Financing Sustainable Public-Private Partnerships

The document examines the internal and external financial sustainability of public-private partnerships (PPPs), emphasizing the role of Special Purpose Vehicles (SPVs), project finance, and risk allocation. It argues that while PPPs can address infrastructure deficits, they require rigorous contracts and governance to ensure value for money. The briefing also suggests that PPPs can be used to promote green jobs, energy efficiency, and social equity through thoughtful design and political will.

• Public-private partnerships (PPPs) are used by governments to address infrastructure deficits and funding gaps, but they are not a complete solution for budget constraints because private partners must eventually be paid from public funds.
• Infrastructure PPPs are characterized by high initial capital intensity and single-purpose assets, which can be risky for lenders, though stable long-term demand for natural monopolies often provides investor confidence.
• To manage liability and financing, PPPs typically use a Special Purpose Vehicle (SPV), a legally distinct entity that employs high gearing—often 75–80% debt and 20–25% equity—to minimize costs through low-cost debt.
• The financial viability of a PPP for lenders is often determined by the debt service coverage ratio, with a ratio greater than 1.1 or 1.2 considered viable and 1.5 being desirable.
• The United Kingdom's National Audit Office reported in April 2011 that the costs of debt finance for the Private Finance Initiative had risen by 20–33% since the credit crisis, leading to calls for greater scrutiny of such deals.
• PPPs can be designed to support environmental goals by reducing carbon emissions, promoting energy efficiency, and utilizing 'green' revenue sources like carbon funds or green mortgages, as seen in Mexico.
• Social sustainability in PPPs can be achieved through procurement preferences and contract terms that ensure fair wages and eliminate discrimination, citing examples of affirmative action in the United States and black empowerment in South Africa.

APA

Turley, L., & Semple, A. (2013). Financing Sustainable Public-Private Partnerships. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/ppp_financing.pdf

Chicago

Turley, Laura, and Abby Semple. Financing Sustainable Public-Private Partnerships. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/ppp_financing.pdf.

Wikipedia

{{cite report |last1=Turley |first1=Laura |last2=Semple |first2=Abby |title=Financing Sustainable Public-Private Partnerships |publisher=International Institute for Sustainable Development |date=February 2013 |url=https://www.iisd.org/system/files/publications/ppp_financing.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{turley2013financing, author = {Turley, Laura and Semple, Abby}, title = {{Financing Sustainable Public-Private Partnerships}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = feb, url = {https://www.iisd.org/system/files/publications/ppp_financing.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }