Nr | Question | YES | NO | User comments | Reference to MGDD | |
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XI. End of the contract An analysis of the clauses dealing with the ownership/transfer of the PPP assets at the end of the contract period can be used as a supplementary criterion for determining the overall risk transfer, in particular where the risk analysis mentioned above does not lead to clear conclusions (e.g. if the risk distribution is borderline). | VI.5.3.3/46 | |||||
92 | Are the provisions for the ownership/transfer of the assets at the end of the contract period taken into account in the balance sheet treatment analysis? |
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| The final allocation of the assets cannot be the single straightforward criterion for the recording of the PPP assets but, notwithstanding this, it might in some cases provide additional insight into risks among the contract partners, as the clauses concerning the final allocation of the asset might help in assessing whether a significant risk remains with the private partner. | VI.5.3.3/46 |
93 | Do the assets remain the property of the partner at the end of the contract period? |
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| If the assets remain the property of the private partner at the end of the project, whatever their economic value at this time (but frequently their future economic life is still quite significant, notably in cases of infrastructure that has only slightly depreciated over time), then recording of the asset in the private partner's balance sheet would have an additional justification. | VI.5.3.3/47 |
94 | Does government have the freedom to buy the assets at the end of the contract or at any given point in time, at the then market value? |
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| If the answer is "yes", the private partner bears the risks associated with the continued demand for the asset and its physical condition. This also reinforces the recording of the assets in the private partner's balance sheet. | VI.5.3.3/48 |
95 | Does the contract foresee a transfer of the PPP assets to government at the end of the contract? |
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| If the risk analysis mentioned in sections IV-VIII for PPP projects does not give clear conclusions, this aspect is taken into account for the balance sheet treatment. If the answer is "yes", the following cases give arguments for the asset to be classified on the government's balance sheet: i) government commits to purchase the PPP assets at a pre-determined price which is higher than their economic value; or ii) the pre-determined price is obviously higher than the expected economic value of the assets at the end of the contract; or iii) the price paid by government is lower than the economic value (or even nil) but government has already paid for the acquisition of the assets throughout the contract by making regular payments that reached a total amount very close to the full economic value of the assets. In some circumstances, the price paid by government is more than economic value (e.g. prisons, hospitals) because the private partner is unable to take the residual value risk. This does not automatically mean that the project should be classified on-balance sheet. | Eurostat |