Category: Infrastructure and Project Finance

Scotland Could Become Carbon Capture and Storage Powerhouse of Europe
FinanceInfrastructure and Project Finance

Scotland Could Become Carbon Capture and Storage Powerhouse of Europe

A recent seminar at the University of Aberdeen focuses on the next steps to ensure that Scotland makes the most of opportunities highlighted in the report The Economic Benefits of CCS in the UK. Key findings from the report include:

CCS can play a vital role in helping the UK meet its statutory target to reduce greenhouse gas emissions by 80 per cent by 2050. It has been estimated that without CCS, the cost of meeting this target will rise by £30-40bn per year.
Inclusion of CCS in the mix of low-carbon technologies would result in a 15 per cent reduction in wholesale electricity prices – leading to an average cut in household bills of £82 a year.

Each new-build CCS power plant would generate between 1,000 and 2,500 jobs in construction, with a further 200-300 jobs in operation, maintenance and the associated supply chain.

CCS could help the UK to retain existing industries, such as coal and gas power generation, and support vital energy-intensive industries (such as chemicals, steel and cement manufacture) which employ 800,000 people directly and in supply chains.

TUC General Secretary Frances O’Grady said: “Carbon capture storage technology offers a way to meet our environmental targets, while creating thousands of skilled, well-paid jobs and transforming regional economies.

“This is a great opportunity to re-invigorate our manufacturing sector and bring new research and development, design and construction jobs to areas like Yorkshire, the North East and Scotland. But without stronger government backing the UK risks losing its competitive advantage, and all the jobs and economic activity that CCS could bring.”

The North East of Scotland has been identified as one of the best places in Europe to develop CCS. The Shell and SSE Peterhead CCS project in Aberdeen promises to deliver a world first; a full-scale CCS project at a gas-fired power station. There are also many other CCS projects in Scotland which could be in operation by the end of the decade.

CCSA Chief Executive Dr Luke Warren said: “This report definitively shows that the successful deployment of CCS has wider benefits for the UK economy. Respected international and UK organisations agree that without CCS in the mix, costs of meeting climate change targets will rise significantly. We have gone further in this report to show that the cost savings from CCS have a real impact on the average UK household – increasing their disposable income and reducing the risk of fuel poverty.”

FSB Brings Business Champions in Parliament Together to Tackle Supply Chain Bullying
FinanceInfrastructure and Project Finance

FSB Brings Business Champions in Parliament Together to Tackle Supply Chain Bullying

Last month a number of large companies including Premier Foods and 2 Sisters were identified and criticised by the FSB for supply chain bullying.

Recent research by the Federation of Small Businesses (FSB) revealed that almost one in five small businesses had been subject to some form of poor payment tactics. Five per cent had experienced the so called ‘pay to stay’ practice used by Premier Foods, who asked suppliers to pay a flat fee in order to be considered for future contracts.

The cross-party parliamentary roundtable will be co-hosted by the FSB and the All Party Parliamentary Group for Small Business. The event will be held in Parliament on Tuesday 20th January 2015 at 8.30am to 9.30am.

Debbie Abrahams MP, having previously led a cross-party parliamentary inquiry into late payments last year, will host the event. Also at the table will be Anne Marie Morris MP, Chair of the Small Business APPG, Tessa Munt MP, Parliamentary Private Secretary to Business Secretary Rt Hon Vince Cable MP and Mike Cherry, FSB National Policy Chairman.

Mike Cherry, FSB National Policy Chairman, said: “It is simply unacceptable for any company to exploit its market position to enforce unfair and unreasonable payment terms. The money outstanding in late payments is in the billions and has consistently grown larger and larger. We need greater leadership from all parties competing to be in the next Government to toughen up the prompt payment code and improve the UK’s payment culture.”

Debbie Abrahams MP, who is hosting the event and has previously convened her own cross-party inquiry into the issue, said: “Late payment is something that CEOs and board members in big businesses can influence and I have always maintained that a late payment culture in a company is set at board level.

“That makes it a leadership issue and it’s time that deliberately paying late, finding ways to pay late, or making unilateral changes to pre-agreed contracts is seen as being as unethical as tax evasion.

“It’s simply a case of big businesses using smaller businesses as a credit line by applying bullying tactics that are unfair and have the knock-on effect of stifling growth in the economy.

“As politicians we must work to change business culture and make it unacceptable to pay contractors late as well as shifting the burden of having to take legal action away from the victims of late payment practices once and for all.”

Anne Marie Morris MP, Chair of the Small Business All Party Parliamentary Group, said: “For our small and micro businesses, late payment presents a real challenge when it comes to managing their cash flows. Our job is to make sure that is it as easy as possible to set up and run your own business, which means addressing the issue of late payment is crucial.

“The Government recognises this and is using the Prompt Payment Code to commit businesses to paying their debtors on time. This is a voluntary scheme, but already has over 1,700 firms signed up. Moreover, the Small Business Bill currently going through Parliament will name and shame larger companies who will not commit to this practice of ensuring a fairer payment culture.

“We must continue to do more however to ensure small businesses are not endangered because of late payment, even if this means more mandatory measures need to be put in place.”

Tessa Munt MP, Parliamentary Private Secretary to the Secretary of State for Business, Innovation and Skills, Rt Hon Vince Cable MP: “I pay tribute to the work of both the FSB and the Small Business APPG towards tackling the growing problem of late payment and the associated issue of extended payment terms.

“We should be clear that large companies, pressuring small businesses to accept unfair payment terms is completely unacceptable. MPs from across all parties have a responsibility towards casting a light on unfair payment practices and helping to redress the balance between small and large contracting parties.

“Going forward the challenge is for politicians and businesses to work together in order to create real cultural change that makes the exploitation of small suppliers a thing of the past.”

As part of the FSB research into poor payment practises, small businesses were asked to give examples of the most common poor payment practices they had to deal with. The FSB has used these examples to create a list of the five most resented payment practices in use today:

1) Flat fees – ‘pay to stay’
Also known as ‘supplier assessment charges’ or ‘supplier investment payments,’ these are flat charges which companies levy on suppliers either as a requirement to be on a supplier list, or packaged as an investment into hypothetical future business opportunities. It is often indicated that non-payment will result in de-listing. New research has indicated that more than a quarter of a million (260,000) businesses could be facing so called ‘pay to stay’ charges after five per cent of businesses surveyed said they had been asked to make a payment by a customer or face de-listing.

2) Excessively long payment terms – ‘pay you later’
In 2011 the EU issued a directive requiring all businesses to pay their suppliers within 60 days, or face interest payments on money owed. However, the UK implementation of the directive allows businesses to agree longer terms “provided it is not unfair to the creditor.” This has led to many companies insisting on payment terms of 90 or even 120 days. In effect this becomes an interest free loan from firms in the supply chain to large companies with excessive payment terms.

3) Exceeding payment agreements – ‘late payment’
As well as insisting on long payment terms, many companies are routinely exceeding agreed terms, or changing terms retrospectively to allow them to miss agreed payment dates. Also thought to be common is the practice of extending payment dates if money is owed on, or close to, the end of a financial reporting date in order to smooth a big company’s balance sheet.

4) Discounts for prompt payment – ‘one for you, one for us’
Prompt payment discounts are arbitrary discounts big firms give themselves for paying early or even just on time. For example, a firm that has agreed to pay 120 days following receipt of an invoice may also apply an automatic discount of 3% if they pay on or before the 120th day.

5) Retrospective discounting – ‘balance sheet bonuses’
Some firms seek to apply retrospective discounts to outstanding money owed to a supplier. This involves the company effectively changing the terms of the contract signed with the supplier after a contract has been agreed. Methods used to extract these vary, but include threats of de-listing, withholding payment, ‘marketing contributions’ and previously un-agreed discounts applied to specific volumes of business.

Balfour Beatty Appointed to New £1.5 Billion Public Civil Engineering Framework
FinanceInfrastructure and Project Finance

Balfour Beatty Appointed to New £1.5 Billion Public Civil Engineering Framework

The framework is valued at up to £1.5 billion, runs until February 2019 and individual projects are expected to be valued at up to £40 million.

The national framework is operated by Scape Group – the public sector-owned built environment specialist – and is open to all public sector bodies in the UK. It is the first to provide dedicated support to such a diverse range of projects, with Balfour Beatty providing expertise and resources for civil engineering and infrastructure projects ranging from road repairs, new bridges and coastal defence works to light rail schemes and major road projects.

The framework encourages collaborative working and early contractor involvement so that project design and delivery can be influenced, progressing rapidly to the construction stage, stimulating local jobs and spend and increasing value for the customer.

Leo Quinn, Balfour Beatty’s Group Chief Executive said: “Balfour Beatty has significant depth of expertise across the UK in delivering civil engineering projects successfully and through this appointment we will be able to improve delivery for our customers and expand our portfolio of local infrastructure schemes. I am also delighted that we share Scape’s commitment to employ and develop trainees and apprentices in acquiring the skills necessary to build lifelong careers, and to support the local businesses that the infrastructure sector relies on.”

CBI outline Challenges and Changes in 2015
FinanceInfrastructure and Project Finance

CBI outline Challenges and Changes in 2015

Focusing on three areas of action, he reminded politicians of all shades that reducing the deficit and cementing the UK’s reputation as one of the best places to do business must remain top priorities for the next government.

Turning to education, he called for radical reforms to the system by scrapping GCSEs, and urged political leaders to place facts first in the debate on the UK’s membership of the European Union.

John asserted that 2014 had been a successful year for the UK economy, which has emerged stronger and more able to tackle the challenges ahead – there are now 1.2 million more jobs than this time last year and employment is set to grow in every region of the UK in 2015.

UK growth is expected to hit 2.5% in 2015. John stressed that, if politicians and businesspeople make the right choices, we can increase living standards, spread the benefit of growth for the country and move forwards with confidence this year.

Nick Clegg Signs £357m Growth Deal for Greater Birmingham and Solihull
FinanceInfrastructure and Project Finance

Nick Clegg Signs £357m Growth Deal for Greater Birmingham and Solihull

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The Deputy Prime Minister, Nick Clegg,  signed a historic Growth Deal for Birmingham and Solihull, bringing over £357 million of investment to the region to support economic growth. While in Birmingham, Nick Clegg will also be visiting precision valve manufacturer HydraForce, which received an award of over £1.8 million from the government’s Regional Growth Fund (RGF).

The Growth Deal will help to deliver at least 13,000 jobs, allow up to 4,000 homes to be built and up-skill 7,633 people by 2021, as well as generating up to £80 million in public and private investment.

In addition, the Regional Growth Fund is providing £1.8 million towards a £17 million investment which has enabled HydraForce UK to build a new, bespoke 120,000 square-foot factory in Birmingham, which will be completed by mid-2015. This will create and safeguard almost 200 long-term jobs while generating upwards of 100 jobs in HydraForce’s supply chain.

The Deputy Prime Minister is today confirming other Regional Growth Fund awards in Birmingham. Dana UK Axle has secured a £1 million grant to increase capacity and install cutting-edge technology, creating 400 jobs in high-tech manufacturing. Sertec Group Holdings secured a £1.425 millionRGF grant to help deliver its project to invest in new stamping equipment and robotic welding cells at their plants in Aston, Coleshill and Tyseley. This will lead to 200 new jobs.

The Deputy Prime Minister Nick Clegg said:

“I’m delighted to be finalising this historic deal bringing real change to our second largest city in the UK. This significant Growth Deal will enable a whole host of jobs to be created, see scores of homes built and transport services improved. All of this is a major boost to the economy in Greater Birmingham and Solihull.”

“Growth Deals are about local areas leading their own growth, giving more power to people in the regions so we can work together to build a strong economy and a fairer society.”

“I was impressed with HydraForce’s ambitious plans to double its turnover and significantly increase its UK workforce. This US company has been in Birmingham for over a quarter of a century and this investment is securing its future in the Midlands.”

The key features of the deal are:

investing in growth in Greater Birmingham and Solihull, including station improvements at Snow Hill, major maintenance of the Tame Valley Viaduct, phase two of the Hoobrook Link Road to improve accessibility of the South Kidderminster Enterprise Park, a growth and regeneration programme in East Staffordshire and the mid-Cannock road/rail freight interchange
maximising the benefits of HS2, including station improvements between New Street and Moor Street, extensions of the Midland Metro, a Bus Rapid Transit scheme from Birmingham City Centre to Quinton and walking and cycling improvements in Birmingham city centre
enhancing growth sectors, and supporting and growing businesses, including new courses to improve skills capacity in the automotive supply chain and life sciences sector, a Solihull Aviation Engineering Training Centre to develop maintenance and repair skills, the Skills Excellence Hub in Birmingham for food technology, the Centre of Excellence for Advanced Technologies at Birmingham Metropolitan College, the Advanced Manufacturing Hub and a Life Sciences Campus

Balfour Beatty Awarded £32m Liverpool 'Baltic Triangle' Residential and Commercial Scheme
FinanceInfrastructure and Project Finance

Balfour Beatty Awarded £32m Liverpool ‘Baltic Triangle’ Residential and Commercial Scheme

Balfour Beatty’s UK construction business has been awarded the £32m contract to build Baltic Triangle, a three-tower residential development in Liverpool city centre for developer Neptune Investments.

The two year project will see Balfour Beatty delivering 324 new apartments across three separate towers, which will be thirteen, ten and eight storeys in height respectively. The project will also involve the creation of commercial space, a gym and concierge, and underground car parking for 358 cars.

Balfour Beatty will continue construction on a building previously begun by another developer, strengthening the existing basement and helping to reduce delivery time and costs by using pre-cast wall panels.

Balfour Beatty will recruit apprentices to the project and utilise its established links with Liverpool John Moores University to provide opportunities for students.

Jon Adams, Balfour Beatty Managing Director for Northern Major Projects, said: “Balfour Beatty has extensive experience in delivering high-end residential schemes and of working in Liverpool, where we have recently delivered the Liverpool One and Aloft Hotel developments.

“We have a fifteen year relationship with Neptune Investments and we look forward to working with them to deliver this exciting new £32m development in the heart of the Liverpool docklands.”

Global Climate Finance Falls for a Second Year
FinanceInfrastructure and Project Finance

Global Climate Finance Falls for a Second Year

Global investment in activities that reduce the threat of climate change fell for the second year in a row from US$359bn in 2012 to US$331bn in 2013. Climate Policy Initiative’s Global Landscape of Climate Finance shows that while public sources and intermediaries contributed US$137bn, a figure largely unchanged from last year, private investment totaled US$193bn, falling by US$31bn from 2012.

The study credits the decrease in private investment largely to falling costs of solar PV, with deployment of this technology growing as investment shrinks. Solar deployment cost US$40bn less in 2013 than would have been the case with 2012’s solar investment costs. However, the situation remains grave: The International Energy Agency estimates that an additional US1.1tn in low- carbon investments is needed every year between 2011 and 2050, in the energy sector alone, to keep global temperature rise below two degree Celsius. In cumulative terms, the world is falling further and further behind its low-carbon investment goals.

Climate finance spending was split almost equally between developed (OECD) and developing (non-OECD) countries, with US$164bn and US$165bn respectively. Strikingly, almost three-quarters of all spending was domestic: It originated in the country in which it was used. Private actors had an especially strong domestic investment focus with US$174bn or 90% of their investments remaining in the country of origin. These figures illuminate a bias by private investors toward environments that are more familiar and perceived to be less risky. However, public sector money made up the vast majority of developed to developing country flows, which fell by around USD 8 billion from the previous year to between US$31 and US$37bn in 2013.

“As policymakers prepare a new global climate agreement in 2015, climate finance is a key ingredient to bring the world on a two degree Celsius pathway. Our analysis shows that global investment in a cleaner more resilient economy are decreasing and the gap between finance needed and actually delivered is growing,” said Barbara Buchner, Senior Director of Climate Policy Initiative and lead author of the study. She added, “Our numbers demonstrate that most investment is happening at the national level with investors favoring familiar environments they perceive to be less risky. This implies that domestic policy frameworks and appropriate risk coverage are critical to encourage investment.

PBoC Injects Cash into China
FinanceInfrastructure and Project Finance

PBoC Injects Cash into China

It is understood the cash injection is a response to the economic slowdown revealed last month.

In data for August, industrial output in the country posted an underwhelming 6.9% annual growth rate. It is the lowest rate since the global downturn of the last few years.

The figures were also revealed amid other weak economic data.

The cash is already starting to arrive in a set of five nominated banks from the People’s Bank of China. The cash started being channelled yesterday (Wednesday 16 September), with tr transfers likely to complete through the course of today.

The Rmb500bn injection represents an equivalent cut of 50 base points to the country’s reserve requirement ratio. This is the level that commercial cash lenders must maintain with PboC, according to economists in the country. Citi analyst Shen Minggao said:

“The effectiveness of this policy move will largely depend on the interest rate charged on this lending by [the] PBoC, which is unknown,

“If the news is true, we believe the PBoC is maintaining an easing bias in its monetary policy stance to neutralise the property-sector down-cycle.

It is not the first action taking by the central bank to support flagging areas of the economy. The country has already seen cuts to RRR for lenders in rural communities, while an relaxation on home buying in the country was also introduced.

According to analysts, it is about taking careful steps to stimulate growth without panicking the market. Lessons have also been learned from 2009, where China introduced a huge stimulus package which resulted in huge debts being run up, among other significant negatives.

Balfour Beatty Awarded £129m Smart Motorway Scheme
FinanceInfrastructure and Project Finance

Balfour Beatty Awarded £129m Smart Motorway Scheme

Balfour Beatty, the international infrastructure group, has announced the award of a £129m scheme to upgrade a 13.4 mile stretch of the M3 through Hampshire and Surrey to a “smart motorway”. The upgrade, for the UK Government’s Highways Agency, will increase capacity, reduce congestion and shorten journey times for the 120,000 motorists who pass through this part of the network every day.

The M3 between Junction 2 (interchange with the M25) and Junction 4a (Fleet) will be upgraded to a four-lane motorway by converting the hard shoulder to a permanent running lane. Electronic signs, operated by a regional control centre, will be installed to manage the flow of traffic in response to dri­ving con­di­tions.

Mobilisation work is due to start at the beginning of August. Main construction works is due to start this autumn with completion scheduled for spring 2017. Construction activity will include installing and refurbishing gantries, new static and variable signs, concrete safety barriers, drainage and surfacing works.

The contract is the latest in a series awarded to Balfour Beatty since the company was appointed to the Highways Agency’s National Major Projects Framework in 2010. In June 2014, Balfour Beatty was awarded the £184m M60 J8 to M62 J20 smart motorway scheme. In April 2014 the company’s construction joint venture with Skanska completed upgrading a 12 mile stretch of the M25 to a smart motorway, and in January 2014 Balfour Beatty completed upgrading parts of the M4 and M5 to a smart motorway in a £88m scheme.

Balfour Beatty executive chairman Steve Marshall said: “The Highways Agency’s approach to using technology in this way reduces the costs of the road network, provides additional capacity and improves journey times. This award further strengthens our position as one of the UK’s leading contractors for smart motorways and reflects the strength of the relationship we have built with the Highways Agency over the last 20 years. ”

The M3 passes through Chobham Common, one of the largest areas of heathland in Surrey, and Balfour Beatty’s sustainable design will take into account ecological considerations with natural habitats reinstated and enhanced.

UK's Financial Services Trade Surplus is the World's Biggest
FinanceInfrastructure and Project Finance

UK’s Financial Services Trade Surplus is the World’s Biggest

New figures from TheCityUK, the private-sector association and industry lobby group promoting the UK financial and professional services industry, reveal that the UK’s trade surplus in financial services is the biggest in the world, more than two and a half times bigger than the next largest surplus recorded by the US and three times higher than Luxembourg in third and Switzerland fourth.

The latest figures available show that the UK’s financial services trade surplus was US$71bn in 2013, up from US$68bn in 2012. According to TheCityUK, this demonstrates the huge competitive advantage the financial and related professional services industry brings to the UK, and the importance of the industry in attracting international business activity which creates jobs and generates economic growth.

Chris Cummings, chief executive of TheCityUK, said: “The UK leads the world when it comes to exporting financial and related professional services. While New York tends to do well in charts because of its size, it is really a domestic financial centre; London is the only truly global financial centre, boasting a unique cluster of both financial and related professional services firms. And it is not just the UK’s financial capital; it is also Europe’s beating heart.

“But we cannot afford to rest on our laurels, especially with other cities such as Singapore continuing to expand and grow. This is why London’s ability to innovate, reinvent itself and seize new opportunities is so important. We have seen this recently with the deals agreed with the Chinese, which will cement the UK’s position as the biggest renminbi centre outside Asia, and also with our status as the leading Western country for Islamic finance. The Financial Services Trade & Investment Board is another initiative vital to the UK’s status as a global financial centre.”

The new report from TheCityUK, The UK as an International Financial Centre, reveals that the number of financial centres seeking international business is growing, and Asian centres such as Singapore and Hong Kong are benefiting from shifting global trade patterns. However, in addition to these well-developed regional hubs, smaller centres such as Tokyo, Toronto, Moscow, Istanbul and Dubai are also developing alongside niche local centres such as Zurich, Sao Paulo, Johannesburg and Mumbai. Many of these centres are using London as a model and basing systems and processes on UK practices and principles.

Shareholders to Enhance FDN
FinanceInfrastructure and Project Finance

Shareholders to Enhance FDN

Fitch Ratings views the entry of the International Financial Corporation (IFC) and the Corporacion Andina de Fomento (CAF) as shareholders of Financiera de Desarrollo Nacional S.A. (FDN) positively.

With the capitalization of US$120 million (US$70 million from IFC and US$50 million from CAF) these supranationals will have a stake of approximately 30% of FDN. This transaction also strengthens FDN’s capital and will enhance its capacity to mobilize resources to meet the financing requirements of infrastructure projects in Colombia.

Currently, FDN is a fundamental part of Colombia’s infrastructure investment agenda in terms of 4G concessions, energy, transportation, and financing other long-term projects. This capital infusion will help the company face the new challenges derived from the widening if its social objectives and the diversification of portfolio products
(Decree 4174/11).

FDN is developing new credit solutions that will permit the financing of infrastructure projects at all stages of development and will improve the credit risk of these projects. This will facilitate the entrance of private banks and other financing institutions as well as provide more favorable financing conditions.

Fitch continues to monitor FDN’s credit portfolio, balance sheet structure, funding requirements, and credit risk administration and appetite, crucial factors for the sustainability of the entity.