East West Link cancellation ‘would hurt Australia’s reputation’

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The Australian: East West Link cancellation ‘would hurt Australia’s reputation’ Kylar Loussikian, Journalist Sydney. 19 November 2014

Reputation at risk in Link backflip

Artist impression of the Western Gateway for the East West Link. Source: Supplied

THE cancellation of Melbourne’s East West Link could harm Australia’s reputation as a destination for infrastructure investors, according to the World Economic Forum’s head of real estate.

Speaking after an investment summit in Sydney yesterday, Michael Buehler said the private sector depended on reliable funding to generate revenue over four or five decades, and political risks including cancellations and contract changes would be priced into any investment.

“If the risks for certain investments are too high, then they can’t compete, and the whole infrastructure asset class will fall apart,” he said.

“You should not forget who the investors are. These are not speculators; they are pension funds and institutional investors. It’s the people’s money and they have to justify a return with certain risks and if the risk is not justifiable then they won’t go into that transaction,” Dr Buehler said.

Lend Lease is heading a consortium selected by the Victorian government to build Melbourne’s $8bn East West Link toll road.

But Labor has vowed to dump the plan if it wins the state election this month.

Dr Buehler said there were many new institutional investors who would consider investing in infrastructure.

“The interesting thing for institutional investors, including pension funds, is that the useful life of these infrastructure assets pretty much match up with their liabilities, so it is the perfect match.

“The only thing they struggle with are the risks. They are clear about comparing it with other assets so the value proposition must be clearly shown that infra­structure as an asset is a good ­investment.”

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