Tarmac chief exec calls for pension-funded PFI

Tarmac chief executive Neville Simms has called on pension funds to step in and finance Private Finance Initiative projects which he says will be the 'win win' initiative of the 21st century.

Speaking at the National Association of Pension Funds Investment conference in Eastbourne last week, Simms called on City funds managers in London to look at South East Asia where more forward-looking pension funds have already taken a œ1.4 billion stake in a range of infrastructure projects.

PFI is expected to spawn a new group of operating businesses with requirements for long-term funding and it is here that pension funds have a role. Simms, recently appointed a director of the Bank of England, said: 'Many large projects will require debt of a maturity which exceeds that which commercial banks are willing to give.'

He added that Tarmac regards the PFI as an important development.

'A company in our business has the opportunity either to participate in this game or to pass it by.

'If we choose to participate, as Tarmac has done by taking part in almost every competition in the UK since the Channel Tunnel, we must play to win,' said Simms.

'Our enthusiasm has not been dashed by the slow pace of progress.

'In the medium term, we believe this investment will yield us an attractive rate of return.

'While in the short term, we expect that our approach will give us access to construction turnover that would not have been available to us otherwise,' he said.

The attraction to Tarmac is that this additional work, being on a design and build basis, is producing better margins than those earned by conventional contracting in today's difficult market.

Simms continued: 'This additional turnover and these increased margins will provide the pay off in the short term.'