It’s not an acronym that slides off the tongue.
But MUFG are four letters New Zealanders could be seeing more of, as the world’s biggest non-Chinese bank (by assets) turns its eye to this country’s infrastructure projects. The bank is the largest foreign lender in the corporate space in New Zealand, but has kept out of the general limelight until now. It has just re-branded and is looking for exposure.
MUFG is already invested in advising on building Transmission Gully’s long-awaited 27 kilometre highway – the country’s largest private-public partnership to date. It’s also the preferred bidder on the Waikeria Prison project.
Now it is looking at rail – specifically, Auckland’s $6 billion light rail project that has already attracted an expression of interest from a joint NZ Super Fund and Canadian fund manager CDPQ Infra bid.
Rob Ward, the bank’s Sydney-based head of advisory, calls that declaration “pre-emptive”, and says MUFG is putting its hand up too, looking to repeat success it’s had with rail projects in Australia.
NZTA held a light rail briefing two weeks ago to give an overview of the Auckland project and process. It was attended by 450 people and 170 organisations, so there’s no shortage of interest.
The bank’s New Zealand managing director, Nick Congdon, says there’s no obvious pipeline of certain infrastructure development outside Auckland’s light rail project, although the bank is talking to the Auckland Council about financing the city’s billion-dollar central interceptor wastewater pipe. That’s a project already budgeted for but the council is looking for other funding models to free up the cash for other urgently needed infrastructure projects.
“There is a little bit of resistance to PPPs from the New Zealand public and the new Government has signalled it doesn’t really see social projects as suitable,” says Congdon. “But we have been involved in some wonderful PPPs with really good outcomes in schools in New South Wales, Victoria, a hospital in NSW and convention centre in Melbourne.”
Says Ward: “The Government’s signalled that’s not a place they want to play in, which is disappointing for us.”
The pair were at last week’s big infrastructure conference in Auckland, partly for the exposure but also to get a handle of where the Labour Government is heading on big, much-needed projects.
Congdon’s not entirely convinced by the message, but says they’re encouraged by Shane Jones’ infrastructure body announcement which aims to take long-term infrastructure planning away from political processes.
“Still, a lot remains to be seen. This approach has been successful in countries such as the UK and Australia improving the way these countries plan, fund, finance and execute key infrastructure projects.
“We’ve heard about certainty (from Prime Minister Jacinda Ardern) but it’s still uncertain as to how we are getting there.
“There’s obviously a significant pipeline building – $28 billion with ATAP for example. But it’s hard to put a time line on it and say ‘It’s happening here, here and here’.”
He says New Zealand’s capacity issue is also a factor in holding projects back, but overseas contractors will come in if there’s certainty – that buzz word again. Congdon says overseas contractors need an identifiable pipeline on what private finance will be needed for over the next 12 months, “and right now it’s somewhat opaque”.
Ward: “Particularly when there’s a change of government, there’s always that question, that’s normal and we’re used to that. Every state in Australia’s had a change of government in recent years and you always know there’s a change coming.
“It’s just how quickly the dust settles and the path becomes clearer. We’re encouraged by some of the general tone that we’re hearing …. It’s now identifying the detail of what’s coming.
“The new Government’s making all the right noises but nothing’s happened yet, I think they are desperate to get things up and running.”
But Congdon says people should be hopeful on that issue. “I think we are going to see some action. Living in Auckland and driving around is challenging. But there are significant infrastructure projects happening, and I’m hoping that will make a difference particularly to people living in Auckland.”
Ward says there’s appeal to operating in the New Zealand market even though, because of size constraints, it doesn’t offer the same scale opportunities as Australia.
“The projects we’ve been involved with have been well put together and have been run really well, agencies have done a great job and that’s really appealing.”
MUFG is also keen on renewables projects throughout the world, with more than $13 billion of exposure. It has a hand in such schemes in New Zealand, including wind farms for Meridian and geothermal with Mercury.
“We are the largest lender globally in the renewable sector and that’s been deliberate,” says Ward. “Our commitment to the renewables sector is enormous. We are a top-tier lender to all the energy companies in New Zealand.”