Construction and development companies are starting to open concession market. The largest companies are forming business units (project offices) engaged exclusively in the PPP. However, mid-level and regional companies are only looking close at the market.
A historical brief. The second PPP market’s wind was found 3 years ago after adoption of the Russian Government decree No. 300 dated 31 march 2015 "On approval of the proposal form for concluding a concession contract with a person initiating the conclusion of a concession contract". What does it mean for developers? It means that developers can initiate construction of an object via the PFI proceedings.
Concession for a developer is super promising for the most active
First, let us look at the VIS company. It started its business as Gazprom subcontractor. Since 2013, the company has started to concentrate on PPP projects and in 2018 the company made key accent on concessions. As a result, being the first developer to enter the PPP market, the company received sufficient benefits. Who wishes to know more, we recommend to "google" its histrory.
why do developers need the PPP?
It allows developer to plan its loading capacity for a long-term period
It allows choose (form) construction objects
It allows change a development company profile (one of 2018 trends is an attempt to implement concession projects in residential construction sector)
It allows diversify company’s business thanks for operational phase
It allows obtain project finance at ease
It allows launch projects in respect of which regions, municipalities and federal executive bodies have lack of funds
How can a developer become a concessionaire?
This question has been already asked and we will try to reply briefly.
A plan is quite simple. We shall present it on a regional level example. Please note, from now you are not a development company that wants to build a preschools, school, road, bridge or military warehouse - you are an investor with your money (loan) entering into a region to implement a necessary project.
- 1.Take look at programs of key regional investments bodies. You should start with a regional investments development agency (the RID) or similar bodies. As a rule, old projects are inactive or financially unattractive.
- 2.Besides the RIDs’ programs take look at projects of construction ministries, transport ministries, health ministries, etc.
- 3.Make a project list focused on budget effective or direct toll projects.
- 4.Choose a project that fits your profile and experience, as in future you may face with competitors.
- 5.Initiate negotiations with a region.
- 6.Draft necessary documents for applying the PFI.
While negotiating, you should keep in mind the following aspects: region experience in the PPP, budget parameters, regional negotiators’ status, conflicts of interest, potential ministries acting as grantors, etc.