Australia re-fi risk under the spotlight

Panellists at our Berlin Summit 2014 differed in their assessment of the attractiveness of Australia's PPP market.

In a panel looking at the greenfield investment opportunity, different views were expressed with respect to Australia's burgeoning public-private partnership (PPP) pipeline.

Praising the market, Bryn Jones, partner and team head of infrastructure development at London-based fund manager InfraRed Capital Partners, said: “Australia has been doing PPPs for a lot longer than the UK and it's a highly experienced, well oiled machine. Elsewhere you see delays, suspension and cancellations”.

However, Julia Prescot, chief strategy officer at Paris-based fund manager Meridiam Infrastructure, accused the Australian PPP market of having a “short term vision” because of the widespread use of five- to seven-year financing, which creates refinancing risk. “We try to reduce refinancing risk and want long-term reliable financing,” said Prescot, pointing to the multi-decade package put together in support of the University of Hertfordshire PPP in the UK.

Jones insisted that in “well structured” deals refinancing risk can be managed. He also added: “Refinancing is a feature of the Australian market and if you want to be active there you've got to take it.” He noted that the use of the US private placement market to replace debt was increasing.

On a separate point, Prescot said that public policy was moving in favour of PPPs and that this was a “more exciting” development than a modest increase in deal flow. However, she urged investors to have a meaningful dialogue with politicians. “We ought to put a lot more effort into influencing politicians through a constant feedback loop. People are prepared to listen. There is a huge difference between the quantity of infrastructure required and the way it's being delivered. They need us to come forward with reasonable solutions.”

Vincent Gerritsen, senior investment manager for infrastructure at Dutch pension administrator PGGM, said the Netherlands was a good example of positive government/investor dialogue. “The government gets investors involved in structuring projects from day one,” he said. “Through pilot projects, the government actively tries to attract long-term capital.”