Whilst the number of PPP deals coming to market is relatively small, Australia stands out for having a continued steady pipeline of new and sizeable deals. PPP projects in the early stages of procurement or expected to launch procurement next year include the Perth Stadium (WA), North West Rail Operations, Trains and Systems project (NSW), the Northern Beaches Hospital (NSW), Sydney Light Rail Extensions (NSW), the Toowoomba Bypass (Qld) and the Ravenhall Prison (Vic).
In addition, there is a range of other projects on the drawing board for the coming years. These are supplemented by projects which, whilst not PPPs, offer similar opportunities for providers of debt and equity including government and public sector projects (recent examples being the Gold Coast University Hospital and Queen Elizabeth II Medical Centre car parking projects) and private infrastructure projects supporting the resources sector.
Overall, Australia's stable political climate, strong economy, continued steady pipeline of large PPP projects and its manageable and increasingly flexible approach to risk transfer will continue to make Australia an attractive PPP market for investors in the coming years.
Australia, however, has had its share of setbacks on high-profile projects. Brisbane’s $3bn Clem 7 Tunnel was predicted to see 100,000 daily users by 2012, but in July last year the figure was only 22,307. This project brings to eight the total of toll-road PPPs that have brought substantial losses to investors over the last five years.
Consequently, state governments will not bear the same level of demand risk on future greenfield road projects. The most recent project to reach financial close (Peninsula Link Victoria) was structured on an availability payment basis, with no toll revenue risk transferred to the project company. While there are drawbacks with this availability model, it’s interesting to note that New Zealand’s $1bn Transmission Gully PPP will follow the same format.
Meanwhile, a number of factors are leading to a greater flexibility in risk allocation in projects. For example, following the recent difficulties faced by the A$394m Ararat Prison PPP in Victoria, where construction was halted due to the construction venture entering into administration, Partnerships Victoria has released a discussion paper requesting submissions on a range of proposed options for reforming the PPP model.
The paper highlighted the need to change the risk transfer and delivery approach, including changing the role of the public sector comparator so that it is no longer simply a pass or fail test. Also, it considers modified financing structures including increased use of government capital, expanding the PPP model to accommodate ancillary costs and core services and streamlining the procurement process.
At present, the outcomes are anybody’s guess, but the approach to projects over the last 12 months by state governments have demonstrated increased flexibility on risk transfer.