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Public-Private Partnerships

Book Description

Over the last decade or so, private-sector financing through public-private partnerships (PPPs) has become increasingly popular around the world as a way of procuring and maintaining public-sector infrastructure, in sectors such as transportation (roads, bridges, tunnels, railways, ports, airports), social infrastructure (hospitals, schools, prisons, social housing) public utilities (water supply, waste water treatment, waste disposal), government offices and other accommodation, and other specialised services (communications networks or defence equipment).
This book, based on the author's practical experience on the public- and private-sector sides of the table, reviews the key policy issues which arise for the public sector in considering whether to adopt the PPP procurement route, and the specific application of this policy approach in PPP contracts, comparing international practices in this respect. It offers a systematic and integrated approach to financing PPPs within this public-policy framework, and explains the project-finance techniques used for this purpose. The book deals with both the Concession and PFI models of PPP, and provides a structured introduction for those who are new to the subject, whether in the academic, public-sector, investment, finance or contracting fields, as well as an aide memoire for those developing PPP policies or negotiating PPPs.

The author focuses on practical concepts, issues and techniques, and does not assume any prior knowledge of PPP policy issues or financing techniques. The book describes and explains:
* The different types of PPPs and how these have developed
* Why PPPs are attractive to governments
* General policy issues for the public sector in developing a PPP programme
* PPP procurement procedures and bid evaluation
* The use of project-finance techniques for PPPs
* Sources of funding
* Typical PPP contracts and sub-contracts, and their relationship with the project’s financial structure
* Risk assessment from the points of view of the public sector, investors, lenders and other project parties
* Structuring the investment and debt financing
* The key issues in negotiating a project-finance debt facility.
In addition the book includes an extensive glossary, as well as cross-referencing.

*Reviews the PPP policy framework and development from an international perspective
*Covers public- and private-sector financial analysis, structuring and investment in PPPs
*No prior knowledge of project financing required

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. List of figures
  5. List of tables
  6. Introduction
  7. Chapter 1. What are Public–private Partnerships?
    1. §1.1 Introduction
    2. §1.2 Public Infrastructure and the Private Sector
    3. §1.3 Public–Private Partnerships
    4. §1.4 Development and Structures
    5. §1.5 PPPS and Public Infrastructure
    6. §1.6 Types of PPP
  8. Chapter 2. PPPs—For and Against
    1. §2.1 Introduction
    2. §2.2 New Public Management, Privatisation and PPPS
    3. §2.3 Budgetary Benefit
    4. §2.4 Additionality
    5. §2.5 Financing Cost and Risk Transfer
    6. §2.6 Risk Transfer and Value for Money
    7. §2.7 Economies of Scale
    8. §2.8 Whole-life Costing and Maintenance
    9. §2.9 Private-sector Skills
    10. §2.10 Public-Sector Reform
    11. §2.11 Complexity
    12. §2.12 Flexibility
    13. §2.13 Ppps and Politics
  9. Chapter 3. PPPs Worldwide
    1. §3.1 Introduction
    2. §3.2 Developing PPP Programmes
    3. §3.3 Legal Framework
    4. §3.4 United Kingdom
    5. §3.5 United States
    6. §3.6 Australia
    7. §3.7 France
    8. §3.8 Korea
    9. §3.9 Spain
    10. §3.10 South Africa
  10. Chapter 4. Cash Flow and Investment Analysis
    1. §4.1 Introduction
    2. §4.2 Net Present Value/Discounted Cash Flow
    3. §4.3 Internal Rate of Return
    4. §4.4 Problems with DCF and IRR Calculations
    5. §4.5 Uses in PPPs
  11. Chapter 5. The Public-Sector Investment Decision
    1. §5.1 Introduction
    2. §5.2 Economic justification
    3. §5.3 Value for money and the public-sector comparator
    4. §5.4 Affordability
    5. §5.5 Balance-sheet treatment
  12. Chapter 6. Public-Sector Procurement and Contract Management
    1. §6.1 Introduction
    2. §6.2 Project Management
    3. §6.3 Procurement Procedures
    4. §6.4 Other Procurement Issues
    5. §6.5 Due Diligence
    6. §6.6 Contract Management
    7. §6.7 External Advisers
  13. Chapter 7. The Private-Sector Investor’s Perspective
    1. §7.1 Introduction
    2. §7.2 The investment pool
    3. §7.3 The investment decision
    4. §7.4 Bidding and project development
    5. §7.5 Joint-venture issues
    6. §7.6 The project company
    7. §7.7 External advisers
  14. Chapter 8. Project Finance and PPPs
    1. §8.1 Introduction
    2. §8.2 Development of Project Finance
    3. §8.3 Features of Project Finance
    4. §8.4 The Project-Finance Market
    5. §8.5 Why use Project Finance for PPPs?
  15. Chapter 9. Private-Sector Financing— Sources and Procedures
    1. §9.1 Introduction
    2. §9.2 The Rôle of the Financial Adviser
    3. §9.3 Commercial Banks
    4. §9.4 Bond Issues
    5. §9.5 Bank loans v. Bonds
    6. §9.6 Mezzanine Debt
  16. Chapter 10. Financial Structuring
    1. §10.1 Introduction
    2. §10.2 The Financial Model
    3. §10.3 Model Inputs and Outputs
    4. §10.4 Financing Costs
    5. §10.5 Debt Profile
    6. §10.6 Cover Ratios
    7. §10.7 Relationship Between Cover Ratio, Leverage and Equity Return
    8. §10.8 Accounting and Taxation Issues
    9. §10.9 Recourse to the Sponsors
  17. Chapter 11. Financial Hedging
    1. §11.1 Introduction
    2. §11.2 Interest-rate Risk
    3. §11.3 Inflation Issues
  18. Chapter 12. Lenders’ Cash-Flow Controls, Security and Enforcement
    1. §12.1 Introduction
    2. §12.2 Control of cash flow
    3. §12.3 Security
    4. §12.4 The rôle of insurance
    5. §12.5 Events of default
    6. §12.6 Intercreditor issues
  19. Chapter 13. Service-Fee Mechanism
    1. §13.1 Introduction
    2. §13.2 Contract scope
    3. §13.3 Payment structure
    4. §13.4 Usage-based payments
    5. §13.5 Availability-based payments
    6. §13.6 Mixed usage and availability payments
    7. §13.7 Third-party and secondary revenues
  20. Chapter 14. Risk Evaluation and Transfer
    1. §14.1 Introduction
    2. §14.2 Principles of Risk Transfer
    3. §14.3 The Risk Matrix
    4. §14.4 Political Risks
    5. §14.5 Site Risks
    6. §14.6 Construction Risks
    7. §14.7 Completion Risks
    8. §14.8 Operation-Phase Risks
  21. Chapter 15. Changes in circumstances and termination
    1. §15.1 Introduction
    2. §15.2 Compensation events
    3. §15.3 Relief events
    4. §15.4 Step-in and substitution
    5. §15.5 Early termination: default by the project company
    6. §15.6 Optional termination or default by the public authority
    7. §15.7 Early termination: force majeure
    8. §15.8 Early termination: corruption
    9. §15.9 Termination and subcontractors
    10. §15.10 Tax implications of a termination-sum payment
    11. §15.11 Final maturity, residual-value risk and hand-back
  22. Chapter 16. Funding Competition, Debt Refinancing and Equity Sale
    1. §16.1 Introduction
    2. §16.2 Funding Competition
    3. §16.4 Debt Refinancing
    4. §16.5 Equity Sale
  23. Chapter 17. Alternative models
    1. §17.1 Introduction
    2. §17.2 Public-sector procurement
    3. §17.3 Post-construction take-out
    4. §17.4 Public-sector debt funding
    5. §17.5 Joint-venture ppps
    6. §17.6 Not-for-profit structures
  24. Bibliography
  25. Glossary and Abbreviations