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THE INSTITUTION OF ENGINEERS AND SHIPBUILDERS IN SCOTLAND The MacMillan Memorial Lecture BRIDGING THE INFRASTRUCTURE GAP By Gus Macdonald STRICTLY CONFIDENTIAL ‘INFRASTRUCTURE TO 2030’ REPORT (OECD, 2006) INFRASTRUCTURE INVESTMENT NEEDS Sector ($ US Billion) Road 5,370 Telecoms 8,170 Electricity 4,210 Water 18,090 1 STRATEGIC TRANSPORT INVESTMENT NEEDS 2009 – 2030 ESTIMATES ($ BILLION) Aggregate Investment: 2009 - 2030 Airports Port infrastructure 2,200 830 Rail (incl. maintenance) 5,000 Oil and Gas – transport 3,255 2 8.1% 8.1% GDP GROWTH RATES 6.0% 9.5% 4.6% 8.1% 4.6% 4.6% 4.4% 3.8% 3.2% 3.2% % 2.6% 2.4% 2.4% 2.6% 2.6% 4.4% 2.4% 2.0% 2.0% 2.0% 3.2% 2.6% 3.8% 3.8% 6.0% 3.3 4.6% 3.8% 1.2% 1.2% 3.3% 1.2% 2.4% 2.0% 1.2% World OECD WorldWorld OECD OECD rld OECD 2010-2015 2010-2015 2010-2015 2010-2015 2010-2015 China China India India China China 2015-2030 2015-2030 2015-2030 2015-2030 2015-2030 2030-2050 2030-2050 2030-2050 20302030-205 Sources: IEA World Energy Outlook 2010, Energy Technology Perspectives, 2010. International Energy Agency 3 WORLD ECONOMY SHIFTING EAST 25000 China GDP ($PPP Billions) 25000 20000 China United States 25000 20000 15000 United China India States 20000 15000 10000 India United Russia States Russia India France 15000 10000 5000 France Russia Germany 10000 5000 0 2007 2015 2030 2007 2015 2030 5000 0 0 Germany France Germany China’s GDP to overtake US GDP before 2025. 2007 Source: IEA World Energy Outlook, 2009. International Energy Agency 2015 2030 4 PASSENGER AND FREIGHT DEMANDOUTLOOK TO 2030 Index Base level 2010 =100 350 300 250 200 150 100 2010 Port containers 2015 2020 Air Freight Air passengers 2025 2030 Global GDP 5 GDP PER CAPITA GROWTH Selected countries to 2030 $70,000 United States $60,000 Germany $50,000 $40,000 France $30,000 Russia $20,000 China $10,000 India $0 2007 2015 2030 6 This year the UK came 28th in international rankings. In terms of productivity, this infrastructure deficit is as serious as our budget deficit David Cameron 7 Privatisation is again sweeping the world, with governments hauling in a record $213bn in revenues last year Financial Times 8 GAS DISTRIBUTION COMPANIES Company 1 Ownership/ Main shareholders 1 Scotia Gas Ontario Teachers (Canada) Borealis (Canada) 2 Northern CKI (Hong Kong) 3 National Grid Listed plc, UK 4 Wales & West Macquarie (Australia) AMP Capital (Australia) CPPIB (Canada) Industry Funds Management (Australia) 2 3 4 9 ELECTRICITY DISTRIBUTION COMPANIES Company 1 Scotland and Southern Listed plc, UK 2 Scottish Power Iberdrola (Spain) 3 North West Colonial First State (Australia) JP Morgan infrastructure (US) 4 North East & Yorkshire Berkshire Hathaway (US) 5 South Wales & South West and Central Networks Pennsylvania Power and Light (US) 6 London, South & South East CKI (Hong Kong) 1 2 3 2 4 5 5 6 Ownership/ Main shareholders 1 10 WATER COMPANIES Regional Company FDI shareholders Northumbrian CKI (Hong Kong) Ontario Teachers (Canada) Yorkshire Citigroup Infrastructure (US) GIC (Singapore) Anglian CPPIB (Canada) Colonial First State (Australia) Industry Funds Management (Australia) Wessex YTL Power International (Malaysia) Thames Macquarie-led consortium (International) Southern JP Morgan infrastructure (US) Future Fund (Australia) UBS Infrastructure (Swiss) CKI (Hong Kong) 11 INFRASTRUCTURE CHARACTERISTICS Natural monopolies or high entry barriers Insulation from business cycle Portfolio diversification Predictable cash flows – inflation linked 12 UK INFRASTRUCTURE – OWNERSHIP ORIGIN UK an attractive market for global investors UK Rest of World Foreign ownership (shareholding) around 40% and increasing Europe Investor opportunities for differing preferences Source: OFT 13 PENSION ASSETS AS % GDP - SELECTED COUNTRIES 2009 Netherlands 130% Australia 82% United Kingdom 73% United States 68% Canada 63% Simple average 36% 25% Japan Spain 8% Germany 5% Italy 4% Source: OECD Global Pension Statistics 14 We are not going to save the planet by putting our country out of business George Osborne 15 Curmudgeons and fault finders who hold forth on the impossibility of renewals...the climate sceptics and armchair engineers Chris Huhne 16 INSTALLATION VESSELS 17 INSTALLATION EQUIPMENT Turbines loading Transport to site Transition piece Pile driving Turbine installation 18 OFFSHORE O&M Offshore substation and accommodation platforms Boat landing Helicopter access O&M Vessel Mother-ship solution 19 ELECTRICAL 20 21 I wrote it because sustainable energy is important. If you would like to have this book free, please help yourself: it is on the internet at www.withouthotair.com Prof. David MacKay 22 BRIDGING THE GAP Multilateral Funds Institutional/Pension Funds Sovereign Wealth Retail Infrastructure Products Funds GFC Stimulus Packages Infrastructure Banks Privatisation/PPP Corporate User Investment Payments Taxpayer Support 23