The communication will be present in the framework of the seminar of Economic Analysis of Public Law and Policy of the MADP Chair of Sciences Po. Paris
Some words about our presentation:
Prior to the 2008 financial crisis, the economic model
of PPPs has benefited from a very favorable environment in terms of credit
availability and cost. The high level of liquidity in financial markets allowed
rising abundant and not expensive external resources. The low level of interest
rates and the search by investors for financial assets characterized by these
kinds of risk and revenue profiles made PPPs attractive. Such context was
essential to help PPP deals to achieve value for money requirement as it
allowed minimizing the additional cost of private funds, compared to public
ones. Indeed, before the Euro crisis, the sovereign debt of developed countries
used to be considered as immunized from default risk. As a consequence, no risk
premium was charged on public debt. So, it would be automatically more
expansive to finance procurement through private funds than public ones. The
financial attractiveness of PPPs, despite this handicap, could be both
explained by intrinsic qualities of such deals in terms of incentive capacities
and by this initial financial context, which had conduced to such a private
funding structure to present a very limited additional cost compared to
sovereign bonds.
The credit crunch compromised the viability of deals,
which are funded through project finance structures characterized by high
levels of debt. Funds are more and more difficult to rise and are more and more
costly. All the highly leveraged deals are concerned even those for which the
counterpart is a public body[1].
Additionally, the disappearance of monoline insurers, which guaranteed to the
investors the repayment of the project entity debt through their AAA financial
rating, has contributed to limit the capacity of project managers not only to
fund them with a limited risk premium but also to obtain a debt maturity, which
matches with the project one. Consequently, mini-perm structures, which are not
a novelty in long-term contracts, tend to be more and more frequent after the
financial crisis.
Our purpose, in the framework of this communication,
is to assess the possible consequences of such financial structures on the
opportunity for the public entity to commit in PPPs. After presenting in a
first part the increasing use of mini-perm structures as a consequence of the
major disruption in the contract financing model induced by the 2008 crisis, we
describe, in a second one, its potential repercussions, both in favorable and
unfavorable situations. Our conclusion is devoted to the analysis of financial
and budgetary consequences of the additional risk induced by such structures
for the public contractor. These ones are put in perspective with other devices
used for preserving PPP financial structure as government guarantees.
[1] For
an in-deep analysis of the consequences of the current financial turmoil on PPP
financing and a comprehensive presentation of the corrective measures
implemented for maintaining the viability of these contracts, see Dupas et al.
(2012).
Aucun commentaire:
Enregistrer un commentaire