Home' Future Building Australian Infrastructure Review : Volume 8 Number 1 Contents futurebuilding 83
Special purpose vehicles
when a couple of things happened – such as putting the project
into the Transport for NSW transport projects division – that the
focus turned to ‘We’re actually here to deliver trains’. In turn, this
put the focus back onto ‘How do we do that?’ We got on with it,
rolled up our sleeves, and delivered the trains. So, the experience
of personnel has a lot to do with that.
KC: I think it’s part of the mindset. As part of partnership, it’s
about being solutions-focused, rather than just problem-focused.
So, from either side, we can always come together and work on
an issue and find a solution. Rather than focusing on the problem
– who was at fault, who did what and who should be in trouble –
let’s focus on working together and finding the answer.
MB: I agree with all of that. I don’t have Charles’ track record
this is my first role interfacing with government, and I must
admit, I found it extremely odd when I first started because I
went to a number of meetings with government and nothing
ever got agreed on. Then, I realised that, actually, that’s what
it’s like dealing with government, and once I got into that
mindset, I realised that at the end of the day, sometimes you’ve
just got to stay in the room until you solve the problem. There
are occasions where things can get heated, and you have to
put your phone down and walk away. The core of it is, you
have to respect each other. Sometimes, it’s difficult to resolve
things on the telephone, but if you walk into the room, you look
someone in the eye, and you have a face-to-face conversation,
it’s amazing how that is an antidote to any sort of aggression or
difficulty because we’re all human, we’ll find a way though, and
when there is a will, there is a way.
CV: I just want to move on now to SPV governance. Most
of the SPVs are Corporations Act companies, meaning all the
directors of the SPVs are bound by certain obligations. From
a management perspective, and Kim from a counterparty’s
perspective, do you think there’s adequate recognition for the
role of SPVs, and do you see any potential for conflict between
a director’s duties under that regime and their employment by
CM: I think that conflict is a reality, and it’s not unusual.
It’s entirely normal in the course of business to have potential
conflicts, and it’s about just identifying that they exist and having
appropriate management measures in place. From an SPV
perspective, there’s a lot to be gained by having shareholders
of substance who have the knowledge and capacity to
support management. I think that the benefits outweigh any
MB: If I could provide an example: we have 15 directors, 14
of whom are appointed by the shareholders, leaving one non-
executive chairman. We have 11 shareholder employees within
those 14. Certainly, we have at least six who have a language
other than English as their first language.
Honestly, we’ve got two directors who fly down from Korea
every couple of months. Of course, they need some support in
understanding what their legal obligations are as directors. A very
significant part of the chairman’s and management’s contribution
is making sure that when the board meets, they can fulfil their
duties. It’s our duty and obligation to do what we can to help them
do that. It is what it is. We have found a solution for it.
KC: From our perspective, generally speaking, we find
that SPV directors are aware of the conflicts – they know how
to manage them, and they’re aware of what their duties are.
There’s a perception by some people further away from actually
seeing the operation of a PPP who believe that the shareholders
are going to tell the directors what they have to do, and that
they will always act in the best interests of the shareholder. Of
course, their primary duty is to act in the best interests of the
SPV, and generally, we find that the directors are aware of that
and act in that way; however, I still hear some people saying,
even for companies when government is a shareholder, that we
can just tell them what to do – well if they’re a Corporations Act
company we can’t.
There still seems to be a perception out there that that’s how
companies work. Personally, I think the SPVs that I’ve seen are
working well, but it’s more that perception of conflict that’s the
IH: I agree with Kim. When things go pear-shaped, the
directors’ minds are very much focused on solving a problem
that could end up in a solvency risk – the Lane Cove Tunnel
project was one where they did go insolvent, and Reliance Rail
was one that came very close. That really focuses the mind.
You can overcome a director’s lack of experience with good
advice, both internally and externally.
There is great value in some sponsors nominating
experienced independent directors as their representative, who
bring a wealth of experience. I’m a big fan of independent chairs,
for a variety of reasons: for the perception reason we were just
talking about, the education of the other directors, and keeping
everyone’s minds on what they’re there to do – it’s much easier
for an independent chair to do than a shareholder employee.
CV: How has the role of SPVs evolved with time? And
could you think of two or three examples of things that you’d
address either in bid phase or in the procurement of major
projects going forward?
MB: At the moment, there seems to be, with some projects,
a real cutting back of funding for the SPV. I can think of one
recent project where the SPV budget is very small and they
are struggling to get a good team together as a result. I would
counsel against that. I genuinely think that the SPV has got a
very significant role to play over the entire concession. If you
start out with inexperienced people, you are just asking for
trouble. I would encourage government to review that when
assessing the model. That would be my major observation.
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