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Public Private Partnerships in the Infrastructure Sector

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CoursesealsPublic Private Partnerships in the Infrastructure Sector
  • Introduction to PPP in the infrastructure sector 6

    • Lecture1.1
      What is PPP and how is the concept defined? 30 min
    • Lecture1.2
      The growth of PPP from an historical perspective 30 min
    • Lecture1.3
      The concept of privatisation in the context of PPPs 30 min
    • Lecture1.4
      Conventional procurement and PPP procurement 30 min
    • Lecture1.5
      Examples of PPP reform 30 min
    • Lecture1.6
      Summary of key characteristics and criteria of PPPs 30 min
  • Chapter 2: Structuring a PPP project 5

    • Lecture2.1
      Structuring a PPP project 30 min
    • Lecture2.2
      Project structuring: feasibility study 30 min
    • Lecture2.3
      PPP economics 30 min
    • Lecture2.4
      PPP economics 30 min
    • Lecture2.5
      Alternative PPP structure: rail project case study 30 min
  • Chapter 3: Financing an infrastructure PPP project 6

    • Lecture3.1
      Sources of financing for an infrastructure PPP project 30 min
    • Lecture3.2
      What is Project Finance? 30 min
    • Lecture3.3
      Drawbacks of using project finance in infrastructure PPP transactions 30 min
    • Lecture3.4
      Structure 30 min
    • Lecture3.5
      Key parties 30 min
    • Lecture3.6
      Timeline for financing an infrastructure PPP project 30 min
  • Chapter 4 :Documenting the transaction: anatomy of a PPP concession agreement and key risk allocation issues 11

    • Lecture4.1
      Scope and term of a PPP Concession Agreement 30 min
    • Lecture4.2
      Construction period obligations 30 min
    • Lecture4.3
      Operation period obligations 30 min
    • Lecture4.4
      Payment regimes 30 min
    • Lecture4.5
      Supervening events 30 min
    • Lecture4.6
      Termination and compensation 30 min
    • Lecture4.7
      Liability and insurance 30 min
    • Lecture4.8
      Dispute resolution 30 min
    • Lecture4.9
      Government controls 30 min
    • Lecture4.10
      Government support obligations 30 min
    • Lecture4.11
      Additional terms and conditions 30 min
  • Chapter 5: Documenting the transaction: finance documents 8

    • Lecture5.1
      Core finance documents 30 min
    • Lecture5.2
      Equity arrangements 30 min
    • Lecture5.3
      Impact on the concession agreement 30 min
    • Lecture5.4
      Direct Agreements 30 min
    • Lecture5.5
      Security 30 min
    • Lecture5.6
      Enforcement and insolvency 30 min
    • Lecture5.7
      Involvement of multilateral development banks (MDBs), development finance institutions (DFIs) and export credit agencies (ECAs) 30 min
    • Lecture5.8
      Government shareholder arrangements 30 min
  • Chapter 6:Documenting the transaction: other project documents 2

    • Lecture6.1
      Construction contract, O&M contract and interface issues 30 min
    • Lecture6.2
      Sub-contract risk pass-down 30 min
  • Chapter 7:Procurement arrangements 2

    • Lecture7.1
      A typical PPP timetable 30 min
    • Lecture7.2
      Unsolicited proposals 30 min
  • Chapter 8:Introduction to key sector issues 7

    • Lecture8.1
      Road projects 30 min
    • Lecture8.2
      Urban rail projects 30 min
    • Lecture8.3
      Freight rail projects 30 min
    • Lecture8.4
      Airport projects 30 min
    • Lecture8.5
      Port projects 30 min
    • Lecture8.6
      Accommodation projects 30 min
    • Lecture8.7
      Glossary 30 min

    Enforcement and insolvency

    As we have seen above, the traditional purpose of taking security in a financing transaction is problematic in a project financing. Enforcing the lenders’ security package may be difficult for a number of reasons:

    (a)        government consents are likely to be required for a change in ownership of the project company or a sale of project assets – a project concession can’t simply be transferred to another party;

    (b)        will the local courts enforce agreements governed by foreign law (e.g. the loan agreement) or the judgments of foreign courts or arbitral awards?

    (c)        in some jurisdictions there might be a moratorium on insolvency, effectively preventing the lenders from enforcing their security;

    (d)        in many jurisdictions, enforcement remedies may only be capable of being exercised through the courts;

    (e)        judicial sale may be the main (or only) enforcement remedy and the concept of a receiver (or a similar concept) may not exist;

    (f)         substantial preferential creditors may rank ahead of all types of security.

    At the outset of the transaction the lenders will need to understand the enforcement position in the relevant jurisdiction so they can be prepared if things go wrong during the project term.

    SUMMARY OF KEY POINTS
    Security, enforcement and insolvency

    • Lenders will always want to take a comprehensive security package to ensure that they have the highest possible chance of recovering the monies advanced to the project company. The main reason for taking security over an asset in project finance transactions is to reduce the risk of competition (other creditors taking an interest in project assets) or the risk of disruption to the project progress (such as a creditor commencing insolvency proceedings). Security provides the lenders with the reassurance that they can control all aspects of the project, from taking ownership and managing it, to dealing with contractual counterparties and appointing an insolvency practitioner if insolvency proceedings are instigated.
    • The type of security taken will depend on the project finance transaction and the nature of the assets involved e.g. whether there are onshore assets (land, equipment, bank accounts, etc.) or offshore assets (rights under construction and supply contracts or contractor guarantees, insurances, shareholder loans, etc.).
    • Lenders will also want to take security over the shares in the project company (so that it can exercise full control) and the shareholder loans (so that it can discharge shareholder debt more easily on enforcement, facilitating a quick sale of the project company if necessary).
    • It is not uncommon for the lenders to face significant difficulties when trying to enforce their security package for various reasons: often government consents are required for changes in ownership of the project company or its assets; the foreign nature of the security documents, the foreign concepts of a receiver or security trustee and the foreign location of the assets, can also be problematic.
    Prev Security
    Next Involvement of multilateral development banks (MDBs), development finance institutions (DFIs) and export credit agencies (ECAs)

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