Irish Schools: Sovereign Risk in Social Infrastructure PPP

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 sovereign debt crisis in Europe put the government's ability to pay in doubt.

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.