Similar to the United Kingdom, Australian states have learned that reasonable risk transfer is preferable to maximum risk transfer. All highway PPPs to date in the three states visited are real toll projects, and the states share the philosophy that private investors in these deals, both equity and debt holders, must bear the downside market risks. In other words, if the revenues or rates of return expected do not materialize, the private investors must endure the consequences.
The maturity of the Australian PPP market supports this philosophy. Both investors and lenders have grown comfortable with these conditions and the marketplace itself can provide remedies to financial hardships (e.g., restructuring financing arrangements).