Comparison of research findings on annual rate of return

The National Audit Office (NAO) and European Services Strategy Unit (ESSU) studies reveal significant differences in the rate of return in the sale of PPP equity.

Firstly, the NAO study was based on a sample of 99 PPP projects compared to 226 projects in the ESSU sample. The NAO did not explain the basis of their sample. The ESSU sample contains all the equity transactions where profit information is publicly available.

Secondly, the NAO did not provide specific annual rate of returns for the projects in their sample and presented their findings in a broad graphic format (NAO, 2012)

Thirdly, nearly ninety per cent of the NAO project sample had a rate of return in 10%-30% range in contrast to the much wider distribution in the ESSU study. The latter cited 29 cases where the annual rate of return was over 55.0% whereas there were none in the NAO study. Similarly, there were 54 projects with an annual rate of return below 10.0% in the ESSU study compared to a smaller percentage in the NAO sample.

The differences between the ESSU and NAO findings are illustrated in Figure 3. The bulk of NAO projects are concentrated in the 10%-30% rate of return with none higher than 55%. In contrast, the rate of return in the ESSU sample is slightly flatter, but with more projects with a rate of return under 10% and a significantly higher proportion over 50%.

Figure 3: Comparison of NAO and ESSU rate of return data