Roads, tourist facilities and airports most likely to pique PPP interest

Newsroom 03/08/2009 | 16:41

Private-public partnerships (PPPs) have great potential for the coming years, according to representatives of law firm Tuca, Zbarcea & Asociatii. Infrastructure is one of the most appealing segments for such partnerships – and many planned infrastructure projects are in still various stages, such as that of feasibility study, public procurement procedure pending and negotiation of the contractual conditions.

Meanwhile, several national motorway sections are already under construction, while others are expected to emerge from the pipeline in the near future, providing plenty of work for local consultancies.

For instance, Tuca, Zbarcea & Asociatii representatives told BR that they were providing assistance to the Romanian Ministry of Transport and Infrastructure and the National Company of Motorways and National Roads for the concession contract for some sections of the planned A3 motorway.

Elsewhere in the business world, many projects in the energy sector also suit public-private partnerships, while another area which requires PPP-type legal advice is the concession of public services, such as parking, water and sewage, the public health system and public transportation.

In the coming period, pundits expect a growth in this area, given the increasing number of projects announced in the infrastructure and energy sectors, projects which, in spite of the delay caused by the financial crisis, will be resumed in the near future due to banking and capital market reinforcement.

But there is a legal fly in the ointment. Although the main features of PPP may be found in various types of contracts regulated by the applicable legal provisions, the absence of any specific regulation of the concept may pose difficulties during the implementation of such projects, according to Tuca, Zbarcea & Asociatii.

Nonetheless, PPPs are on the way. In the road infrastructure segment, a consortium of constructors comprising Dragados, Sedesa Obras y Servicios and Diversia Concvesiones y Servicios has applied to design and build seven sections of national roads, as part of the strategy for the repair of national roads launched by the Romanian National Company of Motorways and National Roads.

Meanwhile, in the energy sector, CEZ took part in a bid to partner the Romanian-state owned Nuclearelectrica for the construction of units 3 and 4 of the Cernavoda nuclear power plant. The project company, a joint venture between Nuclearelectrica and private investors, will develop, construct and operate the two units.

Airports and tourism could see PPPs get off the ground

Air transportation services may attract significant public-private partnerships. Canada's IntelCan, an international airport developer and operator, is building the EUR 200 million Brasov airport through such a contract.

Earlier this year, the National Federation of Balneal Tourism Patrons (FNPTB) announced that firms in the sector were planning to form public-private partnerships in order to attract EU structural funds, with PPPs the most suitable form of pursuing them. “These partnerships are fast to make and the initiative must come from the investors. It is just a matter of will,” said Nicu Radulescu, president of the FNPTB.

Sometimes, the impossibility of accessing EU money is due to the lack of financing, which in turn stems from poor regulations. For instance, the Buzias resort needed about EUR 7 million for modernization works, while the entire western region has been granted only EUR 3 million from European financing, according to Radulescu.

Real estate gets on the bandwagon

In 2008, the Romanian government approved an Emergency Ordinance for the signing of a PPP between the Romanian Ministry of Development, Public Works and Housing and Hungarian developer Trigranit for the EUR 1 billion Esplanada project in Bucharest.

Works on the project were scheduled to start in 2007, but paperwork delays pushed the deadline back to the second half of 2009. So far, though, no news has been released on the scheme. If ever completed, the project is set to be built on 10.7 hectares located in downtown Bucharest and, by completion time, will deliver 800,000 sqm of offices, residences, retail, cultural buildings and green space.

The local authorities will get a EUR 40 million building in the project and 12,000 sqm of office space, under the PPP agreement. The project will become state-owned after the 49 years stipulated in the contract.

Another PPP in Bucharest is the Casa Radio project. With a similar investment sum, it began in 2007, after several years of negotiations and issues triggered by interchanging investors. The project, to be called Dambovita Center, is being developed by Plaza Centers, part of Israeli group Elbit Medical Imaging, in partnership with the Romanian state.

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