MIIR AND PFR Stimulate Public-Private Partnership. Smaller Local Governments Are To Benefit.

Ultimately, five pilot JST groups will participate in the programme and will receive financial support from the Ministry of Investment and Economic Development. Local governments which meet the enrolment requirements will receive advisory support financed with 90% financing from the Ministry. Additionally, the Ministry will run training in PPP for all local governments interested in the subject. PFR will actively seek participants for the pilot groups with regard to five areas:

- remodelling and maintenance of railway buildings,

- remodelling/construction and maintenance of public facilities,

- remodelling/construction and maintenance of public roads,

- remodelling/construction and maintenance of educational facilities (e.g. nurseries, kindergartens, schools),

- remodelling/construction and maintenance of sports facilities.

“We are implementing a whole set of activities aimed at stirring the PPP market. We are educating, providing advice and changing the legal regulations. Two days ago, the President signed an amendment to the PPP act. Today, we are signing a letter of intent with the Polish Development Fund, an institution that helps finance investments. All our activities are aimed at breaking the obstacles that PPP faces: a lack of tested procedures, experience and relatively high advisory cost,” summed up Witold Słowik, Vice-Minister of Investment and Economic Development.

He also urged local governments to be more open to public-private partnership: “We are aware of the fact that disadvantageous things are being said of PPP. But these stereotypes are outdated. For the current government, PPP is an equal form of financing investments with regard to, for example, standard public procurement. Quite often this is a more cost-efficient solution because we gain a private partner and his know-how.”

“The development of public-private partnership and accelerating investments in modern infrastructure of Polish local governments constitute the key premises of the so called Morawiecki Plan, and they have been combined successfully in this project. PPP packaging enables numerous local government units to access this financing model, but simultaneously it poses a challenge to public administration and enterprises. The expert and financial support from the Ministry of Investment and Economic Development, as well as the PFR’s offer create a real chance for the execution of new investment projects that are important to local communities,” said Paweł Borys, Polish Development Found President.

Thanks to PPP packaging, a group of local government units will execute jointly a single procedure with regard to public-private partnership and enter into a single public service contract to procure specific services, e.g. construction works or modernisation. This solution will enable local governments to increase their negotiation capabilities in talks with potential private partners. What is more, the cost of the procedures will be split among several entities. The packaging will also enable them to incorporate projects that have been too small to interest private partners and re-scale them so that they achieve economies of scale.

The Polish Development Fund will be responsible for acquiring local government units to participate in the pilot groups. PFR’s Department for Local Government Investments (DIS) cooperates with local government units on a daily basis, for example it invests the capital of Local Government Investment Fund (FIS) into public service companies. Additionally, over the past year DIS has analysed 120 local government units within the scope of the ‘Package for Medium Towns’ in order to identify their needs with regard to development and accessible financing opportunities. Thus, the Fund has thorough knowledge on the needs and investment capabilities of local governments.

“Within the scope of its tasks, FIS acts for popularisation of public-private partnership as a financing instrument for public tasks through cooperation and financing companies that execute PPP projects. The Fund also conducts market research within the scope of local government needs that could be financed by means of PPP. We have managed to acquire unique knowledge and experience that we will be utilising in the package PPP project. It is worth emphasising that PFR has tested the concept. The municipality of Krapkowice in cooperation with neighbouring municipalities prepared a PPP project concerning maintenance of public facilities,” said Bartłomiej Pawlak, PFR board member.

An additional benefit PFR is able to offer thanks to FIS is the possibility of granting subordinated loans to private partners. In PPP projects, private partners must bring their own contribution to the concessionaire companies and that cost is relatively high. Loans offered by PFR FIS may partially replace their own capital on favourable financial terms. Such a mechanism has already been utilised by the PFR FIS team with great success.

The Polish Development Fund also partners with the Ministry of Investment and Economic Development in the execution of the ‘Package for Medium Towns’ programme. PFR’s role is to consult local government units on financing opportunities with regard to their investment needs. As a result of PFR’s enrolment process, 150 local government units that wish to execute investments, but are unable to obtain grants and cannot or do not want to incur a debt for various reasons, submitted their applications. The investment needs reported to PFR were dominated by road and transportation infrastructure projects (that is, roads, streets, ring roads, crossings, bridges, railway stations, tracks, rolling stock, interchanges) and high-capacity buildings (museums, educational centres, schools, kindergartens). The total value of these projects exceeds PLN 5.5 billion.

Local governments interested in participation in Package PPP should contact PFR (phone: 800 800 120 or +48 22 703 43 00, e-mail: samorzad@pfr.pl).