Preparing for the Next Asthma Storm

asthmaThe week started hot in Melbourne. The temperature climbed to 38 degrees Celsius, supported by a northerly breeze that blew in from grasslands north of the state. The change came in late afternoon. The dark clouds on the horizon were black and ominous.

If you live in Melbourne this kind of weather is a familiar story.

How could a storm, that we all have come to expect, lead to the deaths of four people, with many more in intensive care units and thousands and thousands of people treated, some in hospitals, some in doctor’ surgeries for asthma.

This is an area that our family has had some experience in.

It was the reason that we left Sydney, after a summer of hospitalisations of our then two year old son.

The technical explanation is that when there is a lot of pollen in the air, the storm leads the pollen to swell. When the storm sweeps in the pollen in the upper atmosphere is condensed. The electrical currents then split the pollens into miniscule particles. The pollen effectively becomes a thousand times more potent in minutes.

In Sydney we would arrive in at the children’s ward of St George hospital and be one of the first there. By the end of the day the ward would be overflowing.

Our health system does a brilliant job. They did a brilliant job in Melbourne this week. A code red was declared. Workers after long shifts stayed on duty. Off duty workers were called in. Every ambulance was put in service. Paramedics visited houses in their own cars. This was a truly heroic response and I have no doubt that many lives were saved as a result.

In Melbourne, asthma storms are relatively rare. The last was six years ago. But with the way the weather is we can expect more. So what do we need to do?

The first thing is that we need a health warning issued. It should be a little like the Total Fire Ban Warnings we grew up, you know, “today is a day of total fire ban in the State of Victoria, no fires in the open air….” I can literally hear the newsreader announcing it, it was repeated so many times growing up. But we knew it was serious.

We need the same thing for asthma storms. Something like “today is a day of potential asthma storms. Keep inside wherever possible and consult your doctor immediately if you experience breathing difficulty.”

The second thing we need to do is prepare our doctors. There was one story of a doctor prescribing tablets, presumably thinking it was a common allergy. In this world of modern communications we need a system where every doctor’s surgery is issued with warnings that are regularly updated. Doctors should be required (and of course paid by the Government) to deliver bulk billing services, no matter if they are purely private practice, in times when it is likely that an asthma storm is on the way.

Doctor’s surgeries should all have Ventolin and the ability to deliver to patients.

This should be part of the responsibility of being a doctor in our national system.

What we have to understand is that asthma storms are not just individual cases of people with asthma. They are the equivalent of natural disasters, and they should be treated like that.

We have the systems and the knowledge to prevent this ever happening again. We owe it to our children to do so.

Infrastructure Asset Owner Fee Increases Raise Long Term Questions

The Australian Financial Review reports that “Glencore has gone to the competition regulator seeking arbitration on the latest pricing dispute between Australia’s biggest coal miner and the new owners of the world’s biggest coal port, the Port of Newcastle”.

The background to this is that in April 2015, Hastings Fund Management’s The Infrastructure Fund and China Merchants Group acquired the Newcastle Port on a 98 year lease for $1.75 billion. As part of the deal The Infrastructure Fund owns 50% of the Port, with China Merchants Group owning the other 50%.

According to reports at the time, the Port’s new owners include 2 million superannuation fund members with The Infrastructure Fund’s unit holders reported to be BUSS(Q), QIEC Super, Australian Catholic Super and Retirement Fund, Energy Super, Sunsuper, Club Super, Suncorp Life & Super, AAI Limited, Mercy Super, Meat Industry Employees Super Fund, AustSafe Super, Motor Accident Insurance Board (Tas), NGS Super, Australian Super, LG Super, Cambooya, and CIRT. It is not clear at the time of writing who are the current unit holders.

Acquiring an infrastructure asset that has long term contracts on a long term lease is an attractive proposition for investors. But it is the actions since the Port was acquired that are continuing to raise eyebrows.

No sooner were contracts signed than the Port’s new owners increased the fees at the Port gate. This led the Port’s main customer Glencore to take the new owners to court under s 44K(2) of the Competition and Consumer Act 2010, seeking to have the Port declared as a service. Glencore’s appeal was successful. The AFR reports however that the declaration is being disputed and Hastings Funds Management have now lifted shipping channel fees for a third time.

Glencore has now gone to the ACCC seeking arbitration. According to the AFR the Port’s new owners are defending the increases, arguing that ”the total increase in fee flow was about $20 million and that was not going to make or break anyone serious in the coal digging game.”
What is going on here?

The first point to note is that the actions of the new Port owners have not gone unnoticed in regulatory and policy circles.
This raises the question of whether there is a disconnect between the conversations that investors actively participate in, and those of other stakeholders.

In investor conversations around infrastructure, the discussion is principally around investment returns and the price of acquiring an asset. But in stakeholder discussions, including government, the focus is much broader, in particular there is a strong focus on the role of infrastructure in the broader economy.

There is no doubt that in investor circles that infrastructure is flavour of the month.

Low yields are pushing investors that have predominantly invested in fixed interest investments, to consider infrastructure.

According to Preqin, the amount of ‘dry powder’ – investments that have been committed by asset owners to fund managers but not allocated due to the shortage of available opportunities – is currently US $147 billion, which is an all-time high.

There has been an ongoing conversation on how we can create a long term pipeline of investable opportunities for asset owners.
As the recent sales of assets, including AusGrid in NSW and the Port of Melbourne, demonstrate, investors have a strong interest in mature, cash flow generating assets.
Countries around the world have many assets on government balance sheets, that investors would love to own.

But as Paul Clement Hunt (founding UNEPFI board member of the PRI) said at the recent International Forum of Sovereign Wealth Funds annual conference in Auckland “a pipeline of investments will not create itself but needs investors to take leadership.”

In our recent Policy Outlook No.2, the Better Infrastructure Initiative, at the University of Sydney’s John Grill Centre for Project Leadership, has proposed the need for an Investor Accountability Protocol.

We are currently consulting a range of stakeholders on what this would look like, but a key element is that a long term focus requires investors to actively manage infrastructure assets.

The way investors manage an infrastructure asset post privatisation is perhaps just as important as the original acquisition. Actively managing assets may require making decisions to increase fees, but where it does, investors need to communicate, not just to their direct customers, but to a wider stakeholders.

Australia is in the fortunate position where the world looks to us for leadership around infrastructure. It is commonly said that in the offices of infrastructure investment managers around the word, you can always hear an Australian accent. Asset recycling, a term that was developed in Australia as a way to communicate to communities the benefits of privatising infrastructure, is now been considered by other jurisdictions.

What this means is that how investors manage infrastructure assets in Australia will be watched and commented on, not just by Australian regulators and policy makers, but internationally.

If investors want a long term pipeline of investable assets then they need to be seen to great custodians of the assets that they have already acquired. In short, trust is key to opening up a pipeline of investment opportunities.

Whether we like it or not it means that Australian super funds have a leadership role around active infrastructure asset management.