February 2002
Profits and perils of public private partnerships
Around the world, cash-strapped governments are following the UK in turning to public-private partnerships to fund projects. No-one disputes the vast commercial potential for what may yet emerge as a new asset class. But deals are often fiendishly complicated and can provoke public doubts. Getting to grips with contract details is vital.
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Toll roads offer reliable cashflows to
back PPP deals
but contracts need to be tightly drafted |
The profits and risks of the public-private partnership
(PPP) approach to building and operating infrastructure projects
are apparent from the new A4 motorway, a major European artery from
Germany, across southern Poland, to the Ukraine. The e80 million
($72 million) cost of upgrading the Krakov-Katowice section has
been funded not by the cash-strapped Polish taxpayer but by the
European Bank for Reconstruction&Development. Under a
concession, the work was completed two years ago. Each hour
thousands of cars and trucks using the A4 yield a rich revenue in
tolls that flows steadily to the private operator and the Polish
government.
The motorway's commercial success suggests that refinancing the
deal in a way that appeals to institutional investors should be
comparatively straightforward. That should also help open the
Polish infrastructure market to much-needed international capital.
There's a...
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