Improving Risk Sharing and Investment Appraisal for PPP Procurement Success in Large Green Projects

Governments are major players in promoting green developments, with private finance being an ideal environment in which such promotion can take place. The financial collaboration between governments and the private sector through public private partnerships (PPP) can promote a widespread implementation of green initiatives. Two reasons make this possible. First, in order to respond to the growing green awareness, governments have a great leverage on how green investments can be developed by the private party while enjoying steady revenues and good services for the public. Second, the international community is promoting green growth in developing countries through PPP investments, and so PPP can play a major role in widespread green growth.This study focuses on improving the chances of success with PPP contracts, since more successful projects will lead to improved welfare and will improve the chances for greening the community.The methodology for this report was a literature review of peer-reviewed journals that analysed the design of PPP contracts and the role of simulative approaches in investment appraisals to recommend improvements for PPP contracts.The study concluded with two recommendations to improve the success of PPP; the first one was to reconsider the design of PPP contracts to include a hybrid structure that allows for a put and call options with a very controlled renegotiation clause. The second was to improve the risk simulation approach to improve the investment appraisal process through improving the type and quality of input variables, in addition to the creation of cost and events charters of all completed projects.