© Clayton Utz

INFORMA MAJOR ROADS PROJECTS CONFERENCE 2014

THE REALITY OF PRIVATE PUBLIC PARTNERSHIPS IN PRESENT MARKET CONDITIONS

Owen Hayford | Partner

11 March 2014

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OUTLINE

Opportunities for utilising private finance on major

road projects

Recent market developments and their impact on

PPPs in the Australian transport sector

Is there scope for innovation around the current

PPP model?

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TRAFFIC/DEMAND RISK

Traditional Toll Road PPPs

» Project Company retains tolls collected from motorists.

» Equity Investors and Debt Financiers bear traffic risk

Availability Payment PPPs

» Project Company receives Availability Payment from

Government, in return for making road available to

motorists

» Government retains any toll revenues collected from

motorists

» Government bears traffic risk

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AVAILABILITY PAYMENT PPP

Mornington Peninsula Link

East West Link

Toowoomba Second Range Crossing

Transmission Gully

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TRAFFIC/DEMAND RISK (CONT)

Government Builds, Tolls then Sells

» Government engages contractors to build and maintain

road, and install tolling equipment, under publicly funded

contracts

» Government retains tolls collected during ramp-up

» Once actual traffic history established, Government sells

right to collect future tolls to the private sector

» Government bears traffic risk during ramp up

» Private sector bears traffic risk after ramp up

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GOVERNMENT BUILDS, TOLLS THEN SELLS

Go Between Bridge

Legacy Way

WestConnex

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IMPLICATIONS OF DIFFERENT APPROACHES

Availability PPP

» Private finance for

construction

» Debt/equity exposed to

risk of contractor

default / insolvency

» Government retains

traffic risk

» But Government could

sell tolling rights/traffic

risk

Build, Toll then Sell

» Government finances

construction

» Government exposed

to risk of contractor

default / insolvency.

No equity/debt buffer

» Government takes

traffic risk prior to sale

» Private sector takes

traffic risk after sale

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SOME INVESTORS WILL STILL TAKE TRAFFIC RISK

M1- M2 Link

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SO IF THE TOLL ROAD PPP MODEL WAS 'DEAD', IT'S NOW RISING FROM THE GRAVE!

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UNSOLICITED PROPOSALS

M1 - M2 Link

Eastern section of East West Link

Dandenong Rail Corridor

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QUESTIONS?

Any questions?

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