Things to make you go MIM….. Wales’ new Mutual Investment Model
Having arrived in Nairobi to attend a Kenyan Roads PPP conference, I was staggered to see over 200 in attendance to discuss a pipeline of over USD$1.5bn of road projects (it was a great event). So as certain as Sam Warburton will be in the Lions Test starting line-up …. I shouldn’t have been surprised to hear that over 200+ attended last week’s Industry Day for the launch of the Mutual Investment Model (MIM).
Whilst there was a great deal of commentary leading up to the event on the innovative nature of the MIM, the model appears to be a hybrid of NPD (Non-Profit Distribution model, used in Scotland) and PF2. It is understood that new standard form documents will be prepared on a sector specific basis and released during this month / early April 2017.
Like the PF2 models, the Welsh Government will be taking an equity stake, details are unclear on the terms of the stake or amount. It is also not clear whether MIM will incorporate an equity funding competition, a feature of PF2 that has been criticised by market participants.
Success for any capital assets procurement model is the pipeline……
As expected, the initial MIM pipeline involves three deals - combined capital value of £1bn with tenders starting in 2017/2018:
- Velindre Cancer Centre, Cardiff (tender starts c. Q3 2017)
- Duelling of the A465 from Dowlais Top to Hirwaun (c.£380m, pre-qualification process in Q1/2 2018)
- Band B of the 21st Century Schools Programme (tender starts c. Q1/2 2018)
A majority of the Welsh population voted “Leave” in the recent the European Union referendum, notwithstanding that Wales has remained a significant net beneficiary of EU funding.
The MIM projects listed above may well have attracted European Investment Bank (EIB) financing, but with the uncertainty created by the Brexit process, it is not clear whether EIB’s participation will be certain. So the need for well-settled risk transfer positions will be crucial to attract long-term value for money financing.
With greater emphasis being placed recently on enhanced devolution settlements (or potential full separation in the case of Scotland), it will be interesting to see project financiers’ (and institutional investors) long-term view on projects procured by the Welsh and Scottish Governments.
A further industry day and consultation is planned, so there will be plenty of opportunities to discuss the model and for Consortia to form to bid these deals.
Overall, a pipeline of greenfield projects should be welcomed (.....as will a Lions Tour victory!!).