The New Market of Public Private Partnerships PPPs in Greece by Alexandros Lykourezos Lykourezos Law

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The New Market ofPublic Private Partnerships
(PPPs) in Greeceby Alexandros
LykourezosLykourezos Law OfficesNew York,
November 17th, 2006
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• Conventional types of
• Public Procurement
• Classical Public Contract
• Concession Agreements

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• Main Features/Characteristics
• of Public Contracts
• Contract for Public Works (on Public Property)
• State appoints Contractor (Public bid/Contract)
• Contractor undertakes the project (construction)
• State pays reward to Contractor
  (installments/upon completion)

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• Main Features/Characteristics
• of Concessions
• Contract for Public Works (on Public Property)
• State appoints Contractor (Public bid/Contract)
• Contractor undertakes the project (construction)
• State contributes in financing the project
• State concedes use and exploitation of the final
  project by Contractor for a long time period

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• The basic practical weaknesses
• The burden on the Public side
• Immediate Cost On Balance Sheet
• Breach of Public Contract (delays, faulty
  construction)
• Risk for bad performance
• Initiative dependant on the National Economy
  (only available when money is available)
• Unfair terms in Concession Agreements
• Not flexible

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• Public Private Partnerships (PPPs)
• Definition
• any joint venture between a public body and a
  private company, typically involving the joint
  ownership of a special purpose vehicle (SPV)
  established under company law, to work in
  collaboration on a variety of projects

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• The basic facts about PPPs
• PPPs are not new (UK Privatization scheme in the
  80s)
• PPPs, in principle, are a type of Public
  Procurement (requiring special legislation)
• A PPP approach can be seen in conventional
  types of Public Contracts (e.g. concessions)
• However, PPPs introduce new financial tools and
  require a new attitude by the Public and
  Private Sector
• Considerable interest about PPPs all over Europe
  (EC Commission launched a wide debate with the
  Green Paper on PPPs in 2004)
• PPP is a generic term Private Finance
  Initiatives (PFIs) is one form of PPP
  Procurement of services by private sector that
  are delivered through public assets

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• The basic characteristics of PPPs
• Contract between a public body and a private
  entity
• Relatively long duration of the contract
• Private entity either Designs-Builds-Operates
  (DBO) or Designs-Builds-Finances (DBF) facilities
• Private entity is financed by Private
  Institutions (agreement may include risk
  transfer, insurance and step-in clauses)
• Public body either pays upon completion of the
  project or agrees on a concession

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• The basis features of PPPs
• New Market for provision of Construction
  Services
• The financial aspect of PPPs
• Public Works ? Financial Instrument
• Off-Balance Sheet EUROSTAT 11 Feb. 2004
• Allocation of Risks
• Construction Demand Availability Risk
• Bankability
• Secondary Market Securitisation
• Insurance
• Value for Money Public Sector Comparator
• Incentive for Quality

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• Basic conclusion on PPPs
• Public sector
• Saves money Value for Money Allocation of
  Risks
• Private sector
• Makes money - Access to a new market
  Investment incentive

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International Interest in PPP
1999


Interested in PPP Source IFSL

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International Interest in PPP
2006
Interested in PPP Source IFSL


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• Greek Law 3389/2005 on PPPs
• Abolishes requirement of Parliament ratification
• Adopts new EU Directives on Public Procurement
• Regulates award and contractual scheme of PPPs
• Provides flexibility and allows shared better
  practice
• Enhances bankability (step-in clauses and
  securitisation)
• Complies with EUROSTAT regulations

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• Practical layout - Award of a PPP contract
• (Greek Law 3389/2005)

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• Greek PPP projects in the pipeline
• Multi-schools projects 27 Schools in Attica and
  31 Schools in Macedonia
• ( 266 mil. 20)
• Prisons projects 3 prisons facilities in
  Salonika, Volos and Corinthos
• ( 198 mil. 20)
• University of Peloponnisos
• ( 84 mil. 20)
• Courthouse projects 2 courthouse facilities in
  Heraklion and Patras
• ( 100 mil. 20)
• Police facilities project in Attica
• ( 36 mil. 20)
• Fire department facilities projects 7 facilities
  in Salonika, Alexandroupolis, Veria, Lefkada,
  Giannitsa, Mesolongi Gargaliani
• ( 31,5 mil. 20)
• International Conference Center in Athens (Paleo
  Faliro)
• ( 54 mil. 20)
• Municipalities (Article 224 of the New
  Municipalities Code)

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• A quick case study
• Athens International Airport
• A concession contract (with a PPP approach)
• EU funding Cohesion Fund 11, EIB loan 47
• Greek State contribution 19
• Commercial debt 17
• Equity 6
• SPV Athens International Airport S.A (55 Greek
  State, 45 Private Consortium)
• Construction delays 3 months in advance
• Source Patrick Boeuf, EIB, 2004

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• Athens International Airport Duration of
  Project Implementation
• Source Patrick Boeuf, EIB, 2004

(Time in months elapsed in each phase)
Total (10 years)
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• Why invest in PPPs?
• Access to a new market (services secondary
  market)
• Private investment (institutional private
  investors)
• Project Finance
• Insurance and Risk Transfer

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• Why is the Government using PPPs
• Expand of Public Works - Private finance, off
  balance sheet
• Value for money Risk transfer
  Performance-related reward
• Commercial interest - Investments
• Innovation, Efficiency, Quality
• New approach to Privatization

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• Arguments against PPPs
• Burden on future balance sheet
• Excessive outsourcing/sale of public property
• Excessive private sector control
• Commercialization of public services
• Corruption?
• Are these real concerns or
• remainders of an old attitude?

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• The keys to a successful PPP
• Political support (focus on the public service)
• Proper and complete legislation harmonized with
  international practice and expertise
• Full and complete legal, financial and technical
  advice to the public bodies
• A good PPP contract
• A level playing field
• Collaboration

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Email allykourezos_at_lykourezos.grWebsit
e www.lykourezoslawoffices.gr

• Thank you for your kind attention!