Investors need 'constructive dialogue' with regulators

The former chief executive of the UK water industry said investors can assist with the "constructive evolution" of regulatory regimes.

Speaking at Infrastructure Investor's 2014 Berlin Summit, Regina Finn – the former chief executive of UK water regulator Ofwat and current director of consultancy Lucerna Partners – said recent controversies about regulatory interventions raise a “question about how firms evolve to engage [with regulators] in a way that prevents unhelpful intervention driven by market forces”.

She said regulators had always been affected by “broader concerns”. In the UK energy sector, for example, there had been pressure on regulators to drive competition and simplify tariffs. But she insisted that a strength of the UK was its regulatory independence and that this allowed long-term commitments from investors. She conceded that short term intervention could be “potentially damaging” but that it was “perfectly legitimate” to have long term policy goals.

Niall Mills , head of infrastructure asset management in Europe at First State Investments, said there was a widespread recognition that politics is short termist these days and that politicians will “get involved” and that this created the need for “really good and effective regulation”. He said that the response to the UK Labour party's calls for an energy price freeze had been “very reactive”.

Meanwhile, Boe Pahari, managing director and head of Europe and the Americas at AMP Capital, made the point that while “investors are in competition with each other, governments also in competition with each other” when it comes to attracting capital.

Peter Hofbauer, head of infrastructure at Hermes GPE, spoke of an “affordability crunch” whereby consumers can ill afford to pay for the services that need delivering. He said that while investors were involved in delivering essential services, they were “not protected on the margins and we can expect increasing margin pressure”.