In this presentation I share my ideas concerning the recently completed project in Ukraine.

1. Is it a Due Time for Public-Private Partnerships?
by Oksana Zatvornytska
June 22, 2015

2. Living in a distant rural settlement or a small town…

3. …we dream of making our lives… …easier, better and safer.

4. To materialize these dreams, the
access to key public goods is needed

5. Adequate transport (infra and
services) is crucial for accessibility:
- providing basic road connectivity to rural villages can
generate significant social and economic benefits;
- urban poor make long and expensive journeys to work,
often over 20 km and sometimes taking 3-4 hours per day
travelling.
http://unhabitat.org/?wpdmact=process&did=MTY3Ni5ob3RsaW5r

6. Is Ukraine on Track in Terms of Road
Infrastructure Development?

7. 169.6 thousand km of roads
are public, out of them 70%
are local roads
https://uk.wikipedia.org/wiki/%D0
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Ukraine: road infrastructure network

8. http://www.indexmundi.com/facts/indicators/IS.ROD.DNST.K2
Road density: international
comparison, km/100 km2
UA
28.01
PL
129.88
HU
214.52
IN
125.00
ZA
30.00
USA
66.57

9. Ukraine road infrastructure needs
0 1000 2000 3000 4000 5000
142500 143000 143500 144000 144500 145000 145500
Needed repairs (upper scale), km Lostbearing capacity (bottom scale), km
Effective repairs (bottom scale), km
http://slidegur.com/doc/1543958/prezent
ac%D1%96ya-dudnika-n.m.
2015
2014
2013

10. Ukraine Road Sector Outlook
 The country has a wide local roads network; local authorities
are in charge of operating and maintaining local roads in Ukraine
 The network of E-roads is quite tiny (1.3% of public roads),
which signals of the necessity to catch up with European neighbors
 Over 2013-2015 the infrastructure gap in roads sector of
Ukraine increased even more
- existing roads keep deteriorating further without being repaired;
- new roads are not constructed at all
 The Government of Ukraine feels confident of IFI loans to support
the rehabilitation along key transport corridors
 PPP projects are discussed as an alternative to support the
road sector development till 2020 period

11. Are there any chances that PPPs will
succeed in Ukraine before 2020?

12. Roads PPP success in UA:
Pros and Cons
Framework PPP Law and
specific law for road concessions
Some unsolicited pre-
feasibilities undertaken
PPP projects integrated into
Road Program 2013-2018
New market for
investors to step in UA
Military conflict and
social unrest
Macroeconomic
volatility
Weak public
finance
Imperfect PPP concepts
and legal collisions

13. Some remarks: road PPP model in UA
 Legal framework avails for different forms of road PPPs
(BOT, DFBOT, operation contract, etc), however, there is a
prerequisite to build an alternative free road even for
operation contracts.
 Due to existing legal collisions, although entitled to toll
revenues, a private partner cannot receive them
directly since toll payments shall be transferred to the State Road
Fund of Ukraine. Only the Government can settle toll rates.
 Besides the tolls, the private partner can also be entitled
to non-toll revenues and availability payments. Yet,
however, the availability payments won`t cover SPV and financial
costs.

14. Some remarks: road PPP model in UA
The Government charges the road users a toll
Tolls are transferred to the State Budget
The Government pays a proportion of collected tolls to a private
partner in the form of availability payments
Private partner needs to collect non-toll revenues to cover the
costs, which are not covered by the Government

15. Some remarks: road PPP model in UA
 On the expenditure side, CAPEX and OPEX for road projects are
regulated by state construction norms and are mandatory
to abide with.
 The Government is sensitive to deferring from the
regulated CAPEX and OPEX, since these costs influence the
amount of availability payments that are due to a private partner.
 Besides of that, the Government shall charge the private
partner a Concession Fee, which could be up to 10% of CAPEX
per annum. The amount of a due Concession Fees is derived in a
regulated manner and is not deemed by the Government to be an
element of a PPP Feasibility Study.

16. Some remarks: road PPP model in UA
PPP CAPEX and OPEX are rigid
No motivation for the private partner to innovate and save in a
longer-term perspective
Concession Fees are excessive and might question if it is worth of
starting PPP at all

17. Prior to start a PPP project, please
make sure if it is a “right move”!

18. Not all moves are pleasant, but you
should not compromise your partner