Once upon a time in the days before the crash, Ireland went before international financiers seeking interest in multi-billion euro projects such as Dublin’s Metro.
Today, the ambition has been scaled back. Now, the projects now being offered as public-private partnership investments – built privately and paid for by the State over 25 years – include primary care centres, a few courthouses and new Garda headquarters for Cork, Limerick and Wexford.
However, if ambitions have become more tempered on the Irish side, interest has returned on the part of investors, who were frightened off after a number of key projects, such as Metro, were abandoned in the eye of the financial storm.
"There will be no more political vanity projects. Our investment programme is targeted at projects designed to stimulate economic growth and create employment," the Minister of State for the Office of Public Works Brian Hayes told investors gathered in London on Tuesday night.
Interest in Ireland is growing. On the one hand, that represents the international financial markets’ growing optimism about the country’s prospects for good returns; but, just as significantly, a lack of opportunity elsewhere for them right now.
The Government is offering temptations: projects will get final approval in 15 months, not the average of 21 months that happened before; while the costs of putting together a bid will be cut in half.
“We intend to have planning permission in place before preferred tender stage so that the bidders don’t have to do this. We will also prepare specimen designs for standard buildings before we go to market,” said the Minister of State.
Meanwhile, the costs of preparing a bid by successful companies will be refunded as a temporary inducement, while short-listed candidates will get part of their bid costs back if a project is cancelled.
However, they (the projects) will not be, promised Minister of State Hayes.
“We mean what we say, and we will do what we say,” he told investors invited by legal firm, Osborne Clarke. “We have taken a close look at what the State can do to reduce bid time and costs.
“We intend to have planning permission in place before preferred tender stage so that the bidders don’t have to do this. We will also prepare specimen designs for standard buildings before we go to market.”
Under the plan, €2.25 billion worth of projects are up for grabs, varying in size from €60 million for some of the smaller buildings, up to €250 million for road projects such as the N17/N18 Gort to Tuam road in Galway and the M11 Gorey to Enniscorthy motorway and N25 New Ross bypass in Wexford.
In all, the Government hopes that the investments will create 13,000 jobs, making it clear to interested companies that some of those employed will have to come from the Live Register, though the final percentage has yet to be decided.
In the past, public-partnerships have raised questions about the cost to the taxpayer. And they will do so again, since investors are being promised returns "in the low teens".
However, on the other hand, the spending is “off balance sheet”, thus not featuring on Ireland’s borrowing figures, while the State secures projects it otherwise would not have had, along with the economic spur they create. Opinions towards the projects will depend on the judgment that people make on that balance of advantage.
Not all of the money needed will be private. The European Investment Bank is interested, particularly in DIT Grangegorman, while National Pension Reserve money is also available.
Meanwhile, the little-known Council of Europe Development Bank is also “kicking the tyres”, in the words of one industry expert.
“The pipeline of projects is fantastic, the market likes that, especially if they stay on schedule, more or less,” says Angus Melville of Inspiratia, an influential trade magazine.
The pension fund money is crucial, since it can act as a stand-by credit facility to offer comfort to the EIB if it seeks to co-finance projects with the Bank of Ireland.
Under the EIB's rules, it cannot co-operate with Bank of Ireland without a letter of comfort from some quarter because Bank of Ireland's credit rating is as low as it is. The three-way partnership has already worked successfully once last November when the National Development Finance Agency signed a deal with BAM PPP and PGGM to build eight schools.
Then, the €120 million debt was covered by the EIB and Bank of Ireland, with the pension fund covering the latter’s share until it was able to raise its own funds.
Responding to the presentation this week, Osborne Clark lawyer Clive Wade, who works with many seeking stable returns from infrastructure projects, said: “The projects on the Irish list are more deliverable than those in the UK, particularly England: that is why you’ve seen so many people here tonight.”
Illustrating the changing attitudes to Ireland, an Inspiratia note sent out to clients in March noted: “There has also been growing support from the Labour party which is a junior member of the [Irish] governing coalition and from trade unions, which see PPP as a way to help stimulate the economy.
“There has been some criticism of PPPs but it has primarily focused on their administration and specific features rather than on the model itself,” it went on.
Emphasising that timetables are being kept, Brian Murphy, the head of the National Development Finance Agency, told investors that one application was behind "by a day", while another multi-million plan was six weeks late – little more than a trifle for those in the room, who are often faced with delays of months, or years.
However, Murphy’s core message was simple: Ireland “has really listened” to the thoughts of those who previously got their fingers burned after they came to Dublin. The “pipeline” will be steady; the primary care centres, the Garda divisional headquarters and courthouses will be built each as single contracts, not sent out piecemeal, he said.
Equally, both Minister of State Hayes and Murphy noted that construction is cheaper now to deliver in Ireland – which once had been over-dependent on construction, but is now behind international norms.
“It used to be 21 per cent [of the economy], way too much. It is now 5 per cent. The argument is that, for developed countries, it should be around 10, or 12 per cent. Sixty per cent of those on the Live Register were previously in construction,” said Hayes.
The Irish roadshow in London this week – the second that has been done in the city, but the one that got the biggest audience – has attractions for investors partly because of their opinion of what is happening closer to home.
Under Labour, PPPs – known in Britain as “private finance initiatives”– won a toxic reputation for being expensive and badly-negotiated by the authorities, which led the Conservative/Liberal Democrat coalition to look again at the terms after they won power in 2010.
However, they also needed to put vim into the British economy. In 2011, the treasury announced a €3.5 billion plan to build over 250 schools with private money and lease them back to the State. Two years on, that figure has been cut back to £700 million.
So far, investors are less than enthusiastic: “The English programme amounts to one bundle for now, with the promise of some more down the line that may well be scrapped by the next government after the next election as they are unlikely to get to financial close in time for the next election.
"Unless things change dramatically in the coming two years, it looks like the Conservatives will be ousted by Labour, which has for months been running its own review of the country's infrastructure in anticipation of its return to power in 2015," said Inspiratia.
Public Private Partnerships in Ireland
Projects coming on the market
A number of projects have already been issued to the market, including two groups of schools, the M11 Gorey to Enniscorthy motorway and the N25 New Ross Bypass.
Coming to market in 2013
The development of the Grangegorman Dublin Institute of Technology campus is the crown jewel of the package: a €200 million plan to house the 22,000 students currently spread out over nearly 40 DIT sites throughout Dublin.
The European Investment Bank is expected to fund the project, which is due to go to the market early next month, to the tune of 50 per cent of the cost, with the rest made up by Irish, or international investors.
Coming to market in 2014
Eight primary care centres; seven courthouses; three Garda divisional headquarters; 12 schools.