Home' Future Building: The Australian Infrastructure Review : Volume 4 Number 1 Contents 28 futurebuilding Volume 4 Number 1
off the Government's balance sheet by mainly
MB: Tell us about what's happening with Royal
Mail in the United Kingdom.
JS: It has just been privatised, after about 20 years
of trying. The pension fund was the biggest problem,
and it's gone down an absolute storm. It's been sold
into the market and I think it's trading at 40 to 50 per
cent over the strike price. So it's been a great success
so far. Royal Mail is a great example of everyone
focusing on the initial sale price, the initial raising
of capital, but the reality is that what matters is what
happens in the 20 years after privatisation -- you get
genuine operational ef ciency and cheap consumer
bills, and all the rest of it.
MB: Let's move to nance. There've been two
different models proposed for nancing the two large
road projects in Sydney and Melbourne. These are of
a scale not before seen in Australia; they'll certainly
be the largest urban projects in the nation when
they're both going, and the seed funding that's been
committed by the Federal Government will mean that
those projects will proceed. What do the different
models mean, what are the different forms of private
nance, and what's the story that they're telling us
about the way Public Private Partnerships (PPPs) will
be done in the future?
SD: I think that there are two aspects to it. From
a funding point of view, we're getting to something
that's a bit more sustainable as a model. In the private
sector, we have the same challenge around what is a
sustainable nancing model.
A lot of the transactions that we are making have
tended to be short-term, because it is dif cult for banks
to provide long-term nancing. I think we do need to
consider what happens after the transaction or the
project has been initially nanced by the banks, and
what level you've got to get to next. There's scope for
development on the banking side in terms of taking
these deals to broader markets. Whether it's the
corporate bond markets or offshore markets, there's
quite a bit of evolution that needs to happen.
MB: Do you think all state governments have a
sense of how innovative they have to be?
SD: We're seeing New South Wales and Victoria
lead the way, and that innovation is welcomed by
the private sector, but it also needs to be matched
by the private sector. I don't think it's innovation for
innovation's sake; it's innovation for the purpose of
creating more sustainable nancing models. I'm very
optimistic that, when the challenge is there, when
the pipeline is there, when something needs to be
solved, we will actually get to a solution.
LM: If I can just comment on the differences
between New South Wales and Victoria -- New South
Wales does have its unsolicited proposals regime,
which has become fundamentally important. Victoria
is doing a good job in terms of its road infrastructure
considerations, but it's quite clear to me that there's
more scope in New South Wales to achieve better
outcomes through some of the more innovative
nancing, and through more innovative planning for
projects, than perhaps would otherwise be possible
under strict tender and related probity regimes.
MB: So has your experience with the M1--M2
proposal been positive?
LM: Yes, it has. It has worked really well, and I
hope not just for Transurban, but also for the New
South Wales Government. We were able to formulate
a proposal, to work with government, to hear from
the Premier in terms of what might or might not work,
and to adjust our sights accordingly. To be able to
come up with a commercial project that still has a
way to go, but that is heading in the right direction,
is pleasing. It is a project that we have been able to
bring to Sydney, and which, if funded solely off the
balance sheet of the New South Wales and/or Federal
Governments, would most likely not have happened.
MB: The business community draws some
strength from the fact that the unsolicited proposals
are being well handled in this state. It's a very dif cult
thing for governments to deal with, because some
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