PUK chief allays fears over PPP equity stakes

Partnerships UK will only put equity into PFI or PPP projects in exceptional circumstances, its chief executive James Stewart told Contract Journal this week.

Seeking to allay industry concerns over the nature of PUK equity investments, Stewart said that PUK would only invest equity in PPP projects if "both the private sector and the public sector are happy for us to do so". The scenario where one or two bidders asked for PUK equity and one did not would not occur he said.

He continued: "We are not looking to compete against the private sector for infrastructure funds. But there may be a project where there is a particular public policy risk and both sides feel more comfortable with us being in there for the long term.

"The only other instance is where there is a shortage of risk capital in the deal, where the private sector doesn't want to invest - IT might be an example. The good thing about those situations is it will unlock the deal for both equity and debt."

Keith Clarke, chairman of the Major Contractors Group, commented: "We welcome the Government putting in money where projects are not viable - that's a tremendous step forward."

However, there are still doubts in the private sector as to whether PUK's investment will be large enough. One PFI contractor warned if PUK was only to convert its fees to equity "that would not be a meaningful amount. That won't leverage any bank debt. It doesn't change the risk profile at all. The first lot of equity, preferably underwritten by government, has to take more risk and then you'll leverage in private equity."