Hybrid PPPs: Turning risk into viability [Video]

The problem: When well-structured isn’t enough

Imagine a government meticulously planning a vital infrastructure project, such as constructing a much-needed road. All the key elements for a successful public-private partnership (PPP) seem in place—the project’s overall benefits to society outweigh its cost and a PPP is the most efficient delivery option. Yet, there’s a major hurdle: the projected cash flows fall short of covering debt obligations. Investors, wary of the financial risks, question the project’s financial viability, particularly in the construction phase, which strikes them as particularly high risk. These shortfalls could stop the initiative in its tracks.

While private sector participation and PPP models offer a pathway to leveraging private capital and expertise, they can’t proceed when projects aren’t financially sustainable. Even when the private sector might be willing to invest, the “viability gap”—the difference between the project’s expected revenues and costs—can make the project commercially unviable, leaving many essential infrastructure projects as mere aspirations.

The solution: Hybrid PPPs with Viability Gap Funding

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