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A presentation conducted by Mr Paul Oppenheim, Managing Director, The Plenary Group. Presented on Monday the 30th of September 2013. • The evolution of Public Private Partnerships • Government objectives and private sector motives • Consortium dynamics • The role of private capital • Australia in a global context
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Monday, 30th September 2013: Business & policy Dialogue
Tuesday 1 October to Thursday, 3rd October: Academic and Policy Dialogue
www.isngi.org
ENDORSING PARTNERS
The following are confirmed contributors to the business and policy dialogue in Sydney:
• Rick Sawers (National Australia Bank)
• Nick Greiner (Chairman (Infrastructure NSW)
www.isngi.org
A private sector perspective of PPPs
Presented by: Mr Paul Oppenheim, Managing Director, The Plenary Group
DELIVERING ON THE PROMISE.
A Private Sector Perspective on PPPs (Public Private Partnerships)
30 September 2013
Plenary Group
• Plenary Group Profile
• Evolution of Public Private Partnerships
• Government Objectives and Private Sector Motives
• Consortium Dynamics
• Role of Private Capital
• Australia in a Global Context
Outline
3
Key statistics
Business Model • Infrastructure sponsor, developer
and long-term equity investor; in-house financial advisory
• Focused on availability-based concessions; being a long-term partner to governments
Plenary Group Profile
4
Australia
Adelaide Melbourne Sydney Singapore
Canada
United States
Vancouver Winnipeg Toronto Ottawa
Office Locations
Established 2004 Projects 22
Total Project Value +A$12bn Offices 9
Employees 120+
Los Angeles
Melbourne Convention Centre (VIC, Australia)
5
CSEC (Ottawa, Canada)
6
Gold Coast Light Rail (QLD, Australia)
7
Disreali Bridges Project (Winnipeg, Canada)
8
Victorian Comprehensive Cancer Centre (VIC, Australia)
9
Evolution of Public Private Partnerships
10
• Social (or availability payment) infrastructure
• 1990s – Small discrete projects – Less risk transfer / scope for innovation – Government accounting treatment important – Types of projects:
• Regional hospitals • Government offices
• 2000s – Larger projects – Key drivers: risk transfer / design and/or cost innovation – Types of projects:
• Metropolitan hospitals • Urban infrastructure
Evolution of Public Private Partnerships
11
• 2010s – Complex and network assets (and any other projects where
benefits accrue) – Increased focus on service delivery and stakeholder outcomes – Government accounting treatment more nuanced – Types of projects:
• Public transport systems • Non-core government services • Any project where private sector innovation/financial discipline
should deliver superior outcomes
• Financial structures and participants have changed significantly over past 20 years
– Debt providers – Equity investors
Government Objectives and Private Sector Motives
12
• Governments have become sophisticated procurers of long-term infrastructure and related services
• Outcomes and objectives are now better articulated – Encourage interaction between government and bidders – Open to new ideas and international best-practice – Sometimes cost is really important
• Private sector drivers – not always what you think – A fair risk-adjusted return, earned through competitive process – Ironically private sector often more long-term focused than
governments – Relationships are paramount
• Governments, communities, stakeholders, customers • Commercial partners
Consortium Dynamics
13
• The main ‘actors’ – Sponsors - usually Builder(s), Financier, Operator(s) – Design consultants – Equity investors – Lenders – Various advisers
• Everyone wants to win – not everyone knows how – Engaging with the client – Best for bid – Commercial balance
• Competition delivers outcomes – Governments benefit from constructive tension… …but be careful about affecting consortium dynamics
Role of Private Capital
14
• Private capital is fundamental to PPPs – the key ingredient that changes the dynamics between Government and contractors
Stakeholder Awareness Commercial Balance
Independence
Risk Appetite
Technical / Commercial Expertise
• Interpret Government objectives
• Assist with design, cost, whole-of-life optimisation
• Identify commercial opportunities
• Interests aligned with long-term government objectives
• Facilitator
• Performance risk • Due diligence rigour • Management of issues
throughout project
Improved prospects of optimal solution
Innovation
Trends in Private Capital
15
• Debt Providers – Banks vs debt capital markets – Refinancing risk – Should Governments pay the current debt premium?
• Equity Investors – Financial vs Industrial – Real money vs Agents – Greenfield vs Brownfield – Investment horizons – Shareholder arrangements
– Exit provisions – Vetoes – Conflicts of interest – Additional funding
Australia in a Global Context
16
• Strengths – Experience and sophistication – Technical and commercial depth – Equity demand – Governments adapting to financial constraints
• Weaknesses – Debt competition – Cost of bidding – Clarity on Government priorities
• Conclusion – Private sector and Governments getting better at understanding
each other, thankfully, because these are long-term partnerships
DELIVERING ON THE PROMISE.
A Private Sector Perspective on PPPs (Public Private Partnerships)
30 September 2013
Plenary Group