This research report is prepared for the Infrastructure Association of Queensland and is a joint undertaking of the Association and the Mirvac School of Sustainable Development at Bond University. The purpose of this study is to examine the present and future use of public private partnerships (PPPs) in Queensland given recent events in international and domestic credit markets and prevailing capital market conditions. The essential research question to be answered here is whether current volatility and uncertainty in capital markets in Australia affects the feasibility of privately financed infrastructure and specifically, the PPP method of procurement.
This research will also examine the likely impact on the use, form and configuration of public private partnerships by canvassing three further issues:
1. Whether changes to the financial environment will affect the type of projects suited to this method of procurement.
2. Are opportunities presented in present market conditions and how these can be accessed and further refined?
3. What changes may be necessary to the PPP procurement model in the light of prevailing market conditions and what is required by stakeholders to adapt to changes in this market?
The report is organised around the following key research themes:
1. The background to infrastructure procurement in Australia and its role in regional economic development
2. What are public private partnerships and what benefits do they bring to public infrastructure procurement and the delivery of public services?
3. What role do capital markets play in the operation of the PPP model?
4. Do PPPs depend on capital markets?
5. What are present market conditions?
6. What impact are present conditions likely to have on future PPP projects?
7. What is the medium term outlook?
8. What are the alternative PPP funding mechanisms?
9. Do present market conditions create opportunities and how can these be addressed by government? By the private sector?
This report also contains the following information:
1. An informal survey of leading finance sector executives -lending institutions, institutional investors, monoline insurers and financial advisers (Appendix 3).
2. An examination of the operational performance of PPPs (Appendix 1)
3. A comparative review of procurement efficiency (Appendix 2).
The finance sector survey was informal because of concerns that the views of senior executives may impact capital markets in a time of considerable market volatility and uncertainty. The informal approach also permitted executives to speak openly about recent and current transactional experience. The comments and feedback from the survey are summarised at Appendix 3 and integrated into the appropriate sections of this report.