6 Apr 2010

Return of 11% targetted by new infrastructure fund

6:51 am on 6 April 2010

Prospective investors are being told a social infrastructure fund is targeting an internal rate of return of 11% before tax, but it admits returns may be a few years away.

Investment bank Craigs Investment Partners plans to raise up to $125 million to invest in a private fund that wants to build social infrastructure such as schools, hospitals and housing.

The Government is proceeding cautiously into public private partnerships, or PPPs; testing the waters with a $500 million prison in Wiri, and a schools' project, later in the year.

Craigs will invest in Morrison & Co's Public Infrastructure Partners, which already has a $100 million commitment from the New Zealand Superannuation Fund.

Morrison director Peter Coman says PPPs will have to demonstrate value for money for the Government.

Mr Coman says the fund hopes to raise between $200 - $300 million and, using debt, deliver projects worth more than $1 billion.

Craigs and Morrison have been on a series of roadshows and Mr Coman says investors are definitely interested.

The fund will finance, build and maintain facilities for the Government in return for an annual fee, before being handed back to public ownership after, say, 30 years.