Mechanics and Implications of Using a Variety of PPP Models

The study found a 29% increase in residential connections per worker, a 32% increase in electricity sold per worker, a 45% increase in bill collection rates, and an 11% reduction in electricity losses. These findings suggest that private sector participation can improve the efficiency and effectiveness of electricity service delivery. There are various public-private partnership (PPP) models that can be used to achieve these performance gains. These models include management contracts, lease contracts, affermage contracts, concessions, and joint ventures. Each of these models has its own characteristics and implications for the parties involved. Management contracts involve a private operator paying a fixed fee to use government-owned assets and contribute to a fixed asset replacement reserve fund. The operator has a commercial incentive to operate efficiently, as it retains the remaining cash flow after payment of the lease fee and expenses. This model is typically used for a term of 10 to 20 years and involves more risks for the operator than an affermage contract. Lease contracts are similar to management contracts, but the fee is paid to the operator from receipts prior to payments to the government as owner. The government is responsible for new capital investments, and it receives an agreed portion of the remainder of net cash receipts as remuneration for assets and reserve for future investment. This model is less risky for the operator than a lease contract but offers less upside potential. Affermage contracts involve the right to use utility assets for a long-term period, typically 20 years or longer. The assets remain owned by the governmental entity, and the concessionaire is responsible for investing in new assets and replacing existing assets. The concession fee for existing fixed assets is paid to the concessionaire, and subsidies are not provided if affordable tariff levels are sufficient to produce a commercial rate of return and finance investments. Concessions involve the government participating in the ownership of a corporation, with the government contributing existing CPU assets to the incorporated joint venture. The private partner accepts principal financial risks, including responsibility for all future investments. The estimate of government shareholding is 15% to 20%, and the principal risks and rewards are attributable to the private partner. The Société Anonyme Mixte (SAM) model is another option for PPPs in Haiti. However, the key question is whether the CPU is considered a public enterprise, which would require Parliamentary approval for a concession. If the CPU is considered a public enterprise, a concession would require Parliamentary approval, which would be a major impediment. A Société d'Economie Mixte (SEM) under the CMEP law would not require Parliamentary approval but would entail more constraints than a SAM, given CMEP involvement and a minimum 20% State shareholding.