Victoria considers infrastructure funding options

The Victorian Government is believed to be considering establishing its own special-purpose vehicle as an option to help cover any funding shortfall for a range of public-private projects, including the planned $3 billion-plus desalination plant, The Age reported.

The newspaper did not elaborate on the proposal, though presumably some form of state government guarantee on debt sourced through banks or the debt capital market is under consideration. The government already borrows through Treasury Corporation of Victoria.

Given credit market turmoil, pricing for infrastructure financing has shot up, with bonds likely to be issued as much as 350 basis points over the relevant benchmark. Before the credit crunch, long-term infrastructure pricing was usually between 40 to 80 basis points over most debt benchmarks.