Optimal subsidies and guarantees in public–private partnerships

Determining Critical Success Factors for Public–Private Partnership Asset-Backed Securitization: A Structural Equation Modeling Approach

“…The private sector protection clause existing in the PPP plan is important for the success of PPP-ABS. Private sector protection clauses include the minimum demand protection from the government and an exclusive clause from administrative power [7,43,44]. A government minimum demand guarantee means that if the actual use of infrastructure delivered by the PPP project is lower than the break-even point agreed on in the PPP contract, then the local government shall pay the insufficient section below the appointed minimum demand [95].…”

“…With the rapid development of PPP in China, the ways to finance and promote the implementation of projects are receiving an increasing amount of attention [6]. It is difficult for PPP projects to obtain support from financing institutions because of the large investment, low profitability and unstable cash flow [7]. The Chinese government has issued documents and policies to encourage the development of PPP asset-backed securitization (PPP-ABS).…”

Public–private equity joint ventures and risk transfers in motorways of the sea

“…The criticism expressed by the European Court of Auditors itself in 2013 (European Commission, 2013) towards such subsidy programmes encouraged the ongoing academic research on new forms of public support formulas from a public–private partnership (PPP) perspective. The existing literature covers exhaustively the topic when it comes to road, railway or port infrastructures, where the usual form of a long-lasting concession contract is reformulated to account for guarantee mechanisms on the public side (Carbonara and Pellegrino, 2018; Chiara and Kokkaew, 2013; Delmon, 2011; De Neufville et al , 2006; Juan et al , 2008; Oliveira-Cruz and Cunha, 2013; Pellegrino et al , 2011, 2013, 2018; Queiroz et al , 2013; Rocha Armada et al , 2012; Roumboutsos et al , 2013; Verhoest et al , 2013).…”

“…So, provisions are included in the PPEJV deal for regulating an eventual additional public support to the private partner(s) through public funds. The distinguishing feature of such provisions, unlike public support guarantees in the literature (Pellegrino et al , 2011, 2013, 2018; Rocha Armada et al , 2012), concerns the fact that public aid is considered as an additional capital contribution of the public partner to the joint venture, which leads to a transition period of allocation of profits and losses among partners by modifying their initial sharing percentages. Moreover, a refunding mechanism is articulated so that the private partner has the obligation to refund such aid through new agreed transitional sharing percentages of profits.…”

“…In order to be able to set appropriate numerical values for the key parameters involved in the aforementioned embedded options, negotiating agents need to quantify risk transfers inherent in both compensation and restatement of ownership clauses. Often in the literature, the methodology used for modelling flexibility and quantifying risk transfers from public guarantee mechanisms included in concessional-type PPPs, mainly motorways, bridges, tunnels or railway lines; it is based on the adaptation of financial option structures and valuation methodologies (Carbonara and Pellegrino, 2018; Pellegrino et al , 2011, 2013, 2018; Rocha Armada et al , 2012). The resulting real options (European-type put and call options[1]) are then valued assuming a single underlying, i.e., cashflow of the project, which in turn depends on a single source of uncertainty, i.e.…”