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This risk refers to the risk (especially from the public perspective) of the infrastructure not being available to use and/or not meeting the quality or expected performance levels. This risk is borne by the private partner as it is the essence of the PPP objectives. The mechanism to transfer the...
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Body of Knowledge:
Strategy Delivery and Commissioning
The private partner will have a limited set of events for which it can claim to:
Extend the completion date by which the asset must be created, commissioned, and operated
Extend the expiry of the PPP contract (effectively an extension to the period in which it can earn revenue from operating the...
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Body of Knowledge:
PPP Introduction and Overview - Appendix A - Project Finance
There are three basic sources by which a PPP project can be financed: debt, equity and government support[4].
Debt
Senior debt enjoys priority in terms of repayment over all other forms of finance. Mezzanine debt is subordinated in terms of repayment to senior debt, but ranks above equity both for...
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Maintenance risk may refer to the risk of improper maintenance resulting in a lack of performance, which is implicit and covered in availability and performance risk analysis.
But maintenance risk also refers to the risk of higher costs for maintenance operations and plans (including current...
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General project company costs
General company costs include the permanent staff of the company, which is usually more of an administrative centre with limited personnel. For instance, it could include staff to manage the finance of the project and interact with the procuring authority and the...
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Body of Knowledge:
Establishing a PPP Framework
A government’s fiscal commitments – both direct and contingent – will be established by the PPP contracts. The value of direct liabilities will be relatively simple to quantify. In many cases its value will be explicitly expressed in the contract. Valuing contingent liabilities is more complicated...
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Body of Knowledge:
PPP Introduction and Overview
For a PPP to be successful, the government must protect and maximize VfM throughout the preparation and implementation process and the life of the contract. A failure to achieve the expected VfM constitutes a project failure.
Success in managing the PPP process is achieved by avoiding project...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Apart from providing public funds to partially compensate for construction, or through public debt or equity instruments, there are other indirect means by which the government can increase commercial feasibility and/or reduce the budgetary burden of the PPP. These can also be considered, in broad...
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Body of Knowledge:
Operations and Handback
As in the Construction Phase, during the Operations Phase, the immediate mechanism to deal with non-compliance and contract breaches is typically a mechanism that has financial consequences for the private partner. However, the system and instruments for managing under-performance (by providing...
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Body of Knowledge:
Operations and Handback
Variation management is closely connected with PPP agreement management and relates to the creation of mechanisms to enable changes to the PPP agreement. Such changes may be necessary as a result of a change in circumstances that could not be anticipated or quantified when the PPP agreement was...
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Body of Knowledge:
Strategy Delivery and Commissioning
One of the common questions asked about PPPs is why, despite the great development of standardized PPP contracts, so many PPP contracts are varied or amended during their term. With standardization in all areas of PPP project development and implementation, why would any form of change or amendment...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The structure of the contents of the contract document may vary significantly from country to country, and even depending on the authority or level of government within the same country. It is preferable that the structure of the contents, the nomenclature, and the treatment of many commercial...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Performance requirements may be considered a part of the broader concept of "technical requirements" or "technical specifications", which in general terms refers to the specifications in the contract for what is requested of the private partner in terms of quality and/or quantity. Performance...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
5.4.1 Quantitative Assessment and Appraisal
As noted, a quantitative assessment (estimating or defining values of the possible outcomes or “expected values”) is usually applied during appraisal for financial analysis and VfM. This is also referred as “adjusting values to risk”, and it is also...
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Body of Knowledge:
PPP Introduction and Overview
The preceding sections explained how the PPP option may be a significant source of incremental efficiency and provide other benefits for better infrastructure management. It may also have weak points and other issues that make it inappropriate for some of projects.
Governments need to protect and...
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Body of Knowledge:
PPP Introduction and Overview
As a private-financed procurement method, all (or most) of the resources for financing the capital investment comes from the private sector.
The PPP structure assigns to a private agent, through a contract, the development and business operation or exploitation of a public asset (under certain...
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Body of Knowledge:
PPP Introduction and Overview
Grant financing (or pure co-financing) is not the only way to increase affordability and/or the commercial feasibility and bankability in PPP projects. There are other instruments (revolving, such as public loans or “co-lending”) and techniques (which may be referred to as de-risking or as credit...
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Body of Knowledge:
PPP Introduction and Overview
a) The Challenge of the Availability of Long-Term Finance
Private finance PPPs require long-term finance, the majority of which should be in the form of debt so as to maximize financial efficiency through gearing[51] (see section 7).
A sound financial structure requires that the debt is denominated...
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Body of Knowledge:
PPP Introduction and Overview
This section explains further the basic structure of a private finance PPP, assuming the form (or the scope) of a DBFOM that was first introduced in section 4.
Figure 1.10 illustrates the basic structure of a common PPP (in which all of the equity in the SPV is provided by the private sector). This...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
3.1 Establishing the Project Team, Incorporating Advisors and Finalizing the Project Management Plan for this Phase
It may happen that the project team was established before appraisal, contracting advisors to handle both appraisal and the structuring and drafting of the tender package. Otherwise...
