Magazine article Public Finance

Review Questions PFI Risk Transfer

Magazine article Public Finance

Review Questions PFI Risk Transfer

Article excerpt

Investors in Private Finance Initiative projects face only a 'relatively benign' risk of expensive construction overruns or payment penalties, credit rating agency Standard & Poor's has stated.

The analysis by S&P, whose ratings are used by investors as a guide in assessing risk, raises questions about whether the public sector has driven a sufficiently hard bargain when negotiating PFI deals and transferring risks.

The S&P report, 2006 global credit survey, explains that 'the relatively benign nature of [Public-Private Partnership] asset construction has resulted in only a small number of... projects encountering delays and overruns severe enough to cause the entire project to default.'

Jonathan Manley, head of PPPs at S&P and co-author of the report, told Public Finance that the analysis was good news from a debt funder's or investor's perspective.

'But it does raise questions about risk transfer for the contracting public authority he added. …

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