Danish labour-market pension fund Industriens Pension is investing DKK110m (€14.7m) in its first public-private partnership (PPP) project in Denmark.
The pension fund said it was providing all the financing for an agreed PPP project between construction firm KPC and Denmark’s Zealand regional council (Region Sjælland) to build and run a new radiotherapy wing at Næstved Hospital.
The investment will give the pension fund a 5% return for very low risk, it said.
KPC signed an agreement with the local authority in June to build the DKK110m property and then be responsible for operating and maintaining the building, Industriens said.
When the property is finished in 2015, Industriens will take over the PPP company.
Henrik Nøhr Poulsen, head of equities at Industriens, told IPE the pension fund would make a 5% annual return on the investment.
“PPP projects differ a lot from project to project,” he said.
“This is more like a real estate project with a government entity as the tenant, and the return reflects that.”
Because Industriens’ risk in the project is extremely low, this return should be compared with that of Danish government bonds, which are currently yielding 2%, Nøhr Poulsen said.
KPC is bearing the construction risk, while subsequent operations and maintenance risk will be fairly limited, he said.
The agreement with the local authority runs for 10 years and can be extended for a further four years.
Laila Mortensen, Industriens’ managing director, said: “The partnership makes it possible to construct a higher-quality building, which, therefore, has lower operating costs.”
At the same time, the pension fund is securing a stable return for its members over a long period, she said.
The hospital construction project was Industriens’ first PPP project in Denmark, the fund said.
“We are glad that more PPP projects are now starting to happen in Denmark, and we would like to be involved in more of them, when projects reflect the risk we are taking and there is the prospect of getting a reasonable return,” Mortensen said.
The agreement is subject to formal approval by the local authority, as well as the commissioning of the finished building.