Aussie state govts to rethink complexity of PPPs

Moody's has suggested that Australia governments are likely to rethink the complexity of PPPs amid a declining risk appetite by contractors.

The ratings agency has said in its new report ‘Public-Private Partnerships - Australia: Established framework provides strong credit support but difficulties lie ahead’ that lower appetite for risk by contractors will prompt state governments to rethink the complexity of PPPs. 

Arnon Musiker, a Moody's senior vice-president, said: "The depth and experience of the Australian contractor market significantly reduces the likelihood of greenfield PPPs being exposed to execution risk, and the credit profiles of PPPs are consequently typically driven by issuer-specific factors.

"However, we expect contractor appetite for more complex PPPs will diminish following recent contractor losses, and that governments in response will increasingly focus on reducing project risk, for example by executing the higher-risk aspects of a large project outside of the PPP.

Moody's cited the Victoria state government as an example when it awarded a separate contract for early works package of the North East Link PPP in Melbourne to CPB Contractors to reduce disruption when major construction works start.

The Victorian government shortlisted three consortia in September to deliver the project.