Representatives of the PPP Agency have participated online in the WAPPP Annual Congress: PPPs for COP27 & Beyond. COP27, also known as the 27th session of the Conference of the Parties, is scheduled for November 2022 as a part of the United Nations Framework Convention on Climate Change (UNFCCC).
This year WAPPP Annual Congress lasted five days, from the 13th to the 17th of June. The motto of the event was “Bringing SDG-driven impact in infrastructure through mobilizing private sector participation”. Continuing the discussion of last year’s congress, titled “Next Level PPP”, the participants have examined the methods of ensuring the resilience of future PPPs.
There is a global call for urgent action to build forward better. In the Glasgow Climate Pact, countries have recognized the need to accelerate public and private sector financing of projects that facilitate the fulfillment of Sustainable Development Goals (SDGs), which are aimed among other things at facing challenges posed by climate change. At the same time, the importance of bringing together stakeholders from the public and private sectors to achieve the common goal of creating resilient, SDG-compliant infrastructure was emphasized.
It is important to mention that countries with developing economies and the least developed countries are among those most adversely affected and least able to cope with the anticipated shocks to their social, economic, and natural systems. Every year the world faces devastating, and increasingly unprecedented, hurricanes, heat waves, wildfires and other cataclysms that result in the loss of lives.
Governments continue to face immense challenges. Even before taking the climate dimension into consideration, governments all over the world find themselves already dealing with extensive challenges brought about by the pandemic, the fast pace of technological change, record-high national debt levels, and the huge gap in financing needs for infrastructure. For Ukraine now, of course, the biggest problem is the barbaric military aggression by the russian federation.
Public-Private Partnerships (PPPs) are becoming more important than ever, as governments have limited financial resources and institutional capacity to undertake sizable investment programs. PPP can help overcome many such challenges. At the same time, proper planning, structuring and implementation of PPP projects are vital. Otherwise, risks arise that some of the projects might exacerbate the existing problems, as systemic risks such as climate change and increasingly environmental-social-governance (ESG) risks affect the basic tenets of PPPs – risk-sharing and value-for-money.
PPPs need to respond to the changing needs, limitations in the planetary resources, extreme weather events, physical climate risks, leapfrogging technological innovations, changing demography of our society, etc.
More than a thousand participants have taken part in the congress this year. Speakers were the international experts in the field of PPP, including representatives of the United Nations Organizations, governments of various countries, global and bilateral Development Financial Institutions (DFIs) as well as the investors, lenders, infrastructure companies, businesses, manufacturers and other organizations.
On the 13th of June, after the welcome address by the President of WAPPP, Ziad Alexandre Hayek, the opening keynote was conducted. The speakers of the keynote were: David Duarte, the Head of Public Finance of the Ministry of Finance of Chile; Morgan Landy, the Senior Director of Global Infrastructure of IFC; Hubert Danso, the CEO and Chairman of Africa investor (AI) Group and Julia Prescot, the Co-founder and Chief Strategy Officer of Meridiam Infrastructure. They have discussed how PPPs harness the opportunities and enhance the predictability of finance to meet COP 27 and 2030 Agenda goals.
Thus, the participants have noted that traditional infrastructure actors, such as governments and state-owned utility service providers, are under financial pressure as the demand for public infrastructure exceeds available public finance. Budgets are strained and will likely remain strained in the mid-term. These actors are increasingly looking to private investment to address and bring efficiencies to this shortfall of public finance. PPPs and private financing offer a strong incentive mechanism for optimizing capital and operational investments, reinforced by the lender’s oversight. PPPs allow for incentives from lenders, project owners and the government to be aligned around efficiency. The decision to involve the private sector has to be guided by an assessment of the relative long-term costs and benefits, as well as the availability and reliability of private or public finance options.
Morgan Landy has emphasized the importance of mobilizing private finance for climate adaptation. IFC takes an adaptive management approach to climate, as it is no longer possible to plan and design infrastructure solely on the basis of historical data. The Sustainability Framework comprises IFC’s Policy and Performance Standards on Environmental and Social Sustainability. The Performance Standards are directed towards clients, providing guidance on how to identify risks and impacts, and are designed to help avoid, mitigate, and manage risks and impacts as a way of doing business in a sustainable way, including stakeholder engagement and disclosure obligations of the client in relation to project-level activities. In the case of its direct investments (including project and corporate finance provided through financial intermediaries), IFC requires its clients to apply the Performance Standards to manage environmental and social risks and impacts so that development opportunities are enhanced.
The opening keynote was followed by a session called “Aligning financing with SDGs and ESG”. The participants have discussed that future-proofing PPPs means bringing new investors who are looking for ESG investments. Climate-related shocks and stresses are increasing in frequency and magnitude, causing damage to infrastructure systems and disruptions in the provision of services. It is essential that climate resilience is integrated from the early stages of the infrastructure lifecycle, to ensure that new and existing infrastructure is climate-resilient. In addition, there is a multi-trillion-dollar financing gap for infrastructure, coupled with ready-to-deliver infrastructure projects. Mobilizing private finance will be key to closing this gap. Marion Amiot, the Head of Climate Economics of S&P Global Ratings has illuminated the issue of climate risks’ impact on economic losses of various countries. Bella Tonkonogy, the Director of the analysis and advisory non-profit organization Climate Policy Initiative, has detailed how climate financing supports climate adaptation and climate change mitigation.
The next session was titled “Climate Resilient PPPs”. ESG-vulnerable countries are facing adverse impacts socially and contractually to existing and future PPP projects caused by climate physical risks, rising sea levels, droughts and other adverse natural events. Speakers have discussed opportunities to increase the institutional capacity of governments to create agile projects, able to respond to the rapidly changing environment in the market and potential demands to the private sector.
Salim Bensmail, the Senior Investment Director at Meridiam has distinguished three types of Climate Resilient PPPs:
1. Climate change
A change in the state of the climate that can be identified (e.g., by using statistical tests) by changes in the mean and/or the variability of its properties and that persists for an extended period, typically decades or longer. Climate change may be due to natural internal processes or external forces such as modulations of the solar cycles, volcanic eruptions, and persistent anthropogenic changes in the composition of the atmosphere or in land use. For example, sea-level rise, increased average summer temperatures; increased frequency and length of heatwaves.
2. Climate change mitigation
A human intervention to reduce the sources or enhance the sinks of greenhouse gases (GHGs). For example, by promoting low-carbon transport methods, such as bus-rapid transit (BRT), electric vehicles, and non-motorized transport options (e.g., cycle lanes and pedestrianized areas).
3. Climate change adaptation
The process of adjustment to actual or expected climate and its effects to moderate or avoid harm or exploit beneficial opportunities. Human intervention may facilitate adjustment to the expected climate and its effects. For example, by expanding urban green space to mitigate heatwaves; building coastal defenses.
The next session was titled “How can PPPs embrace innovation and technology?”. The participants have explored the potential of the 4th generation infrastructure – Infrastructure 4.0. This is a forward-looking infrastructure that leverages technology and information to provide high-quality environmental, economic and social outcomes. Dr Alex Byrne, the VP and Head of Asset Management Services of Siemens Healthineers has discussed innovations that can be implemented in PPP projects in the healthcare sector. Also, during the discussion, Andrés Rebollo, the Managing Director of K-Infrastructure, emphasized that one of the aspects of embracing innovation and technology in PPP projects is related to tender procurement options. He believes that competitive dialogue is a vital part of all projects that rely heavily on technology. Another aspect of innovative technologies in PPPs discussed by the participants was project longevity. Richard S. Seline, the Managing Director of the Resilience Innovation Hub and the ROAR Partnership has expressed his opinion that innovation and technology do not bring value to PPPs when considered the end goal of a project – they are instruments for changing the cost-benefit ratio, improving project effectiveness and impact probability.
The last session of the day, titled “Private sector as a catalyst of sustainable infrastructure”, was organized by the Inter-American Development Bank (IDB) Invest. Speakers discussed ways in which the private sector can bring forward financial and technical innovation to promote the development of more resilient and sustainable infrastructure.
On the 14th of June, 7 countries presented before congress participants, including potential investors, creditors and representatives of international organizations, information about their PPP project pipelines, noteworthy successful case studies, peculiarities of project lifecycles, etc. These countries were Kuwait, Kenya, Morocco, Poland, Panama, Tunisia and Ukraine.
The Director of the PPP Agency, Niko Gachechyladze and the Head of the Project Office for the Development of Public-Private Partnership in Infrastructure “SPILNO”, an independent advisory body to the Ministry of Infrastructure of Ukraine, Taras Boichuk, have illuminated the peculiarities of the PPP mechanism in Ukraine as well as the discussed potential of using PPPs to rebuild infrastructure destroyed by the russian federation’s armed aggression against Ukraine. Mr Gachechyladze has told the participants about the main changes in legislation that have taken place since 2017, ensuring the transparency of the PPP mechanism; about prospective PPP projects that were planned to be implemented before the active phase of the russian-Ukrainian war as well as about the new challenges that arise before the government of Ukraine in rebuilding the infrastructure destroyed from the February this year. He has noted that direct losses in dollar equivalent have now exceeded 105 billion and indirect losses amount to around 600 billion. Niko Gachechyladze has provided statistics on which objects were destroyed by type, explained which issues and opportunities our country might come across during infrastructure reconstruction and why the PPP mechanism can be an effective instrument for high-quality implementation of this process.
Taras Boichuk has mentioned which PPP projects are being implemented (now paused) and discussed the planned creation of a digital platform – an electronic trading system for PPP projects, including concessions. It will facilitate the quality post-war reconstruction of Ukrainian infrastructure. The project began back in 2019, with the support of the European Bank for Reconstruction and Development (EBRD) and entails the integration of the SOURCE platform in Ukraine. Taras Boichuk also noted that the need for the development of new types of infrastructure arises. For example, the need to create facilities near the borders with EU countries to ensure smooth grain export.
The Director of WAPPP has expressed his belief that a in future Ukraine will experience an influx of investment.
You can watch the video of the presentation below:
Other sessions of the day were:
- “Managing PPP contracts to cope with current and future changes”
The participants have discussed the peculiarities of managing contingencies, risks, claims, relationships, disputes and changes.
- “Evolving the airport PPP industry to meet the challenges of the energy transition”
Today’s real challenge for airports is to meet the future energy needs of the aeronautical industry. Speakers examined how future airport PPP models can consider this challenge and face its financial consequences.
- “PPPs in times of crisis”
This session was organized by the World Bank. The participants focused on challenges created by the pandemic on PPPs and what actions the governments can take to emerge from the pandemic while ensuring infrastructure investments are clean and green.
- “Financing the leapfrogging of emerging economies: The role of PPPs”
The attendees drive a paradigm shift in infrastructure investment planning to stimulate economies and enable the transition to a regenerative economy.
On the 15th of April, representatives of 12 countries shared their experience in PPP project implementation, presented successful case studies and relevant legislative developments, and/or climate-related initiatives. Those countries were Japan, the Republic of Korea, the Philippines, the Kyrgyz Republic, Egypt, Italy, Rwanda, the United States, Canada, Mexico, Peru and Paraguay.
In addition, there were three sessions:
- “PPP Project Transaction Management”
Andy Potter, the Director of Ansarada has explained how technology can reduce risk and accelerate PPP preparation and implementation.
- “What can MDBs do to foster resilient PPPs”
During the session, Takeo Koike, the Director of the Office of Public-Private Partnerships of the Asian Development Bank (ADB) and Matthew Jordan-Tank, the Director of Sustainable Infrastructure Policy & PR of the European Bank for Reconstruction and Development have discussed how tools and products developed by Multilateral Development Banks (MDBs) support PPP units in project preparation and implementation.
Matthew Jordan-Tank has noted that the cooperation between the European Bank for Reconstruction and Development and the government of Ukraine on the preparation of the Olvia and Kherson seaport concession projects was very successful.
- “What can UN Regional Commissions do to foster resilient PPPs?”
During the session speakers explained how UN Regional Economic and Social Commissions support PPP units in project preparation and implementation, particularly by sharing their tools and products.
Claudio Meza, the Economic Affairs Officer of the UN Economic Commission for Europe has discussed the People-first Public-Private Partnerships Evaluation Methodology for the Sustainable Development Goals and the UNECE People-first PPP Self-Assessment Tool. The latter, according to him, will be officially launched at the end of the year. Currently, discussions are held on how this instrument can be used to fast-track the evaluation of projects that would facilitate the recovery of Ukraine.
On the 16th of June, the representatives of Indonesia, Bangladesh, Belarus, Jamaica, the Dominican Republic and Ecuador presented case studies and discussed the peculiarities of implementing PPPs in their countries.
Other sessions of this day were:
- “Rising urbanization, changing demographics and the need for green mobility”
As economies grow, so does access to private vehicles. The participants discussed the challenge of shifting people to a greener mode of mobility and the need to direct private investments towards relevant projects.
- “Ports on the frontline of climate change”
Speakers have illuminated the key challenges in the design and delivery of PPPs for port resilient infrastructure.
- “Financing of Rail PPP Projects”
Participants discussed how governments are adapting to make Rail PPP projects ESG compliant.
- “Central PPP Units: Success factors and challenges”
During the session, the speakers discussed the roles of Central PPP Units (CPPPUs), key factors for their success and the challenges they may face.
- “The growing role of PPP in North America”
This regional session has shed light on the interconnectivity of infrastructure in North America as well as the growing role of PPPs in the region to improve infrastructure at both national and international levels.
- “Structuring sustainable PPPs in Latin America”
During this regional session, new case studies of PPP projects implemented in the region were presented along with the tools developed by the Inter-American Development Bank together with PPP units to facilitate sustainable development.
- “State of private investment in infrastructure: GIH’s Infrastructure Monitor”
Cinthya Pastor, the Director of Economics of the Global Infrastructure Hub (GIH) has provided insights on the state of global private investment in infrastructure (PPI), levels of PPI in primary markets and its performance on financial and environmental, social, and governance (ESG) indicators.
On the 17th of June, 7 activities took place:
- Session “Supporting the successful delivery of PPPs with free educational resources”
Richard Pharro, the founder and CEO of APMG International and Helen Platt, the project manager at APMG International have illuminated the need for providing PPP practitioners with access to free educational materials.
- Session “Future generation and impact of today’s PPPs”
Speakers discussed how PPPs and private sector participation can create impactful initiatives that will shape the governments’ future, especially in education, skill development and technology. This will ensure countries’ sustainable growth and help the future generation to receive skills, crucial for becoming qualified experts.
- Session “Growing role of Private sector initiatives and Philanthropy in developing critical infrastructure PPPs with social impact”
Private sector and philanthropic organizations became key players in bringing transformational change and impact in social infrastructure PPPs.
- Session titled “Ensuring women empowerment and participation in sustainable PPPs”
Women are the major stakeholder in the development of sustainable PPP projects. Experts have explained the need for involving women in the creation of future infrastructure to combat climate change.
- Session “Capstone: PPP projects to align with SDGs economic recovery and resilience”
With global losses and damages from disasters increasing rapidly, developing and the least developed countries, most affected by natural disasters, have limited resources to respond. Participants discussed how public-private partnerships can increase adaptation capacity while aligning with the SDGs. The session was focused on innovations in PPPs to increase resilience while adapting and strengthening coastal economies in this new reality.
- Closing keynote “Outlook at COP27”
Closing keynote participants have discussed what will define the success of future PPPs in the implementation framework of COP27.
- Awards for selected papers & Recognition of event partners
The congress has ended with awarding selected papers. Geoffrey Hamilton received an award for the most innovative paper and K-Infra for the paper with the most practical application of PPPs in developing countries.