This, the fifth edition of Infrastructure Investor, is the first issue of the magazine since its launch in which we don’t feature a big story about a proposed PPP in America collapsing before reaching the finish line (such as Midway Airport), or running into trouble soon afterwards (Chicago’s metering system). That makes for a nice break – though we fully expect to be at it again when the next US privatisation scheme comes unstuck.
This is not just because failed deals can make for great reading, especially when the finger pointing starts. The main reason why we will continue to cover broken deals is because a) more will break and b) when they do there will be some important lessons to be learned from the failure.
Invariably, these lessons relate to the nature of the partnership put in place to deliver and maintain the asset. Were all stakeholders clear about the potential benefits the partnership would generate, and were these benefits deemed equally attractive by all sides? Were the expected costs and liabilities split equitably? And did the structure align the interests of everyone and over the entire life of the partnership, rather than just at the outset?
All it takes for a deal to go wrong is for someone involved in it to decide, rightly or wrongly, that the answer to at least one of these questions is ‘no’. The point seems trivial, but this is essentially why everyone with a vested interest in making the PPP process easier – not just in North America, but wherever infrastructure assets require input from both public and private institutions – has a vested interest in asking what went wrong every time a high-profile project hits the skids.
The lessons matter in sub-Saharan Africa, for example, a region we cover in detail in this issue with several stories starting on page 14. Creating a functioning PPP framework is a stated priority of many African governments, which recognise it as a necessary condition for the realisation of their infrastructure programmes. According to practitioners, progress is being made in countries including Nigeria, Kenya, Ghana, Tanzania and Uganda, to name a few. Progress is also evident in Malawi, the landlocked West African country that is staking its economic future on building a shipping link to the Indian Ocean (page 16). If and when this transformational project is completed, it will owe its existence overwhelmingly to the Malawian government forming a viable partnership with many public and private sector backers.
Getting such partnerships right is also paramount in Armenia. The country’s economic development goals are tightly linked to, and underpinned by, a strong commitment to investing in infrastructure. In July, our reporter Chris Josselyn travelled to Yerevan, the Armenian capital, to interview the country’s most senior politicians about their plans for new assets. On his return, Chris led the team that produced the Intelligence Report that accompanies this issue. Unsurprisingly given the nature of what Armenia is aiming to achieve, the PPP acronym features prominently in the report.
Meanwhile countless private sector institutions with an appetite for infrastructure are pondering the meaning of partnership as well. One example is Hochtief, the German construction group, which through its concessions business is deeply involved in the asset class. Our interview with Bernward Kulle, who runs the group’s PPP platform, starts on page 26. And on page 8, we present an analysis of the three indicative proposals now on the table for investment in the port of Virginia. What we found is that all three proposals are clearly aiming to balance their return requirements with a value-for-money offering to the client. Whether a deal can be done remains to be seen, but the necessary focus on aligning interests seems to be there.
We don’t know for sure whether the authors of the Virginia proposals have studied why similar projects have gone wrong in the past (and why others have succeeded). But with so much at stake and so much to gain, it is hard to imagine that they haven’t. Here is to hoping that when we come to write the story of the port of Virginia PPP, it will be a story of success.