Two Downer EDI/Waratah articles Saturday 29 SMH

[johnnigh]

http://www.smh.com.au/business/tricky-task-of-engineering-the-finances-of-publicprivate-projects-20110128-1a8hg.html
http://www.smh.com.au/business/waratah-is-another-emblem-of-state-of-nsw--on-a-downer-20110128-1a8b5.html

PPP in trouble. What a surprise  :conf

[#Metro]

I don't think the Infastructure Partnerships Australia is a good source to take view on.

Advocates, such as Infrastructure Partnerships Australia, say PPPs protect taxpayers from project cost blowouts. They also claim that incentives built into contracts (completion bonuses and penalties) often result in projects being delivered at much lower prices than if the government had handled them itself.

''What we've seen so far with the Reliance Rail project is the PPP model working well because it's not the taxpayer footing the bill for these overruns - it's the investors and shareholders,'' said Infrastructure Partnerships Australia chief executive Brendan Lyon. '''That's why PPPs stack up from a public-sector value viewpoint.

What they fail to see is that the cost blowout would not have occurred in the first place with competent public oversight. The rate the government can borrow at is much lower than that of the private sector, and also subject to less volatility (because it is backed up by the entire state or nation of taxpayers). There is this obsession with making the balance sheet smiley for the sake of making it smiley come election time.

Yes we have Clem 7, but the benefits did not materialise. For a "critical piece of infrastructure" it was touted as, it is totally underused. The apologists who refuse to accept this affront to PPP have now retreated into the "this infrastructure will be important in the future" territory, seemingly not realising that a dollar of benefit in the hand now is worth much much more than a dollar of benefit in the future, and that this would also likely have changed the cost-benefit ratios in the business case. And we know that the low number of cars in that tunnel are directly due to it being a toll road and nothing else- because when it was free, it had almost no problem reaching its traffic forecast. The traffic plummeted after the tolls came in.

[#Metro]

In politics, debt is considered to be evil and it's an easy card to play, to whip up fear. ''We're putting our children and grandchildren in hock. We're mortgaging the future.'' You hear it every election.

But take a look at the corporate world. There, the opposite view is taken. Debt is essential for growth. Analysts look for the ability to repay interest and to refinance, and whether there are adequate assets to cover the debt, rather than the size of the debt itself.

Sums it up nicely.