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Outlook 2017: Green lights for Aussie greenfield

In addition to mega-privatisations, Australia counts a solid pipeline of large-scale, complex PPP projects. Notwithstanding wobbles on the political front, transport and healthcare are set to benefit in 2017.

This year has been a good one for Australia's public coffers. In September, Victoria sold Port of Melbourne for A$9.7 billion ($7 billion; €6.76 billion) while New South Wales divested Ausgrid for A$16.2 billion. All in all, state governments have raised over A$20 billion through privatising assets in 2016. 

They now plan to use the proceeds to fund some of their large-scale, complex greenfield infrastructure projects. For instance, part of the record A$9.7 billion Victoria collected through selling Port of Melbourne's 99-year lease will go towards removing 50 level crossings in the city – under a PPP model – as well as build regional and rural infrastructure projects. 

Australia, described by a number of market participants as “the world's most active PPP market”, has managed to attract many of the world's major developers to its shores. Intensifying competition has indeed seen expected returns of prospective projects tighten in recent years, according to Peter Munns, who leads John Laing's primary renewables investments in Asia Pacific. 

The UK firm has been active in the Aussie PPP market since 2010, with four investments currently held in the rail and social infrastructure sectors. Recently, it has strived to grow its renewables business, after the market picked up on the back of supportive policies passed by the federal and state governments in 2015. 

While Australia is deemed attractive due to its stable regulatory framework, a politically volatile environment in some states has led some schemes to falter. One example is Victoria's A$5.3 billion East West Link project, stopped last year after the Labor government won the election in 2014 on a pledge to scrap it. While the government ended up paying over A$1 billion in cancellation costs, the move “did not inspire investors' confidence”, comments Simela Karasavidis, a Melbourne-based partner at global law firm Pinsent Masons.   

However, she argues that political negotiations over infrastructure projects in Australia are not much different from what happens in other developed democracies, where infrastructure assets are often considered strategic. 

Earlier this month, the Victorian government proposed to build the long-discussed North East Link, another road project in Melbourne budgeted at A$10 billion, though it said work would start only if the Labor administration is reelected in 2018. The East West Link could also make a come-back in the future: the federal government has still A$3 billion earmarked for it should Victoria one day decide to build it. 

While these two projects may take time to hit the market, Australia is not short of big-ticket transport schemes in 2017, starting with the Melbourne Tunnel, Melbourne Metro, Sydney Metro City and the western package of the Outer Suburban Arterial Roads. 

Healthcare is another key theme for next year: New South Wales is currently procuring the redevelopments of five hospitals under an operator-led PPP model. Malcolm Macintyre, a director at Capella Capital, said that the approach is consistent with NSW's focus on service outcomes and is seen as a “natural evolution” of the PPP model given recent experiences with convention centres, prisons and light rail.