What makes good infrastructure? A financier’s perspective…

As we all know, creating successful infrastructure that fulfils its purpose is a multi-faceted affair. It takes political and social will coupled with expertise from the developers, designers, engineers and contractors to plan and build effectively. But before the first foundation stone is even loaded onto the lorry, someone has to foot the bill. We spoke to Brian Field, Urban Planning and Development Adviser of the European Investment Bank and one of the WIN Awards judges, to get his personal take on what turns the financiers onto – or off – a potential project…

Field’s answer to that first question is a straightforward one. “Investors and financiers are clearly looking for an adequate rate of return, although what this actually means will depend on the nature and substance of the project in question.”

It stands to reason that all the stakeholders involved want to see the project succeed. While the civil engineers might lose sleep at night over tangibles such as materials turning out to be unsuitable, or unforeseen geological issues, we asked what might keep a financier awake in the small hours. Field replies, “Once a project is underway, from a financial perspective the key issues are whether it will be delivered on time and on budget and, more generally, whether it will deliver on its promises.”

He is a believer that “best practice in infrastructure design and delivery can only benefit our industry”, so what – to him – marks out a truly successful infrastructure project? “For me, a successful infrastructure project is one that does indeed deliver on its promises, but also benefits the community at large.  It needs to meet basic financial sustainability criteria, including adequate cost coverage for the developer/promoter at the required level of service, including the ability to repay the providers of funds, affordable rents and charges for those using the service where these apply, and value for money for the tax payer.

“However, in satisfying such requirements, it should also meet basic social and environmental sustainability criteria by addressing or mitigating the impact of its development on the natural environment.  It sounds like a tall order, but there needs to be a balance.”

Bridging the blue Danube at Bratislava

When asked what excites him most about a quality infrastructure project, Field comments, “The role of major infrastructure projects as “agents of change” cannot and should not be underestimated.  For me a “quality” infrastructure project is one that is a positive agent for such change. A good example that I think has made a real difference is the Apollo Bridge in Bratislava, Slovakia, a project in which I was involved.

“The bridge itself was planned many years ago and was an aspiration of the municipal authorities even in the Soviet era – as reflected in spatial plans dating back more than 60 years.  The original intention was improve the link between the central area of Bratislava and what was originally developed as a dormitory settlement with large panel-block apartment buildings on the other side of the Danube in Petrzalka.  In the event, the building of the bridge has delivered on all of its promises and more.  It has not only addressed the perceived problems of separation of Petrzalka from the central area of the city, but has also facilitated the regeneration of Petrzalka itself as a thriving district within the broader Bratislava conurbation.”

Completed in 2005 by Metro Bratislava, the bridge is not only remarkable for the regeneration it has brought with it. In an extraordinary feat of engineering, the 5,240-ton steel structure, spanning 231 metres, was rotated across the river from its construction site on the left bank into its final position on a pillar 40 metres from the right bank. The Apollo Bridge was the only European project to be selected as one of the five finalists for the 2006 Outstanding Civil Engineering Achievement Award (OPAL Award) by the American Society of Civil Engineers.

Having established what ticks the boxes for him in terms of infrastructure, Field goes on to explain what he sees as some of the most typical stumbling blocks for new projects. “In conception, infrastructure projects, and particularly large ones, often come with significant political risks that can be a serious pitfall. There are also social and environmental risks that are an increasing focus of public concern and can prevent projects taking off. Meanwhile, once a project is accepted in principle, then funding and procurement can be a problem, a problem often exacerbated by the size of the project in question.  Construction risk comes into play once project implementation is underway and can, once again, be significant.”

Getting infrastructure off the ground in Europe

To help address the funding issues touched on by Field, in collaboration with the European Union and other partners, The European Investment Bank (EIB) currently offers a number of initiatives to offer advice and financial help to EU member states. We asked Field to give examples of where this support has proved to be of significant importance.

Starting with JASPERS (Joint Assistance to Support Projects in European Regions) – created specifically to boost infrastructure in the 12 new member states joining in 2004 and 2007 – he cites the Sofia Metro in Bulgaria as an excellent example of how such support has played a key role in moving forward the construction of an urgently needed mass transportation system. Although planned as far back as the 1960s, work on the city’s new rapid transit network kept stalling. Problems encountered included the unearthing of major Thracian and Roman archaeological finds, the city’s homeless taking shelter in the half-finished tunnels, and a crucial lack of funding.

Enter JASPERS to the rescue with the technical advice that helped the project win the vital EU funding that eventually enabled work to start in earnest in 1998. So far two lines – M1 Red and M2 Blue – have been completed and a third line, the M3 Green, is in the early planning stages. The project design contract has been awarded to the Czech company, Metroprojekt Praha.

Another EIB product is JESSICA (Joint European Support for Sustainable Investment in City Areas). Field explains, “JESSICA was not initially conceived as an infrastructure funding vehicle, but was designed to facilitate urban regeneration and renewal which had otherwise been prevented or stalled by market failure and/or imperfections; such projects are frequently multi-sector and can be quite complex.  In any event, a recently launched JESSICA operation in Sopot, Poland to develop a new railway station and regenerate the built environment in the station’s immediate vicinity – including development of commercial buildings, a hotel, and parking areas – is a good example of where a relatively modest financial injection can make a significant difference in kick-starting an operation.”

The EPEC (European PPP Expertise Centre) focuses its activities not on projects per se, but on the provision of advisory services that help to create structures to facilitate delivery of robust PPPs. Field tells us, “To this end EPEC has been very active in Greece and Ireland, and is currently very busy in Romania.”

Field goes on to talk about the LGTT (Loan Guarantee Instrument for Trans-European Transport Network Projects) scheme, “An excellent example of where exploitation of the loan guarantee scheme has facilitated the development of a large scale infrastructure project is the Bordeaux-to-Tours link of the LGV Sud Europe Atlantique high speed railway line, which brings high speed rail services to south-western France.”

Overall investment on the new link totals 7.8 million euros, of which 1.2 billion has come from the EIB via LGTT financial instrument. The project got the go ahead in June 2011 and will take six years to complete, cutting journey times from Paris to Bordeaux to 2 hours and 5 minutes. The tracks will be 340 km long with 17 connecting lines, and about 400 civil engineering structures including 19 viaducts and 7 cut-and-cover tunnels.

When you consider that this is just one of EIB’s pan-European projects, it’s worth keeping an eye out for opportunities as and when funding is granted. Regular announcements are made on the bank’s website www.eib.org.

The opinions expressed in the above interview are those of Brian Field and not those of the EIB.