1. Government Finance Statistics
GFS course ch
Concessions
Government Finance Statistics

2. Concessions - Definition
GFS course ch
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

3. Key questions & concepts for concessions
GFS course ch
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

4. Government Finance Statistics
GFS course ch
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
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5. Government Finance Statistics
GFS course ch
MGDD
MGDD Chapter VI.3
“Contracts with non-government units related to fixed assets (exc. PPPs)”
mainly covers concessions
Government Finance Statistics
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6. Government Finance Statistics
GFS course ch
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
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7. Concessions – MGDD rules
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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
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8. Concessions – MGDD rules
GFS course ch
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
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9. Concessions – MGDD rules
GFS course ch
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
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10. Concessions – MGDD rules
GFS course ch
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
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11. Concessions – MGDD rules
GFS course ch
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
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12. Concessions – MGDD rules
GFS course ch
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
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