PP420-01: Private and Public Sector Partnerships

The Global PPP Experience

Global Trends

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1. PPP model faces intense scrutiny, but continues to spread

2. PPP Coordination Agencies are on the rise

3. Infra funds are aggressively chasing deals

Global Trend #1

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P3 Model faces intense scrutiny, but continues to spread

Spectrum of Infrastructure Provision Options100 yr pendulum swings with political winds!

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Public

Private

PPP

Typical Opposition to P3, globally

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Why does the pendulum swing towards more private provision?

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Bankrupt states – Spain, Chile, UK, Australia….

Why does the pendulum swing towards more private provision?

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Bankrupt states – Spain, Chile, UK, Australia…. Persuasion of multilaterals – Organizations like the

World Bank have been highly instrumental in persuading countries to enact privatization legislation from 1985-present

Why does the pendulum swing towards more private provision?

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Bankrupt states – Spain, Chile, UK, Australia…. Persuasion of multilaterals – WB and ADB with

developmental objectives persuade states to enact privatization legislation from 1985-present

“New Nations & Rapid Growth”– US canals and railroads in the 1800s built by private European investment; China today

Why does the pendulum swing towards more private provision?

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Bankrupt states – Spain, Chile, UK, Australia…. Persuasion of multilaterals – WB and ADB with

developmental objectives persuade states to enact privatization legislation from 1985-present

“New Nations & Rapid Growth” – US canals and railroads in the 1800s built by private European investment; China today

Times of Crisis – eg. Three Mile Island Disaster – nuclear activity ended in US, supply shortfall, major foray into private power in 1980s

Why does the pendulum swing towards more private provision?

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Bankrupt states – Spain, Chile, UK, Australia…. Persuasion of multilaterals – WB and ADB with developmental

objectives persuade states to enact privatization legislation from 1985-present

“New Nations & Rapid Growth” – US canals and railroads in the 1800s built by private European investment; China today

Times of Crisis – eg. Three Mile Island Disaster – nuclear activity ended in US, supply shortfall, major foray into private power in 1980s

New PPP model: competition, risk transfer, lifecycle perspective = value for money – direct and material benefit to society!!! eg. California, “new tool in the State toolkit”

The components of the P3 value proposition

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CompetitionIncrease efficiencyMaximize innovationTap global best practice

Risk transferPrivate sector takes performance risk (i.e. cost, schedule,

service levels)Lifecycle perspective

Integrate a project’s D, B, F, O & M components & optimize lifecycle costs

Reserve for future maintenance costs = Value for Money! = Direct, material benefit to society!! … eventually opposition goes away!!!

P3 is not:• New Money• Privatization

Global Trend #2

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As PPP model gains global legitimacy… PPP Coordination

Agencies are on the rise

Global diffusion of PPP Coordination Agency model since 1991

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Partnerships UK

Infrastructure Ontario

Partnerships BC California:

Performance-Based Infra

South Africa, Spain

Italy,Portugal,France

49 Other U.S. States ???

P3 Coordination Agencies: Roles & Functions Vary

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Debate in California: Service Agency vs. Center of Excellence?

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Benefits of Service Agency:Better positioned to protect public interest

than private “transaction advisors”Economies of scale in transaction management Long-term institutional memory for

assimilation of lessons learned into future project design

Global knowledge of terms negotiated in other deals and avoids inequities across sectors & geographies

Global Trend #3

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Global funds aggressively chasing deal flow

Who is originating these funds?

Geographic FocusConcentration in US/Europe

25 Source: CRGP, 2007, Infrastructure Fund Database

Dollar Value of New F unds B y R eg ion

$43,500

$26,826

$14,727

$21,360

$6,930 $5,997$2,724

$0

$10,000

$20,000

$30,000

$40,000

$50,000

N. Amer. Europe Global N. Amer. &Europe

India MENA Other

Number of New F unds B y R eg ion

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25

8 7 7 68

05

1015202530

N. Amer. Europe Global N. Amer. &Europe

India MENA Other

~15 India Focused Infra Funds, US$10-12 bn

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Source: CRGP, 2007, Infrastructure Fund Database

Summary - Three Global Trends

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