Ratings agency Moody’s has found that one-third of public-private partnerships (PPPs) are open to re-financing risk in the medium term.
Moody's looked at 18 social infrastructure PPPs in Australia and found that six will need refinancing before the end of the project life. Moody's described the refinancing risk as “medium term” since 2014 is the earliest any of the projects will need refinancing.
Typically PPP sponsors seek to line up debt terms with the life of the project since the fixed-term, single-asset nature of these arrangements, combined with high leverage, makes them difficult to refinance.
The six projects included on Moody's list of PPPs with refinancing risk are Victoria’s Royal Women’s Hospital, the redevelopment of Melbourne’s Southern Cross Station, the Southbank TAFE, the Perth Central Business District Courts, the NSW Rolling Stock project and the Australian Department of Defence's new headquarters joint operations command centre.
Moody's said that the refinancing risk is already reflected in its debt ratings for the issuers of each of the projects, but “the length and depth of the current crisis” may lead it to revise the ratings in the future.
The report also concluded that the pipeline for Australian PPPs remains robust. But financing new PPPs in Australia will be challenging, Moody's noted.
Australian social infrastructure PPPs: open to refinancing risk.