Infrastructure Funding: PPP promoters advocate new funding structure
February 10th, 2010
Promoters of public-private partnerships (PPPs) to help fund roading projects in NZ are back on the offensive saying failed PPP transport projects in Aust are structured differently to the type of projects which could be undertaken in NZ. Commentators in Aust say investors have been turned off by the collapse of the Lane Cove Tunnel project in Sydney. Consortiums were allegedly chosen on the basis of upfront payments to Govt and were overly optimistic about traffic volumes and valuations.
However CEO of the NZ Council for Infrastructure Development, Stephen Selwood says there is almost no appetite in NZ for the sort of structure used for the Lane Cove Tunnel. Lane Cove was a demand-risk toll road where consortiums effectively competed for the right to levy a toll with upfront payments to Govt in the structure of the bids.
Selwood contends the model of the Govt levying the toll and taking the risk on traffic demand known as a service-and-availability PPP model is more likely for NZl. “The private sector carries the risk for construction, operation and maintenance of the road and is paid for the provision of that service and gets its return over time in the form of service payments. The private sector still lends to the project, carries the risk on the project and gets paid for delivering an open road, if you like.” He doubts investors would be put off by the project failures in Australia. “Most investors in these sorts of schemes are sophisticated investors and they will be knowledgeable of the various models. Superannuation organisations are looking for this type of investment. Where it might impact is if they were to issue a public bond or shares.”
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