This presentation was made by Raffaele DELLA CROCHE, OECD Secretariat, at the 11th Annual Meeting of the OECD Network of Senior PPP and Infrastructure Officials held at the OECD, Paris, on 27 March 2018

1. PARTNERING WITH THE
PRIVATE SECTOR:
DELIVERY AND
FINANCING MODELS
11th Annual Meeting of the OECD Network of Senor PPP &
infrastructure Officials - 27 March 2018
Raffaele Della Croce
Senior Economist - Long Term Investment Project
Directorate for Financial and Enterprise Affairs- OECD
Raffaele.dellacroce@oecd.org

2. • Infrastructure financing
• Delivery/Financing Models and the
Capital structure
• Choice of Delivery models and the cost of
capital
• Alternative Sources of Finance and Risk
Sharing
Content

3. INFRASTRUCTURE
FINANCING

4. Financing Infrastructure

5. 1. Role of Private Sector
Source: IJGlobal Transactions, BNEF. OECD calculations.
Note: The data only includes the financing of the Renewable Energy, Power, Transport and water infrastructure sectors. 5
In 2016, 3,507 transactions reached financial close for a global infrastructure financing volumes of USD 406 billion, in
line with the previous year.

6. 2: Financial Structures (Project vs Corporate
2010 – 2016)
Renewable
Energy
Power Sector
Transport
Sector
Source: IJGlobal Transactions, BNEF. OECD calculations..

7. 3: Delivery models: PPPs/Not PPP and
SOEs/Not SOEs
62%
55%
69%
41% 41%
47%
79%
0%
20%
40%
60%
80%
100%
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016
PPP Non PPP PPPs as a % of total transactions
Trends in Transport Sector PPP/ not PPPs

8. 8
Source: BNEF (2016), OECD Calculations. Note: Figures correspond to shares of total equity in sample.
The ownership of power generation assets has been changing over the past decade
shifting from relatively large scale projects financed through the retained earnings of well-
capitalised utilities and power producers to more diverse sources.
… Additional sources of finance and new financial structures are emerging
Change in equity mix in wind energy projects in Europe, 2010 and 2015
4: Financing Mix
(Debt/Equity/Mezzanine)

9. CHOICE OF DELIVERY
FINANCING MODEL, THE
COST OF CAPITAL AND
ALTERNATIVE
APPROACHES

10. Delivery and Governance of
Infrastructure
Source: OECD Public Investment Framework

11. Capital structure decisions – debt / RCV
2011‐12
Source: Ofwat

12. Delivery and Financing Models and the
Cost of Capital
Delivery
Model
Description Indicative
WACC
(%)
Public
Finance
Direct government funded investment
e.g. flood defence, some rail and roads
3.9
Government
supported
Government guaranteed debt +0.0-1.25
Privatization
-Regulated
Markets
Regulated Asset Base model e.g. water,
electricity, regulated airports
+0.25-3.0
PPP/PFI
Schemes
Availability based payment +2.0-3.75
Privatization
Unregulated
markets
User pays demand based – such as
corporate energy utilities, unregulated
airports, waste operators and
communications
+3.5-7.0
Delivery models and cost of capital in UK
Source: Adapted from HM Treasury, National Infrastructure Plan
2010 Source UNDP Derisking Renewable Energy Investment
Impact of financing costs on wind and
gas power generation costs

13. Delivery modes, Contractual structures and Risk
Transfer: Alternative risk/profit sharing models
Dominant counterparty:
Public Sector
Dominant counterparty:
Private sector
Low or relatively low
Predominantly public
Public
High or very high
Private
Private
RISK INCURRED BY THE PRIVATE PARTNERS
OPERATION &
MAINTENANCE
SERVICES (O&M)
CONCESSION
(PUBLIC OWNERSHIP
OF THE FACILITIES)
CONCESSION
(PRIVATE OWNERSHIP
OF THE FACILITIES)
FULL
PRIVATIZATION
• Management of
public facilities by
private parties
• Leasing agreements
• Rehabilitation of existing
facilities, management and
transfer
• Design, building, management
and transfer (service agreements
with the public administration)
• Design, building, own,
management
and transfer
• Merchant plants
• Asset sales
• Divestitures
• Construction: Public
• Investment: Public
• Commercial: Public
• Operation: Private
• Construction: Public
• Rehabilitation: Private
• Commercial: Public/Private
• Operation: Private
• Construction: Private
• Commercial: mainly Private
• Operation: Private
• Investment: Private
• Commercial: Public/Private
• Operation: Private
TYPES OF CONTRACTUAL STRUCTURES
RESPONSIBILITY FOR FINANCING
PROJECT GOVERNANCE
MAIN RISKS AND RELATIVE ALLOCATION AMONG THE INVOLVED PARTIES
Source: OECD 2012

14. Co-Investment/Platforms
Source: OECD 2014