public private partnerships taking a balanced look…. development equity associates inc. nov. 14,...

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PUBLIC PRIVATE PARTNERSHIPS

Taking a Balanced Look….

Development Equity Associates Inc. Nov. 14, 2012

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PUBLIC PRIVATE PARTNERSHIPSAGENDA

What are PPP transactions Why and When to do them How are they done Some Examples Good and Bad. The Key lessons to remember… Future Outlook for PPPs.


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PUBLIC PRIVATE PARTNERSHIPSWhat they are…


• Agreement between Government and the Private Sector for the Provision of a Public Good or Service by the Latter.

• Generally but not always involving:– Long Term Contracts– User Charges and/or Payments flowing between the

Parties– Shared Investments but Mainly Private– Risk Sharing by the Parties

• Must be a Partnership

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PUBLIC PRIVATE PARTNERSHIPSWhat they are…


Source: European Commission

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PUBLIC PRIVATE PARTNERSHIPSWhy do them….


• Fiscal Head Room• As a Way of Financing the Project• Separate Policy & Regulation from Operations• Make the Good or Service Available• Pay for Performance and Output• Introduce Competition – For and In the Market

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PUBLIC PRIVATE PARTNERSHIPSWhen to do them….


Source: Vikram Kutaree – World Bank

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PUBLIC PRIVATE PARTNERSHIPSWhen to do them….


Benefits• Economic Growth and Employment• Other Social Benefits• Impact on the Poor

Ease Of Implementation• Political Support & Lack of Resistance• Technical Feasibility• Financial Viability• Public Support

B E N E F I T T O C O M M U N I T Y

EASE OF IMPLEMENTATION

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Prioritization Political Economy

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PUBLIC PRIVATE PARTNERSHIPSHow to do them….


• Project Identification– If it ain’t broke don’t fix it !

• Pre – Feasibility– More than back of the envelope – do this first !!– Go –NoGo here

• Public Relations Program – A must !• Feasibility Study

– Only if needed for the RFP• Agree Regulatory Framework • RFP Design

– Technical Pass Fail & Selection on Financial bids– Include Draft Contract– Include Surrogate regulations if needed with Phase out.

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PUBLIC PRIVATE PARTNERSHIPSHow to do them….


• Implementation Institutional Arrangements – Preferably before tendering!– Must have Transition Plan

• EOI & Tendering– ICB Best for Large Projects

• Selection, Negotiations and Contract• Financial Closing• Implement Regulatory Framework

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PUBLIC PRIVATE PARTNERSHIPSExamples – The Good & Not So Good


The Good

• Roads – Chile• Urban Public Transport - Jordan, BahrainWater Supply – Bucharest Romania

The Not So Good

Roads – MexicoSolid Waste Collections- BahrainMunicipal Parks – Sophia BulgariaWater Supply – Mumbai, India

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PUBLIC PRIVATE PARTNERSHIPSKey lessons to remember…


Legal & Regulatory Framework

Tariff Regimes

Avoidance of “Fate Control”

Competition a Must !!

Balance in Private Incentives & Public Interest

LEGAL & REGULATORY FRAMEWORK FOR PPP

Private Incentives Public Interest

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What is the Sector Priority ? In Transaction DesignIncentives and PenaltiesLength of ContractRisk Allocation

In Regulatory StrategyTariff RegimeCompetitionInstitutional Structure

The Need to Set the Right Priorities

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Budget Rationale vs. Present Value Test

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Average Time to Renegotiation …

1.5 to 3.5 Years …Depending on Sector

The Common Causes:• Bidder’s Remorse• Strategic • Additions after Award• Winner is Stronger Position

Some Remedial Measures• Adequate Escalation Clauses• Right to Re-Bid ( e.g., O&M)• Conditions & Penalties

Renegotiation !!!

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PUBLIC PRIVATE PARTNERSHIPSOUTLOOK


• Greenfield and Energy PPPs will continue to Dominate

• South Asia likely to remain the main growth Area for PPPs.

• Worldwide PPPs are likely to pick up as Fiscal Headroom lags Demand Growth

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PUBLIC PRIVATE PARTNERSHIPS


THANK YOU

public private partnerships taking a balanced look…. development equity associates inc. nov. 14,...

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