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Body of Knowledge:
Structuring and Drafting the Tender and Contract
Financial or economic capacity criteria are intended to guarantee that the company or group of companies (consortium) that are candidates for the project have a healthy financial situation. The criteria provide evidence that they will be capable of meeting the financial needs of the project, which...
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Body of Knowledge:
PPP Introduction and Overview - Appendix A - Project Finance
Financing infrastructure projects through the project finance route offers various benefits such as the opportunity for risk sharing, extending the debt capacity, the release of free cash flows, and maintaining a competitive advantage in a competitive market. Project finance is a useful tool for...
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Site and ground conditions/geo-technical risks
The risk of unexpected geological or geo-technical conditions in the ground will also be commonly allocated to the private partner in a conventional project, that is, in those projects where geo-technical conditions do not represent a significant...
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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:
Project Identification and PPP Screening
There are multiple techniques for identifying the best technical solution for a project and hence which projects best meet public needs. This section will briefly introduce those techniques.
The government should have a policy of using a particular technique so that all projects are compared in a...
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Body of Knowledge:
Appraising PPP Projects
The initial capital expenditures (initial Capex) group represent the expenses incurred from the private consortium’s preparation of its proposal until the commissioning of the asset. These expenses commonly occur before the project company obtains any revenue. The expenses are mostly obtained from...
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Body of Knowledge:
Project Identification and PPP Screening
This section introduces[16] the concepts of Cost-Benefit Analysis and economic analysis.
FIGURE 3.3: Sequence of the CBA Analysis
Note: CBA= cost-benefit analysis; eIRR= economic Internal Rate of Return; eNPV= economic Net Present Value.
The most refined form of economic analysis is the Cost-...
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Body of Knowledge:
PPP Introduction and Overview - Appendix A - Project Finance
The concept of project finance requires the sponsors to adopt a unique organizational structure in the form of a stand-alone project company (that is, a special purpose vehicle, SPV) which will enter into a PPP agreement with the government to design, build, and operate the project. This SPV has a...
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Body of Knowledge:
Establishing a PPP Framework
Institutional responsibilities for PPPs, that is, which entity will play what role at each step of the process will need to be defined in the framework.
Institutional arrangements differ widely from place to place. This depends on the particular needs of the PPP program and the pre-existing...
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Body of Knowledge:
Establishing a PPP Framework
PPP programs create direct and contingent liabilities. The government will need to ensure that there is sufficient fiscal space to fund direct liabilities, as well as to deal with situations where contingent liabilities translate into fiscal expenditures. The financial management of PPPs is...
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Body of Knowledge:
Appraising PPP Projects
An important parameter of the financial model is the contract term, since it directly affects several of its conclusions. This is typically a variable preliminarily defined during the design of the financial model and is confirmed or adjusted during the structuring of the project. Some of the...
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Body of Knowledge:
Appraising PPP Projects
The output of the process of analyzing the impact of the project on the public debt involves the addition of the marginal impact of the project in terms of expenditure with the existing projection of national expenses, plus the marginal related impact in terms of debt in the national accounts.
This...
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Body of Knowledge:
Appraising PPP Projects
Infrastructure projects will often have significant environmental impacts arising from construction and operation, which can be both positive and negative. The impacts may also include follow-on effects beyond the immediate project area, as well as beyond the people directly associated with the...
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Body of Knowledge:
Appraising PPP Projects
An appraisal exercise intimately connected with the evaluation of environmental feasibility is the assessment of the project’s impact on the lives of people that live and work in the project’s area of influence.
The social impact analysis (or social feasibility assessment) can be a very important...
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Body of Knowledge:
Appraising PPP Projects
The Value for Money (VfM) analysis indicates how the PPP alternative compares to traditionally procured infrastructure, not only in terms of the associated fiscal costs but also in terms of the net economic benefit of the project. The assessment also incorporates qualitative aspects of this...
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Body of Knowledge:
Structuring and Drafting the Tender and Contract
The assets will be “handed-back” to the procuring authority at contract expiration. It is good practice to establish minimum criteria to be met by the assets so as to ensure that these are transferred back to the procuring authority in an acceptable condition. It is also good practice to note that...
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Construction risk is the possibility that during the Construction Phase the actual project costs or construction time exceeds those projected.
The delay in the completion or commissioning will also represent a loss of income. This is assessed and categorized as a separate or ad hoc risk category in...
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In the context of user-pays projects (for example, a toll road, a rail project including service operations, or a water PPP including water supply to the public), revenue risk includes the risk of the charges to users not being at the anticipated level in each particular year. This may cause either...
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Fraud may be considered a subset of volume risk in user-pays PPPs when considering volume as the level of demand that effectively pays for the service. Fraud is commonly used to refer to willingly avoiding payment, whereas collection risks include non-payment when the payment may be or become...
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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...
