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