The financial needs for public infrastructure will significantly grow in Europe in the years ahead, according to the latest study by Siemens Financial Services on "public infrastructure and private funding." In the sectors of healthcare, energy, transport and water, investments of more than EUR 4 trillion will be needed within the next 20 years, the study notes. Healthcare costs alone will grow tenfold, from the current level of EUR 68 bn to EUR 680 bn to cover needs through 2027. The public sector will, however, hardly be able to perform this task without bringing in private partners. To meet the challenges arising from such developments as increasing amounts of traffic and growing energy needs, alternative financing solutions like private financing investments are essential. As a result, the significance of equity participations through public-private partnerships is expected to climb 20% across Europe (Germany: 13%) over the next three years. The role of financing leasing should rise 19% (Germany: 35%).
Siemens not only has the necessary technology, it also offers tailored financing models ranging from sales and investment financing, treasury services and venture capital to funds management. Successful projects, like the financing of traffic lights in Freiburg, Germany, or the construction of the Bangalore International Airport, show that partnerships between the public and private sectors promote the use of the latest technology, cut costs and facilitate efficiency.
To create a long-term, stable relationship, the partners should determine beforehand whether certain success factors are already in place. These include clear definability and stable demand to ensure long-term profitability. Other factors are low substitution risk, flexible contract structuring and limited chances of a project becoming a political issue. Private financing partners certainly are not a cure-all for empty public coffers. But they can help solve infrastructure challenges both in technically effective and economically efficient ways.
You will find additional findings from the study, based on global-insight data and a survey of more than 400 public financial decision makers, in the complete version.
E-mail this page