What should be included in PPP contract?

As laid down in EU rules on concessions and public-private partnerhips, a PPP draft contract shall contain at least the following topics:

  • the rights and obligations of the parties

  • risk allocation (this is usually achieved through setting out events which give the PPP Company a right to some compensation)

  • service performance standards and targets which need to be objective and measurable

  • the procedure for permitted modifications as well as their scope and nature

  • payment mechanisms (e.g. tariffs, subsidies, grants) and adjustments to payments in response to various contingencies

  • penalties (and possibly bonuses) which have financial consequences or give rise to warning notifications (eventually leading to termination of the PPP contract)

  • security and performance bonds

  • project insurances

  • the term of the PPP contract

  • the conditions for termination (categorised by party and type of event) and compensation upon termination (for each type)

  • step-in rights (both for lenders and, in emergency situations, the Authority)

  • the definition and impact of force majeure and changes in the law

  • the dispute resolution procedure

  • other rights, obligations and responsibilities of the parties

A PPP contract shall contain at least the following appendices concerning:

  • Standards of the services

  • Table of risk allocation

  • Guarantee for execution of the contract

  • Guarantee of the parent company for the special purpose vehicle

  • Financial model

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