The allocation of risks between the parties serves to mitigate the overall project risk. This meaning that is conventional in the project finance literature21 is a form of credit enhancement. Yet in the PPP arena, the term "risk sharing" has often been used to imply the allocation to the private party of the major public infrastructure risks (design, construction, and principally financing). The reason of this transfer was nonetheless associated to off-balance financing and seen as solution for public financial constraints. The prospective of receiving the delivery of public infrastructure at no cost have proved nonetheless generally difficult to achieve for self sustainable concession itself, impossible for non self-sustainable public infrastructure service delivery.
Risk sharing and Debt reduction: an uncertain belief for PPP [Mexico: Acuerdo Secretaria de Hacienda Diario Oficial 9 Abril 2004, Considerando] ..Que con motivo de la restricción presupuestaria que enfrentan las dependencias y entidades de la Administración Pública Federal, resulta fundamental la participación de los sectores sociales y privado como coadyuvantes en el objetivo de hacer un uso eficiente del gasto público federal; Que es necesario aprovechar la experiencia y los medios de financiamiento y desarrollo de infraestructura con que cuentan los sectores social y privado, con el fin de dirigir los recursos público hacia las funciones esenciales de la Administración Pública Federal, así como a la prestación eficiente de los servicios públicos por parte del Estado; Que una forma de incrementar la eficiencia en el uso de los recursos del sector público es transferir a los sectores social y privado la mayor cantidad de riesgos y contingencias relacionados con los costos financieros y de ejecución de obras, mediante la utilización de esquemas para la realización de proyectos para prestación de servicios con base a los cuales se celebran contratos de servicios de largo plazos, a fin de que el gasto de cada ejercicio fiscal se concentre en los aspectos más importantes de la función pública; Que el grado de eficiencia que los sectores social y privado pueden aportar a las dependencias y entidades de la Administración Pública Federal en la prestación de servicios de largo plazo, con el uso de activos que posean dichos sectores, puede redundar en ahorros significativos para las dependencias y entidades, con el consecuente incremento en la eficiencia y racionalidad del gasto público a ser ejercido anualmente.. |
Differentiating "funding" and "financing" of a project. "A project may be privately financed, but service payments to the private party would still be funded out of the State Budget. The distinction revolves around whether or not a Privately Financed Project (PFP) provides additional funding on top of what is normally provided in the State capital investment program. This in turn depends on the type of project - i.e., whether it is a Social Infrastructure PFP or an Economic Infrastructure PFP. • In the case of social infrastructure, PFP procurement normally does not generate additional funding over and above what is provided in the State capital program. Potential social infrastructure PFPs must be approved and funded for, using conventional procurement methods, before a decision is taken to use PFP procurement on value-for-money grounds. • Economic infrastructure, however, has the potential to add to the pool of resources for capital investment. Such projects are generally funded by third party revenues (user charges) and may not require net additional funding from the Government's consolidated revenue. To the extent that economic infrastructure PFPs top up existing resources, this frees up capital resources and gives the Government the capacity to bring forward capital expenditure which it might not otherwise have undertaken". [NEW SOUTH WALES TREASURY, "Submission to public accounts committee. Inquiry into Public-Private Partnerships", November 2005, pp.14] |
Thee emphasis of risk sharing should be on "efficient risk allocation" or "allocate the risk to the partners who are best able to manage those risk and thus minimize costs while improving performances" instead of on "more risk to private sector the better". This is also the consequence of the introduction of contracts whereby the private party's performances are normally stated in terms of required final output.
A second meaning which is in reality a specification of the first started to predominate in PPPs: "participation" in the risk of the public party at the financial level by way of public support via guarantee, capital contribution, transfers of assets or commitments in kind. In both cases risk sharing serves to make the PPP sustainable and normally bankable (able to serve debt incurred with its financing).
The long term duration PPP makes the management and supervision of risk of risk a fundamental element of its stability.
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21 M.F. KABIR KHAN -R.J. PARRA, Financing Large Projects, Pearson, 2003, pp. 11