The Basic Policy Issues ofThe Basic Policy Issues of

Public Private Partnerships Public Private Partnerships (PPPs)(PPPs)

by Alexandros Lykourezosby Alexandros LykourezosLykourezos Law OfficesLykourezos Law OfficesWorld Bank ConferenceWorld Bank Conference

Athens, December 19Athens, December 19thth, 2006, 2006

Public Private Partnerships (PPPs)Public Private Partnerships (PPPs)

Definition:Definition:““any joint venture between a public body any joint venture between a public body and a private company, typically involving and a private company, typically involving the joint ownership of a special purpose the joint ownership of a special purpose

vehicle (SPV) established under company vehicle (SPV) established under company law, to work in collaboration on a variety law, to work in collaboration on a variety

of projects”of projects”

The basic features of PPPs:The basic features of PPPs: New Market for provision of Construction & New Market for provision of Construction &

ServicesServices The financial aspect of PPPs The financial aspect of PPPs Public Works Public Works Financial Instrument Financial Instrument Off-Balance Sheet – EUROSTAT 11 Feb. 2004Off-Balance Sheet – EUROSTAT 11 Feb. 2004 Allocation of RisksAllocation of Risks

Construction – Demand – Availability RiskConstruction – Demand – Availability Risk BankabilityBankability

Secondary Market – SecuritisationSecondary Market – Securitisation InsuranceInsurance Value for Money – Public Sector ComparatorValue for Money – Public Sector Comparator

Incentive for QualityIncentive for Quality

Interested in PPPSource: IFSL

International Interest in PPP 1999

Interested in PPP Source: IFSL

International Interest in PPP 2006

The ongoing discussions on PPPs in Europe:

European Commission “Green European Commission “Green Paper” on PPPs Paper” on PPPs

PPP Alliance Programme - UNECE PPP Alliance Programme - UNECE

European Commission “Green Paper” European Commission “Green Paper” on PPPs (2004)on PPPs (2004)

Wide debate by Governments and Wide debate by Governments and Stakeholders in the Private SectorStakeholders in the Private Sector

Apparent need for concise legal Apparent need for concise legal frameworkframework

Emphasis on the procurement aspectEmphasis on the procurement aspect Next steps: Concessions legislation and Next steps: Concessions legislation and

shared better practice information shared better practice information

PPP Alliance ProgrammePPP Alliance Programme

United Nations Economic Commission for EuropeUnited Nations Economic Commission for Europe UN Global Compact & Millennium Summit (2000): UN Global Compact & Millennium Summit (2000):

Declaration to use PPPs as a means to address Declaration to use PPPs as a means to address critical challenges of poverty and social deprivationcritical challenges of poverty and social deprivation

Fourth Alliance Meeting (2005): Governance in PPPs Fourth Alliance Meeting (2005): Governance in PPPs for Infrastructure Developmentfor Infrastructure Development

Emphasis on Shared Better PracticeEmphasis on Shared Better Practice Critical importance of carefully choosing a PPP Critical importance of carefully choosing a PPP

approach approach

Policy Issues of PPPs:Policy Issues of PPPs:

Proper Legal FrameworkProper Legal Framework Appropriate Institutional FrameworkAppropriate Institutional Framework Transparent Procurement FrameworkTransparent Procurement Framework Attractive Market FrameworkAttractive Market Framework GlobalizationGlobalization

Proper Legal Framework:Proper Legal Framework: Clarity and Stability Adherence to International Convention

and European Union Law Safeguard a Level Playing Field “Commercialization” - “Soft Law”

ATTENTION TO ALL STAKEHOLDERS:ATTENTION TO ALL STAKEHOLDERS:USE THE LAW WELL!!!USE THE LAW WELL!!!

Appropriate Institutional Framework:Appropriate Institutional Framework:

The Government The “PPP Taskforce” Stakeholder Associations End-User Concerns Important: Choosing the proper

approach

Attractive Market Framework:Attractive Market Framework:

Primary Market ConcernsOpen Market / Good PPP Contract

Secondary Market ConcernsBakability / Insurance

Risk AllocationReal Risk / Financial Risk / Risk Management

Globalization – The next step?Globalization – The next step?

The “Mature Market Test” The “Lessons Learned Test” The “Uniform Practice Test” The “PPP Mutual Fund Challenge”

Greek Law 3389/2005 on PPPs:Greek Law 3389/2005 on PPPs: Abolishes requirement of Parliament ratificationAbolishes requirement of Parliament ratification Adopts new EU Directives on Public Adopts new EU Directives on Public

ProcurementProcurement Regulates award and contractual scheme of Regulates award and contractual scheme of

PPPsPPPs Provides flexibility and allows shared better Provides flexibility and allows shared better

practicepractice Enhances bankability (step-in clauses and Enhances bankability (step-in clauses and

securitisation)securitisation) Complies with EUROSTAT regulationsComplies with EUROSTAT regulations

Practical layout - Award of a PPP contract Practical layout - Award of a PPP contract

(Greek Law 3389/2005): (Greek Law 3389/2005):

Government(Ministers’ Committee)

PPP Taskforce

Public Body (Municipality)

External Advisors Award Committee

Private entity(consortium)

SPV

Private entity(consortium)

SPV

Private entity(consortium)

SPV

Greek PPP projects in the pipeline:Greek PPP projects in the pipeline: Multi-schools projects:Multi-schools projects: 27 Schools in Attica and 31 Schools in 27 Schools in Attica and 31 Schools in

Macedonia Macedonia (€ 266 mil. + 20%)(€ 266 mil. + 20%) Prisons projects:Prisons projects: 3 prisons facilities in Salonika, Volos and Corinthos 3 prisons facilities in Salonika, Volos and Corinthos (€ 198 mil. + 20%)(€ 198 mil. + 20%) University of PeloponnisosUniversity of Peloponnisos

(€ 84 mil. + 20%)(€ 84 mil. + 20%) Courthouse projects:Courthouse projects: 2 courthouse facilities in Heraklion and Patras 2 courthouse facilities in Heraklion and Patras

(€ 100 mil. + 20%)(€ 100 mil. + 20%) Police facilities projectPolice facilities project in Attica in Attica

(€ 36 mil. + 20%)(€ 36 mil. + 20%) Fire department facilities projects:Fire department facilities projects: 7 facilities in Salonika, 7 facilities in Salonika,

Alexandroupolis, Veria, Lefkada, Giannitsa, Mesolongi & Gargaliani Alexandroupolis, Veria, Lefkada, Giannitsa, Mesolongi & Gargaliani (€ 31,5 mil. + 20%)(€ 31,5 mil. + 20%)

International Conference Center in AthensInternational Conference Center in Athens (Paleo Faliro) (Paleo Faliro)(€ 54 mil. + 20%)(€ 54 mil. + 20%)

MunicipalitiesMunicipalities (Article 224 of the New Municipalities Code) (Article 224 of the New Municipalities Code)

A quick case study: A quick case study: ““Athens International Airport”Athens International Airport”

A concession contract (with a PPP approach)A concession contract (with a PPP approach) EU funding: EU funding: Cohesion Fund 11%, EIB loan 47%Cohesion Fund 11%, EIB loan 47% Greek State contribution 19%Greek State contribution 19% Commercial debt 17%Commercial debt 17% Equity 6%Equity 6% SPV: Athens International Airport S.A (55% Greek SPV: Athens International Airport S.A (55% Greek

State, 45% Private Consortium)State, 45% Private Consortium) Construction delays: 3 months in advanceConstruction delays: 3 months in advanceSource: Patrick Boeuf, EIB, 2004Source: Patrick Boeuf, EIB, 2004

““Athens International Airport” – Duration of Project ImplementationAthens International Airport” – Duration of Project Implementation

Source: Patrick Boeuf, EIB, 2004Source: Patrick Boeuf, EIB, 2004

5 19 25 2 9 56

Announcement of theTender

Pre- selection ofBidders

Submission of Off ers

Signing of theConcession Contract(C.C.) Ratification of theC.C.by Law

Signing of FinancialContracts

Commencement Date ofthe C.C

Construction period

(Time in months elapsed in each phase)

Total (10 years)

5 19 25 2 9 56

Announcement of theTender

Pre- selection ofBidders

Submission of Off ers

Signing of theConcession Contract(C.C.) Ratification of theC.C.by Law

Signing of FinancialContracts

Commencement Date ofthe C.C

Construction period

Why is the Government using PPPs:Why is the Government using PPPs: Expand of Public Works - Private Expand of Public Works - Private

finance, off balance sheetfinance, off balance sheet Value for money – Risk transfer – Value for money – Risk transfer –

Performance-related rewardPerformance-related reward Commercial interest - InvestmentsCommercial interest - Investments Innovation, Efficiency, QualityInnovation, Efficiency, Quality New approach to “Privatization”New approach to “Privatization”

The keys to a successful PPP:The keys to a successful PPP: Political support (focus on the public service)Political support (focus on the public service) Proper and complete legislation harmonized Proper and complete legislation harmonized

with international practice and expertisewith international practice and expertise Full and complete legal, financial and Full and complete legal, financial and

technical advice to the public bodiestechnical advice to the public bodies A good PPP contractA good PPP contract A level playing fieldA level playing field CollaborationCollaboration

Email:Email: allykourezos@lykourezos.gr allykourezos@lykourezos.gr

Website:Website: www.lykourezoslawoffices.gr www.lykourezoslawoffices.gr

Thank you for your kind Thank you for your kind attention!attention!