Despite operational concerns, public private partnership remains a common funding model for infrastructure projects
Public private partnerships (PPPs) remain popular around the world, with more than 100 countries using the model, according to the World Bank. PPPs provide immediate infrastructure investment, without public borrowing, and transfer risks to the private sector.
PPP has been more successful for new build projects than refurbishments or extensions of existing facilities. However, New York’s LaGuardia Airport expansion demonstrates that PPPs can work for a major upgrade of an existing asset, when construction risk is separated from live operations. The client, The Port Authority of New York & New Jersey, is now considering PPP for projects such as the Gateway Tunnel.
President-elect Donald Trump campaigned on a trillion-dollar infrastructure rebuilding plan. His economic adviser has proposed tax credits to encourage $167 billion of private equity investment in projects, with the remaining $833 billion coming from debt, also raised by the private sector.
While this sounds like a PPP model, the details are still sketchy. Projects would need to be revenue-earning to provide payback for private investors.
Once PPP’s trailblazer, the UK currently has less appetite for the model. One of the most exciting opportunities in the UK PPP market is the Silvertown Tunnel project – developed to address the significant issue of traffic congestion and unreliability at the Blackwall Tunnel.
Canadian pension fund CDPQ is pioneering a new PPP model for transport, which has been dubbed a ‘public public partnership’. This is where institutional investors take on all of the project risk, including demand and ridership.
For further information, please contact Naresh Dade, Partner on +44 20 7528 4776