quarta-feira, julho 28, 2010
Preserving the Integrity of the PPP Model in the Context of the Financial Crisis
The title of the recent article in PPPnetwork, “Preserving the Integrity of the PPP Model in the Context of the Financial Crisis”, presumes that there is a finely calibrated PPP risk sharing arrangement to be maintained, through the application of temporary, measured and coordinated changes to that arrangement, in order to retain or transfer more risks and liabilities to the Public partner.
As RF pointed out, the “Value at Risk for Governments in PPP” arises in two ways:
Ø Government liabilities arising from the risks explicitly taken by the Public partner in the PPP contract, which can be shared and even capped, especially in the case of projects based on user fees. Since financial risks (funding costs, interest rate, tenor, refinancing, syndication…) are usually allocated to the Private partner and its banks, it seems reasonable to move those risks temporarily to the Public partner by way of a “syndication guarantee”, as was done by the Government of Victoria, in order to keep the project on schedule, and in expectation that financial markets return to normal.
Ø Government liabilities arising from the ultimate consequences of contract termination, if the Private concessionaire fails and abandons the project, in such a way that the Public partner is forced to step-in order to maintain the public service operating. In this termination situation, caps are forgotten, since PPP contracts asymmetric, after all.
In practice, these two sources of Public sector risk are intertwined, and the real or implied threats of project cancellation or termination can lead Government to take on much more than “temporary and measured financial risks”.
This calls attention to the issue raised by CH, regarding the extent of policy and practical coordination within the Government, between the Finance and sector Ministries and among the public investment management and public financing units. As sector Ministries push to keep their PPP projects moving forward, even in the face of intense and growing risk-aversion by banks, it is the job of a strong Central PPP unit within the Finance Ministry to manage and pace the overall PPP program in order to keep the Public partner from assuming risks and PPP liabilities which, individually or all together, might come to reflect negatively on the Government sovereign risk rating. This is especially true for non-user based PPP contracts, such as shadow tolls, SCUT, or availability-based contracts, which represent indirect and deferred public debt.
Countries with large PPP programs but fragmented PPP institutional organizational structures may transfer more risks to the Public partner in the context of the financial crisis. Thus, creditors wishing to avoid traffic risk, for example, would do well to look closely at sovereign risk.
Mariana ABRANTES de Sousa, Portugal