Financing of public private partnerships: Six Australian motorway case study projects: Six Australian motorway case study projects

Peter E D Love, Jim Mac Gregor Smith, Michael Regan

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

Abstract

In the past fifteen years, Public Private Partnerships (PPPs) have emerged as the preferred procurement method for toll road construction and management in developed economies. In Australia, seven of eight new toll roads implemented since 2003 were commissioned as PPP projects. Unlike traditional procurement methods, PPPs involve higher levels of risk for private firms, who rely on bank loans for up to 85% of development funding. This study undertakes a comparative review of the financing of six of these projects of which two were financed after the global financial crisis of 2008. This paper seeks to identify differences between the projects and the bearing that these differences may have had on project outcomes. The review considers matters such as capital formation and structure, risk allocation, loan tenors, and the organisation of equity. Common characteristics are also identified including the use of short-term bank debt, reform of State PPP policy, forecasting error and the financial failure of projects, and changes in risk allocation over the 10 years of the survey. With one exception, projects were delivered on time and within budget. However, two projects experienced financial failure and substantial loss of asset value. Moreover, a further project traded for nine years before it was sold at less than half of its original construction cost. Lessons learnt from recent toll road experience in Australia and recent policy reforms particularly in the area of risk allocation are examined.

Original languageEnglish
Title of host publication6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017
PublisherThe Canadian Society for Civil Engineering
Pages707-714
Number of pages8
ISBN (Print)9781510878419
Publication statusPublished - 2017
EventCanadian Society for Civil Engineering Annual Conference: Leadership in Sustainable Infrastructure - Vancouver, Canada
Duration: 31 May 20173 Jun 2017
http://csce2017.ca/

Publication series

Name6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017
Volume1

Conference

ConferenceCanadian Society for Civil Engineering Annual Conference
Abbreviated titleCSCE
CountryCanada
CityVancouver
Period31/05/173/06/17
Internet address

Fingerprint

Toll highways
Bearings (structural)
Road construction
Costs

Cite this

Love, P. E. D., Smith, J. M. G., & Regan, M. (2017). Financing of public private partnerships: Six Australian motorway case study projects: Six Australian motorway case study projects. In 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017 (pp. 707-714). (6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017; Vol. 1). The Canadian Society for Civil Engineering
Love, Peter E D ; Smith, Jim Mac Gregor ; Regan, Michael. / Financing of public private partnerships: Six Australian motorway case study projects : Six Australian motorway case study projects. 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017. The Canadian Society for Civil Engineering , 2017. pp. 707-714 (6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017).
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title = "Financing of public private partnerships: Six Australian motorway case study projects: Six Australian motorway case study projects",
abstract = "In the past fifteen years, Public Private Partnerships (PPPs) have emerged as the preferred procurement method for toll road construction and management in developed economies. In Australia, seven of eight new toll roads implemented since 2003 were commissioned as PPP projects. Unlike traditional procurement methods, PPPs involve higher levels of risk for private firms, who rely on bank loans for up to 85{\%} of development funding. This study undertakes a comparative review of the financing of six of these projects of which two were financed after the global financial crisis of 2008. This paper seeks to identify differences between the projects and the bearing that these differences may have had on project outcomes. The review considers matters such as capital formation and structure, risk allocation, loan tenors, and the organisation of equity. Common characteristics are also identified including the use of short-term bank debt, reform of State PPP policy, forecasting error and the financial failure of projects, and changes in risk allocation over the 10 years of the survey. With one exception, projects were delivered on time and within budget. However, two projects experienced financial failure and substantial loss of asset value. Moreover, a further project traded for nine years before it was sold at less than half of its original construction cost. Lessons learnt from recent toll road experience in Australia and recent policy reforms particularly in the area of risk allocation are examined.",
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Love, PED, Smith, JMG & Regan, M 2017, Financing of public private partnerships: Six Australian motorway case study projects: Six Australian motorway case study projects. in 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017. 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017, vol. 1, The Canadian Society for Civil Engineering , pp. 707-714, Canadian Society for Civil Engineering Annual Conference, Vancouver, Canada, 31/05/17.

Financing of public private partnerships: Six Australian motorway case study projects : Six Australian motorway case study projects. / Love, Peter E D; Smith, Jim Mac Gregor; Regan, Michael.

6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017. The Canadian Society for Civil Engineering , 2017. p. 707-714 (6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017; Vol. 1).

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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M3 - Conference contribution

SN - 9781510878419

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SP - 707

EP - 714

BT - 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017

PB - The Canadian Society for Civil Engineering

ER -

Love PED, Smith JMG, Regan M. Financing of public private partnerships: Six Australian motorway case study projects: Six Australian motorway case study projects. In 6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017. The Canadian Society for Civil Engineering 2017. p. 707-714. (6th CSCE-CRC International Construction Specialty Conference 2017 - Held as Part of the Canadian Society for Civil Engineering Annual Conference and General Meeting 2017).