Public-private alliances failing

Partnerships have high failure rate with report citing poorly scripted deal structures

Despite the massive push Gulf governments have put in, nearly one in four public-private partnerships (PPP) taken up in the last 20 years ended up being abandoned, according to findings by MEED. In all, there were 80 projects classified as PPPs during this period, of which 49 were delivered.

The remainder are at different stages of development — from seeking expressions of interest (EoI) to having signed the PPP contract but still working towards a financial close.

The primary reason for the high number of closures had to do with governments failing to offer deal structures that were “attractive to investors because they carried too much investment risk”, Meed reports. This could stem from either a “lack of detail in the project scope, or inadequate guarantees over revenues”.

Poorly defined deal structures in turn led investors to increase their contract bid prices to mitigate exposure to potential and unforeseen risk. The domino effect was felt in the rise of the overall project costs and making it economically unviable.

One such high-profile project, as noted by MEED, was the 6 October Wastewater Treatment Plant PPP launched by Cairo in 2009. It was abandoned in 2012 after studies showed higher-than-expected levels of industrial wastewater being required. This led to more advanced “pre-treatment technology than had been anticipated, making the project prohibitively expensive,” MEED said in a report.

Build-operate-transfer (BOT) port projects have also seen a high failure rate, including Aqaba New Port in Jordan and the Tangier port complex in Morocco. But port concessions without construction work, especially at Tanger-Med Port, have been much more successful.