INSEAD Library

Includes bibliographical references and index and glossary

Digitized

Public-Private Partnerships Principles of Policy and Finance Contents List of Figures List of Tables Introduction Chapter 1 xi xiii xv What are Public--Private Partnerships? §1.1 Introduction 1 §1.2 Public Infrastructure and the Private Sector §1.3 Public­Private Partnerships 2 §1.4 Development and Structures 4 §1.5 PPPs and Public Infrastructure §1.6 Types of PPP 13 11 1 1 Chapter 2 PPPs--For and Against 15 16 §2.1 Introduction 15 §2.2 New Public Management, Privatisation and PPPs §2.3 Budgetary Benefit 17 §2.4 Additionality 17 §2.5 Financing Cost and Risk Transfer 18 §2.6 Risk Transfer and Value for Money 18 §2.7 Economies of Scale 20 §2.8 Whole-Life Costing and Maintenance 21 §2.9 Private-Sector Skills 21 §2.10 Public-Sector Reform 24 §2.11 Complexity 26 §2.12 Flexibility 26 §2.13 PPPs and Politics 27 Chapter 3 PPPs Worldwide 29 §3.1 Introduction 29 §3.2 Developing PPP Programmes §3.3 Legal Framework 31 §3.4 United Kingdom 33 §3.5 United States 39 §3.6 Australia 41 §3.7 France 43 §3.8 Korea 44 §3.9 Spain 46 §3.10 South Africa 47 29 Chapter 4 Cash Flow and Investment Analysis §4.1 Introduction 49 §4.2 Net Present Value/Discounted Cash Flow §4.3 Internal Rate of Return 51 §4.4 Problems with DCF and IRR Calculations §4.5 Uses in PPPs 56 49 49 52 Chapter 5 The Public-Sector Investment Decision 58 §5.1 Introduction 58 §5.2 Economic Justification 58 §5.3 Value for Money and the Public-Sector Comparator §5.4 Affordability 67 §5.5 Balance-Sheet Treatment 68 62 Chapter 6 Public-Sector Procurement and Contract Management §6.1 Introduction 74 §6.2 Project Management 75 §6.3 Procurement Procedures 77 §6.4 Other Procurement Issues 84 §6.5 Due Diligence 86 §6.6 Contract Management 88 §6.7 External Advisers 91 74 Chapter 7 The Private-Sector Investor's Perspective §7.1 Introduction 96 §7.2 The Investment Pool 96 §7.3 The Investment Decision 101 §7.4 Bidding and Project Development §7.5 Joint-Venture Issues 108 §7.6 The Project Company 108 §7.7 External Advisers 111 96 107 Chapter 8 Project Finance and PPPs 113 114 §8.1 Introduction 113 §8.2 Development of Project Finance §8.3 Features of Project Finance 115 §8.4 The Project-Finance Market 116 §8.5 Why Use Project Finance for PPPs? 120 Chapter 9 Private-Sector Financing--Sources and Procedures §9.1 Introduction 124 §9.2 The Role of the Financial Adviser §9.3 Commercial Banks 126 §9.4 Bond Issues 135 §9.5 Bank Loans v. Bonds 140 §9.6 Mezzanine Debt 142 124 124 Chapter 10 Financial Structuring 143 §10.1 Introduction 143 §10.2 The Financial Model 143 §10.3 Model Inputs and Outputs 145 §10.4 Financing Costs 150 §10.5 Debt Profile 153 §10.6 Cover Ratios 159 §10.7 Relationship between Cover Ratio, Leverage and Equity Return §10.8 Accounting and Taxation Issues 167 §10.9 Recourse to the Sponsors 169 166 Chapter 11 Financial Hedging 171 §11.1 Introduction 171 §11.2 Interest-Rate Risk 171 §11.3 Inflation Issues 187 Chapter 12 Lenders' Cash-Flow Controls, Security and Enforcement §12.1 Introduction 202 §12.2 Control of Cash Flow 202 §12.3 Security 208 §12.4 The Role of Insurance 211 §12.5 Events of Default 218 §12.6 Intercreditor issues 219 202 Chapter 13 Service-Fee Mechanism §13.1 Introduction 223 223 §13.2 Contract Scope 223 §13.3 Payment Structure 225 §13.4 Usage-Based Payments 229 §13.5 Availability-Based Payments 236 §13.6 Mixed Usage and Availability Payments §13.7 Third-Party and Secondary Revenues 241 241 Chapter 14 Risk Evaluation and Transfer §14.1 Introduction 242 §14.2 Principles of Risk Transfer §14.3 The Risk Matrix 245 §14.4 Political Risks 247 §14.5 Site Risks 248 §14.6 Construction Risks 253 §14.7 Completion Risks 259 §14.8 Operation-Phase Risks 263 242 242 Chapter 15 Changes in Circumstances and Termination §15.1 Introduction 270 §15.2 Compensation Events 271 270 §15.3 Relief Events 276 §15.4 Step-In and Substitution 277 §15.5 Early Termination: Default by the Project Company §15.6 Optional Termination or Default by the Public Authority §15.7 Early Termination: Force Majeure 287 279 285 §15.8 Early Termination: Corruption 288 §15.9 Termination and Subcontractors 289 §15.10 Tax Implications of a Termination-Sum Payment 289 §15.11 Final Maturity, Residual-Value Risk and Hand-Back 289 Chapter 16 Funding Competition, Debt Refinancing and Equity Sale §16.1 Introduction 292 §16.2 Funding Competition 293 §16.3 Equity Competition 296 §16.4 Debt Refinancing 297 §16.5 Equity Sale 307 292 Chapter 17 Alternative Models 310 §17.1 Introduction 310 §17.2 Public-Sector Procurement 311 §17.3 Post-Construction Take-Out 312 §17.4 Public-Sector Debt Funding 313 §17.5 Joint-Venture PPPs 321 §17.6 Not-for-Profit Structures 321 Bibliography 327 Glossary and Abbreviations 334