When Denmark's infrastructure is to be boosted in the coming years, private-sector investors such as pension funds should be involved to a greater extent than previously. With the right setup, public-private partnerships (PPPs) can provide larger gains for society than infrastructure projects carried out by the public sector alone.
That is the conclusion of a newly published report from a working group to investigate the PPP potential in Denmark set up in 2012 by PensionDanmark in cooperation with ATP, PFA, PKA and Sampension.
"Development of our welfare society requires constant upgrading of the basic infrastructure. It is essential to long-term competitiveness and growth in society that we have an efficient public-sector infrastructure. Cooperation between the public sector and private investors could be an important means of achieving these goals," says Anders Eldrup, former CEO of DONG Energy, who headed the working group together with Peter Schütze, former CEO of Nordea Bank Danmark.
PensionDanmark welcomes this report.
"The report confirms that public-private partnerships have a large potential, as our own projects based on this model have also shown, e.g. in connection with the offshore wind farms at Anholt and Nysted," says CEO Torben Möger Pedersen, PensionDanmark.
According to the report, the PPP model is best suited for infrastructure projects such as schools, hospitals, roads, tunnels and bridges. Cases in point include a harbour tunnel in Copenhagen, school construction projects and upgrading of the motorway from Næstved to Rønnede.
"We agree that society can reap considerable gains by carrying out large Danish infrastructure projects as PPPs – one reason being that this will improve the overall project funding. And as an investor vi find these projects very interesting because they can provide a stable return for members many years ahead. So we are ready for more infrastructure investments via PPPs in the coming years," says Torben Möger Pedersen.
"If PPPs are really to take root in Denmark, there must be greater political will to apply this model. This report provides a thorough analysis of the PPP potential and should be taken into account in the coming years when decisions are made on how to implement major Danish infrastructure projects," says Torben Möger Pedersen.
See the report here.
Public-private partnership
– A public-private partnership (PPP) can be defined as a long-term contract between the public authority and a private-sector partner.
– In a PPP, the public authority specifies the extent and quality of the service to be delivered by the private-sector partner. The latter's tasks may include design, construction, funding, operation and management of fixed assets, as well as delivery of a service to the public authority or the citizens using the assets. A core element is the link between the construction and operational phases.
– The private-sector partner receives a series of payments from the public authority, user fees, or a combination of the two. In many cases, the assets are returned to the public-sector party when the contract expires.
