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PPPs can bridge gaps in project finance – KBW Investments

The PPP model is the “way of the future for many projects in the Middle East”, as it allows the private sector to shoulder the burden of financing, says the CFO of KBW Investments

Mathew Shimmy, chief financial officer of KBW Investments.
Mathew Shimmy, chief financial officer of KBW Investments.

Public-private partnerships can address project financing gaps created by the drop in liquidity in the market, said Mathew Shimmy, chief financial officer of KBW Investments.

Mathew told Construction Week that he views the PPP model as the “way of the future for many projects in the Middle East”.

He explained: “It’s a great way for the private sector to shoulder some of the burden of financing and to help deliver a huge variety of infrastructure projects here in the region, a burden that has traditionally been the domain of local governments.

“I suspect that we’ll see PPP make more inroads in the region as regulatory regimes improve, and as more sectors become open to this type of financing.”

Mathew, noting that the PPP model is underutilised outside the utilities sector and describing it a “missed opportunity”, continued: “The drop in liquidity [owing] to the low oil price environment that we have been witnessing over the last two years has left regional governments paying closer attention to their budgets, which has meant that funding for some projects has been squeezed. The PPP model is a great way for the private sector to fill that gap.”

KBW Investments, Mathew pointed out, has been “a first mover when it comes to this particular form of financing”.

He elaborated: “Last year, one of our portfolio companies, NGP, helped set up a special purpose company – Park Line LLC – which will develop the world’s largest automated car park within the existing premises of Dubai Courts.

“We’re especially proud that this was Dubai’s first PPP project, and was announced shortly after the PPP legislation was signed off by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai.”

Expounding on the benefits of public-private partnerships, Mathew noted that with the model, the burden of dealing with risks is transferred from the public sector to private companies.

He added: “This is especially important during a low-oil price environment, and it also allows for the transfer of knowledge from the private sector back to the public sector.

“In addition, the clarity, structure and efficiency of the PPP process will bring greater certainty for private investors, many of whom might previously have been risk averse to this sector, thus providing access to a significant new pool of liquidity.”

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Construction Week - Issue 751
Oct 13, 2019