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Implementing PPPs in Italy: Challenges and Lessons Learned from Hospital Financing

This presentation by Guy Chetrit explores the implementation of Public-Private Partnerships (PPPs) in Italy, highlighting the European Investment Bank's role as a key funder. It discusses the slow progress in large investments, significant failure rates during procurement, and extended implementation timelines. Through a case study of a hospital project, the presentation emphasizes the importance of stable cash flows, sensible risk allocation, and the need for public sector engagement in managing regulatory uncertainties. It concludes with lessons learned and future recommendations for improving PPP processes in Italy.

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Implementing PPPs in Italy: Challenges and Lessons Learned from Hospital Financing

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Presentation Transcript

  1. Rome, 12 May 2005 Implementing PPPs in Italy: a real case by Guy Chetrit Project finance for infrastructure, Lending operations in Italy & Malta via Sardegna, 38 – Rome

  2. Introduction • EIB is a key funder of PPPs across Europe • Since the early 1990s, over 100 deals • In several countries (UK, Portugal, Netherlands, Spain, Ireland, Greece…) • Across sectors (transport, water, health, education,…) • Comparing Italian experience

  3. PPPs in Italy • Slow progress to date for large investments • Significant failure rate during procurement phase • Long and costly implementation times WHY ? Learning from experience : the case of a hospital project

  4. Case study • 28.5 year concession to design, build, finance and provide services Sponsors from the construction sector • EUR 130m financing from banks (of which EUR 70m from EIB) • English law financing documentation • A long and challenging process: 18 months for due diligence and negotiations

  5. (often forgotten) Lenders’ objectives • Stable and predictable cash flow (revenue and costs risks) • Bankable concession : sensible risk allocation • Transparency, clarity, predictability over the long term • Importance of due diligence and negotiations • Public sector to play its role (revenues, regulatory changes, etc)

  6. Issues faced (1) • Long term credit standing of the ASL • Regulatory uncertainties (changes in safety regulation, in laws, in tax, …) • Commercial revenues • Technology risks • Life cycle costs

  7. Issues faced (2) • Renewal of medical equipment • Clinical support services • Finding adequate service providers • Interfaces • Non insurability, planning risks…

  8. Legal issues (Merloni law) • Concession signed before financing • ‘Equilibrio economico-finanziario’ • Compensation on termination • Step-in rights • Interest-rate risk • Risk of legal recourse (tender, reclassification of contract, …)

  9. Lessons learnt • Unrealistic expectations (rather than value-for-money approach) • Lack of expertise of public sector, fragmentation of responsabilities • Private sector’s approach and industrial mix (focus on construction, …) • Concessions signed and PEF agreed without lenders’ involvement • Complex legal and regulatory framework

  10. The future • A step in the right direction but a lot still needs to be done • Need to capitalise on experience and promote best practices • Need to promote culture change for both public and private sector • Role of Unità Tecnica FP • Legislative changes?

  11. www.eib.org Lending operations in Italy & Malta via Sardegna, 38 – Rome

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