University public-private partnership projects, or PPPs, are expected to multiply over the next couple of years as universities speed up efforts to replace aging utility infrastructure. Moody’s Investor Service predicts these projects will carry “a wide variety of risks” for investors.
According to a sector report recently released by Moody’s, each energy service project agreement reached by a university “includes unique requirements related to the scope of services, technology and operational and performance standards that can elevate risks for investors.”
It noted that “no project is the same, and credit risks will therefore vary for each PPP project.”
The report cited several factors that can contribute to these risks, including the complexity of services and technologies used and the contractual cost recovery mechanisms and risk sharing specific to each project. Moody's also noted that state energy efficiency mandates that have to be met by universities as early as 2020 will accelerate the number of public-private partnerships undertaken.