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Assignment Nicmar/Sode Oofice: Public Private Participation Schemes
Assignment Nicmar/Sode Oofice: Public Private Participation Schemes
NICMAR/SODE OOFICE
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Course No.
Course Title
Assignment No.
Date of Dispatch
Last Date of Receipt of
Assignment at SODE office
-PGQS 12
-Management of PPPs
-2
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builds the facility on a turn-key basis, assuming cost overruns, delays, and specified
performance risks. Once the facility is commissioned satisfactorily, the title is
transferred to the implementing agency. The private entity, however, operates the
facility on behalf of the implementing agency under an agreement.
CAO- Construct Add and Operate
CAO is a contractual agreement whereby the project developer adds to an existing
infrastructure facility which it rents from the Government and operates the expended
project over an agreed period as a franchisee. There may or may not be a transfer
arrangement with regard to the added facility provided by the Project developer.
DOT-Develop Operate Transfer
DOT is a contractual arrangement whereby favourable conditions external to the new
infrastructure project which is to be built by a private developer are integrated into the
arrangement by giving that entity the right to develop adjoining property, and thus,
enjoy some of the benefits created by the investment such as higher property or rent
values.
ROT-Rehabilitate Operate Transfer
ROT is a contractual arrangement whereby an existing facility is turned over to a
private entity to refurbish, operate and maintain for a specified period as a franchisee,
on the expiry of which, the legal title to the facility is turned over to the Government.
The term is also used to describe the purchase of an existing facility from abroad, and
refurbishing, erecting and consuming it within the host country.
ROO-Rehabilitation Own Operate
ROO is a contractual arrangement whereby an existing facility is turned over to the
private sector for refurbishing and operation with no time limit on ownership. As long
as the operator has not violated the franchise, it can continue to operate the facility in
perpetuity.
LROT-Lease Renovate Operate Transfer
LROT is a contractual arrangement whereby an existing infrastructure facility is
handed over to private parties on lease, for a particular period of time for the specific
purpose of renovating the facility and operating it for a specific period of time, on
such terms and conditions as may be agreed to with the Government for recovering
the costs with an agreed return and thereafter, transferring the facility to the
Government. The frame work should provide for clear consequences of termination
particularly with respect to the Government, which should include the determination
and delivery of due compensation to the project company.
BOOT- Build Own Operate Transfer
In this case the ownership rights are also vested in the Entrepreneur. Thus he can
decide whom to allow entry and use the assets as security for financing.
PARTIES
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out the entire scope of work relating to Engineering, procurement and construction of
an infrastructure facility to one contractor who is referred to as the EPC contractor.
Another method is to contract out the work of formulating the design of the facility to
a constructor distinct from the contractor undertaking to construct the facility. This
method is not preferred as it causes complication regarding the allocation of
responsibility for any defect detected in the facility at a later stage.
6) Project Vehicle- Special purpose vehicle
The particular entity vested with the right to implement the project is commonly
referred to as the Project Vehicle or the Special Purpose vehicle. Sponsors generally
seek to implement a project through a specific legal entity formed by them. The
reason for such structuring is to transfer the risks to a special purpose company
/vehicle rather than undertake it themselves .the documentation relating to the
implementation of the project is entered by the Project Vehicle. The extent to which
the sponsors succeed in isolating the risks relating to the implementation of the
project is ultimately decided only after an analysis of the project documents and the
finance documents. The shareholders agreement, between the shareholders of the
project vehicle becomes a critical document in relation to the implementation of the
project. The shareholders agreement generally provides for the allocation of the
responsibilities and distribution of risks between the sponsors themselves. It also
ensures equity funding of the project and sponsor participation, provides the
framework for the management of the implementation of the project and mechanism
for the settlement of disputes between the sponsors.
7) Users/Consumers
The users of an infrastructure facility or consumers of the infrastructure facility
service are generally members of the common public and may be, at times ,be
represented by a public interest forum or a consumer body. In India, generally the
users of the facility are represented by the government itself. However, it is not
uncommon to find that at times, an infrastructure facility is designed for use for a
clearly identified and defined set of users or even a single user. In such circumstances
the facility is referred to as a captive use facility or facility having captive
consumption. In case of captive facilities the defined set of users are represented
directly by their representatives who actively participate in the documentation of the
project.
8) Regulator(Like TRAI)
The body vested with the authority and powers to regulate the development
and provision of the related infrastructure service, if in existence, would also be a
participant in the development of an infrastructure project. Ideally, prior to opening of
any infrastructure sector to private participation, a regulatory body for that sector
should be first constituted in order to regulate the conflict of interests from the various
participants, so involved in the development of the project. In India however there has
been no such planned opening of infrastructure sectors. Only two such infrastructure
regulatory bodies had been constituted, and that too, much after the opening of the
concerned sectors to private participation.
The existing infrastructure regulatory bodies are Telecommunications
Regulatory Authority of India which had been constituted pursuant to the Telecom
Regulatory Authority of India Act 1997, to regulate the provision of
telecommunication services by the various licenses and he electricity commissions
established at central and state levels pursuant to the Electricity Regulatory
Commissions Act 1998and a few state electricity reform legislations which seek to
regulate the electricity sector under their jurisdiction.
9) Other Authorities (NHAI, AAI etc.)
Apart from the regulatory authorities there are certain other authorities that have been
established for the purposes of providing specific infrastructure services. In the
sectors where such development authorities have been established, it is these
authorities that would, subject to the relevant legislation, grant the rights to private
developers for implementation of the project. Such authorities are the arms of the
government and are authorized to control and develop a specific infrastructure.
Examples of such authorities are, The Airport Authority of India established under the
Airports Authority of India Act 1994, which is in charge of the development,
operation and maintenance of Airports in India, The National Highways Authority of
India established under the National Highways Authority of India Act 1988, which is
in charge of the development, operation and maintenance of the National Highways
that have been notified to be under its control, the various port trusts established
pursuant to the Major Port Trusts Act 1963 which have control over the development ,
operation and maintenance of the specific major ports for which they have been
constituted under the Major Port Trusts Act 1963.
FINANCIAL STRUCTURING
It is necessary to establish the appropriate mix of debt, equity and mezzanine
financing.
Cost components of Project
The main components of Project Cost Are as follows:
i)
Pre-investment: The cost incurred by sponsors in developing the project
concept and preliminary design.
ii)
Bidding & Procurement related costs: The cost involved in collecting
sufficient information for bidding documents and bids.
iii)
Project Development Costs: The costs involved in further developing and
refining the scheme.
iv)
Construction Costs: The cost involved in operation and maintenance of the
facility till transfer.
v)
Terminated Costs: The cost involved in bringing the asset to the acceptable
standards at the time of transfer.
Regulations of Interests
REFERENCE
1) Management of Public Private Partnership (Lesson Book ,SODE)