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PPP for Infrastructure Financing in the MENA region Istanbul, November 8, 2006 P ublic P rivate P artnerships *. Nuran Durmaz. *connectedthinking. PwC. Agenda. Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process

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  1. PPP for Infrastructure Financing in the MENA region Istanbul, November 8, 2006 PublicPrivatePartnerships* Nuran Durmaz *connectedthinking PwC

  2. Agenda Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  3. 1 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  4. 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 provideand deliver public sector assets and services. Public Private Partnerships*

  5. 2 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  6. Benefits of PPPs Encourage the injection of private sector capital Development of specialist skills Private sector takes life cycle cost Quality of service has to be maintained Risks are allocated to the party best able to manage or absorb PPP Force the public sector to focus on outputs and benefits from the start Budgetary certainty The public sector pays when the services are delivered PPP’s deliver value for money Public Private Partnerships*

  7. Opportunities Public Private Partnerships*

  8. 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 Public Private Partnerships*

  9. 3 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  10. 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 Public Private Partnerships*

  11. 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 Public Private Partnerships*

  12. 4 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  13. Basic Structure of a PPP-Project Public Private Partnerships*

  14. Summary of the PPP-Buying Process PPP only in appropriate projects and if positive effects are established! Public Private Partnerships*

  15. Five Phases of a PPP Procurement Project Public Private Partnerships*

  16. 5 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  17. 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. Public Private Partnerships*

  18. 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. Public Private Partnerships*

  19. 7 Definition Benefits, Opportunities & Risks Preconditions for Successful PPPs About PPP Process Recurring PPP Issues and Solutions PwC- PPP Services

  20. PwC – Thought Leadership Public Private Partnerships*

  21. PricewaterhouseCoopers Turkeywww.pwc.com/tr Public Private Partnerships*

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