Government Finance Statistics GFS course ch. 13.5.9 11.15 Concessions Government Finance Statistics

Concessions - Definition GFS course ch. 13.5.9 Concessions - Definition As with PPPs, concessions are long-term contracts between government and corporations concerning building/use but here Government is not the main payer, final users are Government Finance Statistics GFS training course 2012 2

Key questions & concepts for concessions GFS course ch. 13.5.9 Key questions & concepts for concessions As with PPPs and long-term contracts National Accounts: who’s asset is it? Legal ownership vs economic ownership Private asset or government asset? Government Finance Statistics GFS training course 2012 3

Government Finance Statistics GFS course ch. 13.5.9 PPPs vs Concessions PPPs vs concessions Eurostat terminology may differ from others Concession: partner builds, operates, maintains & most revenue from 3rd parties PPP: partner builds, operates, maintains & most revenue from government Government Finance Statistics GFS training course 2012 4 4 4

Government Finance Statistics GFS course ch. 13.5.9 MGDD MGDD Chapter VI.3 “Contracts with non-government units related to fixed assets (exc. PPPs)” mainly covers concessions Government Finance Statistics GFS training course 2012 5

Government Finance Statistics GFS course ch. 13.5.9 Concessions Typical concessions (1) Government allows private partner to operate its asset (e.g. an airport for 30 years) (2) partner builds, operates and maintains a toll road, most revenue from road users Government Finance Statistics GFS training course 2012 6 6 6

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules New build concessions Usually asset classified as private partners until end of concession period At end asset transferred at market value (GFCF), if difference in price paid (often nil payment) balanced by capital transfer Payments to govt during lease period are rents (if for land) or taxes Government Finance Statistics GFS training course 2012 7 7 7

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules Existing asset transfers from government asset usually is private partners until end of concession period At start, asset transfer is GFCF at market value, matched by imputed investment grant. At end asset transfers at market value (GFCF), if difference in price paid balanced by capital transfer Payments to govt during lease period are rents (if for land) or taxes Government Finance Statistics GFS training course 2012 8 8 8

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules If partner is public enterprise: Check it is genuinely market (using forecasts if necessary) Check for early termination clauses due to partner’s performance using PPP rules Where government 100% shareholder of partner restricted to one concession, it is ancillary unit Government Finance Statistics GFS training course 2012 9 9 9

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules Usual off balance sheet case: Major part of partner’s revenue comes from tolls/fees So partner bears risk : demand risk from end-users, availability risk – their performance maintaining assets That price for end-user is pre-set in contract not relevant consideration Government Finance Statistics GFS training course 2012 10 10 10

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules But can be on balance sheet: Government finances majority of capital expenditure costs Government guarantees more than half the debt for financing asset’s capital expenditure costs Government Finance Statistics GFS training course 2012 11 11 11

Concessions – MGDD rules GFS course ch. 13.5.9 Concessions – MGDD rules If on balance sheet: GFCF imputed finance lease as for PPPs (net of any investment grants) User payments are routed to government (with collection charge paid to partner) and balanced with repayment of imputed loan/interest Government Finance Statistics GFS training course 2012 12 12 12