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Back to bank debt
01 July 2005
Australian sponsors and governments are still arguing the risk-reward equation. While that continues, traditional project debt structures look set to make a comeback against bond and equity sale packages. By Dominic Jones
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[PPP]
[Public Private partnership]
[project finance]
[social housing]
[project finance]
Despite the market's maturity, the future shape of the Public Private Partnership (PPP) sector in Australia is uncertain.
On the one hand, individual states remain undecided about the value of the PPP approach. On the other, concerns over risk allocation have caused construction companies to adopt an increasingly cautious stance in their PPP bids.
A debate over the best financing model has also re-emerged and, in several deals this year, the investment banking approach, championed so successfully by ABN Amro in 2003 and 2004, has lost out to a more traditional funding model.
The deal which underscored the risk allocation problem more than any other was the A$425 million ($300 million) Spencer Street PPP (for more details search 'Spencer Street' on www.projctfinancemagazine.com). Problems associated with site access eventually forced the contractor, Leightons, to draw up A$110 million in provisions against its construction contract.
Growing caution in...
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