Template-type: ReDIF-Paper 1.0
Author-Name: Sfakianakis, Emmanouil
Author-Email: Emmanouil.Sfakianakis@esma.europa.eu
Author-Workplace-Name: European Securities and Markets Authority (ESMA) 
Author-Name: Laar, Mindel van de
Author-Email: mindel.vandelaar@maastrichtuniversity.nl
Author-Workplace-Name: UNU-MERIT / MGSoG, Maastricht University
Title: Assessing contingent liabilities in public‐private partnerships (PPPs)
Abstract: Public-private partnerships (PPPs) can impose important future cost on the
	government, which in turn create obligations similar to public debt obligations for
	financing infrastructure investment. Apart from that, government guarantees, typical
	in PPP contracts, constitute explicit contingent liabilities. The risk that arises from
	such guarantees must be transparently valued to assess a country’s fiscal profile. In
	this study, we aim to show that the notion of a PPP as a (set of) contingent claim(s)
	can also be used to value the PPP public risk. Valuing contingent claims in this
	manner is important, as it allows us to compare more carefully different set-ups of a
	PPP. We introduce and analyse the different scenarios that were at the Chilean
	government’s disposal for executing a transport infrastructure project. Our findings
	reveal that, for the first years of a PPP programme, the burden on the surplus or deficit
	will be less in the case of the PPP compared to typical public investment. Secondly,
	the net contingent PPP flows constitute the real effect on the deficit and
	correspondingly on the public debt and weaken the government’s fiscal stance.
	Finally, we attribute a specific price to the PPP public risk introducing CDS valuation
	with and without counterparty (government) default.
Classification-JEL: H40
Keywords: PPP, Guarantees, Public Finance, CDS valuation
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 030
File-URL: http://www.merit.unu.edu/publications/wppdf/2012/wp2012-030.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012030