(06-25-2015, 12:09 AM)mpd618 Wrote:(06-24-2015, 11:45 PM)numberguy Wrote: I'm afraid as well. P3 is 2-3 times more expensive than going it alone.
Citation needed. There is certainly a higher cost due to higher borrowing rates and the risk transfer, but, well, there is also the risk transfer. What aspect of this project could be 2-3 times cheaper?
Can't cite due to NDA.
Built in escalation rates. Infrastructure Ontario is looking at a number of P3 agreements. A number of very large P3 projects are experiencing escalation rates 2-3 times more expensive than CPI.
So the private partner running the say, maintenance, experiences a 2% increase in a year. The escalation rate in the agreement turns that 2% increase into a 6% increase that is passed onto the public partner. This is real and has happened and is costing taxpayers on multiple levels huge.
Basically, the cash strapped province of Ontario is backstopping risk free ventures and a number of private capital firms are profiting quite handsomely from poorly designed contracts. The escalation/inflation formulas are generating risk free alpha for the private partners. All alpha, no beta.