2.16 Under PF2, the public sector will act as a co-investor alongside one or more private sector equity providers. The public sector is expected to take a minority shareholding in a project and it will appoint a director to the board of the project company set up to implement the project. The minority stake will ensure that transfer of risk to the private sector is maintained and the necessary incentives on the private sector to achieve efficiencies in the project remain in place.
2.17 Public sector equity investment will be made on the same terms as private sector equity investment (i.e. shareholder rights) to ensure that the partnership is appropriately balanced. Further details on the terms for the investment are set out in Box 2.C.
Box 2.C: Terms of public sector equity investment • It is expected that the public sector will take a minority shareholding in a project to ensure sufficient risk transfer to the private sector is maintained. • Investment will be performed on a same terms basis (i.e. shareholder rights) as the private sector equity providers in order to ensure an appropriately weighted partnership. • Investment will be managed centrally by a unit within the Treasury on a commercial basis. • Funding competitions for a portion of the private sector equity will provide a transparent market price for the project equity and will set the price for public sector equity. For projects where an equity funding competition is not held the price will be matched to that of the successful bidder. • The proportion of equity that the public sector intends to invest will be set out in project's tender documents. |