PPP for Infrastructure Financing in the MENA region Istanbul, November 8, 2006 PPP P ublic P rivate...

PPP for Infrastructure Financing in the PPP for Infrastructure Financing in the MENA regionMENA region

Istanbul, November 8, 2006Istanbul, November 8, 2006

PPublic PPrivate PPartnerships*

Nuran Durmaz

*connectedthinking

Agenda

Definition Benefits, Opportunities & Risks Preconditions for Successful PPPsAbout PPP ProcessRecurring PPP Issues and SolutionsPwC- PPP Services

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Public Private Partnerships*PricewaterhouseCoopers

November, 2006

What is a Public Private Partnership?

PPP is a generic term for the relationships formed between public

bodies and the private sector with the aim of introducing private sector resources and/or expertise to provide and deliver

public sector assets and services.

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November, 2006

Benefits of PPPs

PPP

Private sector takes life cycle cost

Development of specialist skills

Encourage the injection of

private sector capital

The public sector pays when the services are delivered

Force the public sector to focus on

outputs and benefits from the start

Risks are allocated to the party best able to manage or

absorb

Budgetary certainty

PPP’s deliver value for money

Quality of service has to be maintained


November, 2006

Opportunities


November, 2006

Risks

•Partner selection

•Long-term connection (e.g. a change in requirements)

•Complexity and expenses of PPP-projects

•Protection of public interests

•Alibi competition

•Long-term connection (e.g. calculation of the final compensation)

•Diverging interests

•Long-term decision-making processes

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Definition Benefits, Opportunities & RisksPreconditions for Successful PPPsAbout PPP ProcessRecurring PPP Issues and SolutionsPwC- PPP Services


November, 2006

Preconditions for Successful PPPs

•Before pursuing a PPP approach, the public sector authority should consider

• Does sufficient private sector expertise exist to warrant the PPP approach?

• Does the public sector have sufficient capacity and skills to adopt the PPP approach?

• It is not always possible to transfer life cycle cost risk• PPPs do not achieve absolute risk transfer


November, 2006

Preconditions for Successful PPPs

•The public sector must recognise the disadvantages of PPPs if they adopt a PPP approach;

• PPPs imply a loss of management control by the public sector

• PPP procurement can be lengthy and costly

•The private sector has a higher cost of finance

•PPPs are long-term relatively inflexible structures

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November, 2006

Basic Structure of a PPP-Project


November, 2006

Summary of the PPP-Buying Process

PPP only in appropriate projects and if positive effects are established!


November, 2006

Five Phases of a PPP Procurement Project

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November, 2006

Recurring PPP Issues and Solutions•Legislative impediments to transport PPPs

National governments should continue to work to identify and eliminate legal uncertainties and impediments to PPP.

•Procurement and State Aid issues

Guidance on PPPs for the public sector should include guidance on procurement procedures. In our view, until the competitive dialogue is proven as a PPP procurement route, such guidance should include guidance on the availability and use of the negotiated procedure as an alternative.

•Affordability issues

•A shadow private sector bid model should be produced prior to starting the procurement so that the authority has a realistic view of the affordability of the project.


November, 2006

Recurring PPP Issues and Solutions

•The speed and cost of PPP procurement

The public authority should critically assess the number of bidders and bid rounds necessary for a particular project. It is often better to reach financial close on a good deal rather than negotiate ad nauseam for the best deal. A degree of central government guidance to procuring authorities might help such sensible decisions be made.

•Building a PPP Centre of Excellence

There is clear value in having a central unit giving guidance and policy on PPP issues within each EU country. Developing an EU knowledge unit would also be very effective, but it should only attempt to give guidance and demonstrate precedents, not impose a common EU-wide approach.

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November, 2006

PwC – Thought Leadership


November, 2006

PricewaterhouseCoopers Turkey

www.pwc.com/tr

PPP for Infrastructure Financing in the MENA region Istanbul, November 8, 2006 PPP P ublic P rivate...

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