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The government is to ask the European
Investment Bank (EIB) to provide funds for large infrastructure
projects, as it attempts to breathe new life into the ailing
public private partnership (PPP) model.
The EIB had limited its investment to
Irish PPP road projects, but recently agreed to invest in
schools projects. The government is hoping this will now act
as a template for significant investment by the EIB in other
PPPs - a finance model whereby the state teams up with private
businesses to co-fund projects.
In a statement, Minister for Finance,
Brian Lenihan said the government was committed to ‘‘exploring
and utilising the potential for EIB investment in PPP projects’’.
Securing EIB funding for projects would
be a boost for the government, which has been forced to cut
capital spending as a result of deteriorating public finances.
PPPs have also been more difficult to
complete because of the international credit crunch, which
has left banks either unable or unwilling to finance large-scale
projects. A number of private consortiums are experiencing
difficulties getting finance for PPP projects, while several
high-profile partnership projects have already collapsed.
However, PPPs remain a key part of government
policy and are being used to develop about 70 projects - including
social housing, prisons, co-located hospitals, transport infrastructure
and sewage plants.
In addition to liaising with the EIB,
the Department of Finance has also been working with the private
sector over the past year to come up with different funding
mechanisms to help deliver PPPs.
The Department of Finance said it had
to be mindful of the potential impact of any financing approach
on the general government balance sheet, a standard way of
measuring government borrowing.
One proposal, tabled by the construction
sector and under consideration by government, would see billions
of euro from Irish pension funds being used to fund state
infrastructure projects and PPPs. Under the proposal, the
government will pay a dividend to pension funds in return
for accessing the cash they hold.
The government is also looking at other
methods of raising funds for projects, including selling off
state assets. In the budget last December, Lenihan announced
that an investment programme in mental health projects would
be funded from the sale of certain Health Service Executive
assets.
‘‘The government will keep an open mind
on the potential for other asset disposals that might help
infrastructure delivery," according to Lenihan.
Source - The Sunday Business Post
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