Why could New Zealand's debt market not sustain three fully-financed public-private partnership bids for the Warkworth to Te Hana expressway, and what does this indicate about the project's affordability?

Answer

The Capital Crown Contribution (CCC) reduced the required private capital for the Warkworth to Te Hana project. This ensured that the Request for Proposals (RFP) procurement process was competitive as it reduced the amount of private debt required by each bidder, especially given the debt market capacity for a large project such as this. The CCC also struck a balance between (1) retaining sufficient transfer of risk from the Crown to the Public Private Partnership (PPP) consortia and (2) taking advantage of the Crown’s lower cost of capital. All of these considerations are consistent with the Treasury PPP Policy Guidance that clearly sets out the factors and trade-offs that should considered when assessing the need for a CCC. This is not a reflection of the affordability of the project. That is a completely separate question.