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The Basic Policy Issues of Public Private Partnerships (PPPs) by Alexandros Lykourezos Lykourezos Law Offices World Bank Conference Athens, December 19 th , 2006. Public Private Partnerships (PPPs) Definition:

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The Basic Policy Issues ofPublic Private Partnerships (PPPs)by Alexandros LykourezosLykourezos Law OfficesWorld Bank ConferenceAthens, December 19th, 2006


Public Private Partnerships (PPPs)

Definition:

“any joint venture between a public body and a private company, typically involving the joint ownership of a special purpose vehicle (SPV) established under company law, to work in collaboration on a variety of projects”


The basic features of PPPs:

  • New Market for provision of Construction & Services

  • The financial aspect of PPPs

    Public Works  Financial Instrument

  • Off-Balance Sheet – EUROSTAT 11 Feb. 2004

  • Allocation of Risks

    Construction – Demand – Availability Risk

  • Bankability

    Secondary Market – Securitisation

  • Insurance

  • Value for Money – Public Sector Comparator

    Incentive for Quality


International Interest in PPP 1999

Interested in PPP

Source: IFSL


International Interest in PPP 2006

Interested in PPP

Source: IFSL


The ongoing discussions on PPPs in Europe:

  • European Commission “Green Paper” on PPPs

  • PPP Alliance Programme - UNECE


European Commission “Green Paper” on PPPs (2004)

  • Wide debate by Governments and Stakeholders in the Private Sector

  • Apparent need for concise legal framework

  • Emphasis on the procurement aspect

  • Next steps: Concessions legislation and shared better practice information


PPP Alliance Programme

United Nations Economic Commission for Europe

  • UN Global Compact & Millennium Summit (2000): Declaration to use PPPs as a means to address critical challenges of poverty and social deprivation

  • Fourth Alliance Meeting (2005): Governance in PPPs for Infrastructure Development

  • Emphasis on Shared Better Practice

  • Critical importance of carefully choosing a PPP approach


Policy Issues of PPPs:

  • Proper Legal Framework

  • Appropriate Institutional Framework

  • Transparent Procurement Framework

  • Attractive Market Framework

  • Globalization


Proper Legal Framework:

  • Clarity and Stability

  • Adherence to International Convention and European Union Law

  • Safeguard a Level Playing Field

  • “Commercialization” - “Soft Law”

    ATTENTION TO ALL STAKEHOLDERS:

    USE THE LAW WELL!!!


Appropriate Institutional Framework:

  • The Government

  • The “PPP Taskforce”

  • Stakeholder Associations

  • End-User Concerns

  • Important: Choosing the proper approach


Attractive Market Framework:

  • Primary Market Concerns

    Open Market / Good PPP Contract

  • Secondary Market Concerns

    Bakability / Insurance

  • Risk Allocation

    Real Risk / Financial Risk / Risk Management


Globalization – The next step?

  • The “Mature Market Test”

  • The “Lessons Learned Test”

  • The “Uniform Practice Test”

  • The “PPP Mutual Fund Challenge”


Greek Law 3389/2005 on PPPs:

  • Abolishes requirement of Parliament ratification

  • Adopts new EU Directives on Public Procurement

  • Regulates award and contractual scheme of PPPs

  • Provides flexibility and allows shared better practice

  • Enhances bankability (step-in clauses and securitisation)

  • Complies with EUROSTAT regulations


Practical layout - Award of a PPP contract

(Greek Law 3389/2005):


Greek PPP projects in the pipeline:

  • Multi-schools projects: 27 Schools in Attica and 31 Schools in Macedonia

    (€ 266 mil. + 20%)

  • Prisons projects: 3 prisons facilities in Salonika, Volos and Corinthos

    (€ 198 mil. + 20%)

  • University of Peloponnisos

    (€ 84 mil. + 20%)

  • Courthouse projects: 2 courthouse facilities in Heraklion and Patras

    (€ 100 mil. + 20%)

  • Police facilities project in Attica

    (€ 36 mil. + 20%)

  • Fire department facilities projects: 7 facilities in Salonika, Alexandroupolis, Veria, Lefkada, Giannitsa, Mesolongi & Gargaliani

    (€ 31,5 mil. + 20%)

  • International Conference Center in Athens (Paleo Faliro)

    (€ 54 mil. + 20%)

  • Municipalities (Article 224 of the New Municipalities Code)


A quick case study:

“Athens International Airport”

  • A concession contract (with a PPP approach)

  • EU funding: Cohesion Fund 11%, EIB loan 47%

  • Greek State contribution 19%

  • Commercial debt 17%

  • Equity 6%

  • SPV: Athens International Airport S.A (55% Greek State, 45% Private Consortium)

  • Construction delays: 3 months in advance

    Source: Patrick Boeuf, EIB, 2004


“Athens International Airport” – Duration of Project Implementation

Source: Patrick Boeuf, EIB, 2004

(Time in months elapsed in each phase)

Total (10 years)


Why is the Government using PPPs:

  • Expand of Public Works - Private finance, off balance sheet

  • Value for money – Risk transfer – Performance-related reward

  • Commercial interest - Investments

  • Innovation, Efficiency, Quality

  • New approach to “Privatization”


The keys to a successful PPP:

  • Political support (focus on the public service)

  • Proper and complete legislation harmonized with international practice and expertise

  • Full and complete legal, financial and technical advice to the public bodies

  • A good PPP contract

  • A level playing field

  • Collaboration


Email: [email protected]: www.lykourezoslawoffices.gr

Thank you for your kind attention!


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