Proyectos app

Financial Structuring of Infrastructure Projects in Public-Private Partnerships: An Application to Water Projects
Antonio Vives, Angela M. Paris and Juan Benavides
Inter-American Development Bank

Peter D. Raymond, Darío Quiroga and Javier Marcus
PricewaterhouseCoopers

[Revised Edition]

IntER-AMERICAn DEVEloPMEnt BAnk

Antonio Vives is Senior Deputy Manager of the PrivateEnterprise and Financial Markets Subdepartment; Angela Paris is Senior Private Sector Development Advisor; and Juan Benavides is Senior Infrastructure Specialist, all of the Sustainable Development Department of the IDB. Peter D. Raymond is a Principal and Javier Marcus is a Senior Associate of PricewaterhouseCoopers llP Darío Quiroga is a Director of Pricewater. houseCoopers SRl. Julia Domeniconi, SeniorAssociate at PricewaterhouseCoopers SRl, and Anna-Maria Eftimiadis, Director at PricewaterhouseCoopers llP also contributed to this publication. the authors thank , the IDB-netherlands Water Partnership Program for its financial contribution and to Silvia ortiz of the IDB for her tireless efforts in making this report possible. the opinions expressed herein are those of the authors and do notnecessarily represent the official position of the Inter-American Development Bank. Permission is granted to reproduce this publication in whole or in part for noncommercial purposes only and with proper attribution to the authors, the Sustainable Development Department and the Bank. Publication of the Inter-American Development Bank, December 2006. For additional copies of this publication, pleasecontact: Private Enterprise and Financial Markets Subdepartment Mail Stop W-504 Inter-American Development Bank 1300 new York Avenue, n.W. Washington, D.C. 20577 E-mail: Fax: Web Site: anamg@iadb.org 202-623-1608 http://www.iadb.org/sds/privsec_e.htm

Cataloging-in-Publication data provided by the Inter-American Development Bank Felipe Herrera library Financial structuring of infrastructureprojects in public-private partnerships : an application to water projects / Antonio Vives … [et al.]. p.cm Rev. ed. Includes bibliographical references. 1. Infrastructure (Economics). 2. Economic development projects—Finance. 3. Public-private sector cooperation. 4. Water-supply. 5. Sanitation. I. Vives, Antonio. II. Inter-American Development Bank. Sustainable Development Dept. III.PricewaterhouseCoopers llP . HC79.C3 F46 2006 363.6 F46-------dc22

FInAnCIAl StRUCtURInG oF InFRAStRUCtURE PRoJECtS In PUBlIC-PRIVAtE PARtnERSHIPS

Foreword

this report sets out an approach and a set of tools for the financial structuring of public-private partnership projects, with a particular application to the potable water and sanitation sector. the analytical framework developed here arose from theexperience and insight of investors, lenders, governments, advisors and Inter-American Development Bank staff, in the development and financing of infrastructure projects in latin America. In the most widely publicized version of public-private partnerships, which originated in the United kingdom with the Private Finance Initiative (PFI), the government contracts with a competitively selectedprivate sector firm to deliver services on its behalf, which often involves building new infrastructure. the firm has to build, operate, maintain and finance the asset, and provide the service for the long term in exchange for recurrent payments from the public sector. At the end of the contractual period the operation of the asset reverts to the government. However, this variety of public-privatepartnership will only deliver under very stringent conditions: there must exist sufficient public funds for the government to comply with its payments schedule; and the judiciary system, regulatory institutions and the dispute resolution mechanisms must be solid enough to minimize the chances of ex post opportunistic behavior. these circumstances do not generally exist in developing countries, where...