March 13, 2025 • 8 mins
Liam Dann joined Matt Heath and Tyler Adams to explain how public private partnerships work.
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Speaker 1 (00:09):
You're listening to a podcast from News Talks Be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
What to help us break down what is a private
public partnership how it all works? We're joined by New
Zealand Heral Business Editor at Large, Liam Dan. Liam, thanks
very much for jumping in.
Speaker 3 (00:26):
No worries, Liam, How do private public partnerships differ from
just contracting a company to build your piece of infrastructure.
Speaker 4 (00:35):
Well, there's an issue about really, and there's a bit
of contention about whether this is a privatization. So in
some cases the private company may own it or own
half of it, or the government will have a partnership
around ownership, or they'll have contracted that it will return
to public ownership in fifty years or something like that. Essentially,
(00:58):
the risk is being borne by the private company and
the money is coming up front from the big money
is coming up from the private upfront from the private company.
Speaker 3 (01:07):
So how does the investor make money?
Speaker 4 (01:10):
Well, then investor makes money by charging a fee back
to the government to use the asset. Right, So I
guess it's pretty simple. Most people get it for roads
and like the idea of another harbor bridge Auckland Harbor Bridge.
You can say, well, we're going to get a private
company in to build this. There's going to be a
fifty year contract on it. It's going to have tolls and
(01:31):
service fees, will the asset will either be still technically
a public asset or it'll revert to a public asset
in fifty years something like that, you know, fairly straightforward.
It gets a bit more contentious around hospitals, schools, that
sort of thing, but essentially, you know, you could still say,
(01:52):
you know, a government is paying as they go for
the healthcare and for the contract to the hospital, so
they are you know, it's sort of like, you know,
difference between buying a car up front. It's kind of
cheaper to car up front, right if you've got cash,
But if you need to you don't have cash, and
(02:13):
this government doesn't have cash, then then you can go
see a dealer and pay a little bit every week for.
Speaker 3 (02:19):
The next So it's essentially a higher purchase.
Speaker 4 (02:23):
Yeah, it is, sort of. There are some other other
factors in there, I mean, you know, weirdly, you know,
critics will say governments can borrow more cheaply than private
the private sector, so it actually maybe puts more cost
into the project when you get the private sector to
(02:45):
fund it. But then there's a lot of skepticism, the
skepticism in this government and on the right generally, and
you know, you can find plenty of examples in history
of governments not doing a great job and of building assets,
and of massive cost overruns and things not getting finished
on time.
Speaker 3 (03:06):
And so essentially, because it's the company bottom line, they
have to make money, they'll do it efficiently.
Speaker 4 (03:11):
Yeah, and it costs them if they at the cost
if it overruns or you know, it isn't finished on time,
that's borne by the private company, so you're out, you're
outsourcing some risk away from the government.
Speaker 2 (03:25):
We've been pretty keen on these PPPs as a country
for some time, or our governments have Are we unique
in that or is this quite a common theme in
other Western countries as well to try and form these
private public partnerships.
Speaker 4 (03:38):
Yeah, they're probably used more extensively around the world. In
the UK, for example, they've used them for big infrastructure
projects like you know, revitalizing their underground. Canada I think
actually does have a lot of PPPs around hospitals. I know,
you know, I think you know at the moment we've
(03:59):
got to bipartisan agreement. You can see labors on board
with big roads, bridges, all that sort of stuff. Yeah,
but they draw the line at the hospitals and schools.
Speaker 3 (04:08):
Right, So, because you could have a situation because some
people might not like a prison being run prisons the
other one.
Speaker 1 (04:13):
Ye.
Speaker 3 (04:14):
But if it's just around the infrastructure, the building of
the actual building but not the running of it, is
that still of interest to companies to invest in.
Speaker 4 (04:24):
Well, they've got to get a return, right, so they
have to get there's got to be a contract where
there's money coming back to that company over a period
of time to make the right return. So I guess
it doesn't necessarily have to involve running the prison, but
there is going to be fees to pay on the prison,
and so it's a cost. It's still a cost of taxpayers.
It's just spreading the cost over time, spreading the risk,
(04:47):
or you know, outsourcing the risk. Critics might say, look
over time, like that car at the car dealers, you'll
have paid a lot more for the asset. But again
that'll come back to that debate about whether you think
governments are just absolutely terrible at building this stuff and
that they're just you know, because if we're borrowing masses more,
(05:07):
well maybe at a lower interest rate, but if we
don't get the things built properly, that that's all going
on the crown accounts and stuffing our books.
Speaker 3 (05:17):
So just to make it clear, how would you envision
say a second harbor crossing working. Then well, how much
would would the foreign investors put all the money in
and then we pay it all back? Or we go
some from the government, some from the investor, and then
how do they make their money back?
Speaker 4 (05:36):
All those models could be the case. You could have
a partnership where the government stumps up half in the
private you know, you create an entity and it might
be fifty percent owned by the government and fifty percent
owned by the private sector and they work together. Or
you go, no, no, we're going the full private model
and pretty much say go to town, build as a harbor bridge,
(05:58):
and we'll pay you tolls and a service fee for
the next thirty to fifty years. Hopefully they would build
it efficiently and look, that would be easier. But because
it would be I think the government, you know, with
the toll is a user pays aspect, you know, a hospital.
There's always going to be a fear or some political
(06:18):
pushback around the user pays aspect of it. People want
a public health service. But then you know, governments could
choose to fund the most gold standard free public health
service and still use a PPP. They could just be
agreeing to pay the money to that.
Speaker 3 (06:35):
And if they have their regulations in place that you
know what we expect and what has to be delivered,
and we're all happy with that, then you could argue
that's not too much of a problem. So is there
any interest so far, anyone putting up their hands and
say they want to do it from the summit?
Speaker 4 (06:50):
I think we heard from an Italian company that was
talking about that extension to the Northern Expressway, so that's
probably a good one. That's that's the one that's on
the table. So this is the summit. The issue is
that we haven't actually got that many PPPs ready to go.
So it's a starting point, but you know, I think
(07:12):
what the government really needs is one that's just underway
and working so that people can see the model and
that other companies can see that that could work. But yeah,
it's going to be a bit more debate around around
whether we go to hospitals and schools and prisons.
Speaker 3 (07:29):
I think so if a company invested a billion dollars,
how much return would they want to see over the
thirty fifty years.
Speaker 4 (07:39):
It's a good question. It's got to be more than
putting in the bank, right, otherwise you don't bother so
that would be I'm sort of guessing a little bit,
but you'd want a return of you know, five ten percent.
It's got to be better than bonds, which is the
equivalent of putting money in the bank. It should be
(08:00):
a relatively low risk, stable investment. So it appeals to
big investment funds around the world. So weirdly, you know
in Zealand our own superfund, our acc fund, that's the
sort of thing they can get involved in because it
provides a stable return. So if you can get a
return of seven or eight percent or something like that,
that would be a solid return if it was over
(08:21):
thirty years.
Speaker 2 (08:21):
And obviously tolling, just to bring it back to the tolling,
that is an added sweetener. If someone's going to invest
a lot of money and infrastructure and that is part
of the equation, then that hopefully might make it easy
to get across the line.
Speaker 4 (08:32):
Governments can still make a choice. They can still say
we're going to make this free, but we're going to
have to pay that difference to the private company to
ensure that the contract works for them.
Speaker 3 (08:40):
Either way, we pay, Yeah, exactly, eventually, eventually.
Speaker 2 (08:44):
That's right, Liam, very very interesting, Thanks very much for
coming and having a chat with us. We'll catch again soon.
That is New Zealand hera Business editor at large. Liam Dan.
You're listening to News Talks at B. Good afternoon.
Speaker 1 (08:56):
For more from News Talks at B listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio.
You're listening to a podcast from News Talks Be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
What to help us break down what is a private
public partnership how it all works? We're joined by New
Zealand Heral Business Editor at Large, Liam Dan. Liam, thanks
very much for jumping in.
Speaker 3 (00:26):
No worries, Liam, How do private public partnerships differ from
just contracting a company to build your piece of infrastructure.
Speaker 4 (00:35):
Well, there's an issue about really, and there's a bit
of contention about whether this is a privatization. So in
some cases the private company may own it or own
half of it, or the government will have a partnership
around ownership, or they'll have contracted that it will return
to public ownership in fifty years or something like that. Essentially,
(00:58):
the risk is being borne by the private company and
the money is coming up front from the big money
is coming up from the private upfront from the private company.
Speaker 3 (01:07):
So how does the investor make money?
Speaker 4 (01:10):
Well, then investor makes money by charging a fee back
to the government to use the asset. Right, So I
guess it's pretty simple. Most people get it for roads
and like the idea of another harbor bridge Auckland Harbor Bridge.
You can say, well, we're going to get a private
company in to build this. There's going to be a
fifty year contract on it. It's going to have tolls and
(01:31):
service fees, will the asset will either be still technically
a public asset or it'll revert to a public asset
in fifty years something like that, you know, fairly straightforward.
It gets a bit more contentious around hospitals, schools, that
sort of thing, but essentially, you know, you could still say,
(01:52):
you know, a government is paying as they go for
the healthcare and for the contract to the hospital, so
they are you know, it's sort of like, you know,
difference between buying a car up front. It's kind of
cheaper to car up front, right if you've got cash,
But if you need to you don't have cash, and
(02:13):
this government doesn't have cash, then then you can go
see a dealer and pay a little bit every week for.
Speaker 3 (02:19):
The next So it's essentially a higher purchase.
Speaker 4 (02:23):
Yeah, it is, sort of. There are some other other
factors in there, I mean, you know, weirdly, you know,
critics will say governments can borrow more cheaply than private
the private sector, so it actually maybe puts more cost
into the project when you get the private sector to
(02:45):
fund it. But then there's a lot of skepticism, the
skepticism in this government and on the right generally, and
you know, you can find plenty of examples in history
of governments not doing a great job and of building assets,
and of massive cost overruns and things not getting finished
on time.
Speaker 3 (03:06):
And so essentially, because it's the company bottom line, they
have to make money, they'll do it efficiently.
Speaker 4 (03:11):
Yeah, and it costs them if they at the cost
if it overruns or you know, it isn't finished on time,
that's borne by the private company, so you're out, you're
outsourcing some risk away from the government.
Speaker 2 (03:25):
We've been pretty keen on these PPPs as a country
for some time, or our governments have Are we unique
in that or is this quite a common theme in
other Western countries as well to try and form these
private public partnerships.
Speaker 4 (03:38):
Yeah, they're probably used more extensively around the world. In
the UK, for example, they've used them for big infrastructure
projects like you know, revitalizing their underground. Canada I think
actually does have a lot of PPPs around hospitals. I know,
you know, I think you know at the moment we've
(03:59):
got to bipartisan agreement. You can see labors on board
with big roads, bridges, all that sort of stuff. Yeah,
but they draw the line at the hospitals and schools.
Speaker 3 (04:08):
Right, So, because you could have a situation because some
people might not like a prison being run prisons the
other one.
Speaker 1 (04:13):
Ye.
Speaker 3 (04:14):
But if it's just around the infrastructure, the building of
the actual building but not the running of it, is
that still of interest to companies to invest in.
Speaker 4 (04:24):
Well, they've got to get a return, right, so they
have to get there's got to be a contract where
there's money coming back to that company over a period
of time to make the right return. So I guess
it doesn't necessarily have to involve running the prison, but
there is going to be fees to pay on the prison,
and so it's a cost. It's still a cost of taxpayers.
It's just spreading the cost over time, spreading the risk,
(04:47):
or you know, outsourcing the risk. Critics might say, look
over time, like that car at the car dealers, you'll
have paid a lot more for the asset. But again
that'll come back to that debate about whether you think
governments are just absolutely terrible at building this stuff and
that they're just you know, because if we're borrowing masses more,
(05:07):
well maybe at a lower interest rate, but if we
don't get the things built properly, that that's all going
on the crown accounts and stuffing our books.
Speaker 3 (05:17):
So just to make it clear, how would you envision
say a second harbor crossing working. Then well, how much
would would the foreign investors put all the money in
and then we pay it all back? Or we go
some from the government, some from the investor, and then
how do they make their money back?
Speaker 4 (05:36):
All those models could be the case. You could have
a partnership where the government stumps up half in the
private you know, you create an entity and it might
be fifty percent owned by the government and fifty percent
owned by the private sector and they work together. Or
you go, no, no, we're going the full private model
and pretty much say go to town, build as a harbor bridge,
(05:58):
and we'll pay you tolls and a service fee for
the next thirty to fifty years. Hopefully they would build
it efficiently and look, that would be easier. But because
it would be I think the government, you know, with
the toll is a user pays aspect, you know, a hospital.
There's always going to be a fear or some political
(06:18):
pushback around the user pays aspect of it. People want
a public health service. But then you know, governments could
choose to fund the most gold standard free public health
service and still use a PPP. They could just be
agreeing to pay the money to that.
Speaker 3 (06:35):
And if they have their regulations in place that you
know what we expect and what has to be delivered,
and we're all happy with that, then you could argue
that's not too much of a problem. So is there
any interest so far, anyone putting up their hands and
say they want to do it from the summit?
Speaker 4 (06:50):
I think we heard from an Italian company that was
talking about that extension to the Northern Expressway, so that's
probably a good one. That's that's the one that's on
the table. So this is the summit. The issue is
that we haven't actually got that many PPPs ready to go.
So it's a starting point, but you know, I think
(07:12):
what the government really needs is one that's just underway
and working so that people can see the model and
that other companies can see that that could work. But yeah,
it's going to be a bit more debate around around
whether we go to hospitals and schools and prisons.
Speaker 3 (07:29):
I think so if a company invested a billion dollars,
how much return would they want to see over the
thirty fifty years.
Speaker 4 (07:39):
It's a good question. It's got to be more than
putting in the bank, right, otherwise you don't bother so
that would be I'm sort of guessing a little bit,
but you'd want a return of you know, five ten percent.
It's got to be better than bonds, which is the
equivalent of putting money in the bank. It should be
(08:00):
a relatively low risk, stable investment. So it appeals to
big investment funds around the world. So weirdly, you know
in Zealand our own superfund, our acc fund, that's the
sort of thing they can get involved in because it
provides a stable return. So if you can get a
return of seven or eight percent or something like that,
that would be a solid return if it was over
(08:21):
thirty years.
Speaker 2 (08:21):
And obviously tolling, just to bring it back to the tolling,
that is an added sweetener. If someone's going to invest
a lot of money and infrastructure and that is part
of the equation, then that hopefully might make it easy
to get across the line.
Speaker 4 (08:32):
Governments can still make a choice. They can still say
we're going to make this free, but we're going to
have to pay that difference to the private company to
ensure that the contract works for them.
Speaker 3 (08:40):
Either way, we pay, Yeah, exactly, eventually, eventually.
Speaker 2 (08:44):
That's right, Liam, very very interesting, Thanks very much for
coming and having a chat with us. We'll catch again soon.
That is New Zealand hera Business editor at large. Liam Dan.
You're listening to News Talks at B. Good afternoon.
Speaker 1 (08:56):
For more from News Talks at B listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio.
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