Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Basics — 32
According to Standard & Poor’s definition,
a public-private partnership (PPP) or private
finance initiative (PFI) is any mediumto
long-term relationship between the public
and the private sector involving the sharing of
risks and rewards of multisector skills,
expertise and finance to deliver desired
policy outcomes.
Standard & Poor’s PPP, Credit Survey 2005
The success of private sector involvement in infrastructure development
and refinancing has been proven in countries such as Australia,
Canada and the UK. The independent National Audit Office in the
UK has found that privately financed and operated infrastructure
shows 10% – 25% efficiency gains versus publicly financed projects,
which underpins the considerable advantages. Aging infrastructure,
scarcity of governmental funding and the aforementioned efficiency
gains are the key growth drivers of public-private partnerships
in mature markets. In theory, infrastructure investments are direct
and indirect investments in businesses that own and/or operate the
physical structure and networks used to provide essential public
services. Based on the definitions above, PPPs and PFIs offer a
huge variety of collaboration between the private sector and public
institutions. There is by no means any form of fixed contract or
finance structure that makes a standard model possible. The most
common point for all such contracts is acquiring access to financial
markets for public projects that are transformed accordingly, so
that investors can directly participate in the success of the specific
project that delivers higher returns than government bonds. Simultaneously,
the project and operating structure guarantees obtaining
the best expertise in the relevant industry.
Transport sector has the longest PPP history
Initially, many countries developed PPPs in the transport sector
(tunnels, bridges, roads), followed by the water and wastewater,
health and education sectors. The reason for this evolution lies
primarily in the huge costs in building up the transport infrastructure.
The overall aim even then was to take advantage of private
sector finance and skills to deliver much needed social infrastructure.
The sector distribution of the PPP portfolio of the European
Investment Bank (see figure 1) adequately reflects this situation.
Sustained investment in infrastructure – especially transport infrastructure
– is vital if Europe is to maintain its competitiveness
against rapidly growing emerging economies.
Rt Hon Alistair Darling MP, UK Secretary of State for Transport at the
2005 PPP Transport Summit
According to Dealogic ProjectWare, during 2004 and 2005, 206
PPP deals worth approximately USD 52 billion were closed worldwide.
Among these 206 projects, only 54 were outside Europe,
which clearly points towards the importance of this growing market
in the Old World. Although there were clearly fewer projects outside
Europe, the estimated value of the investments outside Europe,
at approximately USD 26 billion, is nearly at the same level. In
the period between 1994 and 2005, PPP deals worth around USD
120 billion were closed in Europe, two-thirds of which were in the
UK, followed by Portugal and Spain, each accounting for 9% –10%
(see also figure 2).
Millau Viaduct France
The Millau Viaduct (French: le Viaduc de Millau) is a cable-stayed
road bridge that spans the valley of the river Tarn near Millau in
southern France, and is a key step for the completion of the French
highway system. French bridge engineer Michel Virlogeux designed
the bridge in collaboration with British architect Norman Foster. The
ambitious project is the tallest vehicular bridge in the world, with
one pier’s summit at 343 meters – slightly higher than the Eiffel
Tower, and only 38 meters shorter than the Empire State Building.
It was opened for traffic on 16 December 2004 ahead of the original