1. The main Legal and Business Aspects of: Public Private Partnerships (PPPs) by Alexander Lykourezos Lykourezos Law Offices Belgrade, May 11 th, 2006

2. Conventional types of Public Procurement: Classical Public Contract Classical Public Contract Concession Agreements Concession Agreements

3. Main Features/Characteristics of Public Contracts: Contract for Public Works (on Public Property) Contract for Public Works (on Public Property) State appoints Contractor (Public bid/Contract) State appoints Contractor (Public bid/Contract) Contractor undertakes the project (construction) Contractor undertakes the project (construction) State pays reward to Contractor (installments/upon completion) State pays reward to Contractor (installments/upon completion)

4. Main Features/Characteristics of Concessions: Contract for Public Works (on Public Property) Contract for Public Works (on Public Property) State appoints Contractor (Public bid/Contract) State appoints Contractor (Public bid/Contract) Contractor undertakes the project (construction) Contractor undertakes the project (construction) State pays agreed reward for the project State pays agreed reward for the project State concedes use and exploitation of the final project by Contractor for a long time period State concedes use and exploitation of the final project by Contractor for a long time period

5. The basic practical weaknesses The burden on the Public side: Immediate Cost – On Balance Sheet Immediate Cost – On Balance Sheet Breach of Public Contract (delays, faulty construction) Breach of Public Contract (delays, faulty construction) Risk for bad performance Risk for bad performance Initiative dependant on the National Economy (“only available when money is available”) Initiative dependant on the National Economy (“only available when money is available”) Unfair terms in Concession Agreements Unfair terms in Concession Agreements Not flexible Not flexible

6. Public Private Partnerships (PPPs) Definition: “any joint venture between a public body and a private company, typically involving the joint ownership of a special purpose vehicle (SPV) established under company law, to work in collaboration on a variety of projects”

7. The basic facts about PPPs: PPPs are not new (UK Privatization scheme in the 80s) PPPs, in principle, are a type of Public Procurement (requiring special legislation) A “PPP” approach can be seen in conventional types of Public Contracts (e.g. concessions) However, PPPs introduce new financial tools and require a new “attitude” by the Public and Private Sector Considerable interest about PPPs all over Europe (EC Commission launched a wide debate with the “Green Paper” on PPPs in 2004) “PPP” is a generic term: Private Finance Initiatives (PFIs) is one form of PPP – “Procurement of services by private sector that are delivered through public assets”

8. The basic characteristics of PPPs: Contract between a public body and a private entity Relatively long duration of the contract Private entity either Designs-Builds-Operates (DBO) or Designs-Builds-Finances (DBF) facilities Private entity is financed by Private Institutions (agreement may include risk transfer, insurance and “step-in” clauses) Public body either pays upon completion of the project or agrees on a concession

9. Practical layout - Award of a PPP contract (Greek Law 3389/2005): Government (Ministers’ Committee) PPP Taskforce Public Body (Municipality) External Advisors Award Committee Private entity (consortium) SPV Private entity (consortium) SPV Private entity (consortium) SPV

10. A quick case study: “Athens International Airport”  A concession contract (with a PPP approach)  EU funding: Cohesion Fund 11%, EIB loan 47%  Greek State contribution 19%  Commercial debt 17%  Equity 6%  SPV: Athens International Airport S.A (55% Greek State, 45% Private Consortium)  Construction delays: 3 months in advance Source: Patrick Boeuf, EIB, 2004

11. “Athens International Airport” – Duration of Project Implementation Source: Patrick Boeuf, EIB, 2004 (Time in months elapsed in each phase) Total (10 years)

12. Why invest in PPPs? Access to a new market Access to a new market Private investment (institutional & private investors) Private investment (institutional & private investors) Project Finance Project Finance Insurance and Risk Transfer Insurance and Risk Transfer Legal and Financial advice Legal and Financial advice

13. Arguments in favour of PPPs: Expand of Public Works - Private finance, off balance sheet Expand of Public Works - Private finance, off balance sheet Value for money – Risk transfer – Performance-related reward Value for money – Risk transfer – Performance-related reward Commercial interest - Investments Commercial interest - Investments Innovation, Efficiency, Quality Innovation, Efficiency, Quality New approach to “Privatization” New approach to “Privatization”

14. Arguments against PPPs: Burden on future balance sheet Excessive outsourcing/sale of public property Excessive private sector control Commercialization of public services Corruption? Are these real concerns or remainders of an old attitude?

15. The keys to a successful PPP: Political support (focus on the public service) Political support (focus on the public service) Proper and complete legislation harmonized with international practice and expertise Proper and complete legislation harmonized with international practice and expertise Full and complete legal, financial and technical advice to the public bodies Full and complete legal, financial and technical advice to the public bodies A good PPP contract A good PPP contract A level playing field A level playing field Collaboration Collaboration

16. Email: allykourezos@lykourezos.gr Website: www.lykourezoslawoffices.gr Thank you for your kind attention!