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The cost of using private finance is at the centre of the public private partnerships (PPPs) debate, but until now most works considered only the direct financial costs such as the loan interest rate and the shareholders return on equity and were based on various secondary sources. This paper focuses on seven shadow toll deals closed in Portugal between 1999 and 2002 and reports the financial costs of the PPP model considering also the associated transaction costs and is based on detailed information included in each concession's financial base case. The transaction costs include financial costs such as banking fees, due diligence costs and the impact of all cash distribution traps, such as reserve accounts or minimum-level of debt ratios. The PPP financial costs were then compared with the costs arising from raising public debt through a government or a public agency bond. Our analysis shows that the PPP ‘true' financing costs are, on average, 370 basis points above the cost of raising public debt and that the ‘transaction costs' account for around 40% of that financial premium. [ABSTRACT FROM PUBLISHER]