NZ state fund to invest in public-private partnership

WELLINGTON, July 23 (Reuters) - A New Zealand fund that will use private capital to help fund public infrastructure works has signed up the state pension fund as its first investor, the manager of the fund said on Thursday.

The New Zealand Superannuation fund will contribute up to NZ$100 million ($66 million) to a fund with an initial investment limit of NZ$500 million, to be managed by infrastructure investment firm HRL Morrison and Co.

The Public Infrastructure Partnership Fund (PIP) is raising funds to build social infrastructure such as schools, student accommodation and hospitals, said Morrison and Co spokesman Peter Coman.

"We're advanced on a couple of negotiations, so within six to 12 months we'd like to have some transactions under our belt," Coman said.

Using private funds to pay for public works has been rare in New Zealand. The PIP fund will look to work with individual government agencies on projects, and will seek opportunities in a programme of infrastructure investment designed to help the economy recover emerge from a long and deep recession.

The PIP will build the infrastructure, but not run the facilities, with the government making gradual payments before taking ownership of the asset in 25 to 35 years.

Morrison and Co, which manages New Zealand utilities investor Infratil Ltd (IFT.NZ), is in talks with a range of other large scale investors about joining the fund, Coman said. A retail fund to allow public investment in the PIP is also being considered. Morrison and Co is also investing in the fund, but its level of investment was commercially sensitive, Coman said.

In its May budget, the government suspended contributions to the Superfund, which has a current value of NZ$13 billion, as it said the government accounts would be in deficit for the next decade.

The Superfund, which began investing in 2003, is designed to help meet the future payments of providing a guaranteed state pension to all people over the age of 65, with payout expected to start in 2031. ($1=NZ$1.52)