SFT brings multi-million long-term infrastructure finance to Scotland
SFT’s work in promoting and bringing forward well structured deals within its £2.58bn NPD programme has created a clear programme of investment opportunities – critical to attracting high levels of low-cost financing from the European Investment Bank (EIB) alongside continued competition from commercial banks and institutional investors to finance Scottish infrastructure.
EIB provides low-cost finance to infrastructure projects across Europe and such has been the success of managing the NPD programme that EIB’s current commitment in Scotland runs to over £350m across major education, health and transport projects. Importantly, SFT’s work provides EIB with clear visibility on up-and-coming projects allowing the bank to direct its limited resources into Scotland’s NPD programme where it can see a clear deal-flow.
To date the programme has secured:
- Over £80m EIB investment into the new City of Glasgow College which is already under construction
- Commitment of up to £100m of EIB cash to help finance construction of NHS Lothian’s new £155m Royal Hospital for Sick Children and the adjacent Department of Clinical Neurosciences, due to reach financial close in 2014
- Commitment of a further £180m of EIB funding into Transport Scotland’s M8/M73/M74 Improvements project which is expected to close in early 2014
During 2013, five deals closed across the programme requiring a total of £300m senior long-term financing. SFT has worked with the procuring authorities to deliver a combination of bank and institutional investment from UK and European commercial funders to sit alongside the EIB investment. Funders across the programme include UK Insurer Aviva, and the German KFW and Helaba banks, all providing value for money financing on 25-years plus terms to Scottish NPD projects.
In relative terms, SFT’s £2.58bn NPD programme is one of the largest financed investment programmes of its kind to be seen across Europe. Contracts for additional investment into Scotland’s infrastructure over the next three years will be signed at an average value of over £150 per person per year, compared to an historic average across Europe of £27 per person per year.
Peter Reekie, director of finance at SFT, stated: “Thanks to our work, commercial banks, financial institutions and the European Investment Bank view Scotland’s infrastructure programme as a robust pipeline to invest in. By adopting common, simplified commercial terms and frequently updating the market on progress across the NPD programme, financiers and building contractors can plan with confidence for the future. This has been vital in attracting such high levels of investment.
“There’s nearly £2bn of NPD projects currently in procurement and SFT’s work will continue to ensure well managed and attractive projects come to market on time, whilst also achieving a great value deal for the taxpayer.”
Notes to editor
The Scottish Futures Trust (SFT), in partnership with Scottish Government, Transport Scotland, local government, NHS Boards and other public bodies, delivers the Non-Profit Distributing programme with delivery risks transferred to private sector partners under capped profit arrangements. Scotland has pioneered capped private sector profits of revenue funded projects so that profits properly reflect the risks undertaken and deliver better value for the taxpayer.
Alongside the profit cap, SFT has introduced pragmatic innovations in a simplified contract and reduced the range of services to deliver better value-for-money, faster procurements and increased flexibility to public authorities. Paying for infrastructure from future revenue budgets rather than from increasingly constrained capital funds means that construction can start as soon as projects are ready instead of being deferred until capital budgets become available.
The £2.58bn programme is made up of large transport, acute hospital and college projects procured as stand-alone NPD projects as well as a large number of smaller health centre and schools projects delivered through hub.
Deals closed in 2013 are:
- Forres, Woodside and Tain health centres for NHS Grampian and NHS Highland (total value £13.5m)
- Inverness College (total value £45m)
- Glasgow College (total value £193m)
- James Gillespie’s School for City of Edinburgh Council (total value £34m)
- Wishaw, East Kilbride and Kilsyth health centres for NHS Lanarkshire (total value £44m)
European Investment Bank (EIB)
The EIB is the European Union's bank and is the only bank owned by and representing the interests of the European Member States, working closely with other EU institutions to implement EU policy.
As the largest multilateral borrower and lender by volume, EIB provides finance and expertise for sound and sustainable public sector projects which contribute to furthering EU policy objectives. More than 90% of its activity is focused on Europe but also implements the financial aspects of the EU’s external and development policies
All the projects EIB finance must not only be bankable but also comply with strict economic, technical, environmental and social standards.
For further information, visit www.eib.org