Nr | Question | YES | NO | User comments | Reference to MGDD | |
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IX. Guarantees and similar mechanisms Eurostat considers that guarantees covering more than 50% of the capital cost of a given PPP project have an impact on the distribution of most of the project risk between the parties to a contract, irrespective of the probability of guarantees actually being called during the contract. In such cases the PPP assets should be recorded on the balance sheet of the government. In Eurostat's view, when classifying PPP assets, it is necessary to look at the individual and aggregate impact of guarantees in order to test whether these cover more than 50% of the capital cost of the project. Relevant guarantees include partial or total credit guarantees, minimum revenue guarantees and guarantees of minimum demand provided to the non-government partner. Additional information about guarantees (also from a statistical point of view) can be found in EPEC's document "State Guarantees in PPPs, A Guide to Better Evaluation, Design, Implementation and Management", published in April 2011. | Eurostat | |||||
78 | Does government provide mechanisms such as guarantees -direct (e.g. loan repayment guarantees) or indirect (e.g. fixed elements of availability payments) - or majority financing (e.g. investment grants, loans)? |
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| Guarantees or majority financing are mechanisms by which government re-assumes the majority of the project risks that would have an impact on which balance sheet the asset is recorded in. Guarantees have an impact on the distribution of risks between the parties. The scope of a guarantee, depending on its coverage and how it is structured, may influence the recording of the PPP assets. It may result in the (re-)assumption by government of some of the risks analysed above. The guarantees to consider when analysing the risk distribution between government and the partner take into account guarantees provided to the creditors or to the partner, in various forms, such as insurance or derivatives, or any other arrangements with similar effects. In those cases where government finances a part of the PPP and also guarantees all or part of the partner's equity and/or debts, these actions should be seen as cumulative from the point of view of risk analysis. | VI.4.2./19 |
79 | Does government provide a guarantee that fully covers the project-related borrowing of the private partner? | on-balance sheet |
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| Generally, this helps the partner to raise funds on the markets at a lower cost and improve its credit rating. In some cases, a debt guarantee can trigger a classification of the partner's debt as government debt. | VI.5.3.5/60 |
80 | Does government provide a guarantee that partially covers the project-related borrowing of the private partner? |
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81 | Are there legal provisions that transfer to government all or part of the debt service? |
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| In some cases, a debt guarantee can trigger classification of the partner's debt as government debt. | VI.5.3.5/61 |
82 | Is the private partner obviously unable to service the debt? |
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| VI.5.3.5/61 | |
83 | Is the coverage of a guarantee wider than just one specific project-related instrument? |
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| The scope of a guarantee, depending on its coverage and how it is structured may influence the recording of the PPP assets. It may result in the (re-) assumption by government of some of the risks analysed above (part V, VI and VII). | VI.5.3.5/63 |
84 | Does the government guarantee cover a majority of the capital cost of the PPP project (or the private partner's project-related debt) at inception or during the construction stage? | on-balance sheet |
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| If the answer is "yes", the asset is recorded in the government's balance sheet. | VI.5.3.5/64 |
85 | Is a given return assured by the public entity to the private partner in all circumstances? | on-balance sheet |
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| For instance, government could ensure a given return on equity, whatever the performance of the partner or the effective level of demand from final users. If the answer is "yes", the asset is recorded on the government's balance sheet. | VI.5.3.5/64 |
86 | Is there a possibility of a change in the economic ownership of the assets (at their remaining value) if a guarantee is actually called? |
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| If the answer is "yes", the reclassification of the assets is required at the time of that event. | VI.5.3.5/68 |
87 | If a guarantee is actually called, does this change the share of risks borne by the parties? |
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| This could be the case if government takes control of the partner and no longer pays on the basis of asset availability and demand, but mainly on the basis of operating costs. If the answer is "yes", the reclassification of the assets is required at the time of that event. | VI.5.3.5/68 |