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Aberdeen peripheral route attracts infrastructure investors to Scotland from across globe

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Allianz Global Investors has made a GBP200 million investment on behalf of its clients into the Aberdeen Western Peripheral Road/Balmedie to Tipperty (AWPR/B-T) project.  

With an overall value of GBP600 million, the AWPR / B-T is Scotland’s largest public-private partnership to date.

The AWPR is a major transport infrastructure project which will significantly improve travel in and around Aberdeen and the north east of Scotland. The construction of the new 58km road is a priority for the Scottish Government and Transport Scotland, together with delivery partners Aberdeen City Council and Aberdeenshire Council.  The road will be designed and built by  Connect Roads, now known as Aberdeen Roads Limited, which is a consortium comprising Balfour Beatty plc, Carillion plc and Galliford Try plc.

The project has been financed using an innovative combination of privately placed listed bonds, commercial bank debt and European Union lending, bringing together all three of the proven methods of infrastructure debt financing in the UK:
 
1. GBP200m of listed bonds privately placed with UK public & private sector pension funds, EU pension funds and insurance companies and Japanese insurance companies (tenor 31 years, average life 20 years)

2. GBP280m European Investment Bank (EIB) loan (tenor 31 years, average life 15 years)

3. GBP80m Commercial Term Loan Facility (tenor 14 years, average life 7 years)
 
Commenting on the transaction, Adrian Jones, Director of Infrastructure Debt at AllianzGI, says: “The AWPR / B-T project shows what can be achieved when the execution of transactions is entrusted to experienced institutions and when the sponsoring authority organisation approaches the capital markets with an informed, long-term view.  International bond investors, one of the world’s leading project finance banks and the largest Government lender to European infrastructure have worked together with some of the UK’s largest construction companies and Transport Scotland to create a genuinely innovative funding structure in less than three months. 

“This successful financial close demonstrates that managed bond funds are able to match the significant funding needs of sizable infrastructure projects like AWPR / B-T.  Recently announced plans for withholding tax reforms for private placements for infrastructure projects by the UK Government will make it even easier for expertly managed bond funds to partner with banks to fund larger and larger projects by restricting the need for public listings to all but the very largest infrastructure bonds.  If medium term bank lending is partnered with very long duration managed bond funding, even the very largest infrastructure projects within the UK are within scope.  We should no longer talk of a ‘funding-gap’ to deter the procurement of new UK infrastructure”.

The AWPR / B-T listed bonds were privately placed with domestic and international investors via AllianzGI’s established infrastructure debt platform.  The Anglian Water Group Pension Scheme is one of a number of third party investors in the transaction.  The AWPR project is the first new-build project investment to be made by AllianzGI’s UK Infrastructure Debt Fund, launched in June this year, with the London Borough of Haringey Pension Fund and Nippon Life, the Japanese insurer, among those investing in AWPR through their commitments to that fund.

AWPR / B-T’s financing builds on Transport Scotland’s success in February 2014 of raising approximately GBP350m of investment for the M8/M74/M73 upgrade from AllianzGI and the EIB.

The AWPR / B-T transaction follows AllianzGI announcing on December 10 that it has invested GBP119.7 million in the refinancing of the student accommodation project at the University of Exeter.  On December 4, AllianzGI stated that it aims to invest upwards of GBP3 billion into UK infrastructure in the next three to five years.

AllianzGI continues to lead the UK infrastructure debt market in terms of both origination and execution, turning funding commitments from its clients into real assets.  Over the last year, AllianzGI has developed a significant portfolio of UK infrastructure assets, which includes university accommodation as well as greenfield and brownfield roads in Scotland and Northern Ireland.

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