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Module 1: Public Private Partnerships (PPPs) - Concept, Benefits and Limitations

Mathieu Verougstraete (ESCAP)

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Transcript of Module 1: Public Private Partnerships (PPPs) - Concept, Benefits and Limitations

Large upfront payment
Funding
Medium to long term
Mainly public sector
Public Private Partnerships

escap-ttd@un.org

http://www.unescap.org/our-work/transport/financing-and-private-sector-participation
Thank you
Duration
Output
Risk
Benefits
Limitations
Risk Transfer
Efficiency Gains
Complex / High transaction costs
Political and social sensitivity
Not suitable for all projects
Limited flexibility
Public
(National budget)
Private
Payment over the lifetime of the project
2
3
4
construction phase only
road without potholes
road surfacing materials and design
vs.
Input
Different mind-set
Risk and reward sharing
"A
long-term contract

Life-cycle cost
ESCAP is the regional development arm of the United Nations and serves as the main economic and social development centre for the United Nations in Asia and the Pacific
PPP
traditional
> 20 years
PPP
traditional
Monitoring required
Start
End of construction
End of PPP contract
PPP
traditional
traditional
PPP
Ownership back to public
Private Capital
Remuneration !

Allocate risk to the partner best equipped to handle it
What ?
How ?
"user-pay principle"
Broad Overview of PPPs
End of PPP contract
Objectives

PPP vs. Traditional Procurement
PPP Concept, Benefits and Limitations
between a
private
party,
and a
government
entity,
for the provision of
public
services and/or development of public infrastructure,
Airport
Option 1
Option 2
Cost
In PPP : both construction and operation costs are taken into consideration
Construction Cost
Time
Maintenance Cost
Option 2
= cheapest over the life of the asset
Why PPPs?
Long term solution for public infrastructure
Improved public services delivery
Lower funding pressure on the government
Inadequate maintenance
Poor quality construction
Lack of available budget
Private sector efficiency and innovation capacity
Years
Construction
Cost
Operation and Maintenance Cost
Years
Construction
Cost
Operation and Maintenance Cost
Cost Overrun
Construction Delay
O&M Cost Overrun
Cost to Government
Years
Tariffs paid by Government
Cost to Government
Years
Cost to Government
Years
Construction
Cost
Tariffs paid by Government or charges collected from users
Operation and Maintenance Cost
O&M Cost Overrun
No payment upfront
User fees
Availability payments
Private Operator
Toll
User
years
t
t+1
t+2
t+...
Private Sector Remuneration
Private
Operator
Government
Check against performance indicators
Traditional Procurement
Risks
Public-Private Partnerships
Construction & operation risks are transferred
Adequate maintenance
Construction and Operational Risks
1
10 million air passengers / year
two terminals, each at least 250,000 square meters
Scope for innovation
Additional revenue streams
Long-Term Solutions
Construction quality
Long-term predictable need?
Minimum size?
Private sector capacity
in which responsibilities and rewards are
shared
"
Cost to Government
Cost to Government
Cost to Government
Years
Tariffs paid by Government
Full transcript