Infrastructure Investment Public Private Partnerships

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Infrastructure InvestmentPublic Private
Partnerships
Robert A. Eckels
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Public Private Partnership

• Understand what it isa Partnership
• PPP Private Investment in Public Infrastructure
• Provision of Service usually long term
• Transfer of Risk to the private sector
• Two Models
• Concession Model
• User Pays (tolls, fare, fee)
• US experience TxDOT, Chicago Skyway
• PFI (Private Finance Initiative) Model UK
• Public Sector Pays based on Contract (Pass
  Through Toll)

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PPPs vs. Privatization

• No Transfer of Public Ownership
• Accountability remains with Public Sector
• Contractual Terms not Regulatory Scheme

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Why PPP?The Texas Model - Growth

• In past 25 years Texas
• Population Increased by 57
• Road use grew by 95
• State road capacity grew by 8
• In the next 25 years estimates show Texas
• Population will grow 64
• Road use will grow 214
• State road capacity, without new funding, will
  grow 6

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Texas Transportation Trends

• Growing Population
• Rising demand for added capacity
• Aging infrastructure
• Increased maintenance costs
• Decline in gas tax revenue
• Rising construction and ROW costs
• Pay as you go can not keep up with demand

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Challenge

• Good Governance Institutional Certainty
• Timely Negotiations
• Transparency in Negotiations and Partner Solution
• Avoid Conflicts of Interests
• Avoid Cancellation of Projects

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Principle 1

• Policy
• Roadmap fixed by Good Policy
• Strong Social Objectives
• Core Values Principles service, quality,
  fairness
• Consultation with Government
• Federal, State Local
• Investor Community Involvement
• Identify Projects

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Principle 2

• Capacity Building
• Internally
• Train personnel for the required skills
• Establish PPP divison
• Externally
• Find qualified consultants to help on projects

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Principle 3

• Legal
• Fewer - Better Simpler
• Fewer Laws remove constraints
• Better Laws transparency, predictability,
  security
• Simpler Laws competition, dialogue, commercial
  viability

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Principle 4

• Risk Sharing
• Partners Share Risk
• No Free Lunch - Government must assume some risk
• Every Deal is different Market Forces at Work
• Risk Sharing is Key to PPP Success
• Public subsidy may be in public interest, but
  care is needed in details and terms
• Cooperation and Mutual Support

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Principle 5

• Procurement
• Open and Transparent
• Public Disclosure of Opportunities
• Non-Discrimination
• Zero Tolerance of Corruption
• Choose the Right Partners

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Principle 6

• People First
• Define the Public Interest
• Consult with the People
• Keep the Public Informed
• Objective 3rd Party Oversight
• Independent Auditors

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Principle 7

• Environment
• Green Works for PPPs
• Provide incentives for private sector to adopt
  environmentally friendly criteria
• Avoid political criteria that mean nothing and
  add no value

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The Future of PPPs

• Public Private Partnerships work -
• Where they bring Value
• Where they bring Innovation
• Where they bring Operational Discipline
• Where they manage Lifecycle Costs
• Where they provide Transparency
• Public Private Partnerships work
• Compliment rather than replace traditional
  financing

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The Future of PPPs

• Public Private Partnerships work
• Where they find what each side does best
• Government
• Builds big infrastructure
• Eminent domain
• Taxes/Incentives
• Private Sector
• Innovation
• Service
• Market driven capital

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When You Think PUBLIC PRIVATE PARTNERSHIPS,Think
Fulbright.TM
AUSTIN BEIJING DALLAS DENVER DUBAI HONG
KONG HOUSTON LONDON LOS ANGELES MINNEAPOLIS
MUNICH NEW YORK RIYADH SAN ANTONIO ST.
LOUIS WASHINGTON, D.C.
www.fulbright.com 866-FULBRIGHT 866-385-2744