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Optimising project finance solutions in the water sector. Suggestions for enhanced public private partnerships in developing countries

19 October 2009

PhD ceremony: X.C. Mandri Perrott, 14.45 uur, Academiegebouw, Broerstraat 5, Groningen

Thesis: Optimising project finance solutions in the water sector. Suggestions for enhanced public private partnerships in developing countries

Promotor(s): prof. H. Folmer

Faculty: Spatial Sciences

 

Public-private partnerships (PPP’s) have become an increasingly important mechanism in the provision of infrastructure and in particular for long term water and waste water services. This research is based on a detailed analysis of considerable international case history and sector experience in PPPs since the late 1980’s. Data is collected through an examination of the historical evolution of PPPs, the implications of PPPs against the national legal contexts in which they are set, and the contractual structures available for private sector involvement in the provision of water and wastewater services. The key findings and recommendations are based on a broad interpretation of sustainability which includes adequately addressing human, social, economic and environmental issues. The long term success of the PPP arrangement will in a very large part be determined by the way that these factors are dealt with contractually. Suggested improvements for clauses that can potentially influence contractual and scheme performance are provided. The importance of ensuring the continuing success of PPP schemes during their long term implementation and operation phases is recognized by providing specific recommendations on how to maintaining the economic and financial equilibrium. Also related to the long term nature of the PPP arrangements, suggestions are made on how flexibility can be introduced to the contract but at the same time do not open the door for full re-negotiation of basic terms.Other recommendations include effective ways to transfer risks of underground asset condition and other imponderables to the Developer in a systematic and sequential manner. This is taken one stage further by providing suggestions to improve public bidding and procurement procedures to deal with imperfect data. The research finishes by building on some of the contractual and structural limitations of the ‘traditional’ contract forms, proposing new contractual models, namely Output Based PPP agreements and long term arrangements incorporating the use of Trust structures to more effectively leverage financial resources.

 

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