Is this the end of privately financed PPPs in Australia?
Privately financed Public-Private Partnerships (PPPs) are in decline in Australia. Why? Because most of the benefits that once justified the use of private finance—risk transfer, whole-of-life value, and funding flexibility—are now being achieved through publicly financed models, without the added cost and complexity of private capital.
I’ve advised on some of the most significant PPPs in Australia. Drawing on 30 years of experience, I want to share why the model is faltering—and what private finance providers must do to stay relevant.
What governments really want
Governments need two things from the private sector:
Expertise, equipment, and materials
Finance
The first is non-negotiable. Governments no longer have the internal capability to deliver major infrastructure projects alone. But the second—finance—is optional. And increasingly, governments are choosing not to use it.
Why private finance is losing its edge
Governments can now borrow more cheaply than ever. So why pay a premium for private finance unless it delivers something extra?
The truth is, most of the benefits traditionally attributed to PPPs—like innovation, performance incentives, and whole-of-life cost savings—can be achieved through publicly financed Design-Build-Operate-Maintain (DBOM) contracts. The only real difference? The “F” in DBFOM: finance.
And that “F” is expensive.
What’s left that private finance can offer?
There are still a few areas where private finance adds value:
Demand risk transfer: In user-charge PPPs (like toll roads), private investors can absorb the risk of lower-than-expected usage. But user-charge, demand risk PPPs are now rare.
Financial rigour: Capital at risk means private investors scrutinise costs, risks, and performance more rigorously than government consultants.
A buffer against contractor failure: If a subcontractor fails, the PPP company may step in—though this safety net is limited.
Integration risk management: PPP companies can manage complex interfaces between multiple contractors, relieving government of this burden. They can also bring together DB contractors and OM contractors to deepen the pool of DBOM contractors.
But these benefits are narrower than those claimed by many PPP proponents.
Why demand risk transfer has disappeared
User-charge PPPs once allowed governments to generate funding for infrastructure while transferring demand risk to equity investors. But after a string of high-profile failures (like the Cross City Tunnel and Brisbane Airport Link), investor appetite for demand risk dried up.
Governments also want more control over pricing and network integration—something they lose when they hand over tolling or farebox rights to private operators.
Can PPPs be saved?
Yes—but only if private finance providers adapt.
Here’s how:
Take on more meaningful risk: Especially demand and integration risk.
Align incentives with government: Revenue-sharing models can help.
Avoid projects that require long-term flexibility: PPPs work best when the scope is stable.
Governments are already minimising the use of private finance in PPPs—contributing capital upfront or paying down debt early. If private finance is to survive, it must offer more than just money.
The infralegal perspective
At Infralegal, we help both government and private sector clients navigate the evolving infrastructure landscape. We understand the legal, commercial, and political dynamics that shape procurement decisions—and we know how to structure deals that deliver real value.
If you're a project sponsor, investor, or government agency looking to make sense of the shifting PPP terrain, let’s talk.
Owen has published a detailed paper on this topic, which you can access via the below link.
