Any lawyers here?

[Ash]

All the points you make are right Terry, but the conclusion that I would reach would be different. Also, I live in Sydney now - I'm not just some super-keen Australian state government infrastructure enthusiast.

Taking the freeway example, say the government builds a freeway, and say it costs $1 billion (over the life of project, say five years).

<Too long to fully quote, sorry>

A few points about PPPs:
- As a rule of thumb, it's cheaper for the government in Australia to borrow money rather than private enterprise.
- As a rule of thumb, complex deals and floats are more inefficient in terms of funding costs: the bankers never lose, and often rake in tens of millions, or more, in fees for setting everything up. The more "innovative" the solution, the more inefficient the funding (remember that next time our new Treasurer says something that dumb again).
- As a rule of thumb, if the infrastructure is profitable for the private enterprise, it's likely to be profitable for the government.

Governments have to include clauses whereby they cover shortfall of traffic (or whatever generates revenue) otherwise they roads (or whatever it is) would carry too much risk to get enough investors interested.

The only reason governments persist with the folly of PPPs is to avoid billions of borrowing appearing on their balance sheets and affecting their credit rating (as I think you basically stated). As a result, the tax payer ultimately loses, the sucker investors who bought into the PPP loses, and the bankers are the real winners. The tax payer very rarely gets anything for "free".

The current end game seems to be that the initial private consortium goes broke and the infrastructure gets bought out cheaply by a pension fund (with the losers and winners as stated above).