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Understanding Government Concession Agreements in Infrastructure Development

Explore the key aspects of government concessions in public-private partnerships for infrastructure projects, including risk allocation, performance guarantees, and dispute resolution. Learn about the critical factors influencing the successful construction and operation of infrastructure assets.

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Understanding Government Concession Agreements in Infrastructure Development

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  1. THE GOVERNMENT CONCERNS Successful Construction of the Infrastructure asset GOVERNMENT CONCESSIONS IN PPP

  2. Quality and Quantity of Infrastructure service • Accessibility of the service • Regulatory Compliance • Acceptable tariff • Adequate maintenance • Fair return on the investment

  3. CONCESSION AGREEMENT • Nature • Key Issues • A. Concession period • i. The cost of constructing the facility • ii. The cost of process for selecting the private sector • iii. The benefits of competition • B. Construction of the facility • i. Time and Price ii. Government Input

  4. iii. Completion • iv. Consequences of late completion • v. Consequences of early completion • C. Standards • i. Tariff • Ii. Regulation • iii. Amount • iv. Tariff Structure

  5. vi Tariff Structure • vii Access and discrimination • vii Integration • ix Administration • E. Role of the Government • i. Tax incentives • ii. Contribution of land and assets • iii. Network and logistical support

  6. iv Network and logistical support • v. Supply of labour and materials • vi Remittance of income from the project • vii Guarantees and stand-by financing • viii Non Competition • F. Change Orders • G. Termination

  7. H. Force Majeurs • I. Stabilisation • J. Dispute resolution • K. Choice of Law

  8. RISK ALLOCATION • A. Construction and Completion Risks • B. Operating risks • C. Demand and Price Risks • D. Technology Risks • E. Change of Law Risks • F. Environmental Risks • G. Casualty Risks • H. Ownership and Borrower Risks • I. Property and contigent liabilities • J. Country and Political Risk

  9. K. Counterparty Credit Risk • L. Exchange rate risks • M. Interest rate risks

  10. PERFORMANCE GUARANTEE TO GOVERNMENT • i. Trigger event • ii. Consequences of default • iii. Expiry • iv. Indemnity

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