1 / 19

1. UK/European PPP Experience and Lessons

colincastro
Download Presentation

1. UK/European PPP Experience and Lessons

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Public Private Partnerships in the Baltics and EuropeVilnius, 22-23 November 2006DAY I, TOPIC IVStructuring and Implementing PPPs: Risk Allocation and Mitigation1. UK/European PPP Experience and Lessons2. Risks in PPP ProjectsScott DicksonSenior Associate, Projects GroupBerwin Leighton Paisner LLP, London22 November 2006[5440725]

  2. 1. UK/European PPP Experienceand Lessons

  3. History of PFI in the UK • 1992: Launch of the Private Finance Initiative by the Conservative Government • 1997 to date: changes introduced by the Labour Government, including relaunch as Public Private Partnerships (PPPs) • Policy development now rests with HM Treasury, including standardisation

  4. European takeup and globalisation • Includes Italy, France, Portugal, Germany, Spain, Greece, Austria, Ireland, Netherlands, Scandinavia, Hungary, Poland • Early projects – Finland (roads) • Increasing deal pipeline • Keep an eye on experience further away: Canada, Australia, Central/South America, South Africa, Japan

  5. Key drivers for PFI • Neglected and crumbling infrastructure and public assets • Need for investment, avoiding the public balance sheet • Failures of public procurement • Political consistency – move from public to private • Utilisation of private sector expertise • Promotion of value for money and more efficient of use of resources • Promotion of innovation (especially design)

  6. Tested benefits/success of PFI • Transferred risk from the public authority to private sector • Harnessed private sector skills and expertise • Introduced competition into procurement of public assets • Payment linked to performance • deductions for unavailability and poor performance • incentive for private sector to deliver

  7. UK sector breakdown (by capital value)

  8. UK sectors (by capital value) – in figures • Health (21%) • Transport (18%) • Defence (15%) • Education (13%) • Scotland/Wales (13%) • Other accommodation projects (government buildings, prisons) (12%) • Housing (4%)

  9. UK position today…. • 700 signed projects worth £46bn • 500 operational projects • Standard contractual/risk positions • Commoditised market • Pipeline: Health, Defence, Transport, Education, Housing, Waste • Market uncertainty – health projects • Growth of other sectors – defence, housing, waste

  10. Consequences of UK commoditised market…. • Tight returns • Interest moved to the margins: • bundling • long-term relationships • new structures, including not-for-profit • funding competitions • secondary market • Opportunities in Europe

  11. Lessons (1): development aide-mémoire • Choosing projects - sectors/assets • Assemble the right public sector team • Robust business case • Analysis and allocation of risks • Learn from early projects • Project planning and management • Legal framework in place • Standardisation/co-ordination

  12. Lessons (2): general • Understand the private sector • Take long term approach and sell project flow to attract private sector • Communication with stakeholders • Deal with opposition • Promote innovation • Limit transaction costs

  13. 2. Risks in PPP Projects

  14. Thinking about project risks • Risk transfer/balance sheet vs Value for money • Analysis of risks • Specifics: Sectoral/Geographical • Funder expectations/bankability • Always open for negotiation? vs Transaction costs • UK settled risk allocation • Private sector: risk mitigation

  15. Public sector – scoping the project • Full risk transfer • Pricing/Value for money considerations • example: condition of existing buildings • impossibility of rational pricing? • risk premium too high? • consider competitive bidding environment • Approach • methodical analysis • justifiable risk transfer • consider value for money • bankable • consistent

  16. Categorisation of risks, with examples • Construction • failure of design • cost of materials • delay/incorrect time estimate • condition of site/existing buildings • change in law • Operational • failure of perform • incorrect cost estimates • change in public authority requirements • change in law • Pure financial risks • tax • inflation • insurance costs

  17. Risk mitigation/management • Contractual/negotiation (inc ringfencing) • Private sector passdown • SPV management • Insurance • Senior funding • Equity funding • Effects of secondary market/ portfolio risk spreading Decreasing Sponsor Appeal

  18. Recommendations Public authority • Early analysis of the project risk matrix • Take soundings from funding market Private sector • Work on risks register/internal compliance • Pricing/mitigation issues • Early discussions with insurance advisers

  19. Vilnius, 22 November 20061. UK/European PPP Experience and Lessons2. Risks in PPP Projects Scott DicksonSenior Associate, Projects Group t: +44 (0)20 7760 4392e: scott.dickson@blplaw.com Berwin Leighton Paisner LLP Adelaide House London Bridge London EC4R 9HA t: +44 (0)20 7760 1000 f: +44 (0)20 7760 1111 www.blplaw.com

More Related