Public-Private Partnerships: An Effective Model For Project Financing

Profession:Yehuda Raveh & Co.
 
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Article by Ron Vered and Brigitta

Zibenberg

For many years, project finance has been, and remains, the

preferred form of financing for large-scale industrial and

infrastructure projects worldwide. The availability of

infrastructure facilities is imperative for the overall development

and economic growth of any country, especially of emerging

economies. Therefore, the long-term need for infrastructure

financing in both developing and industrialised countries is very

high and of pivotal importance. However, almost every country faces

the problem that its actual infrastructure requirements are far in

excess of the funding allocated for this purpose. The recognition

of this financial deficit has led to a nearly universal

acknowledgment that the private sector should play a greater role

in the financing of infrastructure in partnership with the public

sector.

PPP In Israel

Public-private partnership (PPP) represents a successful policy

option available to a government for the provision of basic

services (for instance, health, transportation, energy, water

desalination, education facilities), which seeks to involve the

private sector. As such, PPP is an alternative to traditional full

public provision of such services, particularly where the services

are private in nature and the government's resources are

limited. Thus, for the public sector, PPP provides a level of

certainty for schedule and cost. For the private sector it offers a

unique business opportunity, allowing private companies to deliver

a wide range of services over a long contract period (usually 20 to

30 years).

In recent years, there have been a number of very large projects

in Israel in which the private sector has been substantially

involved in the construction and funding of public infrastructure.

These are long-term and large-scale contractual partnerships

between public- and private-sector agencies, targeted towards

financing, designing, implementing and operating infrastructure

facilities services.

The surge of such project finance transactions in Israel, based

on PPP models, coincides with the creation of extensive and

long-term government programmes focused on fostering the

development of infrastructure in the country. The involvement of

private-equity funds in projects such as the construction of toll

roads, desalination facilities and other infrastructure facilities

is evidence of the maturing PPP market in Israel.

Moreover, witnessing the success of the strategy, the Israeli

PPP market is expanding the scope of projects to areas...

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