PPP Research Center

 Romanian Public-Private Partnership Law Review

No. 8 / 2013

TABLE OF CONTENTS: 

The role of the concession contract in public-private partnership structuring
by Simona Gherghina, PhD, Lecturer, Faculty of Law, University of Bucharest

The implications of VAT on the transfer of assets to the public partner upon termination of the public-private partnership contract
by Marilena Ene, LLM, Attorney at Law, Bucharest Bar Association

Financing transport infrastructure in Europe: post – 2008 developments
by Ruxandra Chiriță, Director - Deals, PricewaterhouseCoopers Romania

Paving the way to ensure capital markets financiability of Romanian PPP
by Laura Busato, Group Head of Debt and Rating Advisory, Erste Group Bank

Replacing the private partner in the public-private partnership contract
by Monica Amalia Rațiu, PhD, Lecturer, Faculty of Law, University of Bucharest

 

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The role of the concession contract in the public-private partnership structure

Simona Gherghina, PhD
Lecturer
Faculty of Law
University of Bucharest

Abstract:

The economic diferences between concession and public-private partnership contracts, determined mostly on the basis of revenue sources, are analysed herein from a legal perspective. Arguments are advanced for the idea that most of the contracts designed for the private financing of public investments, respectively concession contracts, public-private partnership contracts and contracts for delegated management of public utilities, shall generally include in their structure one or more types of concession. The import of certain contracts used in other legal systems has not replaced nor diminished the importance of the existing regulations concerning the concession, and such “models” were adapted to the Romanian legal system by incorporation of the traditional legal concepts related to concession.

Keywords: concession, public-private partnership, risks, public investments.

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The implications of VAT on the transfer of assets to the public partner upon termination of the public-private partnership contract

Marilena Ene
LLM
Attorney at Law
Bucharest Bar Association

Abstract:

The public-private partnership contract is required to include a provision relating to the categories of assets produced or acquired during performance of the contract which are transferred to the public partner upon termination of the contract. From civil law perspective, this transfer raises no special discussions since the contract is binding for the parties, and the parties may provide, obviously within the law, regarding the assets produced or acquired during performance of the PPP contract. From the tax perspective, the situation is different as national and European regulations force taxpayers to pay certain duties when transferring ownership of assets. The article offers a brief analysis of the tax implications, specifically the value added tax, on the transfer of assets upon termination of a PPP contract from the project company or private partner to the public partner.

Keywords: public-private partnership, value added tax, the project company, the public partner, the private partner, delivery of assets, taxpayer.


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Financing transport infrastructure in Europe: post – 2008 developments

Ruxandra Chiriță
Director - Deals
PricewaterhouseCoopers Romania

 Abstract:

Following the financial and debt crisis from 2008, in Europe at least, it became clear that large infrastructure projects can no longer be financed purely public or private but rather through a well-balanced combination of the two sources, as public sector is under increased pressure to observe its spending while the private sector is less inclined to fully assume the construction risk in its entirety. The financing methods for public investments that involve large capital expenditure became more sophisticated during the past years, as new categories of investors have emerged, such as pension funds, insurance companies, looking for long term investments at a reasonable profit rate and which could counter-balance their short term investment portfolio and the placements in state treasury bonds.


Also, specialised investment funds became more active, willing to become shareholders in project companies, thus assuming the construction risk together with strategic investors and therefore increasing the confidence level of commercial lenders. With few exceptions (UK, Germany, France, Benelux), Europe still relies to a large extent to banking finance for its infrastructure projects (as opposed to non-banking finance i.e. project bonds.

Central and Eastern Europe (CEE) has emerged timidly, the most active has been Poland (6 projects which reached financial closing in the analysed period) in rail (train stations), roads, ports, car parks. The road sub-sector concluded financially most of the deals during 2008 – 2013, perhaps because it is the sector in which investors and financiers feel most comfortable and the public sector is most inclined to support given its immediate impact. The PPP may not be a solution for all transport infrastructure projects however, there are a number of alternative financing sources for such projects provided that the transaction is realistically sized and structured and there is political and legislative stability as well as long term commitment from the public sector.

Keywords: transport infrastructure, public-private partnership, PPP, EU funds, investment funds, Marguerite Fund, European Investment Bank, EIB, European Bank for Reconstruction and Development, EBRD, availability payments, EPEC.

 

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Paving the way to ensure capital markets financiability of Romanian PPP

Laura Busato
Group Head of Debt and Rating Advisory
Erste Group Bank

 Abstract:

Ensuring financiability to public-private partnership projects (PPP) represents one of the most important challenges in such a project both for the public partners as well as for the private partners. Knowing the key elements about crediting and capital markets and also the role of the debt and rating advisor in a PPP project may ensure the success of a Romanian PPP project.This article offers a brief analysis of the financiability principles to be taken into consideration by the public sector, PPP framework initiators and early stage advisors (law) when building the PPP framework, based on the best-practice guidance sourced from advanced PPP jurisdictions’ experience but emphasizing the specific elements of an emerging jurisdiction.

Keywords: financiability of PPP, capital markets, sovereign credit rating, rating cap, credit enhancement considerations, international supportive mechanisms, public-private partnership, credit drivers, PPP framework, debt and rating advisor.

 

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Replacing the private partner in the public-private partnership contract

Monica Amalia Rațiu, PhD
Lecturer
Faculty of Law
University of Bucharest

Abstract:

The possibility to replace the private partner during the execution of a public investment project is a circumstance which stems, primarily, from the project lender’s concern regarding the reimbursement of the loans and expected benefits. Public-private partnership contracts are characterized, among others, by the relatively long duration of the contractual relations (meant to allow the private partner to recover the investment and to obtain a reasonable profit) and by project financing mainly from private funds and, where appropriate, by combining private funds with public ones. This feature results in the presence of credit institutions and financial institutions as lenders of the contracts.


However, the perspective, be it theoretical, of the lenders facing the termination of the public-private partnership contract previous to the credit and credit costs refund, has caused the development of specific mechanisms, among which is the replacement of the initial private partner and the continuation of the contract with another counterparty. On the other hand, early termination of a privately funded public contract, will generally incur the payment by the public partner of compensations, their inclusion in the public budget representing a real problem. Therefore, the need to avoid the early termination of the public-private partnership contract has become apparent to all parties involved in the development of the project.

Of course, in the member states of the European Union, such a legal mechanism requires analysis in relation to the rigors regarding changes to public contracts as reflected in EU legislation and in the jurisprudence of the Court of Justice of the European Union.

Keywords: public–private partnership, creditors, lenders, direct contracts with lenders, early termination of the public–private partnership contract, cure rights, step-in right, termination of the public-private partnership contract due to the private partner’s default, replacing the private partner, amendment of the public contract.

 

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