Governments have historically financed infrastructure projects through budgetary allotments. However, as the demand for infrastructure grows and access to resources has become limited the public sector has increasingly looked to the private sector to provide financial resources, innovation, and technical expertise. Though working relationships between the public and private sector are not new, public private partnerships (PPP) are a relatively recent addition to an ever-evolving relationship.
PPPs are a "cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards".1 PPPs can be quite complex, involving many different participants including government, private sector experts, financiers and customers, each having a different perspective, which is not always fully understood by the other participants. The purpose of this report is to provide the reader with a better understanding of the financier's perspective of PPP structures. Though some of the financing issues and examples may not be applicable to everyone, it is hoped that this report will provide an increased understanding of the financier's perspective; and in doing so a framework to increase the capacity of governments in order that they may be able to mobilize additional resources for the provision of infrastructure and basic services.
The report is broken up into five sections, each section representing a different segment in the development and assessment of PPPs. The first section provides a quick review of PPP structures and some of the key financial benefits. The second section looks at the financing of PPPs - what it is, how it is put together, and the different sources of financing available. The third section provides an overview of the activities that financiers use to assess the commercial viability of a project. The fourth section looks at risk and how it is defined. The fifth and final section provides an overview of environmental issues that affect private sector financing. Included in the Appendix are worksheets and background information to be used while reading the report.
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1 As defined by the Canadian Council for Public-Private Partnerships