Public-Private Partnerships (P3s) enable the financial collaboration between government and private industry. They are defined by their contractual agreements which ultimately work towards financing, designing, building, and operating:
- Highways, Roads, & Tunnels
- Railroads & Railways
- Shipping Ports
- Airports
- Tourism Facilities & Services
- Real Estate & Housing
- Renewable (and nonrenewable) energy generation, transmission, sub-transmission, distribution, and related facilities
- Transport Systems
- Telecommunication systems/ facilities
- Information technology (IT) and database infrastructure
- Tax collection systems
- Stadiums and event centers
- Research facilities
- Agriculture
- Canals & Dams
- Water supply, sewage, drainage, and related facilities
- Land reclamation
- Space Ports
- Education facilities
- Hospitals
- Industrial facilities
- Government buildings
Public-private partnerships (P3s) are attractive as they embody an optimal risk allocation between their participants in a manner that prioritizes successful outcomes.
P3s are geared to benefit both sectors by improving their collective ability to deliver projects that serve the public more efficiently. Furthermore, P3s are structured to provide their private participants with competitive initial rates of return (IRR) for their investment.
They also offer important non-monetary advantages for governments as they are often utilized to serve underbudgeted sectors. But, depending on the type of project and its relative risk profile, various types of P3 contractual structures are used.
P3 structures
There are various P3 contractual structures that reflect varied roles and risks for the government and the private participant. Partnerships between the government and private sector for infrastructure and development projects are made possible through the following methods:
- Build-and-transfer (BT)
- Build-lease-and-transfer (BLT)
- Build-operate-and-transfer (BOT)*
- Build-own-and-operate (BOO)
- Build-transfer-and-operate (BTO)
- Contract-add-and-operate (CAO)
- Develop-operate-and-transfer (DOT)
- Rehabilitate-operate-and-transfer (ROT)
- Rehabilitate-own-and-operate (ROO)
Though there are many types of P3 contracts, the vast majority of P3s today utilize build-operate-and-transfer (BOT) structures including…
Case Studies
The Bel Monte hydroelectric power plant in Para, Brazil is the fourth largest in the world and the second-largest in Brazil. In the late 2000s, Brazil’s economy was growing fast, and it needed a stable energy source that prioritized security and independence. Today, the dam powers 20 million Brazilian homes and has become an important contributor to Brazil’s electricity infrastructure. In 2021, 66% of all electricity in Brazil was generated from hydropower!
- P3 Structure: Build-operate-transfer (BOT)
- Total Investment: $14,800,000,000
- Debt/equity ratio: 94/6
- Debt provider: Brazil Development Bank ($13,415,000,000)
- Equity provider(s): J. Malucelli Construtora de Obras LTDA, Grupo Bertin Construtora Queiroz Galvao, and other misc. sponsors (~$1,385,000,000)
- Duration: 5 years between construction start and opening day. Expansion of the facility continued for another 3 years.
The Noor Power Station in Morocco is the world’s largest concentrated solar power complex. Sitting on 6,178 acres in a remote region of southern Morocco this project today sources almost 5% of Morocco’s total energy requirements! Today it generates an annual revenue of approximately $279,000,000 and represents a scalable solar solution for the region.
- P3 Structure: Build-operate-transfer (BOT)
- Total Investment (phase 1): $1,438,000,000
- Debt/equity ratio: 70/30
- Debt provider(s): African Development Bank ($336,000,000), French Development Agency ($136,000,000), European Investment Bank ($156,000,000), World Bank ($200,000,000), KfW ($136,000,000)
- Equity provider: ACWA Power ($402,900,000) and other sponsors
- Duration: 3 years between construction start and connection to the Moroccan power grid.
Why governments need P3s
In general, governments utilize a public-private partnership (P3) for the following reasons:
- The P3 structure attracts private investment.
- P3s make projects affordable.
- P3s allocate risk to the party who can responsibly manage or absorb it.
- P3s force the public sector to focus on output and public benefit.
- P3s maintain a higher quality of service.
- P3s encourage innovation and much more…
The P3 structure will continue to be used more often and more creatively as capital efficiency improves. To achieve this, borderless and decentralized financial technologies that enable everyone to participate will be embraced.
Through DeltaP3 we are able to achieve just that, a new method for accessing investment opportunities previously only available to large corporations and the ultra-rich.
To learn more about how we’re doing this, check out the DeltaP3 Litepaper!
And don’t forget to ask any and all questions in our community Discord.
-DeltaP3 Team
