Public Private Partnerships

Concept and Local frameworks

Module 1

By Mujtaba Shahneel, CFA, CP3P

 Introduction to the course
 Understand what Public Private Partnerships are and their peculiar
issues/structures
 To understand the local milieu and frameworks of PPPs in different
jurisdictions
 Be able to integrate and apply the necessary qualitative and
quantitative tools and techniques to evaluate project viability and to
structuring financial arrangements to allocate the risks and returns of
the PPP project to different stake-holders.
 Be able to assess the financing aspects of local and global PPP projects
and use this assessment as input to current and emerging business
decisions. The course will also look at infrastructure financing options
in Pakistan including China Pakistan Economic Corridor and the
Independent Power Producers regime
 Develop an appreciation of the multiple perspectives and experiences
as well as the value of teamwork in real world business contexts.
 Contact info
 Email: mujtaba.shahneel@alumni.utoronto.ca

Write [Atomcamp] at the start of the subject

 Phone: +92-305-8444422 – I am always available on whatsapp

 This is a safe space for any issues that you may have and I am always
available to provide any kind of support that any of you may need

 I am also open to any kind of suggestions that you may have to

improve the course structure or content
 General Rules
 Lets make it interactive – lets learn together
 Lets respect eachother
 Lets make it practical and closer to real life by discussing examples
and anecdotes
 Our objective is to not only learn about PPP but also to develop an
overall analytical and critical approach
 What is infrastructure?
 “The basic structures, services and facilities needed for the
efficient and effective operation of a society/entity”
 It is the primary job of the Government to develop and
maintain infrastructure on the foundations of which the
private sector/investors will run their enterprises that will
lead to economic growth and socio-economic development
 Infrastructure needs to coordinated and logistically
complete
 Roads, Highways, Power network, Water network, Social
Services?
 Generally,
 High Project Cost i.e. funds requirement
 Feasibility study/time
 Long Gestation/Construction period
 Pay back period is long
 What is a public good?
 a facility or service that is provided without profit to
all members of a society generally by the Government
to benefit overall society’s development.
 public can have a free rider affect as it is developed by
tax payers money and the user may not be
contributing to the overall tax basket
 Example:
 Roads
 Street Lights
 Sewerage lines and treatment plants
 Emergency services
 Free health care
 Free education
 Service versus Product
 How about buying a printer with ready supply of toner, paper
and maintenance for 4000 rupees a month instead of paying
250,000 rupees to buy the printer and then maintaining it by
buying toner, paper and regular maintenance?
 Public Private Partnerships

World Bank’s PPP Knowledge Lab defines a PPP as "a

long-term contract between a private party and a
government entity, for providing a public asset or
service, in which the private party bears significant risk
and management responsibility, and remuneration is
linked to performance"
 Public Private Partnerships
Public sector has: Private sector has:
•legal authority • experience
• expertise
•law-making power
• technology
•monitoring and
• business skills
regulatory function
• access to multiple
•mandate financing
…but lacks …and faces
•funding •Immediate Profit
Maximizing pressures
•technical resources from shareholders
•business skills

PPPs align the varying objectives to create efficiency

 Difference between Privatization & PPPs
 Privatization is divestment of asset while PPPs is
development and operations of assets.
 Under Privatization, the government divest the asset and
management control through offer of shares purchase while
under PPP government develops a relationship based on
responsibilities and rights
 Privatization is transference of ownership while PPPs is
transfer of risks against agreed remuneration
 Types of Contracts
100 % non-public Divestures Enabler/ Regulator
ownership

Concessions BOO

BOT Governments’
Role
Leases

Management
contracts
100 % Public
ownership Provider
Duration
5 10 15 20 25 30

Increasing level of delegation, risk &

irreversibility
 Is it a PPP or not a PPP?
 Toll based DFBOT project?
 10 year Operations and Maintenance contract for a
major highway?
 A BOT Hydel power project with a 20 year PPA?
 Transportation project for 2 years based on availability
of bus fleet in agreed conditions against guaranteed
payment/km?
 10 year contract for Construction and Maintenance of
hospital and equipment where all medical staff is
employed by the Government?
 Turn key construction of Grain Silos where the
developer signs a separate operations contract for 10
years where financing is raised by EXIMP Bank?
 Why PPPs?
 What advantages PPPs bring to the table as
compared to a traditional project?
 Financing (both equity & debt) & commercial value creation
 Operations & Maintenance
 Efficiency, Innovation & Specialization
 Risk transfer
 At the same time, PPPs have negatives as well
like
 Development of PPP institutions and frame-work
 Long and cumbersome project development process
 Complex structure & procurement
 It is not a free lunch
 Risk sharing
 The theory behind risk sharing is that the party ‘most able’ to
handle a particular risk is allocated that risk to manage or
transfer
 Risk matrix captures all details of the transaction
 Importance of efficient risk allocation

Public Sector Contribution Optimal Risk

Allocation leads to Private Sector Contribution
 Guarantees Finance
sustainable and 
 Subsidies successful  Efficiency
 Co-investment projects  Technical expertise
 Tax incentives  O&M regime
 Land

Too much allocated risk Too much allocated risk

to public sector leads to to private party leads to
no Value for Money & project failure
inefficiency Optimal Risk
allocation

Public Sector Risk Transfer Private Party

 Institutional Frameworks
Primary
Government Institutional Arrangement Brief Functions
Legislation

Planning Project preparation and

P3 Authority
Commission facilitation
PPP Authority Act
Pakistan/
2017 (Amended
Federal
2021)

Finance Division Risk Unit Risk Analysis

Facilitation and Secretariat

PPP Unit
Finance to the PPP Policy Board
Sindh PPP Act 2010 Department Project Support Risk Analysis/Fund
Sindh (Amended 2018)
Facility Management
Project Identification &
Line Agencies PPP Nodes
Preparation
Punjab PPP Punjab PPP Almost similar to Almost similar to that of
Punjab
Authority Act 2020 Authority that of P3A P3A
Facilitation and Tech
Baluchistan PPP Act 2018 P&D PPP Unit
Support
Facilitation and Tech
KPK KP PPP Act 2020 P&D PPP Cell
Support
Facilitation and Tech
GB GB PPP Act 2019 P&D PPP Unit
Support
Thank You
Questions