International banks and investors are now giving serious consideration to supporting Irish infrastructure projects for the first time since 2007, the Chief Executive of the National Development Finance Agency (NDFA) said today (Thursday 21 March 2013).
NDFA Chief Executive Brian Murphy said international banks stopped financing major projects in Ireland when the financial crisis first hit – but their renewed interest is a crucial sign that confidence is returning.
Mr Murphy was speaking at a conference for investors in major Irish infrastructure projects, “Irish Public Private Partnerships in the new economic environment: procurement, delivery and finance”, which was hosted by the NDFA in Dublin today.
“While the international project finance banking sector had ceased to lend to the Irish market after 2007, there are clear signals that at least some players are now giving serious consideration to returning to the market,” said Mr Murphy.
Mr Murphy said the Government and NDFA have taken a number of significant steps to address the concerns of international bidding groups, lenders and investors. These include:
“The matter of recent project cancellations was a point of serious concern for many market players,” said Mr Murphy. “This is particularly understandable, not only because some parties lost large sums on unreimbursed bid costs but also because it raised questions about the certainty of and the commitment to the proposed new pipeline.”
Mr Murphy said one important example of the Government’s statement of intent in stimulating investor interest in Irish projects and giving them confidence to proceed is the recent decision to make provision for substantial partial reimbursement of bid costs to bidders who make the shortlist for a project but are ultimately unsuccessful.
Many bidders had expressed concern over incurring substantial costs on individual projects but losing out at the final stage.
The risk of losing this money was a major issue for bidders and made them less likely to bid for projects, said Mr Murphy. It was important to address this issue to ensure that there will be a healthy level of competition for Irish Public Private Partnership (PPP) projects in future, he said.
Other measures being taken to stimulate investor interest include streamlining bid processes to reduce costs by up to 50%. The NDFA also plans to shorten bid times by at least six months, reducing the timeframe for bidding processes to between 15 and 18 months.
Mr Murphy also said that the next major PPP project it plans to procure, Schools Bundle 4, will be launched in May with an expected financial close date in Quarter 3 2014. Two other major projects, Schools Bundle 5 and the Primary Care Centres project, are expected to reach financial close in Quarter 4 2014.
“We are introducing a pipeline of projects to stimulate jobs and growth, with strong political commitment and support, and with potential funding solutions available. Definite steps are being taken to reduce delivery time and cost supported by bid compensation arrangements,” said Mr Murphy.
“We recognise that successful delivery presents challenges in particular issues relating to the construction sector. We feel these can be managed.”