In the case of a New project, the investors need not perform significant due diligence on what went before. Risks, in particular liabilities, can be considered on a prospective basis, ring fencing the investors, and in particular the lenders. It is also easier to replicate New project structures in different places, for example the successful IPP and toll road programs that have been developed in Chile and other countries. The key benefits of a New PPP include:
• Defined capex - the single purpose nature of a New PPP project allows the investors and lenders alike to identify with some accuracy the total debt and equity requirements of the project. The design of solutions can start from the more or less blank page, without the complication and uncertainty of the series of interactions and relationships typical of existing commercial functions. Though there may be some slippage in construction cost, the capital expenditure required for the project is defined in advance, and therefore allows greater certainty and foreseeability.
• Ring-fenced operation - since they involve a new legal entity and a new commercial undertaking, New projects provide a more straightforward opportunity for project assessment, due diligence, security rights, risk assessment, forecast of financial viability, isolation of the revenue stream. Investors and lenders need not be concerned with historical liabilities, rights created in third parties, defects caused by third parties, etc.
• Isolated services - utilities are often loathe (or may find it unwieldy) to outsource management or decision-making processes, but are more comfortable isolating specific tasks for private sector involvement. Since New PPP usually involves identified structures or services, this may fit more easily into the context of utility management.