Private Concessionaire Research Articles

Methodological Proposal for Sustainable Territorial Communication—The Case of Castilla y León

The proximity television model adopted by Castilla y León since 1999 is based on promoting territorial identity and closeness to citizens, in line with the principles of identity and proximity in regional television, albeit with the particularity in the Spanish context of being a regional television system managed by a private concessionaire. In response to the current challenges of the television sector, a consultancy project is implemented with a methodological approach based on a SWOT analysis and the participation of multiple actors. This work details the methodology followed during the different phases of this interdisciplinary consultancy work: definition of bases, development of a base document, and concretion of actions, until reaching the elaboration of a detailed guide that establishes strategic objectives and specific actions. This strategic approach translates into a proposal to improve the performance of regional television and its contribution to the economic and social development of the region; however, the difficulty for its effective implementation due to an uncertain political scenario is pointed out.

Public-Private Partnerships with No Contractual Base Case:

The purpose of this article is to discuss a method for compensating a private concessionaire for cash flow losses related to Covid-19 suffered in 2020 and 2021. The analysis is based on a public-private partnership (PPP) set up to exploit surface parking lots, signed between a Portuguese municipality and a private corporation. The contract has no financial base case. The article concludes that a base case is not an obstacle to calculate this type of compensation, that the previous performance of the contractor is a reasonable basis to estimate losses and the forecasts extending to 2026 are a good schema with which to estimate the extension of the concession period claimed by the Petitioner. The arbitration court deciding the corporation’s claim has valid reasons for an equitable decision. Keywords: public-private partnerships; Covid-19 losses; financial base case; Portugal

Metro Manila's 2019 water crisis: Of efficiency traps and dry taps

AbstractIn 2019, Metro Manila experienced a water supply crisis, barely 2 years after the government and its private concessionaires were given international recognition for a successful water privatization, with success defined in terms of high operating efficiencies and improved service levels. These service‐level improvements, however, brought about a surge in consumer demand, which necessitated the construction of a new water supply infrastructure. Regulatory failures resulting in nondelivery of the infrastructure effectively negated and trapped the efficiency gains that were built slowly over the years, at a cost of US$5.4 billion. Such failures resulted in public indignation over dry household taps, as well as a presidential anger that threatened to cancel the program in its entirety. Using the lessons learned from this crisis, the paper enumerates measures to help unlock the traps set by these regulatory failures.

Assessing and allocating the financial viability risk factors in public-private partnership wastewater treatment plant projects

PurposeThis research investigates the financial viability risk factors that threaten the private investor's economic scheme in the public private partnership (PPP) wastewater treatment plant (WWTP) projects in Egypt. The aims of this study are to: (1) illustrate and cluster the financial viability risk factors in accordance with the PPP WWTP projects' nature, (2) assess the risk factors' criticality degrees according to their severity and frequency levels of the financial viability, and (3) pinpoint the suited allocation of the financial viability risk factors between the public and private parties.Design/methodology/approachRelying on the previous analysts' endeavors, the questionnaire method, the fuzzy synthetic evaluation approach and the hypothetical normal distribution curve model; the severity, frequency, criticality and allocation preference of 32 financial viability risk factors were assessed from 12 Egyptian PPP experts.FindingsThe data analysis yielded that foreign exchange risk, currency risk/inflation, license risk, construction cost-overrun and late site handover are the key factors in arising the financial viability risk issue in the PPP WWTP projects. Considering the discussion of these key risks, the study summarized that the financial viability's key risk factors are notably be affected by the economic, political and administrative circumstances of the host county. Additionally, the inflation lesion was found to be the core reason of most of the key risk factors.Originality/valueThis research originality stems from its contribution to address the gab in the PPP risk assessment literature of the concessionaire's financial viability in the WWTP projects in a country of developing economy as Egypt. This, first, enriches the scholarly based knowledge of the PPP projects' risk analysts of the developing countries. Accordingly, it moves the current PPP risk assessment research further to deeply apprehend these markets' risks. Second, it equips the policymakers in the public and private sectors of such projects with a map that clarifies their assigned risk factors and the responsibilities that each party should bear to generate a mutual stable investment environment for achieving their aims successfully. This, indeed, paves the way for more private investments to be involved in the developing markets' PPP projects with a profitable satisfactory level for the private concessionaire. In the same vein, more WWTP projects, which are highly needed for the public sector and its people, are executed.

Água como um bem social público: os processos de privatização face ao abastecimento público em Pau dos Ferros- RN

A água é um recurso natural considerada um bem social público e de uso comum. Entretanto, atualmente esse bem vem sendo comprometido pelo viés econômico, principalmente pelos de hodiernos processos de privatizações de concessionárias de abastecimento de água no Brasil e no mundo. Desta forma, o presente estudo tem por objetivo debater a importância do caráter público das concessionárias de água como mecanismo de garantir minimamente acessos mais justos à água. Para tanto, buscou-se mostrar exemplo desses acessos, como o papel das tarifas sociais da abastecimento de água especificamente de uma cidade do Semiárido brasileiro denominado Pau dos Ferros, estado do Rio Grande do Norte. Como método de pesquisa, aporta-se na dialética como forma de ver as disparidades sociais historicamente construídas por mecanismos perversos de controle da sociedade e de mecanismos de/para reprodução do capital. Como procedimentos metodológicos fez-se levantamento teórico e documental a respeito da água enquanto um bem público, realizou-se pesquisas sobre a variação tarifária de concessionárias privadas em contraponto às públicas e como isso influencia principalmente o acesso à água a famílias pobres. Empiricamente, estudou-se as tarifas sociais da referida cidade no período de 2017, com base nos dados da Companhia de Abastecimento de Água e Esgoto do Rio Grande do Norte (CAERN). Através dessa tarifa social constatou-se que a companhia diminui os laços das desigualdades e garante para muitas famílias um baixo custo ao acesso a água. Mostra ainda a discrepância do tarifário de concessionárias públicas e privadas. Espera-se com esse artigo ampliar-se a consciência da responsabilização do Estado enquanto provedor dos serviços de abastecimento de água e chamar a sociedade ao debate do direito à água.

The Importance of Harmonizing Working Timetables in Seaport Clusters

Seaport clusters are complex commercial systems, consisting of a large number of heterogeneous stakeholders. Therefore, it is important to harmonize their business procedures to ensure effectiveness. Harmonization implies the adjustment of differences and inconsistencies among different measurements, methods, procedures, schedules, specifications, or systems to make them uniform or mutually compatible. This paper will particularly research the inconsistencies of working timetables of various seaport cluster stakeholders, which hampers their business flow and seaport effectiveness in general. In order to analyse the inconsistencies of working hours of seaport cluster stakeholders, it was necessary to collect and summarize the working hours of various statutory authorities (government institutions) and service providers (private concessionaires) in the port of Rijeka, Croatia. Data was collected from 14 different stakeholders, and it was evident that working hours’ discrepancies exist, manifested by different and uneven periods of daily shifts, daily breaks and periods of regular and overtime work. Service providers have different shifts, and differently defined overtime (and overtime compensation). For the simplicity and transparency of seaport cluster operations, the authors recommend harmonizing the shifts, periods of regular and overtime work, and overtime compensation of all stakeholders, with the ultimate goal to increase the competitiveness of the seaport cluster and the traffic corridor as a whole.

Probabilistic Approach to Evaluate Acceptable Toll Rates in Road Concessions

Countries worldwide make substantial efforts to keep the condition of their road infrastructure at an acceptable level under budgetary constraints. One possible model that enables the delivery of road projects under limited budgets is a public–private partnership (PPP). Because of several technical, financial, legal, and economic issues that need to be addressed, PPP agreements are relatively complex. In addition, defining long-term rights and obligations between the public sector and the private concessionaire requires an in-depth risk analysis because of the considerable number of risks usually encountered in PPP projects, such as a toll road concession. The objective of this paper is to present a method for an ex ante assessment of the acceptable toll rate for different stakeholders based on a probabilistic analysis of construction costs, operations and maintenance costs, and traffic volumes. The financial constraints included in the analysis are the debt service coverage ratio and return on equity. The resulting toll rates are determined from the simulated probability distributions of the input parameters. Such rates are then compared with the socially acceptable toll rate. The application of the proposed method to a case study of a toll road concession in Greece for which publicly available data were obtained indicates that the method presented is able to capture some uncertainties and improve the project’s risk quantification process. It is recommended that the proposed method be tested on other projects for further validation and eventual upgrading of the model for use as a tool in risk management in toll road concessions.

Determination of the Optimal Concession Period for BOT Contract Projects Based on a Discrete Stochastic Process Model

The concession period is one of the most important issues in the contractual arrangement of build-operate-transfer (BOT) projects. When planning a BOT project, the government should aim for a trade-off between the concerned government’s satisfaction and the private concessionaire’s profit. The objective of this paper is to present a discrete stochastic process model to obtain an optimal concession period considering the trade-off. The process model is developed for a highway project by analyzing the actual traffic data. The net present value (NPV) is calculated for use as a constraint condition that indicates the boundary of risk preference in a utility function. Using a utility function, this paper estimates the duration of concession periods at which the government can both attract investments from private concessionaires and satisfy public opinion. A numerical simulation is applied to demonstrate the applicability of the methodology presented. The result of the simulation shows that the discrete stochastic process model contributes to a better understanding of trade-offs in determining the optimal concession period.

Developing a governance model for PPP infrastructure service delivery based on lessons from Eastern Australia

Public-private partnership (PPP) concession agreements are awarded by National, State and local public agencies that contract with private companies to finance and deliver infrastructure as a long term service to governments and their citizens, rather than having the private firms design and build infrastructure assets to be financed, operated—and, hopefully, maintained—by government. PPPs are similar to the emerging model of selling business or personal software as a cloud-based service (SaaS) rather than as a product licensed by the user—a model that that has transformed and disrupted the enterprise software industry. Australia is a world leader in PPP infrastructure delivery, and has had over two decades of experience in delivering civil and social infrastructure services to its citizens via PPP concessions. Along the way, the public and private participants in infrastructure PPPs have developed practices and a mature institutional framework necessary for this kind of long-term, risky public-private commercial partnership. This study reports the findings from in-depth interviews with 25 senior executives of public and private participants in PPP infrastructure projects from the three Eastern Australian States with the longest history of PPP delivery. Based on the results of those interviews, we develop a governance model for infrastructure service delivery: the government selects infrastructure projects, guided by a non-partisan, expert infrastructure prioritization panel, and contracts for the delivery of these prioritized infrastructure services with a private concessionaire financed by long-term institutional investment capital. The concessionaire is a private entity in charge of financing, designing, constructing, operating, and maintaining the infrastructure service. The government supervises the infrastructure service, to safeguard public interest. The government also provides an institutional framework, with contracts and authorities necessary for the interaction between the public and private actors.

Persistent and Transient Efficiency on the Stochastic Production and Cost Frontiers An Application to the Motorway Sector

This paper implements both stochastic production and cost frontier analyses to estimate the efficiency of toll motorway companies in Spain, the country with the largest number of private concessionaires in this economic sector. Our dataset includes 32 concessionaires with different features for a time span of 26 years (1988-2014). The results support the existence of scale and density economies, showing that an increase in vehicle-kilometers is more important for cost efficiency than extending the motorway. The differences between transient and persistent efficiency are significant, so that we can test for regulatory and ownership differences. The price cap regulation seems to increase management technical efficiency. Regional governments grant better projects than central governments and, as shareholders, they also perform better. However, their performance is not significantly differently from that of full private concessionaires. We also find limited evidence of efficiency gains from privatization. These results help us provide new insights to evaluate policy and regulatory reforms aimed at enhancing technical efficiency in the sector.

Winners and losers in tolled motorway renegotiations: an empirical evaluation of the Spanish pioneers

This paper evaluates the welfare impact of a tolled motorway contract renegotiation in Spain. The results show that, after renegotiation, both taxpayers and the private concessionaire were better off. However, road users lost out. An agreement leaving road users unaffected, while securing gains for taxpayers and the concessionaire, would have been possible by negotiating a larger reduction in tolls linked to the extension of the contract duration.

Reconstituting the state: City powers and exposures in Chicago’s infrastructure leases

In the 2000s, cities across North America began leasing existing infrastructure to global investment consortia. Previous evaluations of infrastructure leases focus on the lack of transparency of the privatisation process and the terms of the arrangements negotiated by the public sector and the private concessionaires. In this research, we argue that such approaches fall short by failing to investigate the significant repositioning of the local state relative to financial markets produced by their involvement in major asset lease deals. We develop this argument through a case study of the institutional transformation of the City of Chicago, the US’s most aggressive instigator of infrastructure asset leases. Even as the concession agreements seemingly protect the City from the claims of investors, creditors and counterparties and provide it with new powers, they enmesh the City in a set of financial relationships that expose it to liabilities not accounted for in lease agreements and create an institutional bias towards managing the collateral effects of financialisation.

Risk management in a major highway construction joint venture project

This paper deals with risk management in a major highway construction project in progress, that of the design, construction, operation, maintenance and exploitation of the Elefsina-Korinthos-Patra-Pyrgos-Tsakona (‘Olympia Odos’) motorway in Greece, a collaboration between the Greek State and a private concessionaire. The contract between those stakeholders is analysed in order to identify possible foreseen and unforeseen risks to the project. Then, with the help of an expert panel, those risks are assessed and categorised in probability-versus-impact matrices. Also, as the project is currently stalled due to several reasons, another objective of the paper is to pinpoint the risks responsible for that problem, which require particular attention in order for the project to resume. Finally, this paper detects possible bias in the various points of the contract in favour of the Greek State or the concessionaire.

Dealing with Traffic Risk in Latin American Toll Roads

This paper presents a cross-country analysis of traffic risk allocation in road concessions of Latin America. It shows that some countries such as Chile, Colombia, and Peru have been greatly concerned with mitigating traffic risk, either by putting into practice public guarantees, implementing flexible term concessions, or through availability payment concessions; whereas other countries such as Mexico and Brazil have assigned traffic risk to the private concessionaire by using fixed-term concession contracts without any traffic guarantees. Based on an analysis of data from 1990 to 2010, the paper finds that shifting traffic risk from the concessionaire to the government or users was not confined to the riskiest projects, as one might expect. The analysis also suggests that the implementation of traffic risk mitigation mechanisms in Latin American toll roads has not been very successful in reducing renegotiation rates or in increasing the number of bidders in the tenders.

Elements of Relational Contract in the Delivery of Public Infrastructure in Malaysia

The involvement of private concessionaire in the delivery of public infrastructure worldwide is apparent in reducing the budgetary burden on the government’s part specifically due to the major downturn in the global economy. Their involvement varies from concessionaire, privatization to partnerships. Looking at the most current type of project delivery approach procured around the globe, which is known as Public Private Partnerships (PPP), although the opportunities are widely opened for the private concessionaires to partake in the delivery of public infrastructure projects with numerous incentives by the government, their responses are still minimal. Their reluctance is observed due to the current scenario in the PPP implementation involving the development of monopolies by certain groups of private concessionaires in Malaysia, which consequently reduces the healthy competition among concessionaires. Therefore, this paper is materialized with the aim of determining the elements of relational contract, which can improve the current delivery of public infrastructure project and subsequently eradicate the private concessionaire’s lack of enthusiasm. Questionnaire surveys on 22 respondents of construction industry players are undertaken to determine the elements of relational contract suitable to be adopted in public infrastructure delivery in Malaysia in encouraging the involvement of private concessionaires. The results show that relational contract elements of clearly defined scope, integrated project team, mutual alignment of goals and open honest communication should be included in the relational contract elements frameworks due to its potential in overcoming the current recession of private concessionaire’s initiatives and ultimately improving the public infrastructure delivery in Malaysia.

Real Options and Incentives in a PPP Railway Project

This master thesis proposes a financial model for the current PPP railway project between Tours and Bordeaux. This work studies the investment opportunity granted to a private concessionaire for this project, considering a semi-stochastic demand. The model uses a standard continuous time real options methodology but also encompasses some concepts from the incentive theory (agency, conflict of interests, effort). Thus, we price the optimal incentives that induce the concessionaire in providing a good quality of service. Finally, some numerical simulations of the project are performed from either real or realistic data, in order to test the model.

Lirneasia Six Country Multi-Component Study 2006-2007: Thailand Report

Until recently telecommunications services in Thailand were exclusively provided by two state-owned enterprises (SOEs): the Telephone Organization of Thailand (TOT), which held a monopoly over domestic telephony, and the Communication Authority of Thailand (CAT), which had a monopoly in international gateway services. The market division between the two SOEs saw through the development of telecommunications sector in Thailand, but in the early 1990s it was recognized that the future growth of the industry would require infusion of private capital. A unique scheme to preserve the statutory monopoly of the two SOEs, while accommodating the private sector, evolved. Beginning in 1992, TOT and CAT awarded concessions to private companies to undertake network development and to provide fixed line, mobile, satellite, paging and other communication services, under a Built-Transfer-Operate (BTO) agreement. Under such an agreement private concessionaires would invest in infrastructure and then transfer legal ownership in the installed network to the state operator upon completion. In exchange, they were granted a 25-30 years exclusive use of the network.

Trickle Down? Private sector participation and the pro-poor water supply debate in Jakarta, Indonesia

Private sector partnerships (PSPs) have been increasingly advocated as an instrument of ‘pro-poor’ water supply policies. This article examines the performance of the private sector with respect to network connections for poor households in Jakarta, Indonesia, drawing on three sources: data collected through a household survey of poor households in six Jakarta neighbourhoods in 2005; data provided by the two private concessionaires and the Jakarta municipal government; and interviews with water supply managers, government officials, and NGO representatives in 2001 and 2005. The analysis concludes that the Jakarta PSP contract has not been pro-poor: new connections were preferentially targeted at middle and upper-income households over the period 1998–2005, and the numbers of new connections have been lower than the original targets. The paper argues that the failure to connect the poor is not solely attributable to the private operators, and identifies disincentives to provide individual network connections to poor households on the part of the municipality, the private concessionaires and poor households. The paper concludes by questioning the long-term ability of private sector operators to supply water to the poor.

An Economic Regulatory Policy Analysis of Private Sector Participated Infrastructure Projects

The aim of economic regulatory policy in private infrastructure development is to protect utility users while ensuring that private concessionaires have incentives to develop and operate infrastructure projects more efficiently. Setting an adequate governance by economic regulation is very important because when the regulatory control is too lax, users will have to bear the risk of higher prices. Contrarily, excessive control may cause reluctance of the private sector to participate in infrastructure development. This paper discusses three alternatives in economic regulation: Price regulation, ROR (rate of return) regulation, and No regulation. It analyzes both the incentive effects to improve efficiency and the degree of risk to which concessionaires are exposed under the different economic governance. Finally, it makes suggestion for improving economic regulation in developing countries.

Criteria for Setting Tariffs on Toll Highways in Mexico

A methodology for determining the tariffs that should be charged for different types of vehicles driven on new toll roads in Mexico is presented. The methodology is based on two criteria: maximize the income of the toll collector (whether this collector is a government agency or a private concessionaire) and minimize national transport costs. The first criterion requires the development of binary logit models for predicting the traffic demand fraction choosing the toll alternative. The second criterion requires the minimization of road users' transport cost, which is composed of vehicle operating costs plus the tariff charged. This tariff should include road deterioration costs, construction and financial costs, the administrative costs of operating the toll road, taxes, and other expenditures. Principles for computing reference tariffs are recommended along with ways to use these tariffs to analyze the economic feasibility of toll highways.