Risk Mitigation in Public Private Partnerships – PPP – P³

Financing, Design, Build & Maintenance challenges for public private partnership (P³) Projects

Introduction

The ongoing global financial crisis has drastically reduced available credit and government participation in PPP financed projects. The world “crisis” affected all asset classes and sectors, lenders responded with changes to the P³ form, financing dynamics and increased collateral security requirements affecting the P³ procurement process.

Many notions exist about P³ projects and the costs. Fact is P³s really do work. For any project to be effective it must not use old models for the structure and the form of the development and its financing metrics models. Many new instruments protecting Stakeholder Cooperatives and Joint Venture Agreements exist. Instruments mastered by Matrixz Consortia facilitators that protect the authority, the community and the developer.

This section explores some of the key factors and their impacts to the creation of sustainable profitable P³ financing including;

Project financing matrices

Long-term permanent funding solutions

Perception of increased risk in PPP projects

Highly restrictive credit-approval practices

Cost of borrowing

Risk aversion metrics

Developments affecting the P³ procurement process

Recent changes to P³ documentation

Default, market-flex and market-out

Lenders issues with long-term debt

Cooperative Provisions

Final-credit-spread-lock-in-date

Bank Bond Financing

Grants

Mini-Perms

Mini-perms; Short-term financing typically used to pay off income-producing developments, payable under terms in three (3) to ten (10) years.

Mini-perms carry an obligatory balloon payment at the terms end, with the anticipation that the loan can then be easily refinanced because the property now has appraised equity and enough history to successfully obtain permanent financing.

Successful projects have agreements which contain incentives for the lenders to extend and stay with the project when certain milestones are reached. Successful project tenders begin the plan or RFP response with start-up and subsequent financing requirements with guarantees at the start to turn key.

Mini-perms really do not work outside a Special Purposes Vehicle (SPV) in the context of a P³ structure, which by the very nature of a PPP requires a long-term funding solution at the outset guaranteed? If a mini-perm is the only solution used to start-up or bridge finance it should be a flexible soft mini-perm.

 

Type of P³ Partnership

1. Finance-Design-Build-Operate-Maintain
2. Pre-development Agreement
3. Concession – Investor Financed
4. Concession – Tax-exempt Financed
5. Long term lease by either party
6. Federal or Local Authority Availability Payments
7. Stakeholders Cooperatives
8. Joint Venture Agreement
9. more…..

Organization

Structure

Revenue Metric

Delivery and Commissioning

Commitment-letters from lenders

Severe-market-disruption-event Clause

Staple financing option

Tax and Availability-Payment Structures and Law

-this-list-in-progress

P³ models retain value as the superior matrix for the procurement of public infrastructure.

There is no development metric whose cardinality is strictly between that of the integers and that of the real numbers.

This page under construction!