Nr | Question | YES | NO | User comments | Reference to MGDD | |
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IV. Assessment of the risks – Introduction Risk is transferred only if the non-government partner faces sufficient financial consequences. To demonstrate a clear risk transfer, the costs that accompany a risk occurrence should generate financial consequences for the non-government partner. Such financial consequence should be sufficient to put at risk not only the non-government partner's operating margin but also expose its equity to significant losses. When a risk is also allocated to third parties (lenders, insurers, guarantors, etc.), the PPP assets should be classified off the government's balance sheet if most of the risk is borne by the non-government partner and the third parties together. | Eurostat | |||||
35 | Has a risk analysis been prepared? |
| on-balance sheet |
| What is observed in partnerships between government and its counterparts is a sharing of risks. Analysis of risks borne by the contractual parties is the core element as regards statistical classification of the assets involved in the contract, to ensure that the impact on the government deficit of this type of partnership is correctly accounted for. However, it may be seen as normal that some risks are taken by government (for instance, in the case of force majeure or for such government actions that change the conditions of activity that were agreed previously). Taking into account a central role of risk analysis for statistical classification of PPPs, the relevant authorities should undertake such assessment. If a risk analysis has not been prepared, it is not possible to assess the PPP project according to Eurostat rules. Projects for which no risk analysis is available will be classified on the government's balance sheet. | VI.5.3.2/31 |
36 | Does the risk sharing analysis rely on the potential effect on the private partner's profits (lower income and/or higher cost) and/or on the probability (even roughly estimated) of occurrence of the risk, assessed and estimated according to relevant statistical methods? |
| on-balance sheet |
| It should not be acceptable for a private partner to bear only risks that are potentially highly damaging but have a very low reasonable expectancy. However, please note that when considering guarantees in PPP contracts, in practice, the probability with which the event triggering the guarantee will/can occur is not considered by Eurostat. | VI.5.4.2/78 |
37 | Does the analysis take into account the combined impact of government financing and guarantees in relation to capital costs? |
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| It might well be the case in PPP contracts that government provides a minority of the total capital costs but then guarantees a major part of the remaining project finance (directly relating to the partner loan liabilities or indirectly, e.g. through guaranteed availability payments). In this case, the combined effect of the government's support would represent more than a majority of the capital costs, leading to the conclusion that the majority of risks rest with government (see also below questions 40, 78 and 84 for instance). Additionally, in the cases where a PPP is majority financed by equity, a special analysis needs to be undertaken to assess the impact on the risk distribution between government and the partner of the contract provisions relating to the equity stake. | VI.5.3.5/67 |
38 | Are the payments linked to both availability and demand risk? |
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| Some contracts may combine payments linked to both availability and demand risks in a quite balanced way, as reflected in the indicators relating to the level of payments where no category seems to be predominant. Therefore, the analysis of the risks borne by each party must assess which party is bearing the majority of the risk in each of the categories mentioned above. However, when contracts combine payments linked to demand and availability in such a way that government receives revenue from tolls and the private partner is remunerated through availability payments, such contracts are not considered by Eurostat to be either PPPs or concessions. A decision for the asset classification needs to take into account the total volumes of these two flows: if government revenues from tolls exceed 50% of availability payments to the private partner, then the asset and corresponding debt is recorded on the government's balance sheet. | VI.5.3.2/39 |