This study examines some of the challenges facing Public Private Partnerships (PPPs) in Australia. Specifically, we consider the characteristics of projects when the private and public sectors experience unexpected financial losses. We estimate that 35 out of 155 PPPs (ie. approximately 22.6%) report additional financial costs after the financial close date of the transaction. We find that projects that receive availability payments from government are just as likely to be problematic as projects that earn revenues from market based demand. PPPs exposed to market demand disclose significantly larger losses than PPPs that receive an availability charge revenue stream. When we examine PPPs based on their industry, we reveal that the problematic PPPs are dominated by projects in the transport sector (exposed to market demand based revenues). It is unclear whether there is commensurate excess returns to the private sector from successful PPP projects to offset the associated losses with the problematic PPPs in this study. The lack of disclosure and transparency in the financial reporting of PPPs remains a formidable barrier in answering this essential question and remains a significant obstacle to attract new equity investment in Australian PPPs in the future.
This Working Paper was produced by the CSIRO-Monash Superannuation Research Cluster a collaboration between the CSIRO and Monash University, the University of Western Australia, Griffith University and the University of Warwick in the United Kingdom. In addition, the Cluster engages on an ongoing basis with a range of industry supporters, government agencies and industry peak bodies who assist in providing guidance and feedback to researchers, providing data, and in disseminating outcomes. The purpose of the Super Research Cluster is to examine issues pertaining to the future of Australia’s superannuation and retirement systems.