The non-profit group Global Infrastructure Hub, working at the behest of the G20, has sent procurement into the digital age with an online database that connects investors and governments in need of project financing.
A little over a month has passed since GI Hub launched Project Pipeline and the free platform is already emerging as a marketplace for investors to shop for infrastructure projects uploaded by government agencies seeking private sector money for their development.
So far, eight countries from Latin America and Asia have submitted information about 44 projects in need of financing. In the private sector, more than 600 individual organisations from 85 countries have registered for Project Pipeline. Around 70 percent of the database’s users are from the private sector.
GI Hub, established by G20 countries in 2014 to help facilitate private investments in infrastructure, created the project pipeline to provide “visibility, clarity and consistency of information”, Richard Timbs, a senior director at GI Hub, explains. Its goal is to gather information in one place that will make it easier for financiers to find projects they want to invest in.
“From the market’s perspective, we felt there was a real demand for a tool that could be accessed online, something that presented information on projects across markets and countries in a standardised format,” he says.
According to Timbs, GI Hub began creating the database by asking investors what information is needed before they would commit money to a project, Timbs recalls. The group then said to countries: “This is what the market wants to see. Are you comfortable with that?”
Project Pipeline depends on government agencies to update information about a project’s development. It tracks the project from when it is first announced through the early stages like investigations and feasibility studies through procurement and eventually to contracting.
“It will only work if the countries themselves are motivated to put in information,” Timbs argues. “If it’s the Hub doing it, to me it doesn’t have the real legitimacy that it will have when the countries do it themselves.”
The Sydney-based non-profit has set a goal to unlock $2 trillion in global infrastructure capacity by 2030. One way to do this, Timbs claims, is to make it easier for investors to learn about projects that governments need help funding.
“There is an enormous reserve of capital waiting to be tapped,” Timbs states. “Anything that the Hub can do to bring those two together, even in small incremental steps, will help to address the problem of a shortfall of projects.”
It is easy to see an emerging markets trend in the eight countries that have so far joined Project Pipeline. They are Australia (New South Wales), Chile, China, Colombia, Mexico, New Zealand, South Korea and Uruguay.
Timbs says Project Pipeline can be especially useful for the governments of developing countries. A database where investors from around the world can peruse projects they might otherwise never have heard of gives these countries a better shot at finding a suitable partner.
Mexico, for instance, has recently committed to meeting a large portion of its infrastructure needs through public-private partnerships.
Around 40 percent of Mexico’s national infrastructure programme is supposed to be financed through PPPs, notes Francisco Antonio González Ortiz Mena, director of banking at Banobras, a state-owned development bank.
Ortiz Mena believes Project Pipeline will be a useful instrument aligned with what Mexico wants to do with project procurement. He adds: “Given today’s environment and the budgetary restrictions that Mexico is facing, I think it’s even more important today that we take a closer look at PPPs.”
The country is flush with investment opportunities and the GI Hub database is providing it with a chance to market those projects to a wider range of potential financiers than would otherwise be possible.
A byproduct of increased exposure is more competition for projects, which is likely to lead to lower electricity prices. An example of this is renewable energy auctions. From South America to South Africa, governments have offered solar and wind projects to developers who win contracts by bidding to build the cheapest and most feasible asset.
Close to 3GW of contracts were awarded in Mexico’s second renewables auction in September for an average of $33.47MW/h, which is 30 percent less than its first auction in April.
“The more competition that we can have in the acquisition process or the tendering process of the PPPs, the better the results for the country,” Ortiz Mena explains.
However, Timbs is adamant Project Pipeline will not screen projects for investors, and it will not endorse projects for sponsor governments: “We’re simply providing a platform that allows them to get a greater insight into what these projects look like at an earlier stage to allow them to determine their level of interest.”
FULFILLING A MANDATE
GI Hub’s Project Pipeline is yet another effort to fulfill its G20 mandate of increasing the supply of government-backed infrastructure projects on the global market.
“The whole concept of putting together the private sector, and especially equity, with appropriate projects and transactions in countries that they’re interested in, that’s core to the mandate of the GI Hub,” Timbs explains.
The non-profit had been laying the groundwork for Project Pipeline since its inception in 2014. In March last year, GI Hub launched the Global Knowledge network aimed at helping countries deliver projects using the PPP model.
Then in April, it launched the precursor to Project Pipeline – the Field Guide to Infrastructure Resources.
The field guide is another online database that houses a comprehensive list of global resources, catalogued and searchable by country, infrastructure sector, author organisation and types. It covers the full life cycle for infrastructure investment – from enabling policy, to project planning and delivery, to operations and secondary markets.
Timbs says Project Pipeline is where GI Hub expected it to be a month in. The database is up and running and government-sponsored projects are posted for investors to browse.
“As it grows and more countries join,” Timbs concludes, “people will start to look at it as being a bit more than an initial curiosity and something that becomes a genuine part of the infrastructure landscape.”