Is There ‘Value for Money’ in Transportation PPP’S? The Case of Macquarie and Sydney International Airport

Abstract

This paper examines the link between value creation and transportation provision by conducting an examination of some of the projects financed and managed by Macquarie Bank, perhaps the worldwide leader in private infrastructure finance. Macquarie, an Australian firm, uses an infrastructure investment model that has been the subject of much imitation. The firm has been especially aggressive in expanding its operations into the United States, its latest acquisition being the Chicago Skyway. But in its home turf, where it has been operating the longest, its operations have increasingly become the subject of controversy. This controversy has not been just around policy, but also around finances, i.e., whether the Macquarie model really does create maximum value for both shareholders and transportation users. It is important to understand the strengths and weaknesses of this model since it is being proposed for adoption in many places worldwide. This paper is divided into 7 sections. Section 1 contains this introduction. Section 2 briefly discusses the recent history of private participation in transportation provision in the US. Section 3 reviews Macquarie Bank’s growing involvement in that American private participation. Section 4 provides a framework for how privatization creates value. Section 5 summarizes the basic structure of the Macquarie infrastructure business model, while Section 6 analyzes the merits and demerits of that model by focusing on one of its key investments in its home country of Australia: Sydney airport. Section 7 draws policy conclusions and recommends steps for further research.

Keywords: privatisation, airports, Macquarie Bank, infrastructure finance, value chain, transportation, transport finance, transport assets

JEL Classification: R4, R41, R42, R48