Public private partnerships' State perspective'

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Public private partnerships. State perspective.

• February 15, 2006
• Andris Parups
• Head of Conccessions Division
• Ministry of Economics, LATVIA

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Questions to be discussed

• Definitions
• What is PPP, concession ...
• PPP Policy in Latvia
• State initiatives, legal acts ...
• PPP Projects
• Identified projects, responsible institutions ...

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Different understandings ...
Strategiskais investors
Contracting-out
Joint Ventures
Concession

• PPP long term cooperation between public and
  private entity within whose framework public
  infrastructure/services are committed to private
  person for a defined period of time and under
  certain conditions, with aim to provide public
  services for society

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PPP classification

• Contractual PPPs
• Concession
• DBFO type projects
• Institutional PPPs
• Joint ventures

EC Green Paper on PPPs and Community Law on
Public Contracts and Concessions, 30.04.2004
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Contractual PPPs in Latvia

• Types

Concession
End user
DBFO contract
Public entity
Latvia
Concession
Concession Law
DBFO contract
Public Procurement Law
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Examples of Contractual PPPs in Latvia and abroad
London Undergound, UK
Millau viaduct (highest bridge in the world),
concession, FRA
Eiffel Tower, concession, FRA
Arlanda Express, Stockholm airport Stockholm
city, SWE
Sigulda cable car, LV
Tukums, Town, Street Lightening, LV
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Institutional PPPs

• Joint PPPs, Joint Ventures, Kooperationamodell,
  etc.
• Creation of joint venture held jointly by the
  public sector and private sector
• By the private sector taking control of existing
  public undertaking
• Selection of private partner
• The general principle of the Treaty
• State Administration Structure Law
• Commercial Law, LV

Some counties have elaborated specific regulation
on choice of private partner, e.g. Department
of Local Governments IRELAND,. Recommendations
of the Dutch Ministry of Finance
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Examples of institutional PPPs abroad
Berlin, Water Management, GER
ØRESUNDSBRO KONSORTIET Oresund bridge, between
Sweden and Denmark
Athens International airport, GRE
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PPPs in national economy of Latvia

• Two main pillars
• I. Additionally principle
• public budget constraints
• public budget management issues
• II. Quality principle
• Smarter procurement (input vs. output specs)
• Synergy on combining project stages risk
  sharing

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Who is doing what?
Ministry of Economics, Latvia

• Elaborates PPP Policy
• - PPP policy planning
• Legal acts
• Information channeling
• Consultations

• PPP project support
• PPP project consulting
• Methodology elaboration/support
• Information channeling
• Consultations

• Public Procurement Monitoring

Procurement Monitoring Bureau, Ministry of
Finance
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PPP Policy in Latvia

• Cabinet of Ministers has approved PPP Policy
  framework document
• PPP Action Plans has been submitted to the
  Cabinet of Ministers

• Elaborate guidelines / standard documents
• Elaborate official PPP web page in the internet
  (one stop agency principle)
• Support PPP preparation by covering transaction
  costs (for a limited time)
• Analysis of suitable economy sectors for PPPs
• Informative report to the Cabinet on state
  budget / national accounts and PPPs
• Establish PPP Consultation Board
• Elaborate PPP Study programs, organize seminars
• Submit new draft law on Concessions to the
  Cabinet
• Other tasks

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PPP procedure
Subject matter of the contract?
Concession
DBFO contract
Joint Venture
Law on Concessions
Public Procurement Law
State Administration Structure Law
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PPP procedure

• Difference between a concession from the
  public contract (DBFO contract)
• in Latvia?
• Right to exploit, or this right together with
  payment
• The right to exploit allows the concessionaire
  to demand payment from those who use the
  structure. Thus the concessionaire does not
  receive remuneration directly from the awarding
  authority, but acquires from it the right to
  obtain income from the use of the structures
  built, i.e. From the spectators, and income
  generated from the related businesses in stadium.
  
• The right of exploitation also implies the
  transfer of the responsibilities of operation.
  These responsibilities cover the technical,
  financials and managerial matters relating to the
  construction, by bearing the risks.
• The rulings of the European Court of Justice

Municipality X concludes the concession to design
/ build / finance / operate a stadium for 30
years
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PPP procedure. Concession Law

• Concession Law, January 20, 2000
• concession the transferring of rights to
  provide servises method auction or competition
• New Draft Concession Law
• concession - an authorisation the conceder
  awards with the concession agreement in
  compliance with the concession agreement under
  the terms and conditions set forth, where the
  concessionaire assumes under the concession
  agreement all or part of the risks relevant to
  the execution of the agreement .
• - Works concession
• - Service concession
• method detailed procedure

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New draft Concession Law

• Elaborated within the cooperation of experts from
  International Law firm the Ministry of Economics,
  EBRD, Swedish International Law firm Manheimer
  Swartling
• Addresses the EU Procurement Directives
• UNCITRAL Model Legislative Provisions on
  Privately Financed Infrastructure Projects

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Draft Concession Law
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PPP Procedure. Drawbacks

• Despite, - common objectives of both the
  contractual PPPs and institutional PPPs
• Long-term cooperation
• Risk sharing
• Higher quality service by the same or lower price
• Different regulations
• Not always suitable for the partnership (except,
  the Concession Law)
• A decision has been taken that it will not be a
  toll bridge. Thus, the option of Concession is
  declined as the private persons receives
  remuneration from the users using the building
  erected.
• Solution combined design/build contract with
  the service element, - by Public Procurement law

Municipality X wants to erect bridge. Possible
soutions (1) Concessoin (Concession Law), (2)
DBFO contract (Public Procurement Law)
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Working with PPP projects

• PPP unit, Latvian Investment and Development
  Agency
• Main objective
• Promote application of PPPs in the national
  economy, by providing the information support and
  consultations on the application of PPP model in
  different sectors of economy.
• Sectors of PPP interest
• Energy (CHP, district heating, etc)
• Social sector (kindergartens, schools, student
  dormitories, social housing, etc. )
• Environment (water management and solid waste)
• Transport (roads)

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Working with PPP projects
Energy sector Reconstruction of Jekabpils city
district heating system (reconstruction and
maintenance of district heating system facilities
on a long-term basis). Transport sector
Renovation of streets in Cesis town
(reconstruction of streets infrastructure and
maintenance in Cesis town). Social
Housing Building of dwelling-houses with social
apartments in Salaspils town (building and
maintenance of dwelling-house). Education
sector (building of a school and a
kindergarten) Renovation of Ogre Town Art
School Building of a pre-school educational
institution in Cesis town (renovation, building
and maintenance of a school and a kindergarten).
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Working with PPP projects

• Expected results
• Gained experience on research and implementation
  of PPP pilot projects
• Developed legal documents templates / standard
• Suggestions on how cooperate with financiers
• Developed PPP project implementation methodology
  
• Analysis of failures and success at PPP
  implementation
• Identified legal barriers and proposals for the
  improvement of legal environment
• Improved expertise to position LIDA as the centre
  of PPP excellence

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Thank you for your attention!