Where next for the global PPP market? By Alex Guy, Partner DLA Phillips Fox
The last two years have seen a significant change in the global PPP market. The GFC has led to a shortage of long-term, limited recourse debt, requiring governments to take urgent action to engender sufficient confidence to enable deals to close. As the global financial markets have started to settle, deals have reached financial close but on significantly more stringent terms, including considerably higher margins. At the same time, governments have been under the competing pressures of reduced tax revenues and the desire to stimulate their economies through public spending. In a number of countries including Australia, spending on infrastructure has become a key focus as part of governments’ individual stimulus packages. Support for PPP Support among governments for the use of PPP to deliver public infrastructure has remained strong in most countries already using PPP as a significant part of their infrastructure delivery programs, and interest is spreading across national boundaries to countries such as Thailand, Vietnam and New Zealand. Clear and positive evidence of the benefits of PPPs from those countries
On average, cost escalation on PPP projects was only 4.3 per cent compared to 18 per cent for traditional projects over the same period. m
with experience of employing it across a range of sectors over a number of years abounds. A benchmarking study published by the University of Melbourne in December 2008, for example, which analysed 25 PPP projects and 42 traditional projects in seven Australian jurisdictions found PPPs deliver assets for a price that is far closer to the original expected cost than traditional projects. On average, cost escalation on PPP projects was only 4.3 per cent compared to 18 per cent for traditional projects over the same period. While PPP projects generally took longer in procurement than anticipated, once they reached financial close, the average further delay was only 2.6 per cent (compared to an average delay of 25.9 per cent during the construction phase of traditional contracts). EDITION 1
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