Wednesday, November 28, 2012

HILLION Pierre, WEE Jean, PAUL Louis
Irish Scools: Sovereign Risk in Social Infrastructure PPP
©2012 INSEAD Case Study
Also available: Teaching Note

In 2009, a Macquarie consortium won the tender to build six Irish schools under a public-private partnership programme. The work was financed mainly with debt, with only €50,000 of straight equity injected into the project. Payments from the Irish government were the sole source of revenue. However, the advent of the soveriegn debt crisis in Europe put the government's ability to pay in doubt.

Pedagogical Objectives: The case study illustrates sovereign risk in PPPs, contrary to the assumptions usually made that the government will not default. Valuation of the project can also be discussed, particularly the use of subordinated debt as quasi-equity.