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Qatar Lined Up for GBP10bn UK Projects Fund

Middle East : 15 March 2013

Source: The Financial Times Ltd

Qatar has begun talks with the UK government to invest up to £10bn from the gas-rich Middle Eastern state into key infrastructure projects in Britain.

Officials and ministers from both countries have held discussions over what schemes the Qataris could invest in and whether a specific fund could be set up. The potential projects include energy plants, road and rail projects and even the Thames “super-sewer” under London.

Qatar has become a prolific investor in British assets in recent years with a portfolio of assets held via several funds encompassing assets from Harrods and the Shard skyscraper to Heathrow airport.

But setting up a dedicated fund to finance government-backed schemes would take Qatar’s investment in the UK to another level.

Among the specific schemes discussed is the new £14bn nuclear reactor at Hinkley Point in Somerset planned by EDF, the French energy giant. EDF has been seeking new investors in its new-build nuclear programme since Centrica quit its joint venture last month.
The government is also keen to shoehorn overseas investment into new gas plants and wind farms as it closes down a swath of coal-fired power stations.

David Cameron hosted a delegation at Downing Street in January with both the Emir of Qatar and the Qatari prime minister as guests of honour. There, the UK’s prime minister made clear he would welcome a major injection of Qatari investment in the British economy.
But discussions are still proceeding over how any fund would be structured and what return the Middle Eastern investors would receive.

Some involved in the negotiations say the Qataris have asked for an effective “first refusal” over some of Britain’s biggest infrastructure projects when they are on the drawing board. But others point out that having a “first call” over a government project would be illegal under European Union law, according to one Whitehall source.

The figure of £10bn has been cited although the timescale for this expenditure has not been agreed. Finsbury, which provides public relations to Qatar, refused to comment.

The talks have taken place as the government seeks to push through more major energy and transport schemes without an enormous outlay of taxpayers’ funds.

Infrastructure UK, a wing of the Treasury, has been working closely with UK Trade & Investment to court overseas institutional investors.

Qatar has made a string of high-profile acquisitions in recent years including stakes in VW-Porsche, LVMH, Credit Suisse, J Sainsbury and Barclays. The state demonstrated its interest in infrastructure last year when one of its funds, Qatar Holding, bought 20 per cent of BAA, the owner of Heathrow airport.

George Osborne, the chancellor, has signalled that Britain is open to overseas investment in strategic industries, even endorsing the potential investment of Chinese state-owned companies in the new nuclear industry.

Mr Osborne is separately offering “guarantees” through the Treasury to major infrastructure schemes of national significance. These are set to include the Northern Line extension to Battersea, the Mersey Gateway toll bridge and the partial conversion of Drax coal-fired power station to biofuel.

Lord Deighton, infrastructure minister, will on Thursday tell the project finance industry that the British economy has secured 112,000 jobs in the last year through inward investment.

“We hope to do even better and are working with institutional investors – from banks through pension funds to sovereign wealth funds – to ensure that the deepest possible sources of capital are available to the widest possible range of infrastructure projects,” he will say in a speech.

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