SOURCE: Black & VeatchDESCRIPTION:
Public-private partnerships (P3s) are most commonly known for funding large-scale water infrastructure projects that a utility can’t support through traditional funding. However, other key attributes in the P3 model are often overlooked. In a P3, the private entity may provide the capital, but the true benefits go well beyond financing alone.
How can public private partnerships help infrastructure development?
- Economic development and job creation: Upfront development funding can enable new job creation to support sustainable development efforts.
- Rate predictability and stability: The P3 model allows the utility to contractually obligate the private party to keep rates consistent in the long term. This protects ratepayers from unpredictable increases over the life of a project.
- Enterprise asset management predictability: Long-term public-private agreements can include agreed-to KPIs so assets are assigned a structured, predictable maintenance plan.
- Optimal risk allocation: One of the primary advantages of adopting the P3 model is the ability of the public partner to transfer established financing, technical, construction and operating risks to the private sector.
P3s can help solve some of the greatest challenges faced by water and wastewater utilities. Of the most important challenges revealed by respondents to the 2017 Strategic Directions: Water Industry Report survey, P3s can directly help solve the top five: aging water and wastewater infrastructure, managing operational costs, system resilience, managing capital costs, and justifying capital improvement programs (CIPs) and/or rate requirements.
More than 60 percent of survey respondents said they are using or considering a P3 for a specific project, which are now diversifying in nature. And while P3s are still a developing approach to infrastructure project funding, successful system-wide case studies in Rialto, California, Prince Georges County in Maryland and San Antonio, Texas, are illustrating the flexibility and stakeholder advantages.
KEYWORDS: Sustainable Finance & Socially Responsible Investment, Energy, Black & Veatch, water industry, Public Private Partnership, P3s, PPPs, financing, infrastructure investment, Economic development