By Gareth Vaughan
The New Zealand Superannuation Fund hopes to hear within a couple of months whether it and its Canadian partner will be the Government's delivery partner for the Auckland light rail project, and it's also interested in domestic long-term climate adaptation opportunities, CEO Matt Whineray says.
Whineray told interest.co.nz that the Super Fund remains enthusiastic about the Auckland light rail project, having made an unsolicited approach to the Government in May 2018 in partnership with Canada's Caisse de depot et placement du Quebec (CDPQ) to design, build and operate a network. In early March Transport Minister Phil Twyford said the Government was considering whether the Super Fund and CDPQ or the New Zealand Transport Agency, should lead the multi-billion dollar project.
"Yes, we remain enthusiastic about it [Auckland light rail]," Whineray says. "I think there's questions to be asked about what does this type of crisis do to drivers around use of public transport and density of living, that kind of thing. But yes, we remain very enthusiastic."
"The Government's obviously had a few things to deal with of late so there hasn't been a decision yet on who the preferred delivery partner is. So whether that's NZ Infra, which is us and our partner CDPQ, or NZTA. But we expect that there will be a decision on that in the next month or two. And if that's us we can crack on with it," says Whineray.
Despite the coronavirus crisis he says a solution to Auckland's transport issues is still required. In a changing environment the Super Fund assesses whether the "usage case" changes for the proposed light rail investment, as with any investment, he says.
"I think we're going to continue to need a solution to Auckland's transport issues and we think that this is a good one. It's a mass transit, it's also very consistent with the principles released by the Climate Change Commissioner around the business recovery, which is to say 'let's not do something that puts us backwards from a climate perspective. Let's use a good climate lens so that we're building things with lasting benefits'. And clearly that's what the light rail does," Whineray says.
"It shifts people from driving in a car with an internal combustion engine into something that's driven by our predominantly renewable generation electricity system. So I think there's some positives in there...We don't want to do these things just to get sugar hits for the economy. They need to have lasting benefits and not lock in lasting detriments."
Talking climate adaption with Rod Carr
Other investment opportunities the Super Fund's interested in include climate adaption ones. Whineray says he has been talking to Climate Change Commission chairman Rod Carr about climate change adaption projects, beyond climate change mitigation.
"Things that he thinks about like upgrading the transmission capacity to be able to distribute that so that when you do transition your transport fleet to electric rather than fossil fuel driven, you've got the means to distribute that safely and effectively [using a renewable energy source]."
"There's other interesting ones that are much more nascent. Things like retreat or protect projects, where you're thinking about where are those places that are going to be physically impacted by the change in climate, the rising sea levels, the increased storm activity? And what are local governments doing about changing that and how would you finance that? That's quite an interesting area for further work," says Whineray.
Expecting government contributions to continue despite much tougher fiscal environment
The current Labour-led government resumed taxpayer contributions to the Super Fund in 2017 after the National-led government suspended them in 2009. Despite the increasing fiscal challenges the Government is now facing, with soaring debt, Whineray expects contributions to the Super Fund to continue when Finance Minister Grant Robertson reveals the 2020 Budget on May 14.
"Yes I've no reason to believe that it won't. I hope that [it] continues. We saw the impact of ceasing them last time. It cost the country quite a significant amount of money in terms of foregone returns. But ultimately the Government has to manage its fiscal position. But [there's] no reason to believe that won't continue," says Whineray.
On March 20 the Super Fund said it had shed $8.90 billion, or almost 20%, of its value since the turn of the year as the coronavirus crisis smashed global financial markets. Whineray says things have improved since then.
"We have seen a significant rally since those times in the middle of March when markets really were tanking. So end of December we were about $46.5 billion, end of March we were at about $38 billion and in the middle of March we were lower than that. And now we $41.5 billion, $42 billion somewhere around there. We've seen a significant reversing of the significant falls and we've recovered more than half of the fall that we'd seen. It has been a very volatile time and that continues from one week to the next."
Established by the Helen Clark and Michael Cullen Labour-led government to help meet the rising cost of superannuation payments to retirees, the Super Fund began investing in September 2003 with about $2.4 billion. From around 2035/36, the Government is expected to begin to withdraw money to help pay for New Zealand superannuation. On current forecasts, a larger, permanent withdrawal period will commence in 2053/54.
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