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A pre-election pipeline message
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It’s election time in New Zealand. And you know… Governments love infrastructure pipelines. Pipelines create jobs. Especially for consultants preparing slides about the pipeline. I won’t talk about NZ… today… or maybe I do later… Let’s talk about Nigeria. Yes… Nigeria has been building PPP pipelines for years. On steroids. And you know what happens if you abuse… Well… In 2020, its infrastructure commission reported adding 158 projects. Yes… projects… not speed tickets. This year, the Government announced another initiative… one more… to prepare investment-ready PPPs across transport, energy, technology and sanitation. To give you an idea… Nigeria needs around $14.2 billion of urban infrastructure investment… every year. But… as in New Zealand… there is a small difference between announcing a project… …and financing one. I won’t go to complete it yet… Anyway, my point. A project that cannot reach financial close is not infrastructure. It is a PowerPoint presentation with environmental impacts. You can give it a name. You can put it on a strategic map. You can estimate that it will create 14,000 jobs. You can commission a business case explaining its “transformational potential.” You can even hold an investor conference in a five-star hotel. None of this makes it bankable. Sorry. Investors usually have allergy to finance strategic importance or political enthusiasm. And contractors do not accept “national significance”… take note New Zealand… as security. They finance cash flows. If users cannot afford the tariff, government must pay. If government cannot pay, somebody must close the viability gap. If nobody closes it, the project does not close either. This is where many pipelines become works of fiction. Demand forecasts are optimistic. Construction costs are incomplete. Land is not available. Revenue is exposed to inflation or foreign-exchange risk. Government support is politically uncomfortable. And the risk allocation assumes the private sector has magical powers. Then procurement begins anyway…. You know… never allow reality to destroy a good headline. The project is already in the pipeline anyway. Three years and several million dollars later, the preferred bidder explains what everybody knew at the beginning: The project does not work. The solution is not another workshop about “unlocking private capital.” Capital is already unlocked. It is simply refusing to enter the room. A credible pipeline should distinguish between: Projects the country wants. Projects the market could deliver. And projects that can actually be financed. Those are not the same list. Good project development is not about making the pipeline look bigger. It is about killing, changing or funding the projects that do not work… before asking the market to price them. So… engrave this in your mind, agencies and politicians… ten bankable projects are worth more than 158 strategic aspirations. Use this information at your own risk.
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Vicente Valencia
Weekly insights on how to perform when it matters | High-stakes decisions. Real situations. No BS. | 👇JOIN +2k readers 👇
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