Developing Public-Private Partnerships for Sustainable Energy REETA Planning Workshop , Georgetown 11./12. February 2014

PPP Definition A Public–Private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. This leads to a business relationship between a private-sector company and a government agency for the purpose of completing a project that will serve the public. Public-private partnerships can be used to finance, build and operate projects especially in public infrastructure including the energy sector. Financing a project through a public-private partnership can allow a project to be completed even under difficult governmental fiscal conditions. Thus, partnership between public authorities and the private sector can allow for a better and less costly provision of services compared to public sector provision of service alone. 11.06.2018 REETA 2014

PPP Definition Governmental contributions to a PPP may be in kind, for example the transfer of existing assets. In projects that are aimed at creating public goods and services the government may provide a capital subsidy in the form of a grant, so as to make it more attractive for private investors. The government may also support the project by providing revenue subsidies, including tax breaks or by guaranteeing annual revenues for a fixed time period. Significant and sustainable development can only be realized with the private sector’s participation. The private sector is the main engine for economic growth and development. PPPs allows entrepreneurs to set economic activity in motion by bringing resources together to produce goods and services. Through PPP the private sector can bring in additional funding for public projects, besides valuable technical and managerial experience. 11.06.2018 REETA 2014

PPP Definition A Public-Private Partnership may take several forms: A governmental agency is a “partner” (shareholder), State provides a concession to private party to render a service and use public property or natural resources (roads, water, land, geothermal resources). The State provides financial support to the project undertaken by a private party (pays for part of the investment or guarantees certain payments). PPPs may involve different contractual modalities and several sources of revenue management, concessions, licenses, user fees, government periodic payments (PPAs) or lump sum payment. 11.06.2018 REETA 2014

FINANCING LEGAL STRUCTURAL Typical PPP risks Lack of financing for good projects Low interest in financing long term projects Limited availability of appropriate terms for project financing LEGAL Weak or missing legal and regulatory framework Low interest in long-term framework setting and projecting Inadequate reliability of political and legal decisions STRUCTURAL Missing expertise and experience Insufficient leadership Lack of capacity building and training of executive professionals 11.06.2018 REETA 2014

Typical PPP advantages COMMERCIAL Synergy effects can increase economical viability Mutual interests in government- private sector partnership increase stability Financing opportunities become cheaper POLITICAL Reduction of costs for consumers Success stories Regional development and creation of jobs STRUCTURAL Increase of public awareness Participation of civil society Earlier solution for public demands and needs 11.06.2018 REETA 2014

Typical Structure of a PPP Project Finance Structure (vs. Corporate Finance) Special Purpose (SPC) with equity from private investor  responsible for investment and Operation & Maintenance SPC is the borrower of long-term financing  creditworthiness based on state guarantees and expected cash flow SPC is the service provider and has interface with end users State provides financial support/guarantees to project (complementary investments) and or SPC (equity contribution, guaranteed revenues) State is regulator and enforcer of contractual obligations 11.06.2018 REETA 2014

Existing PPP Examples in the Caribbean MADDENS ESTATE WIND FARM, NEVIS, W.I. Developer: WINDWATT Inc. Technical Studies: wind studies, EIA, Geo tech etc. Capacity of 2.2 MW on government leased land of 2 acres, 8 – 275 KWh Turbines to supply 1.1 MW to 1.6 MW, commissioned in July 2010, Wind Resource Contract (NIA & Windwatt) Power Purchase Agreement/PPA (Nevlec & Windwatt) – signed in 14 July 2009: 1st in OECS 11.06.2018 REETA 2014

Possible future PPPs in the energy or energy-related sector Waste to Energy Electrical Mobility 11.06.2018 REETA 2014

Possible future PPPs in the energy or energy-related sector Decentralized Electrification Solar marine transport 11.06.2018 REETA 2014

Possible future PPPs in the energy or energy-related sector Efficient Energy Generation Hydropower 11.06.2018 REETA 2014

Recommendations Support the improvement of regulatory framework energy sector to promote RE and EE-PPPs.   Technical assistance and support through GIZ in cooperation with other donors, prioritizing non-reimbursable funding to develop pilot projects in RE and EE. Replication of successful RE and EE initiatives at national levels Support and participate in PPPs diversifying the energy production matrix Use other donors’ funds and facilities to leverage additional financing resources and instruments as well as technical assistance: the Global Environment Facility (GEF) the EU’s Caribbean Investment Facility (CIF) IDB, MIF and CDB’s grant funding 11.06.2018 REETA 2014

Thank you for your attention! 11.06.2018 REETA 2014