Water Journal : Current May 2017
CONCESSIONAL LOAN How it works: Funds are provided to a borrower at a rate of interest below the market rate, typically by a government entity. Key benefits: Concessional loans will soon be used in the Australian water industry with the Commonwealth Government announcing $2 billion over a 10-year period for the National Water Infrastructure Loan Facility. State and territory governments will be required to co-fund 50% of the project costs. GRANTS How it works: Funds are provided to eligible recipients for a specified purpose. Grant money is generally distributed following an application process by recipients. Key benefits: Grants do not require repayment. PUBLIC PRIVATE PARTNERSHIP (PPP) How it works: PPPs are long-term service contracts between the private and public sectors wherein the latter pays the former to deliver infrastructure and related services. The government generally retains responsibility for delivery of the core service. Private sector costs are recouped over time through availability payments from the government or – in the case of some economic infrastructure assets – either partially or wholly from users. Key benefits: PPPs provide for efficient risk transfer and innovation. They provide a delivery model that joins the need of public infrastructure with the capital, risk transfer, life-cycle asset management, optimisation of life-cycle costs and flexibility provided by private investors. REGULATORY ASSET BASE (RAB) MODEL How it works: Publicly owned entities and/or private companies own, invest in and operate infrastructure assets. An economic regulator ‘funds’ the infrastructure by providing regulated revenue. This effectively allows the regulator to establish a price cap in situations where the absence of competition could drive prices exorbitantly high. Key benefits: The RAB model is used as a means of regulating network industries where there is a high risk of monopoly pricing, such as water supply. It provides pricing certainty to both the investing company and customers, resulting in increased efficiency and fairer consumer prices, borne over long periods. VALUE CAPTURE How it works: This shares benefits of increased land values and densities driven by infrastructure projects. A tax, levy or charge is applied over a specified period of time for properties, paid by people from communities that specifically benefit from the infrastructure. LONG-TERM LEASE How it works: A long-term lease is a contractual arrangement between two parties, in which the lessor (typically a government entity) grants the lessee exclusive use over an asset or a piece of land for an agreed sum and time period. Key benefits: Allows the government to maintain ownership of public facilities and control over the public services, while at the same time entrusting operational and maintenance responsibilities to the private-sector operator at its own risk. MEDIUM TO LARGE you are trying to finance? Does your model need to be able to fund additional capital expenditure? How much documentation are you happy to provide? How about funding construction risk? Where are you thinking the demand risk should be allocated? Will your project provide a measurable value uplift to the community? How much documentation are you expecting to provide?
Current Feb 2017
Current August 2017