| Several parties are involved in the implementation of a PPP project. They include government, project sponsor(s), banks and other financial institutions, experts, suppliers, off-taker(s) and third parties. As already discussed in Chapter II, a special project company called SPV may also be established for the purposes of project implementation and its operation.43 The details of implementation and payment arrangements are negotiated between the parties involved and are documented in a number of written agreements signed by them. If an SPV is established, it is at the centre of most of such agreements. In other words, the SPV negotiates the contract agreements with most of the parties involved in the process. If establishment of an SPV is not required, the concessionaire (or the private project company which sponsors the project) is at the centre of such agreements and negotiates the contract agreements with the other parties including the government involved in the process. | Parties in a PPP |
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| Figure 12 shows the nature and the general order of execution of such agreements between different parties. Among the agreements executed between an SPV (or the concessionaire/private project company) and other parties, the two most important once are the contract agreement with the government and the agreement with the financiers. In fact, the contract agreement with the government forms the basis for subsequent agreements with other parties. | Agreements in a typical PPP structure |
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A concession/contract agreement is the only agreement that is unique to PPP projects. It underpins the whole structure of a PPP transaction, defines the relationship between the public sector and the private sector, identifies and allocates vital risks in a project and represents an important part of the security documents for lenders. Other agreements are analogous in form and content to agreements found in other corporate or commercial transactions.
It may be mentioned here that all types of agreements shown in figure 12 may not be necessary for all projects, for example, an off-take agreement in case of a toll road. An off- take agreement may not be also necessary for all power projects.
Considering the scope of the present document, discussion presented here is limited to the contract agreement between the SPV or the concessionaire and the government.
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43 It was mentioned in Chapter II that establishment of an SPV is a key feature of large PPP projects, particularly when the PPP is a joint venture and/or financed on project basis. However, establishment of an SPV is not required for all PPP projects. A PPP contract can also be awarded to an existing private company.