Infrastructure Investment – The Emergent PPP Equity Market

Abstract

Increasingly governments are looking to private sector actors to invest in infrastructure projects. An emergent mechanism for such investment is the market in PPP equity. This is an aspect of PPPs that has to date had little empirical attention. This paper reports on the size and scope of the market in PPP equity sales within the UK. In the process, the nature of PPP projects and the existing rationales for the policy are critiqued. The paper concludes by laying out a number of potential research agendas focused on PPP equity sales including a call for reassessing theoretical perspectives.

Understanding absences and ambiguities of Post-decision Project Evaluation in the UK's PPPs: drawing from the sociology of ignorance

“…However, prior research evidence questioned the promises over cost, efficiency, flexibility and financial returns (e.g. Shaoul et al, 2008;NAO, 2018;Acerete et al, 2019;Whitfield and Smyth, 2019), indicating the need for robust and comprehensive PPP ex-post evaluations. As Andon (2012) and Helby Petersen (2019) conclude, lack of inquiry into the operation of PPPs post-financial closure leaves a substantial gap in our knowledge.…”

“…. the economic case for the method is based on false assumptions and misleading evidence" (Hellowell and Pollock, 2009, p. 23; see also Boardman and Vinning, 2012;Smyth and Whitfield, 2017;Whitfield and Smyth, 2019).…”

Financialization: the next stage in PPP development

“…Over time, financial deregulation and the emergence of infrastructure investment funds as the main participants has led to power shifting away from senior debt financiers, such as banks, whose main concern was to minimise the risk of debt. Instead the institutional investors, including private equity, and the equity markets have gained in significance (Weber et al, 2016;Whitfield and Smyth, 2019).…”

“…First, in the classic UK form of PPP projects to deliver public infrastructure (such as schools, hospitals, etc. ), a secondary market in equity transactions has emerged, growing from the first transactions in the late 1990s (Smyth and Whitfield, 2017;Whitfield and Smyth, 2019).…”

“…Initially these secondary market transactions represented capital recycling by, and among, the primary private sector partners, but since 2008 there has been a substantial growth of infrastructure investment funds in this market (Whitfield and Smyth, 2019). It is estimated that there were a total '… of 462 transactions between 1998 and 2016 … an estimate of the total value of this market is £10.6 billion' (Whitfield and Smyth, 2019, p. 299).…”