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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

    Timeline for financing an infrastructure PPP project

    The image below depicts a simplified version of the different timelines for the workstreams that will be carried out on a project financing.

    The main points to note are:

    1. The concession will be negotiated for sometimes several years and maybe even signed before the financing is arranged. The project investors and government counterparty need to be mindful of the requirements of funders when putting the concession package together.
    2. The effective dates of the various contracts should ideally align, although in some projects early works may be contracted and undertaken before the financing has been entered into.
    3. Although the O&M contract will not kick in until the end of the construction period, it will need to be signed at the same time as the other project documents to ensure that the operator is lined up and the relevant risks adequately transferred to the operator.
    4. Financial close is the date on which all the conditions of the lenders to financing have been met – these include all consents, corporate and other authorisations to be in place; all relevant documents to have been entered into; legal opinions provided; feasibility, due diligence and environmental studies to have been done and reports from the relevant experts provided, etc. Following satisfaction of these conditions, the lenders will be ready to fund.
    5. Funding will be in line with an agreed construction schedule, with payment usually being made monthly against construction invoices. The lenders’ technical adviser will sign off on the progress of the works before payment will be made by the lenders. The lenders will make payments during the availability period – usually the period from financial close to expected construction completion. The lenders may want to include a “look forward test” as a condition to drawdowns – if the technical adviser certifies that the project is unlikely to complete by the longstop date, then it will a default under the loan agreement. They won’t want to throw good money after bad. This type of test is also linked to a “funding shortfall” test – which looks at whether there is enough money to achieve construction completion – if there isn’t (perhaps because of delays) the lenders will want to drawstop the loan (stop making disbursements) or call a default (unless further funding can be found).
    6. At the outset of construction the different documents will provide for an expected completion date. It is well known that construction projects rarely run on time, so some flexibility for delays is built into the documents. However, the documents will provide for an ultimate long stop date, by which time construction must be completed. This longstop date will be different under each document. The first longstop date to occur will be under the construction contract, say, 6 months after the expected completion date; then the loan agreement, say 9 months after the expected completion date and then the concession contract, say 12 months after the expected completion date. This gives the project company time to resolve the issues before it becomes a default under the loan agreement, and then the lenders time to resolve the issue (using any step in rights under a direct agreement – which are discussed in section 5.2(f) before the concession agreement is terminated.
    7. The operator’s obligations will arise just before the expected completion date with a mobilisation period to get on site and prepare for completion when the project will effectively be handed over to the operator to run. There will be a period of warranty by the construction contractor when it will be obliged to return and rectify any issues with construction, after which the construction contract will terminate. A detailed interface agreement is usually entered into between the construction contractor and the operator to deal with this period and to address any issues between them e.g. who is liable for an issue and how it will be dealt with.
    8. The O&M agreement will typically continue until expiry of the concession agreement. The loan agreement will however terminate some years before that – this is to ensure that the loan is repaid while the project is still performing and that the lenders are out of the picture before any handback obligations kick in (the obligations relating to the conditions of the project assets when they are transferred back to the government at the end of the concession).
    Prev Key parties
    Next Scope and term of a PPP Concession Agreement

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