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How does the PPP model work in the current climate?

  • 18-02-2011 5:19pm
    Registered Users Posts: 247 ✭✭

    How does the PPP model work in the current climate? People post that it is good way to allow the government to continue to invest in infrastructure projects such as Metro North etc without having to borrow upfront.

    But surely for a PPP project the contractor is effectively just borrowing on the behalf of the Government and is actually only acting as a proxy between the lender and the state. The state is still the final guarantor as the company would not have the resources to pay it back itself without the state payments. Therefore surely the PPP team would have to borrow at least the same rate or higher than the rate for government bonds. Surely that rate is cost prohibitive.

    I know that there is the advantage of risk being shared etc but is the point valid that that international lenders are going to be even more unwilling to lend to a PPP than the Irish state as there is even more risk involved than Government Bonds?

    I’m not an financial expert so I’m just wondering what your opinions are.


  • Registered Users Posts: 5,625 ✭✭✭Chris_5339762

    We wont know until the M17/18 project gets signed (if it goes ahead at all). Its on shaky ground at the moment but will be the first big PPP to get going since the country fell apart. So if it goes ahead, PPPs are viable, if it doesnt go ahead, forget all of them.

  • Closed Accounts Posts: 724 ✭✭✭dynamick

  • Banned (with Prison Access) Posts: 25,234 ✭✭✭✭Sponge Bob

    The Connacht Tribune ( this weekend) confirms BAM Balfour Beatty cannot fund the PPP and that the NRA have gone "cap in hand" to the losing consortia to see if they have a few shekels.

    Separately I hear that the (National) Cancer (Strategy) Centres will not be a PPP but will be speculatively built and operated by private companies AND their own doctors and with guarantees given as to base load business from the HSE. I am unaware of where the centres will be located in this non PPP ppp plan. I also understand that only one will be contracted in 2011 and 2012, somewhere in Dublin.

  • Closed Accounts Posts: 3,032 ✭✭✭DWCommuter

    And one of the losing consortia includes AIB who couldn't raise an erection in a brothel.

    Looking good alright!:D

  • Registered Users Posts: 6,165 ✭✭✭Pete_Cavan

    Well clearly it doesnt. It doesnt look like any of the planned PPPs will now go ahead. Any of the projects that are to procede will most likely have to be paid for from exchequer funds.

    Perhaps the M17/18 should be split into two schemes, Gort - M6 and M6 - Tuam. Projects like the Tralee bypass will have to be scrapped and Gort - M6 built next year with M6 - Tuam as a medium term goal (with Claregalway bypass done asap). The Newlands Cross/M11 should also be split with Newlands Cross being done next year and M11 gap another medium term goal. As for MSAs, Simon Coveney (FG spokesman on Transport) recently spoke of allowing private companies to develop them so may not need PPPs to build them.

    It is hard to see Metro North going ahead either, although they should still do the enabling works IMO. Maybe it is no harm that MN doesnt go ahead because that would clear the way for Dart Underground in a couple of years time, DU being a more important scheme. The existance of the Dart tunnel would strengthen the case for MN in the near future and doing DU first could result in both projects being completed sooner than if MN was done first. Needless to say Metro West and Luas Lucan haven't a hope.

    AFAIK the Thornton Hall prison is not be to a PPP and instead the government will fund it itself and build it in phases. With FGs health policy of universal private health insurance, Im not sure if we will need PPPs for cancer centres or if they will be privately funded anyway.

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