Pension Insurance Corporation (PIC) will consider financing some of the £4.2bn (€5.1bn) cost of a new London sewage system as it struggles with the “mismatch” between demand and supply of infrastructure projects.

Allen Twyning, head of debt origination, said the £12bn pension insurer saw the gap between the infrastructure pipelines being “talked up” by governments and the number of transactions as problematic.

“Institutions have put together large teams, but they have struggled to deploy cash because the projects have not come to market,” he said. 

He did not anticipate the market becoming any less crowded.

“I think 2015 will be an interesting year, as we will see a real chase for assets,” he said.

Speaking in the current issue of IPE, Twyning said PIC largely considered involvement in “relatively straightforward assets” when seeking long-dated cash flows.

He said the insurer was interested in projects with low levels of construction risk that were already operational, citing regulated utilities such as energy and water.

“One project that includes construction risk but looks particularly attractive is the Thames Tideway Tunnel, which is expected to start looking for funding in 2015,” he said. 

The 25 km tunnel is needed to expand the capacity of London’s sewage system, built around 150 years ago for a city one-quarter its current size.

Its construction will be overseen by a standalone entity working with utility company Thames Water.

For more on the challenges of investing in long-term, illiquid assets, see On The Record in the current issue of IPE with PIC, Ärzteversorgung Westfalen-Lippe and SPF Beheer