Financiers, advisers and the credit rating agencies indicate that present market conditions favour PPP projects with strong credit attributes. Many of the characteristics of these projects are highlighted above but can be summarised here. PPP projects have a greater chance of success in attracting private debt and equity finance in present market conditions if they possess more of the following characteristics:
• An availability based revenue stream
• Equitable and not wholesale risk allocation by the state
• A benign regulatory framework with a graduated abatement regime, incentives for high performance and robust mechanisms for dispute resolution
• Low leverage or equity contributions commensurate with actual project risk
• Strong debt service coverage and adequate stand-by liquidity
• Manageable technology and lifecycle risk
• Strength in the underlying financial covenants
• Track record, financial or well rated contractors
• Adequate measures for project and financial risk management (Standard and Poor's, 2008).
Projects that meet this criteria are generally PPPs in the social infrastructure sector especially non-core service delivery in health, education, public buildings, law courts and police stations, corrective services, waste management, energy and the water resources industries. Project size is not a barrier to raising capital for PPPs with these characteristics.
Governments keen to maintain a strong bid market should consider fast-tracking projects that meet these criteria. Governments should also consider a more equitable cost-based approach to risk transfer and guarantees to support privately-sourced senior debt in projects that are suited to delivery by PPP but cannot be financed in present market conditions. This may not be a significant number of projects and will mainly concern those with complex construction or patronage risk. Such a measure will also have the advantage of preserving value for money outcomes in an environment of higher cost private capital.