PUBLIC PRIVATE PARTNERSHIPS
Taking a Balanced Look….
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
AGENDA
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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.
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
What 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
Development Equity Associates Inc.
Nov. 14, 2012
3
PUBLIC PRIVATE PARTNERSHIPS
What they are…
Source: European Commission
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Why do them….
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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
Development Equity Associates Inc.
Nov. 14, 2012
5
PUBLIC PRIVATE PARTNERSHIPS
When to do them….
Source: Vikram Kutaree – World Bank
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
When to do them….
Benefits
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Prioritization
Political Economy
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Economic Growth and Employment
• Other Social Benefits
• Impact on the Poor
Ease Of Implementation
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EASE OF IMPLEMENTATION
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Political Support & Lack of Resistance
Technical Feasibility
Financial Viability
Public Support
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
How 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.
Development Equity Associates Inc.
Nov. 14, 2012
8
PUBLIC PRIVATE PARTNERSHIPS
How 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
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Examples – The Good & Not So Good
The Good
The Not So Good
• Roads – Chile
• Urban Public Transport
Roads – Mexico
Solid Waste Collections
- Jordan, Bahrain
Water Supply – Bucharest
Romania
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Bahrain
Municipal Parks – Sophia Bulgaria
Water Supply – Mumbai, India
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Key lessons to remember…
Balance in Private Incentives & Public Interest
LEGAL & REGULATORY FRAMEWORK FOR PPP
Legal & Regulatory Framework
Tariff Regimes
Avoidance of “Fate Control”
Competition a Must !!
Private Incentives
Public Interest
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Key lessons to remember…
The Need to Set the Right Priorities
What is the Sector Priority ?
In Transaction Design
Incentives and Penalties
Length of Contract
Risk Allocation
In Regulatory Strategy
Tariff Regime
Competition
Institutional Structure
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Key lessons to remember…
Budget Rationale vs. Present Value Test
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
Key lessons to remember…
Renegotiation !!!
Average Time to Renegotiation …
The Common Causes:
1.5 to 3.5 Years …Depending on Sector
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Bidder’s Remorse
Strategic
Additions after Award
Winner is Stronger Position
Some Remedial Measures
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Adequate Escalation Clauses
Right to Re-Bid ( e.g., O&M)
Conditions & Penalties
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
OUTLOOK
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Greenfield and Energy PPPs will continue
to Dominate
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South Asia likely to remain the main
growth Area for PPPs.
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Worldwide PPPs are likely to pick up as
Fiscal Headroom lags Demand Growth
Development Equity Associates Inc.
Nov. 14, 2012
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PUBLIC PRIVATE PARTNERSHIPS
THANK YOU
Development Equity Associates Inc.
Nov. 14, 2012
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