Public Private Partnership – An opportunity for private investors
June 29, 2012
On June 27th, VAPRO Romania has participated in the seminar „Public Private Partnership for infrastructure projects” organized by Bursa Media Group – an initiative which we welcome as being still of great interest and current.
The reason we are saying this is because we have been talking about Public Private Partnership (PPP) for some years now, but it is known that up to today we have no projects implemented or even submitted and approved. However, this is an approach that works well in many other countries (the most representative of them would be Great Britain, France, Hungary, Austria and many more) and which could also work in our country.
So, we will make a short summary, with the main ideas about what PPP means and conclude with some types of projects or priorities brought at the panel by the representatives of the Ministries. We tried to focus on the priority areas that are most interesting for the community of investors, namely: infrastructure – transport and health.
The PPP is always initiated by a public partner (central or local authority) and is (or should represent) the most appropriate form of raising and involving private capital in the development and operation of public investments. The cooperation between the public and private investors, within a PPP project can run for a relatively long period of time (up to 49 years). In Romania, the authority responsible for the PPP is The Central Unit for Coordination of Public Private Partnership (UCCPPP). Basically, their role is to review the procedural aspects related to the process of selecting the private partner.
What is the procedure and what are the steps of a PPP project?
1. Identifying the object (the need) of the PPP project and approving its opportunity
2. Developing the pre-feasibility study or background study, and get the approval of the UCCPPP
3. Developing and publishing of the selection announcement for the PPP (description of the project and services needed, the requirements, criteria and methods of evaluation and selection of interested investors)
4. Receiving the letters of intent, from private investors, selecting and signing the project agreement – in order to start the negotiations
5. Negotiation / competitive dialogue and presenting the final offers
6. Designating the winning offers, signing the PPP contract with the private partner selected and publishing the contract
7. Setting up the project company (joint-stock company, Romanian legal entity, having as shareholders the public and private party, who are represented in proportion to their participation in the PPP project)
8. Developing and operating the investment, according to the PPP contract
9. Terminating the PPP contract by the free transfer of property to the public partner, in good condition, exploitable and free of any charges, and then dissolving the project company
Among the most interesting projects, listed as a priority by the ministries, we mention:
• Ministry of Transport: Danube – Bucharest channel (Trans-European Transport Corridor VII), estimated value of investment 1.528 million Euro; Highway Tg Mures – Iasi – Ungheni, 307 km, estimated value of investment 609 million Euros; Metro line Bragadiru – Voluntari, 25,9 km, estimated value 2.000 million Euros
• Ministry of Health: 6 projects for construction and equipment of emergency regional hospitals approved by memorandum in Cluj, Iasi, Tirgu Mures, Timisoara, Bucharest, Craiova, reabilitation of nursing homes/spas from Mangalia, Techirghiol, Felix, etc.
UCCPPP representatives have presented a PPP project, which seems to be the most advanced among the others, project already approved by UCCPPP under the pre-feasibility study phase, namely: building a road tunnel undercrossing Gutai Mountains, with user fees, project innitiated by Maramures County Council. The estimated value of the investment is 92,193,690 euros. The next phases are: the publication of the announcement in SEAP, negotiating with the private investors and awarding the contract.
Could this be the first PPP project that will attract the interest of private investors for such projects? It should be noted that although there is a legal framework and in the opinion of the legal authorities this could work and could provide the necessary conditions to implement these PPP projects, until now, the investors have not rushed to answer the challenges.
Remains interesting to see if, the current legislation – which according to some is quite restrictive and much more perfectible in the opinion of others – allows the configuration of an optimal mechanism that provides the private investor with the tools to safely return his investment and to obtain an attractive and reasonable profit. The political factor must also be considered. Good news is that, at the European Union level, there are discussions that for the next programming period, 2014 – 2020, in which Romania will spend again a semnificant part of the European budget, we could use the European funds to support PPP projects. Could this be another way to reduce investors’ risks and make these projects more attractive?
For more information about the PPP project implementation and the priority projects on the list of the central and local authorities please contact us.