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The New Market ofThe New Market of
Public Private Partnerships Public Private Partnerships (PPPs) in Greece(PPPs) in Greece
by Alexandros Lykourezosby Alexandros LykourezosLykourezos Law OfficesLykourezos Law Offices
New York, November 17New York, November 17thth, 2006, 2006
Conventional types of Conventional types of
Public Procurement:Public Procurement:
Classical Public ContractClassical Public Contract
Concession Agreements Concession Agreements
Main Features/CharacteristicsMain Features/Characteristicsof Public Contracts: of Public Contracts:
Contract for Public Works (on Public Property)Contract for Public Works (on Public Property) State appoints Contractor (Public bid/Contract)State appoints Contractor (Public bid/Contract) Contractor undertakes the project (construction)Contractor undertakes the project (construction) State pays reward to Contractor State pays reward to Contractor
(installments/upon completion) (installments/upon completion)
Main Features/CharacteristicsMain Features/Characteristicsof Concessions:of Concessions:
Contract for Public Works (on Public Property)Contract for Public Works (on Public Property) State appoints Contractor (Public bid/Contract)State appoints Contractor (Public bid/Contract) Contractor undertakes the project (construction)Contractor undertakes the project (construction) State contributes in financing the projectState contributes in financing the project State concedes use and exploitation of the final State concedes use and exploitation of the final
project by Contractor for a long time periodproject by Contractor for a long time period
The basic practical weaknesses The basic practical weaknesses The burden on the Public side:The burden on the Public side:
Immediate Cost – On Balance SheetImmediate Cost – On Balance Sheet Breach of Public Contract (delays, faulty Breach of Public Contract (delays, faulty
construction)construction) Risk for bad performanceRisk for bad performance Initiative dependant on the National Economy Initiative dependant on the National Economy
((“only available when money is available”“only available when money is available”)) Unfair terms in Concession AgreementsUnfair terms in Concession Agreements Not flexibleNot flexible
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 facts about PPPs: PPPs are not new (UK Privatization scheme in the 80s)PPPs are not new (UK Privatization scheme in the 80s) PPPs, in principle, are a type of Public Procurement PPPs, in principle, are a type of Public Procurement
(requiring special legislation) (requiring special legislation) A “PPP” approach can be seen in conventional types of A “PPP” approach can be seen in conventional types of
Public Contracts (e.g. concessions)Public Contracts (e.g. concessions) However, PPPs introduce new financial tools and require However, PPPs introduce new financial tools and require
a new “attitude” by the Public and Private Sectora new “attitude” by the Public and Private Sector Considerable interest about PPPs all over Europe (EC Considerable interest about PPPs all over Europe (EC
Commission launched a wide debate with the “Green Commission launched a wide debate with the “Green Paper” on PPPs in 2004)Paper” on PPPs in 2004)
““PPP” is a generic term: Private Finance Initiatives (PFIs) PPP” is a generic term: Private Finance Initiatives (PFIs) is one form of PPP – is one form of PPP – “Procurement of services by private “Procurement of services by private sector that are delivered through public assets”sector that are delivered through public assets”
The basic characteristics of PPPs:The basic characteristics of PPPs:
Contract between a public body and a private Contract between a public body and a private entityentity
Relatively long duration of the contract Relatively long duration of the contract Private entity either Designs-Builds-Operates Private entity either Designs-Builds-Operates
(DBO) or Designs-Builds-Finances (DBF) facilities(DBO) or Designs-Builds-Finances (DBF) facilities Private entity is financed by Private Institutions Private entity is financed by Private Institutions
(agreement may include risk transfer, insurance (agreement may include risk transfer, insurance and “step-in” clauses)and “step-in” clauses)
Public body either pays upon completion of the Public body either pays upon completion of the project or agrees on a concessionproject or agrees on a concession
The basis features of PPPs:The basis 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
Basic conclusion on PPPs:Basic conclusion on PPPs:
Public sector: Public sector:
Saves money – Value for Money – Saves money – Value for Money – Allocation of RisksAllocation of Risks
Private sector:Private sector:
Makes money - Access to a new market – Makes money - Access to a new market – Investment incentiveInvestment incentive
Interested in PPPSource: IFSL
International Interest in PPP 1999
Interested in PPP Source: IFSL
International Interest in PPP 2006
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 invest in PPPs?Why invest in PPPs?
Access to a new market (services & Access to a new market (services & secondary market)secondary market)
Private investment (institutional & private Private investment (institutional & private investors)investors)
Project FinanceProject Finance Insurance and Risk TransferInsurance and Risk Transfer
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”
Arguments against PPPs:Arguments against PPPs: Burden on future balance sheetBurden on future balance sheet Excessive outsourcing/sale of public Excessive outsourcing/sale of public
propertyproperty Excessive private sector controlExcessive private sector control Commercialization of public servicesCommercialization of public services Corruption? Corruption?
Are these real concerns or Are these real concerns or
remainders of an old attitude?remainders of an old attitude?
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: [email protected] [email protected]
Website:Website: www.lykourezoslawoffices.gr www.lykourezoslawoffices.gr
Thank you for your kind Thank you for your kind attention!attention!