What if any role should public sector risk underpinning or guarantees play in partially de-risking the construction or operational phase of public assets and services? In which areas could underpinning or guarantees have a beneficial impact on investor and/or lender appetite and pricing? What are the constraints to this approach, with particular regard to risk transfer and performance incentives? 

SFT considers that an underpin or guarantee of up to 50% of the financing requirement could be made whilst maintaining the diligence and performance incentives that a "payment for asset availability" structure places on the private sector delivery partner and financiers.

Other respondents will be better placed to give a view on the extent to which this (and indeed public sector capital injection) will alter pricing of private finance as there is significant detail in the tranching of any guarantee and it seems that different views are taken (in particular in different jurisdictions) on any pricing differential on the unguaranteed proportion due to an increased credit risk alongside reduced quantum of equity buffer.