Murphy sells Malaysian business to PTTEP for $2.1B
Source:  Offshore Energy Today
Thursday, 21 March 2019 13:59

The U.S. oil company Murphy Oil has agreed to sell its Malaysian business to Thai oil firm PTTEP for $2.127 billion. Murphy could also earn further $100 million subject to certain future exploratory...


Energean spuds Karish North well offshore Israel
Source:  Offshore Energy Today
Thursday, 21 March 2019 13:47

Greek oil and gas company Energean has started drilling its Karish North exploration well offshore Israel using the Stena DrillMAX drillship  Energean’s flagship Karish and Tanin development...


Ophir, Medco agree on sweetened takeover deal. Coro backs away
Source:  Offshore Energy Today
Thursday, 21 March 2019 13:34

London-listed oil company Ophir Energy has accepted Indonesia Medco Energy’s increased takeover bid. Ophir was also recently approached by Coro Energy over a potential takeover.


McDermott in Middle East EPCI deal worth at least $500 million
Source:  Offshore Energy Today
Thursday, 21 March 2019 12:19

McDermott International has been awarded a substantial contract award from a Middle East customer for engineering, procurement, construction and installation services in the Arabian Gulf.


CNOOC Limited meets annual oil and gas production goals, hits historic high in net proved reserves
Source:  Offshore Energy Today
Thursday, 21 March 2019 11:12

CNOOC Limited has met its annual production goals in 2018 and reached a "historic high" in its net proved reserves. 


Shell wins most blocks in Gulf of Mexico offshore sale
Source:  Offshore Energy Today
Thursday, 21 March 2019 10:54

Latest offshore oil and gas lease sale in the U.S., held on Wednesday, attracted $244,299,344 in high bids for 227 tracts covering 1,261,133 acres in federal waters of the Gulf of Mexico. Oil giant...


Wintershall sets new production record ahead of pending DEA merger
Source:  Offshore Energy Today
Thursday, 21 March 2019 10:37

German crude oil and natural gas producer Wintershall has set a new production record in 2018 and increased its reserves by 12 percent. 


Semco Maritime lands Tyra engineering job
Source:  Offshore Energy Today
Thursday, 21 March 2019 09:48

Semco Maritime has been awarded an EPCI contract with Total as part of the Tyra Redevelopment Project in the Danish North Sea.


OGA to explore powering offshore oil and gas platforms from renewables
Source:  Offshore Energy Today
Thursday, 21 March 2019 09:21

The UK Oil and Gas Authority (OGA) has been supporting the country’s ongoing transition to a low carbon energy mix.


Global Energy forms EPC contractor firm following Apollo buy
Source:  Offshore Energy Today
Thursday, 21 March 2019 09:10

Global Energy Group has formed a new engineering, procurement, and construction (EPC) contractor through the acquisition of the Apollo Offshore Engineering.


Public-Private Partnership in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC)
Source:  PPP Blog World
Wednesday, 22 August 2012 10:12

Today I would like to feature very useful tool for anybody involved with Public Private Partnership. The World Bank site developed by legal experts providing excellent database of ppp related legislation, regulation and also contracts focused on infrastructure in following sectors:
Clean Tech : Clean energy laws and regulations, PPP toolkits, examples of PPPs for green technology, renewable energy and energy efficiency projects.

Energy and Power: Overview of countries' existing energy laws and regulations, PPP toolkits, sample laws and licenses, Power Purchase Agreements (PPAs), implementation agreements, etc.

Telecommunications/ Information & Communication Technology (ICT): Information and resources on telecom sector reform, laws by country regulations and licensing.

Transport: PPP agreements for airports, ports, roads and tolls, light rail, and other transportation infrastructure projects.

Water and Sanitation: PPP sample agreements, toolkits, and legal material for PPPs in Irrigation and Small - Rural Water Providers

Solid Waste: PPP legislation and sample contracts on waste collection, street cleaning, waste disposal, treatment and recycling.

PPP Days 2012
Source:  PPP Blog World
Tuesday, 07 February 2012 11:03

I wish to announce an upcoming event that will be of interest to you. It is the Business Forum which will be held on 23 February 2012, at the Palais des Nations, Geneva, Switzerland. It is held under the auspices of the PPP Days that is being co hosted by the United Nations Economic Commission for Europe, the World Bank Institute and the Asian Development Bank with the support of the IFC and the Swiss Economic Cooperation Organization( SECO).
This event will provide opportunities to:
– personally meet key government officials from countries show-casing their project pipelines at the Business Forum including the Russian Federation, India, Brazil, Kazakhstan,  Vietnam , the Philippines, Turkey, Japan and Ukraine,

– be among the first to learn about their PPP projects;

– network with public and private sector practitioners and decision makers in the PPP business world;
In addition, you may also be interested to attend the the ‘Virtual Site Visits’ (Friday, 24 February) that will present several PPP success stories from around the world such as the administrative buildings project in Berne , Manila Water, Lesotho Hospital, Romania dialysis, and the Geneva-Annecy PPP motorway.

You can find detailed information on the event at the following website where you can also obtain the registration form. furthermore a briefing for the business community will be held prior to the Business Forum at 4pm on Wednesday, 22 February - that will be followed by 'Swiss Night' that is kindly being hosted by the Swiss Government.

Should you have further questions, please do not hesitate to contact the UNECE Secretariat by email.

Discussing Public Private Partnership in Irrigation
Source:  PPP Blog World
Monday, 26 July 2010 17:40

Two weeks ago we did hold the eConference on Public Private Partnerships in Irrigation on the Global PPP Network, which was following the WBI organized eCourse on Irrigation PPPs. I would like to share with you couple of comments made by different discussantsw on this subject as I find it quite interesting.

“The International Food Policy Research Institute estimates that “the food gap” (the difference between consumption and production) in developing countries will grow from about 90 million tons in 1993 to about 230 million tons in 2020. The FAO estimates that 60% of future gains in food production will have to come from irrigation. Modernized, efficient, intensive irrigated agriculture, rather than an expansion of irrigated area (i.e. not in Africa – Africa’s must expand and there is huge potential for the “right irrigation”), will have to play a central role.” Commented Abdulhamid Azad (World Bank)

So it seems we do have a problem here to solve, and privately financed and operated Irrigation can be very important solution provider, or not? This was extensively discussed and especially did discussants look at cost recovery, demand side and government subsidies.

Abdulhamid Azad (World Bank) also said, that “It should not be concluded from the dismal perspective on cost recovery in irrigation financing that the huge public investments in irrigation have been a waste or that the era of irrigation is over. On the contrary, irrigation project have made a great contribution to welfare, food security, poverty alleviation and the economy. As documented in a number of World Bank review, the benefits of most irrigation investment have also directly reached the large numbers of poor farmers and poor famers or landless (such as in India: Sodic Land reclamation project) have benefited directly. Also, since irrigation increases farming intensity, it increases labor demand.

A typical example of the aggregate impact on poverty comes from India: districts with little irrigation had an incidence of poverty 2.5 times greater than in districts which had substantial irrigation. And irrigation projects -- at least those financed by the World Bank -- have substantial economic returns -- the average rate of return of World Bank-financed irrigation projects is 15%.Farmers are responsible for the costs of operating and maintaining their systems (tertiary/on-farm); in many instances they are responsible for meeting the full costs of replacement, rehabilitation and new investments. Where these changes have taken place, there have not only been sharp swings in the relative proportion of private and public spending, but there have been dramatic improvements in the efficiency of investment and operation and, in most cases, major positive environmental impacts.”

Melissa Rekas (Castalia), who did facilitate the eCourse on PPPs in irrigation did observe that ” The topics that have been discussed most are subsidies and farmers’ willingness to pay for irrigation. Participants in the course state that one of the obstacles in an irrigation PPP is the required subsidy. However participants understand that PPPs in irrigation can bring many benefits – mostly stemming from improved planning and design, operations, maintenance and management of irrigation systems. PPPs can overcome many of the weaknesses of government-provided irrigation, in which poor maintenance and unreliable service are common.”

“The major constraints in the sector are related to knowledge, governments’ interests and farmers’ willingness to pay. The concept of PPPs for irrigation is not widely known. Where it is known, there may be misconceptions. Central government ministries may not be interested in PPPs because they wish to retain control over investment decisions, and they don’t see that the private sector is not a welcome partner in agriculture. Besides the constraint of farmers’ willingness to pay, in the absence of secure land rights they may also fear losing land to the private party. Farmers opposed implementing an irrigation project in Swaziland as a PPP because farmers perceived it to be a ploy to have the private operator take over their land after they fail to pay for the water.”

The very same concern has been shared by Kristen Rautela (India) “in my opinion in infrastructure like water, there is hardly a demand risk (specially in developing world). Important point is the real demand backed up with willingness and capacity to pay. when that is factored in we would know the gap which government may have to find ways to fund.The other issue is to provide a better value for money solution when compared with micro solutions deployed by small farmers, like in case of some parts in India where bore wells are easy solutions. Any collective solution has to make the availability of water and cost of delivery of water attractive enough for these farmers. “
Issac Averbuch did comment on the willingness of farmers to pay “The price of the water and the willingness to pay for it depend on the price of the products which are grown by the small farmers. In developing world, normally the small farmers has a low educational level and limited skills to cultivate more sophisticated products and is not possible to pay an irrigation project with cultures like lettuce or onions or using scale of production like subsistence agriculture. Is absolutely essential to grow products with higher added value (like cotton, fruits which has international market or energy plantations). These cultures will allow the small farmers recover their money, pay for the water and have a sustainable development for their families and properties. So, provide the water is basic, but not enough. Technical and financial assistance at some level are essential. But to get the money of those more valuable products the small farmers has to be integrated in an agribusiness scheme or at least organized in cooperatives which will trade their products. I think I can summarize that a successful irrigation project is based in a tripod: water, education and high scale business.”

Alfonso Guzman (Castalia) explained demand risk in a great detail “One of the key issues with irrigation systems is demand risk - that is, the risk that not enough farmers will be willing to pay the price that is needed to cover the full cost of building and operating the irrigation system. This risk is particularly important in irrigation systems because small farmers that are used to growing subsistence crops find it very hard to reliably quantify the financial benefit that irrigation water brings to their farming business, and therefore to commit to pay a price for that irrigation water. Farmers find it particularly difficult because with irrigation they would be able to grow higher value crops which they do not know how to grow, or where to sell or what prices to expect. This issue of demand risk is of particular importance in greenfield irrigation systems - that is, where farmers are not yet consistently using irrigation. For example, this was a particularly difficult issue in Ethiopia where the Government , with the our help, was considering a PPP for a greenfield irrigation system. When we surveyed farmer willigness to pay we found that farmers were essentially not willing to pay for irrigation because they could not quantify the benefit of irrigation.There are at least three options for managing demand risk.First, is to have the the private investors bear the full demand risk. This would create strong incentives for the private investor to build the system to fit the demand and willingness to pay, or to find options for minimizing demand risk (for example, by helping farmers to learn how to grow new high value crops and providing them with access to markets). This was trialed in the proposed West Delta PPP irrigation system, but limited interest from private investors signalled that transfering all the demand risk to the private party might not be viable.Second, having the government bear all the demand risk. There are several ways in which the government can do this. One way is for the government to pay the private party for making the irrigation system available, regardless of how much water farmers use and how much they pay for this water. This method is commonly used in PPPs for hospitals, prisons, schools. This essentially means that the government is providing farmers with a subsidy to make irrigation water available to them. Providing this subsidy would only make sense if the net economic benefits that the irrigation system brings to the country are greater than the subsidy.Third, is to have the government and private party share demand risk. There are several ways in which this can be done. One way is for the government to offer a minimum demand guarantee (as well as share on the demand upside), another way is to have a PPP contract with a variable term (for example, if the demand is lower than expected the term of the contract would be extended to ensure the private party that it will receive the same present value of the revenue). This is a common demand sharing arrangement in tolls roads in Chile.”

Aldo Baietti (World Bank) did also comment extensively on this issues following” I think it is important to differentiate the "cost of water" and the "cost of the service". From my experience very few countries actually charge a water resource price. So when we are talking about cost recovery in irrigation we really mean the cost of bringing the water to the farmer (although there is no particular reason for not including a water resource fee given the effects of climate change and increasing water scarcity). But in terms of the cost of service, this would involve the cost of the infrastructure plus O&M, including a reasonable return on investment, whether it be a public or private entity. But rarely we have seen where most of these costs are factored into an irrigation service tariff that farmers would pay. This is particularly true for irrigation services that are conducted on a "utility model" whereby there is one service provider with many consumers. Certainly on private systems where the farms have developed their own water source and irrigation infrastructure, they do wind up paying for most of these costs as they are unavoidable.But going back to a utility system that serves many, it becomes more difficult to pass on all the costs to the farmers, for a number of reasons including political ones. For this reason, it is essential to carry out willingness to connect an pay studies prior to designing and building the system. what you don't want to do is to overbuild a system without fully understanding the financial commitments that must be made to support it if the farmers cant or won't pay. If you are catering to commercial farms that produce high value crops it is probably easier to pass on the full costs of service. More difficult will be to pass on these costs to subsistence farmers. So this is where you need to develop a coherent subsidy policy, where the Government may assume initially a good share of the capital as well as some of the operating costs. But ultimately and as we have seen, there is at least the need to fully cover O&M, otherwise we would jeopardize the sustainability of the system. Since subsidy programs do have a significant opportunity costs, Governments must factor these financial commitments against competing demands and if resources are scare as they are in most developing countries, they must make a careful assessment on which investments subsidized over others. “

It is clear that many do recognize PPPs in Irrigation to be an important option with demand risk/willingness of farmers to pay being absolutely key success factor. And with public sector understanding the benefits this can certainly be done in form of public support mechanisms with great benefit of major impact on productivity of farm land and reduction of hunger in regions dependent on agriculture.

Changing landscape of PPP units governance
Source:  PPP Blog World
Wednesday, 14 April 2010 20:19

There has been published a lot regarding PPP Units governance, role and best practices. Common exterminator has been permanent evolution of PPP Units landscape and emergence of practices, which fit the current public administration and needs in particular country, rather than development of a single best practice that would rampage across the globe.

Stanford published research paper “Public Private Partnership Agencies, A Global Perspective” defines three types of PPP agencies: (a) Review Bodies; (b) Full service Agencies and (c) Centers of Excellence. While Review Bodies do have a more of a Regulatory function, Service Agencies do have Advisory role and Centers of Excellence have Capacity building mandate. Obviously these roles tend to be more structured and mixed up in different governance structures within the global landscape.

PPP Days 2010 has featured interesting developments in this area as a result of financial crises and also perhaps a natural development of PPP markets. Some of the trends are perhaps emergence of regional PPP units covering specific well defined region, emergence of strong federal PPP Units in Brick countries looking at country, state and municipal PPPs markets and governance major shift in single country focused PPP Units.

Three countries (South Africa, United Kingdom and Russia) have been featured in this regard during PPP Days 2010 in a specific session and number of other PPP Units during the course of the event including Indian PPP system, Korean PIMAK, EU EPEC, Canadian Partnerships BC, Brazilian Federal PPP Unit etc. Interestingly there are common trends to development of PPP Units alongside PPP market development.

Financial crises and South Africa PPP Unit: the demerger of regulatory and advisory roles, greater independence on Treasury. This was presented at PPP Days by the Head of PPP Unit at Treasury, William Dachs. SA context of financial crises did bring major change of government and while presidential support to PPPs remained strong, the government and line ministerial leadership in this field was very weak. Financial crises initiated some progress in terms of IPPs to respond to energy crises, set up of a hospital PPP program and strong support still for the transport related PPPs. Key driver at SA PPP governance is at the moment the separation of Advisory from Regulatory function when driving the deal flow. PPP Unit will move away from Treasury in to a new Government Component under the brand name of Partnerships SA, will be 100% government owned and will have mainly project development function. The regulatory function will be exercised by Director General NT.

Financial Crises and PPP governance in UK is taking opposite root that the one in SA. As presented by Director of PUK Eduard Farquaharson there are two important policy measures stipulated by financial crises: recent establishment of TIFU and planned set up of Infrastructure UK within UK Treasury, which will consolidate regulatory and policy team, TIFU and PUK and exercise clear responsibility from developing and supporting delivery of an infrastructure strategy for the UK. TIFU standing for “The Infrastructure Finance Unit” has been lunched as a “funding mechanism” to ensure successful financial close of UK PPP projects. While it did only support Great Manchester Waste deal with TIFU loan, it is deemed to have much bigger impact just by being available for financing of PPPs.

Very substantial impact had financial crises on Russia and its impact on PPP perception in Russia. Russian federal PPP Unit is located within Russian Development Bank the “Vnesheconombank” and led by Alexandr Bazhenov. Alexander explained during PPP days that the situation in Russia has changed dramatically. While prior financial crises Russia did look at PPPs as an important, but not essential tool, given rich surpluses in budgets, this has changed with financial crises and PPPs are now considered essential for the development. This is reflecting on status and role of PPP Centre within “Vnesheconombank”, giving the PPP unit mandates in capacity building, advisory of choice, and financing of PPPs.

Looking at the developments showcased on Russia, UK and SA makes one wonder, how often and how quickly are some countries able to reflect the governance of the PPP units to current market needs and how slow are some other countries in making small changes to support proper role of PPP units in terms of governance, policy, staffing and financing.

World Bank PPP Network
Source:  PPP Blog World
Saturday, 20 March 2010 03:49

We are launching a new collaborative space for PPPs, it is now up and running in a bare-bones form and we will be launching it at PPP Days in Manila in March.

The site is:
(if that doesn't work, this one should )

The idea of this is that it provides a set of communities - one overall one and then sub-communities - that can form the platform for a broad range of knowledge management activities. We hope develop this into a platform where we post learning tools and products as well as stream web conferences and seminars. We are hoping to "scoop up" people from the various forums we have (both those who attended and invited) which will form a good base for all of our work on PPPs.

Of course we are also keen to develop this with everyone's feedback.
We do expact large number of around 600 public sector offcials (who are in our database) working in PPP related areas in developing countries to join the platform.

We are also looking for experts to play a more significant role in management of this platform, let me know if you are interested in this.

Despite crisis, positive outlook for PPPs in Russia by Natalia Reznicenko and Filip Drapak
Source:  PPP Blog World
Monday, 21 September 2009 18:37

Many countries are experiencing a big infrastructure gap, and Russia is no exception. The Russian government is well aware of the problem, and it has announced that it will invest about US$1 trillion over the next 10 years in improving infrastructure. But how can the government raise that kind of capital? The expectation is that the private sector will contribute most of the financing though a Public Private Partnership (PPP).
While Russia does have some experience with PPPs, the track record so far has been spotty. We might mention in this regard one project that is sometimes considered to be the first PPP in Russia—the South-West Wastewater Treatment plant of St. Petersburg. The project was agreed upon by the Russian, Finnish and Swedish governments all the way back in 1986, but due to a lack of public financing the project was stopped. It was resurrected as a PPP in 2002 and formally procured as a 12-year BLT (Build-Lease-Transfer) contract.

The financial crisis has also thrown a wrench in the works. St. Petersburg has taken a lead in developing PPPs in Russia, but shaky credit markets have meant many projects have been put on hold.

The first PPP project launched by the government of St. Petersburg was a toll road called the Western High Speed Diameter (WHSD). The WHSD was enacted under the Federal Law on Concession agreements, which has been in force since 2005. Since the city government didn’t have the experience and proper skills to procure PPP projects, the WHSD met a lot of difficulties, including legal problems and issues with a feasibility study. In 2006 new regional legislation on PPPs was introduced in St. Petersburg that allowed the government to attract private sector interest and prompt PPP development. The value of the WHSD project is estimated at US$5-6 billion, which makes it difficult to procure in the current circumstances due to the high costs of capital and limited available funding. (Not to mention that the overall downturn of the economy has affected traffic forecasts.) Although a tender has passed and a bidder was chosen, the instability in financial markets has meant that the project had to be rescheduled. Investors need more time to redesign their financial models to meet the challenges of the financial crisis.

Read more here.

Is public guarantee for private debt solving the problem on PPP market?
Source:  PPP Blog World
Thursday, 13 August 2009 22:16

Financial crises and following credit crunch have substantially reduced options of governments in using PPPs. The reason is very simple; there is no longer enough money available for long term private infrastructure investment. However this situation is temporary as fundamentals of PPPs and reasons for PPPs remain stronger than ever.

Governments in many countries are in the process of procurement of large PPPs and therefore in need to solve this problem. More and more, the solution is, to deliver the public sector guarantee to private sector loans on the PPP projects. The question is: is this solving the problem? There are voices that say this is no longer rational, why does public sector guarantee a loan in private sector? Is not the rational for PPPs to actually let private sector provide the financing?

Actually, and for many people surprisingly, it is rational and it makes sense. First of all public sector is not doing PPPs primarily to secure financing. If public sector is doing PPPs for the right reason than it is for the expertise, innovation and motivation that private sector can deliver. Private financing is never cheaper and was never source of the value in PPP projects.

But than when we talk about moving some key risks to private sector do we cheat? Are no risks are being moved to private sector? How will private sector pay for the failure? The answer is "priovate sector invests equity, which is at stake, private sector is always risking just equity and the debt is the risk of banks, which finance the project.

Well, during financial crises, these banks do not want to do this at all, or they require additional security in form of guarantees of their loans. The only party, which can provide such guarantee on the market today is government or credit enhancement institution. And credit enhancement institutions are no longer available as their ratings have dropped due to financial crises.

To face all these issues French government has been “allowed to guarantee loans on priority projects implemented through PPPs entered into before 31 December 2010, up to a global ceiling of €10bn.”

UK, which is the largest PPP markets so far, has decided to establish Treasury Infrastructure Finance Unit (TIFU) to lend to PFI /PPP projects to “ensure that infrastructure projects go forward as planned despite financial markets conditions and thereby support jobs and economy”. This scheme found first project to bail out in April 2009, when “TIFU completed its first loan facility on 8 April 2009, providing a £120 million loan for the Greater Manchester Waste Disposal Authority’s PFI project alongside the European Investment Bank and a syndicate of commercial banks “.

Spanish ministry of infrastructure initiated special financial guarantees for PPP projects (mainly for high speed train) for an estimated amount of 15.000 M€ In Australia, the main problem is the unavailability of long tenor debt, with recent projects being financed using 5-year mini-perm structures. Governments have proved willing to share in the refinancing risk at the maturity of these financings. The State Government of Victoria has underwritten the senior debt syndication of its A$5 billion desalination project, in the expectation, that the bank club supporting the winning bidder will be able to sell down to members of the bank club that supported the losing bidder.

Portuguese government is reportedly providing Euro 800 mil. guarantee to Litoral Centro highway concession and will also guarantee Pinhol Interior concession project.

Kazakhstan had used debt instruments guaranteed by government to finance PPPs already prior financial cruises for the reasons to “encourage participation of pension funds in the system”. Currently the law enables the government to provide to the concessionaire guarantees for infrastructural bonds within the limits of concession agreements, guarantees for loans attracted to finance concession projects; the transfer of exclusive rights related to running a concession object; and the provision of grants in kind in line with Republic of Kazakhstan legislation. According to the professionals participating in the PPP process, they mentioned that the government’s accounting process in the fiscal budget will include subsidies or co-funding as state investments, whereas the guarantee will be considered as public debt.

There has also been a lot of countries having or considering Guarantee funds to support PPPs. The most successful has been Korea. Korea lunched Infrastructure Credit Guarantee Fund (KICGF) to facilitate private participation in infrastructure in 1994. In response to Asian financial crises in 1998 Korea supported even further the PPP policy and one of world largest and quite successful PPP programs has been lunched as result.

According to IMF “Korean government announced a fiscal stimulus package in response to the financial crisis with more than 15 percent of the envisaged investment to be carried out through PPPs. The package is accompanied by measures to reduce financial burdens on PPPs, smooth interest rate changes, and shorten project implementation. The measures introduce: (i) lower equity capital requirements on concessionaires (5–10 percent); (ii) for large-scale projects, higher ceilings on guarantees provided by the Infrastructure Credit Guarantee Fund (50 percent); (iii) help in changing equity investors for some projects; (iv) compensation for the preparation of proposals to encourage more vigorous competition during bidding; (v) sharing of interest rate risks with concessionaires; (vi) compensation for the excess changes in base interest rates through grading of risks at the time of the concession agreement; and (vi) shorter periods for readjusting benchmark bond yields.”

As it seems Korea has been quite happy about using this type of instrument in the financially critical times.

Is your lunch delivering the Value for Money?
Source:  PPP Blog World
Thursday, 30 July 2009 16:14

Value for Money (VfM) is a concept much older than PPP. You might find yourself, asking this very question, after an expensive lunch “was this value for money?”. Indeed if you can buy the same quality lunch for half of price, you can easily conclude, that this lunch was not value for your money. However the question also is; did you consider the risks? The risks you undertake in perhaps less reputable restaurant or risks related to commuting to a cheaper place or less convenient venue. Did you think about the risk that you shall not get served quickly enough and that you shall find yourself ill with food poisoning? Yeas all these factors have to be considered. On the other hand you can have the same risks in a very expensive restaurant as well –, but perhaps with a different probability.

As you can see, in order to evaluate Value for Money, you have to consider all risks and also the probability related to them. You have to consider the price and compare the quality and find some formula of how to evaluate this. Value for Money measurement in PPPs is no different. UK government started to use as a method to measure Value for Money a reference “lunch”. Reference lunch in this case is a project which delivers public infrastructure or service. This project is examined if being delivered traditionally by public sector and used as a reference. Than the reference project is being compared to options in using different forms of PPP and in the end of the day, comparing the private sector bids. UK Treasury Guidance on VfM has defined VfM “as the optimum combination of whole-of-life costs and quality (or fitness for purpose) of the good or service to meet the user’s requirement”.

The concept had some pedigree and good rational and so number of other countries has adopted Public Sector Comparator (PSC) as a way to ensure Value for Money in all procured PPP projects. One of such countries has been Australia. According to the Technical note of Partnerships Victoria “ The PSC estimates the hypothetical risk-adjusted cost if a project were to be financed, owned and implemented by government. The PSC is developed in accordance with the required output specification; the proposed risk allocation reflected in the contract released with the Project Brief, and is based on the most efficient form and means of government delivery.

However to compare one lunch with another is rather easy – you can actually get both and taste, but with infrastructure projects you can only build the project once, and sometimes you can only procure the project once so all your comparisons are theoretical and leave an open space for questions. Number of issues in PSC has been reported by UK National Audit office and the issues around PSC have been extensively discussed since. PPIAF have discussed this and the relevance of PSC for the developing countries in the article “Is the public sector comparator right for developing countries?”. The conclusion that “the PSC method, particularly as used in some industrial countries, may not be the best way to do all this in developing countries…”

Dutch way of looking at this was a little bit different. Dutch did realize, that there is need, to asses if private sector can actually deliver value, before going in to procurement and focused on cost benefit analyses of the options that are really available prior the procurement and the Public Private Comparator (PPC) has been born. Actually two of them have been born; one focusing of financial aspect and impact to government and the second one focusing on broader economic aspects and impact. For example building the bridge has financial cost to government and financial benefit is the toll charged on the bridge. But the economic impact of the traffic, shorter commuting way or establishment of connection to a remote location is not captured in financial PPC but in the economical PPC. Many critics do find however PPC even more tricky and see PPC even less reliable than PSC (Kramer). Dutch did therefore added also reference lunch for the private sector option and do use PPC early in the process and PSC in the procurement phase to compare public reference with private bids. National Treasury of South Africa in its PPP manual also describes how PSC model and PPP model are to be developed, so that VfM assumption can be made regarding the project. Capital Assets management Framework of British Columbia also in its guidance state that “Agencies should develop and use a Public Sector Comparator (PSC) to assess the financial aspects of value for money – and as a benchmark against which to measure the net value of alternative procurement options.”

Value for Money, PSC and PPC are a way to quantify the potential benefits when considering your options in infrastructure. But in the end of the day, despite all the analyses, it is up people responsible for individual project, to consider all the modalities and make the decision. And concerning the lunch – my advice is; whatever the value for money is, don’t forget to enjoy it.

PPPs endorsed on banks of Victoria Lake
Source:  PPP Blog World
Monday, 27 July 2009 23:25

There is a place, where Nile is born and local people can show you exactly where it is. It is such a privilege to see that place, which was searched for, by generations of explorers in Africa. Yeas I am talking about the place on the banks of Victoria Lake. Another perhaps important birth is taking place here at Munyonyo on the Ugandan Banks of Victoria Lake just now.

Ugandan president Museveni is hosting in this luxury resort over 1000 delegates from number of African countries including 4 other presidents to discuss how to go forward in transformation of Africa and the first day of dialogue kicked off with strong call for public private partnerships. When I was in Munyonyo last year, to hold a Regional PPP Forum for Anglophone Africa, we did have no idea, that just a year later will our efforts to push PPPs in Africa be endorsed by the most needed element in PPPs – which is broad political support from the top of the public sector pyramid. This clearly happened in Munyonyo this year and it is not just political endorsement of one country or one president, this is endorsement and consensus of Africa.

PPPs are taking nowadays strong roots in Africa. I remember couple of years ago, African PPPs were about South Africa, which first pioneered PPPs on the African continent, in modern times, establishing strong PPP Unit at the Ministry of Finance. And then I have heard very mixed news regarding PPPs coming over last years from the region. Number of countries transformed their privatization capacity in to a public private partnership capacity, building new institutions and new policies and often needed to adopt a new legislation. South Africa has been followed by Mauritius, setting up its PPP Unit and establishing PPP Policy in 2003. In the meantime number of other African countries got involved in PPPs on the project by project basis. I have to mention Maputo Port concession in Mozambique of 2003, Songas Processing Plant in Tanzania of 2004, Skikda Desalination Plant in Algeria of 2005 and Lesotho National Hospital in 2007 and most recent Ugandan Power PPP project at Bujagali. When you look at the map of PPP in Africa today , you can clearly see that PPPs have taken strong roots here and with the sort of political support that the 19th Global Smart Partnership Dialogue provided in Munyonyo this year, I do expect Africa to become regular player on the PPP global market.

'Let's not go out and throw the word privatization around…
Source:  PPP Blog World
Friday, 24 July 2009 18:34

...the way Joe McCarthy used to throw the word communism around.'—Coun. Justin Swandel

Privatization has been once magical word. I remember that, if something did not work in public sector utilities, companies or services, it was quite popular by politicians to call upon invisible hand of market and all powerful capabilities of private sector. And the magical word politicians used was privatization.

After 1980 the popularity of privatization has been decreasing steadily and PPP came in as more popular solution to problems in public services and infrastructure. Number of people is making the same mistake and PPP is becoming “magical word” of the begging of this century.

But there is no magic. There are many issues which can be solved by privatization, which PPPs can’t solve, there are projects, which are ideal for PPPs and there are some, which can’t be PPPs and should not be privatized. We have to evaluate all pros and cons rather than using magical words.

Sometimes people even define PPP as privatization like Kieran Lynch, who in his case study on London Underground defines PPP as “a variation of privatization in which elements of a service previously run solely by the public sector are provided for through a partnership between the government and one or more private sector companies. “ Obviously this kind of definitions is not helping to make substance of PPP clear to public.

As result of confusing PPP and privatization a lot of people in many countries have to explain the difference. Mr. Mitra in India recently commented "Let me make it clear, the Public-Private-Partnership model of financing projects is not privatization ... Besides building the world-class facilities, generating revenue for the Railways would also be the key consideration of the innovating business ideas," John Prescott, former UK Deputy Prime Minister, wrote in a letter to The Guardian “The PPP is not privatization…” and European Parliament explains that PPP is not even “ the first step towards privatization, because it's a contract with an end. “

Wikipedia defines privatization as the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector (government) to the private sector (business). In a broader sense, privatization refers to transfer of any government function to the private sector including governmental functions like revenue collection and law enforcement.

Wiki definition is correct, while privatization transfers ownership, PPP does transfer risks. While in privatization public sector delivers assets and gets paid, in PPPs private sector delivers assets and gets paid. I am really surprised people can get this wrong.

Global Infrastructure Basel GIB