Description
A typically long-term cooperative arrangement between one or more public entities and a private organization, where there is an allocation of risks between the two partners. The aim of this instrument is to use public policies and regulations to leverage private sector financing, which will receive payments from the public entity for providing a defined service.
Instrument category
Public-private partnerships (PPP)
Implementation status
High - much evidence available
Enabling conditions and success factors
- Appropriate legislative framework should be in place.
Instrument benefits
- Full divestment or privatization can enable municipalities to pass full responsibility for operations and maintenance to private sector entities, reducing related costs.
Challenges and risks to implementation
- A private purchaser may be unwilling to accept all of the existing liabilities of the utility being privatised and only be willing to accept a portion of the assets and liabilities. In such case, the assets could be transferred to a special purpose company.
