitedwithportfolioofover80projects.
47Pensionfundsof4'wellknownUKcompanies'49.
9(HBOSretains50.
1)217.
1Fundvaluedat434.
3McGrigorsLawPress10/12/2008,Times7/12/2008InvestinginInfrastructure,PEI,p223-230LandSecuritiesGroupplcLandSecuritieslaunchesTrilliumInvestmentPartners,aPPPJointVentureinMarch2008with1.
1bn100estTrilliumInvestmentPartners(LandSecuritiesGroup90851.
9(399.
6fromLandSecuritiesPress18/3/2008LandSecurities53capital–equitypartnersHBOS(UberiorInfrastructure),VictorianFundsManagementCorporation(Australia),BankofIreland,TransportforLondonPensionFund,LioydsTSB,LondonPensionFundAuthorityandDailyMailplcretains10%)saleofequity&414.
8raisingdebtagainstassets)plus37.
5profitondisposalAR2008p17BabcockBrownPublicPartnershipsLIFTCosEastLondonLIFTCompanyLtdDudleyInfracareLIFTLtdOxfordInfracareLIFTLtdBristolInfracareLIFTLtdBexley,Bromley&GreenwichLIFTLtdBrent,Harrow&HillingdonLIFTLtdHealthcareImprovementPartnership(Wolverhampton&Walsall)Ltd7AshleyHouseplc14.
0plus8msharesinAshleyHouseplcEdisonInvestmentResearch06/09/08Investigate19/05/082007EbbgateInvestmentsandSeddonGroupLimitedLancasterHealthSurreyHealth2EquitixLimitedandEquitixHoldingsLimitedregisteredbyCSCapitalPartnerslllLP100.
06.
7EquitixLimitedAR2007andEquitixHoldingsLimitedAR2007MillGroupLimitedLandSecuritiesbuysoutMillsGroups50%stakeinInvestorsintheCommunityFundjointventureformedin200610LandSecuritiesGroupplc50%ofjointventure7.
4LandSecuritiesPress28/02/2007PFIInfrastructureCompanyEatAyrshireSchools(20.
0)MidlothianPrimarySchools(50.
0)Argyll&ButeSchools(50.
0)Stobhill&VictoriaHospitalsGlasgow(25.
0)EdinburghSchoolsPPP122InfrastructureInvestorsLP(Barclays,SocieteGeneraleand3ijointventure)100.
0156.
0(May)valuedat104.
0atendof2006QuayleMunroHoldingsplchad1.
2msharesinPFICoatcostof2mandreceived3.
7mfromInfrastructureInvestors(QMPress2006)StarCapitalPartners,HalifaxBankofScotland,AMPCapitalInvestorsSecondaryMarketInfrastructureFundPPPprojects79LandSecuritiesGroupplc100.
0914.
6(517.
0mcash&397.
6mnetdebtrepaid)LandSecuritiesAR2008p101STARCapitalPartnersNews22/12/06BuildingBetterHealthLIFTPartnerships(ReminLimited–subsidiaryofWilliamPearsGroup-&BuildingBetterHealthHoldingsLtd(Jersey).
Renova–WilliamPearsGroupSouthLondonLIFTHealthPartnership(Lambeth,Southwark&Lewisham)(60).
SouthWestLondonHealthPartnerships(Merton,Sutton,Wandsworth,Richmond,Kingston&Croydon)(60).
WestLondonHealthPartnership(Ealing,Hounslow,Hammersmith&Fulham)(60).
RenovaDevelopments(Knowsley,Halton,StHelens&Warrington)(60)4FulcrumInfrastructureGroupLimited(MeridiamInfrastructureFinances.
a.
r.
l(Luxembourg).
FulcrumInfrastructureGroupHoldingsLtd(Jersey)dissolved2013.
60n/aFulcrumInfrastructureAR2007&2015.
ReminLtdAR2006LIFTcompaniesAR2006&20152006MillGroupLimitedJointVentureformedbyMillGroup'sexistingInvestorsintheCommunityFundwithLandSecuritiesplc10Trillium(LandSecuritiesGroupplc)50%/50%jointventure20.
0LandSecuritiesPressRelease31/01/2006and11/01/20052005InfrastructureInvestorsI2LP(BarclaysBank,SocieteGeneraleand3i)BarclaysBanksandSocieteGeneralejointlyestablishedfundin2003.
In20053ijoinedthefundviaanequityshareholding.
313iGroup33.
3150.
03iGroupPress21/6/20053iGroupAR2006p28Times21/6/2005Reuters11/10/102004NoblePFIFund1LPandNoblePFIFund2LPandseveralStGeorge'sHospitalTootingKingsCollegeHospital,LondonWansbeckHospital,Northumberland(14%)18Barlay'sPrivateEquityandSocieteGeneralejointventure100.
0n/aNoblePFIFundLimitedandsubsidiariesAnnualReports54subsidiaries23/07/04Dumfries&GallowayAcute&MaternityHospital(14.
0)BodminHospital(17.
0)Luton&DunstableHospital(StMary'sWing)(14.
0)CastlehillHospital,Hull&EastYorkshireNHSTrust(14.
0)BuryLIFThealthcentre(17.
0)EastLothianSchools(13.
5)WestLothianSchoolsPPP1(13.
5)HighlandSchoolsPPP1ParagonSchools,DudleySheffieldGroupSchoolsPhase2CaerphillyBCSchools(14.
4)InvernessAirportSecureTrainingCentre,MiltonKeynesMentalHealthFacilities,Newham(17.
0)Perth&KinrossCouncilOfficesAcquiredassetsofEdisonCapitalIn2001.
GrosvenorHouseGroupplcacquireda12.
5%stakeinNoblePFIFundfor4.
0min20032000-2004.
Dundas&Wilson,News,January20032003GrosvenorHouseGroupplc02/01/2003"Aprofitondisposalof1.
05mwasgenerated"EquityinvestmentinNoblePFIEquityFundn/an/a12.
53.
8Dundas&Wilson,NewsJanuary2003GrosvenorHouseGroupplcAnnualReportto31August2003BabcockBrownLimited(Australia)andAbbeyNationalplcSecondaryMarketInfrastructureFundformedin2001with23projectsvaluedat120m23StarCapitalPartners,BankofScotlandandAMPCapitalInvestors100.
0120.
0StarCapitalPartnersNews18/12/03,FinancialNews,05/05/2003,PublicPrivateFinance,July2006Subtotal331,1517,364.
4Estimatedcostof6transactions(115projects)*736.
0Total8,100.
4Sources:CompanyAnnouncementstotheLondonStockExchangeandPressReleases;PPPIn-DepthNo.
6,2006;PPPBulletin,TheSecondAgeofPFI,CollinsStewart,May2004;InfrastructureandSecondaryMarketFundwebsites;PPPWealthMachine:UKandGlobaltrendsintradingprojectownership(2012);*SeeTable555SourcesandreferencesSourcesInformationforeachsecondarymarkettransactionhadtobecompiledfromseveralsources.
Inaddition,trackingtheequityofownershipofindividualprojectsfrequentlyinvolvedtiersofinvestmentandholdingcompanies.
Thesourcesusedincluded:StockExchangeAnnouncements/RegulatoryNewsServiceCompanypressreleasesCompanyInterimandAnnualReportsandAccountsUKCompaniesHouseannualreturnsandreports(https://beta.
companieshouse.
gov.
uk)Jersey,GuernseyandLuxembourgcompanyregistersInfrastructurefundwebsitesConstructionandPPPcompanywebsitesHMTreasuryannualPFIcurrentprojectsdata2011-2015ScottishGovernmentPFIandNPDprojects2015NationalAuditOfficePFIreportsPPP,financial,constructionandinfrastructurejournalsESSUPPPEquityDatabase2012and2016update(forthcoming)PPPWealthMachine:UKandGlobaltrendsintradingprojectownership,Appendix3(2012)References3iInfrastructureFundsplc(2015)Half-yearlyreport–forthesixmonthsto30September2015,http://www.
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