The Legislative Decree 1012 approves the Framework Law on Public Private Partnerships (PPPs) to generate productive employment and dictates rules for the streamlining processes to promote private investment. APP or PPP is a concept that involves cooperation and associated work with the public and private sectors to provide infrastructure and utilities. Is one of various alternatives between the usual purchasing of goods and services and a privatization process. The PPP (or APP= syllables in Spanish) process involves three stages: Building , Operations and Transfer. The Importance of a PPP (APP): • Creates incentives to achieve efficiency: the concessionaire has incentives in order to come up with a qualified work. He will be in charge of its maintenance. The user will have access to utilities at the lowest possible cost. • Conciliates budgetary restrictions with the necessity of investments. • Incorporates innovation in closed sectors to private capital. • Assignment of risks: “Risks shall be assigned to the Part that can best handle them. PUBLIC SECTOR: Retained Risks: - Regulatory Risks: Tariffs. - The Obtaining of planning permits - Project financing. SHARED OR RETAINED RISKS: - Risk on demand; - Inflation risk; - Act of God; - Project Financing. PRIVATE: RISKS TRANSFERRED TO PROVIDERS: - Design; - Construction; - Starting work; - Exploitation return; - Project financing; - Technological risk. SCOPE OF APPLICATION: The PPP is only applicable to the Public Entities of the Non Financial Public Sector. The Public Private Partnerships( PPP) are ways of participation of the private investment in which experience, knowledge, equipment, technology is added and where specially private risks and resources are distributed in order to create, develop, improve, operate or maintain public infrastructure or provide utilities. PARTICIPANTS in a PPP or APP (in its syllables in Spanish): -The State: through one of the public entities from the Non Financial Public Sector, and -One or more private investors. CLASIFICATION OF PPPs or APP: - Self sustainable: complies with the following requirements: -Lowest demand or no guarantee financed by the State. -Non financial guarantees should have zero or least probability of demanding usage of public resources. - Co-financed requires: 1. Co-financing or 2. Granting or 3. Contract of financial guarantees or 4. Non financial guarantees that have a significant probability of demanding the usage of public resources. PRINCIPLES: FOR THE CONDUCTION OF THE PPPs • Value for Money: A better quality utility at a determined cost or of the same quality at a lower cost. • Transparency: Throughout the evaluation, development, implementation, and account rendering processes. • Capacity to assure efficiency and lower prices to users. • Adequate assignment of Risks to the participant from the public and private sectors who is in a better position to manage them at the lowest cost. • Budgetary responsibility: Assume obligations without engaging the support of the public finances. PRIVATE INVESTMENT PROMOTION ENTITIES.- For the Central Government: -PROINVERSION for projects of national significance. -Ministries: Through the Investment Committee. In both cases the projects will be assigned or incorporated by a Supreme Resolution. The Promotion Office for the public sector entities of the Regional and Municipal governments will be the Regional or Municipal Council, respectively. INSTITUTIONAL FRAME FOR THE PROVISION OF PUBLIC PRIVATE PARTNERSHIPS Identification of Priorities and Investment Projects. The current legislation chooses an open diagram for any infrastructure or utility related to it. Other legislation excludes scopes of action. The PPPs according to the enunciation manner of the Law on Regulations for PPPs (SD No. 146-2008-EF) , can be applied on investments on transportation infrastructure ( road networks, airports, ports) ; Utilities as Telecommunications, energy, lighting, water and sanitation. Other social interest works as infrastructure for tourism, waste treatment and processing, town planning; penitentiary, health and education. GUARANTEES In a PPP diagram the guaranties classify as follows: - Financial guarantee; - Non Financial guarantee. OBLIGATIONS OR APPOINTMENTS OF THE STATE IN A PPP - Firm Obligations (The co-financing): The commitment of the State to pay a counter-allowance for the acts of the private according to the PPP contract. Investment periodical quota or periodical dues on exploitation and conservation. - Contingency Obligations: Eventual obligations of the State to pay the private party for the guarantees that the State has assumed by the PPP Contract. (Tariff guarantee; Traffic guarantee; Disasters coverage). REGISTRATION.- The Ministry of Economy and Finance is authorized to produce the norms for the registration of the firm and contingent quantified obligations, the guarantees and the other connected and collateral instruments as well as of the income derived from the projects executed under the rules of the PPPs. LIMIT The firm and contingent quantified obligations accumulated stock cannot exceed the 7% of the GNP. . PRIVATE INITIATIVE REGIME PRIVATE INITIATIVES NATURE The private initiatives may be presented to PROINVERSION or to the Regional or Municipal Governments private investment promotion entity by local or foreign juridical persons as by corporations of juridical or natural persons regardless they are local or foreign. The private initiatives have the nature of grace petitions, referred to in the Administrative Proceedings General Law, Number 27444, article 112. PROCESS, EVALUATION AND DECLARATION OF INTEREST OF THE PRIVATE INITIATIVES. • The confidential and reserved nature of the private initiatives will be kept until they are declared of interest. • The private initiatives shall be evaluated by the Promotion Organism of the private investment. • Private initiatives presented to PROINVERSION prior to the Declaration of Interest shall have the favorable opinion of the Ministry or Ministries of the Sector or Sectors competent on the matter dealt with. When said initiative is financed with tariffs from utilities it shall count with the favorable opinion of the regulation entity. In the case of private initiatives that require the granting of guarantees the favorable opinion from the Ministry of Economy and Finance shall be requested. The opinions shall be rendered in a no longer term than 20 working days. • Once the private initiative is presented the proponent will not be able to unilaterally perform modifications or extensions that to the understanding of the maximum organ of the Promotion Organism of the private investment, result substantial. • The private initiatives will be declared of interest by agreement of the highest instance of the Promotion Organism of the private investment. • The Declaration of Interest must contain at least the following information: a) A summary of the project contained in the private initiative that contemplates: i) The object and scope of the investment project. ii) The goods and/or utilities about which the project shall be developed. iii) The contract means and term. iv) The investment referred amount. v) The intended chronogram of the investment project. vi) Proposed retribution form (indicating if the Project requires tariff increase) . b) If necessary, quality indicators of the utility to be provided. c) Essential elements of the contract’s project, according to the criteria established by the Promoting Organism of the private investment. d) Guarantee of the true fulfillment of the contractual obligations. e) Public Offer pre-qualification requirements, Public Licitation or Contest of full projects to be called. f) Public Offer contest reason, Public Licitation or contest of full projects to be called. g) Model letter expressing interest and model of bail letter to be presented by third parties interested on the execution of the project. • In the case of private initiatives declared of interest the proponent shall present within 10 calendar days of the publication of the declaration of interest a letter of bail in order to assure the subscription of the corresponding contract in case the contract is granted directly to the proponent. • Said letter of bail shall be kept in force until the subscription of the contract. The amount of the letter of bail shall be established in each case by the private investment Promotion Organism in accordance with the amount of investment of the project. • The declarations of interest will be published only once in the Official Newspaper” Diario Oficial El Peruano” and in another nationwise circulation newspaper as well as in the website of the Private Investment Promotion Organism.
Posted on: Wed, 13 Nov 2013 16:00:00 +0000
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