2012: The Year of the Politician

Politicians – and their decisions – had a big influence on proceedings at this year’s Infrastructure Investor Berlin summit.

There was something different going on at this year’s Infrastructure Investor Berlin summit. 
 
On the one hand, it was the biggest and most successful iteration of our annual European infrastructure forum, with close to 300 delegates networking and carousing under the watchful eyes of 1,500 tropical fish, elegantly swirling in the one-million litre AquaDom, the massive aquarium that dominates the lobby of the Raddison Blu hotel.
 
But the impressive concentration of industry heavy hitters contrasted with the relative absence of what is likely to be the most influential force in infrastructure this year – the world’s politicians.
 
It should come as little surprise then to find that Gordon Bajnai, a former Prime Minister of Hungary, ended up stealing the spotlight at this year’s event, which he started with a statement that grabbed everyone's attention: “The biggest risk in infrastructure [today], especially for public-private partnerships, is political and not financial”.
 
He will probably be proved right. For all the threats posed by Basel III and Solvency II, a diminishing infrastructure bank market and a clear lack of large-scale alternative debt solutions – politicians and the decisions they make are likely to end up being the asset class’s biggest talking point this year.
 
In a way, this is entirely logical. If you followed 2011’s European debt crisis rigmarole, you could clearly see how politicians ruled the day, with markets and investors hanging expectantly on their every move. So why should things be any different in infrastructure? As it turns out, they aren’t.
 
The main problem, as Bajnai succinctly summarised, is the mismatch between infrastructure’s long-term characteristics and the electoral cycle’s short-term nature – a mismatch which, at a time of unprecedented crisis, is becoming ever more glaring.
 
Nowhere is this more evident than in the UK. Anthony Rabin pointed out in his quietly outraged presentation at the opening of day two, it took only a flick of the electoral switch for the Private Finance Initiative, the country’s standardised procurement process for public-private partnerships, to go from respected procurement tool to “a national disgrace”.
 
In tough times, governments are increasingly anxious to differentiate themselves from their predecessors and this is impacting infrastructure in several ways. One of the more visible trends is the growing ‘localisation’ of deals, with governments wanting their countries’ infrastructure in the hands of their national champions. 
 
Just look at the recent acquisition of Amprion, Germany’s fourth-largest electricity grid. Asked what made the deal special, one of the members who helped broker the sale candidly answered: Amprion is a great political story of a German asset sold by a German utility to several German pensions with the help of a blue-chip German bank. 
 
Aside from the legal advisers, all the principals in the Amprion deal were German. This type of ‘national’ deal is precisely what the new UK government is trying to bring about via its initiative to channel UK pension money to UK infrastructure. 
 
At the end of the day, it was Bajnai the politician who again shed a helpful light on how to ring-fence infrastructure from the short-term depredations of his peers by calling for the creation of technocratic structures that will help manage long-term infrastructure programmes.
 
As he tellingly joked: “We [politicians] all know what we need to do. The problem is: how do we get re-elected if we do it?”