A Road Map to Success for Public-Private Partnerships of Public Infrastructure Initiatives

Abstract

This article explores the risks and rewards associated with public-private partnership (“P3”) initiatives and provides a framework through which these initiatives can achieve success by providing attractive returns to private investors including investment funds, developers, operators and construction contractors, while creating an optimal partnership mechanism for the public agency. In light of the substantial risks inherent in P3 initiatives, this article offers advice on how to master the confluence of government affairs and political issues that are unique to each P3 initiative and provides a “Roadmap for Success” that can be used as a methodology for private investors to minimize risk exposure and optimize their returns on investment through active engagement with political and community stakeholders, establishment of an optimum legislative and regulatory framework for P3 investments, and through implementation of an integrated contractual framework to allocate risks among the public and private partners in an equitable manner. We write from the experience of having spent years working on numerous privatization, project finance, and P3 transactions at all levels of government and involving projects covering a multitude of disciplines such as transportation, housing, water and wastewater, prisons, and alternate energy facilities.

TOPICS: Private equity, other real assets, legal and regulatory issues for structured finance, project finance