~ InternationalTransport Forum

Public PrivatePartnerships forTransport InfrastructureRenegotiationand Economic Outcomes

. OECD

TABLE OF CONTENTS - 5

Background 8Findings 8Policy insights 9

Chapter 1. Overview of discussions 11

PPP renegotiations defined 13Incidence of PPP renegotiations 13Reasons for renegotiation 16How to approach renegotiations 23Conclusion 27

Referen ces 31

Chapter 2. Renegotiations in public private partnerships: Theory and evidence 35

A simple renegotiations modeL 38Extensions 42Evidence from Chile, Colombia and Peru 43Conclusions 50

Chapter 3. The renegotiation of public private partnership contracts: An overview of the recentev0Iution in Latin America 55

Definitions: What is renegotiation? 59Renegotiations typology 60Why renegotiation is an important issue: implications 61Evolution 2005-2013 69Platform for addressing renegotiations and measures taken to tackle this issue 70Some reflections on PPP renegotiation 71

Literature review 81Case studies 83Discussion 88.Conclusion 96

Chapter 5. Institutional and political determinants of private participation in infrastructure 119

Theoretical background to understand the determinants ofPPI.. 122Data description 126Results 127Conclusions 130

Table 1.1 The difference between contract renegotiations and adjustments in line with the contract.. 13Table 1.2 Renegotiations ofPPPs in different regions 14Table 1.3. Summary statistics on renegotiations in Chile, Peru and Colombia: 1993-2010 15Table 1.4. Average cost overruns in PPPs and traditional projects in Australia 16Table 1.5. Examples of contract changes in PFI projects in the United Kingdom 19Table 2.1. Chilean PPPs and renegotiations (in USD millions) 45Table 2.2. Characteristics of renegotiations in each country 46Table 3.1. Percentage of renegotiated contracts by region and sector 58Table 3.2. Definition of renegotiation and examples 60Table 3.3. Renegotiation classifications: initiated by the government, the operator or concessioner, by

both or ambiguous 61Table 3.4. Percentage of renegotiated PPPs and average time to renegotiation 63Table 3.5. PPP contracts cancelled 1984-2013 in LCR (no divestitures) 63Table 3.6. Summary of sample statistics by country: 1993-2010 64Table 3.7. Characteristics of contract changes: 1993-2010 65Table 3.8. Portugal renegotiations case study 68Table 3.9. Measures taken in some countries to address the renegotiations issue 70Table 4.A1.1. Outcome of renegotiations in Latin America and the Caribbean (1985-2000) 100Table 4.A 1.2. Geographic distribution of United States PPPs, renegotiations and our case studies 100Table 4.A1.3. Summary of United States PPP renegotiation cases (1995-2013) 101Table 4.A1.4. Complexity in the design and construction ofPPP cases 101Table 4.A1.5. Summary ofPPP renegotiation cases (1993-2013) 102Table 4.A1.6. Outcome of renegotiations in the United States highway PPP cases (1995-2013) 104Table 4.A1.7. Changes in the majority party, state executive and legislative branches 104Table 4.A1.8. Primary private owners and their road asset portfolio facing renegotiations 105Table 4.A1.9. Contract complexity of PPP cases 108Table 4.A1.10. Fractionalisation index for the United States (2010) 109

Table 4.A1.l1. Ethnic fractionalisation of select countries 110Table 4.A 1.12. The state management report card: Infrastructure grade, states with PPP enabling

legislation 111Table 5.A1.1. Determinants ofPPI -- literature taxonomy and mapping 133Table 5.A3.1. Summary statistics 135Table 5.A3.2. Correlation of independent variables 136Table 5.A3.3. Determinants of private participation in infrastructure 137Table 5.A3.4. Determinants of private participation in infrastructure by sector. 138Table 5.A3.5. Determinants of private participation in infrastructure (no year dummies) 140Table 5.A3.6. Determinants of private participation in infrastructure by sector (no year dummies) 141Table 5.A3. 7. Determinants of private participation in infrastructure by quartile of experience

and GDP. . 143

Figure 1.1 Causes of renegotiation - four different categories 20Figure 2.2. Profile of renegotiations by PPP age, quartile and country 47Figure 3.1. Number ofPPP transport projects in developing countries by type and region (1984-2013) 56Figure 3.2. Number ofPPP transport projects by type and year in developing countries 57Figure 3.3. Projects with government support 62Figure 3.4. Number of concession renegotiations per year in each country 64Figure 3.5. Additional cost versus initial contract value (%) 66Figure 3.6. The fiscal costs of renegotiations in Chile and Colombia (Constant prices in million USD,

December 2009) 66Figure 4.1. Number of DB & PPPs financial closes in the United States by sector, 1986-2013 79Figure 4.2. Cumulative highway PPP financial closes 80Figure 4.3. Consumer price index - All urban consumers (1992-2014) 90Figure 4.4. Real GDP growth in select states (1992-2014) 91Figure 4.5. Unemployment rates in states with highway PPP renegotiations, 1992-2014 92Figure 4.6. PPI (construction machinery & iron and steel mills) 1992-2014 93Figure 4.7. Prime bank loan rate, not seasonally adjusted (1992-2014) 94Figure 5.1. Private investment in infrastructure in low- and middle-income countries 121Figure 5.2. Private investment in infrastructure in low- and middle-income countries, by sector 121