Public
private
partnership

What is a Concession (Concession Agreement)?
A concession is a type of agreement on the creation by an investor of an immovable property object into state ownership with the transfer back to the investor (concessionaire) for operation on a reimbursable basis.

What is a PPP agreement in simple terms?
PPP agreement is a type of agreement on the creation by an investor of an immovable property object in private ownership for operation on a reimbursable basis.

What is the difference between PPP and the Concession Agreement?
The key difference is the receipt of the object of the agreement in private ownership for the period of the PPP agreement and preservation in private ownership with the investor's contribution of at least 50% after the end of the agreement. At the same time, PPP agreements carry more risks for the signatory, are more difficult to justify and formalize, and, in general, are less common. With a concession, the object always remains with the state and cannot be pledged by a bank, unlike a PPP agreement. The rest of the technical and legal differences are less important.

What is a Private Concession Initiative (PCI)?
A private concession initiative is a legally enshrined procedure for concluding a Concession Agreement at the initiative of an investor.

Who is a Grantor?
A grantor is a state (represented by a designated body), a region, a municipality, when they are parties to a PPP agreement.

Who is a Concessionaire?
A concessionaire is a legal entity (investor) that undertakes obligations to implement an investment project in the field of PPP.

Who is a concessionaire legally?
Any individual entrepreneur, Russian or foreign legal entity, as well as two or more legal entities or individual entrepreneurs acting on the basis of a simple partnership agreement.

What is a Special Design Company (SEC) in a concession agreement?
SEC is a special design company (SEC, SPV) created for a project from "0" exclusively under a concession agreement, often by a consortium of companies with different competencies. The importance of the purity and profile of the activities of this SEC is manifested in the termination (termination of the concession agreement) in the framework of the coordination of compensation with the state.

Who is the participant of the concession projects?
Large projects are characterized by the following set of participants:
Investor (shareholder) - a group of participants in the SEC of the concessionaire
Financing organizations - banks, funds, other organizations providing debt financing
General contractor - a participant with whom an EPC contract is concluded
Operator - a person, as a rule, engaged in a specific type of operation
The state represented by an authorized representative
This typical list of participants can be linked through participation in the capital of the SEC (for example, an investor and financing organizations) or through a contractual relationship (concession agreement, direct agreement).

Which of the investment projects can become concessional?
A project with the following features can become a concession project:
The investment object complies with the list of legally permitted
The object is immovable property and it provides for its construction or reconstruction
Operation of the object is provided
Private investment (equity and / or borrowed capital) in the facility is expected
Investment object - state property
The object is not withdrawn from circulation (not limited) and is free from the rights of third parties
The financial model provides for the return on investment of the investor.

I am supplying equipment - can I formalize a concession relationship?
Not. The concession object is real estate.

I am engaged in the operation of real estate (hospital, boiler room, military warehouse ...) - can I formalize a concession relationship?
Not. The construction or reconstruction of the facility must be envisaged.

Where can I see the objects for which it is possible to conclude concession agreements?
The main groups can be found in 115-FZ and 224-FZ. Specific objects in respect of which it is planned to conclude concession agreements after its approval are to be posted on the website www.torgi.gov.ru, as well as on the official website of the future concessor. However, this list is for informational purposes, and is often not completed, which is not an obstacle to concluding a concession agreement.

Is it possible to create private property under a concession agreement?
Property in private ownership can be present with the permission of the public side in the concession agreement, but it must be technologically removed as far as possible from the object of the concession agreement.

Who pays for such property?
The concessionaire pays for the creation and registers the property on his own. Accordingly, after the end of the agreement, he receives lease rights to the memory under his property -)))

When can movable property be subject to a concession agreement?
The object of the agreement may be exclusively movable property, technologically related to the object of the concession agreement and intended for the activities of the CC. (A typical example is mobile cameras for photo video fixation and a data center building)

How many objects can there be in a proposal for a concession agreement?
The number of objects is not limited, but these actions (to combine objects) should not lead to restriction of competition. (Typical Acceptable Example - Airport Infrastructure)

When is the project optimal to structure for Concession, PPP?
There are many options. For example: there are no guarantees (or the possibility at all) of the project payback, but there is a significant macroeconomic or social effect.

What is an investor obliged to give other than money in the concession agreement?
Design (optional). Project documentation (PD) can be either developed by the concessionaire or provided by the concessioner. Responsibility for the correctness of the PD and tax peculiarities under various transfer options are separate risks of the concessionaire.
Create and renovate real estate. The peculiarities of the wording of the legislation do not allow in this case to be limited to just a major overhaul of the building.
Carry out activities with the use (operation of the compressor station facility), namely:
use (operate) the object of the concession agreement for the purposes and in the manner established by the concession agreement;
carry out the activities provided for by the concession agreement;
maintain the object of the concession agreement in good condition, carry out current repairs and major repairs at its own expense, bear the costs of maintaining this object, unless otherwise established by the concession agreement;
carry out activities with the use (operation) of the object of the concession agreement.

The peculiarities of the wording of the legislation create additional difficulties in the formation of the text of the Concession Agreement.

Does the concessionaire have the right to involve the project operator during the operation phase?
Yes, the concessionaire has the right, with the consent of the concessor, to transfer the object of the agreement for the use of third parties. It is standard practice to hand over the operation to a qualified contractor.

How is land provided for the construction of the KS facility?
In case of proactive submission under the CHKI within 60 working days, in case of a competition in accordance with the CBA.

Who carries out the site preparation activities?
Concessionaire or Grantor or both in stages.

Who gets the necessary building permits?
The concessionaire receives all the necessary permits independently. The grantor only provides assistance in the provision of documents related to his competence

Are there any special requirements for the initiator of the PSC?
The requirements are quite typical - no liquidation, no bankruptcy, no tax debts and confirmation that the initiator has 5% of funds

How long does it take to submit a PQI application?
The general deadline for the submission of an application for the CQI is 7-9 months, excluding the competition. In the presence of other applications and bids, the period is increased by 4-5 months

What is the term of the Constitutional Court?
Up to 30 working days by CHKI
Within the framework of the competition, it is determined by the competition documentation.

How long is the credit card valid?
The term of the concession agreement is not legally limited, but is often determined from:
useful life (before overhaul, for example)
financial model (requirements for profitability) of the investor
At the same time, it should be understood that the return of the object at the stage "before major repairs" can create significant difficulties for the concessionaire.

Is it possible to extend the term of the concession agreement?
Yes, based on the decision of the authority at the appropriate level. For the regional and municipal, the approval of the FAS is also required.

How is the draft concession agreement being prepared?
There are several approaches, the most popular of which is the following.
An organizational and legal model (AO) is being formed
A matrix of project risks is being formed
The method of risk management and the party (grantor or concessionaire), most successfully managing this risk, are identified.
Formation of CS points at the base
A) risk matrices
B) the essential conditions of Art. 10 FZ
C) other conditions of the concession agreement

What is a sample concession agreement and is it mandatory?
Model agreements have been developed and approved for individual objects - health care, culture, education, roads. Due to the prescription of the approval, the content of these agreements does not correspond to the realities of the market and interferes with the correct construction of the agreement. And if municipal (sometimes regional) projects still use these forms, then large concession projects are built on the basis of a risk distribution matrix, through a balance of interests.

What is a Direct Agreement?
A direct agreement is a tripartite agreement between the concessionaire, grantor and funding

I. General provisions
Subject of the agreement / Object of the agreement. Property relations of the parties / Duration of the agreement / Purpose and term of use (operation) of the object of the agreement / Actions and circumstances as of the date of conclusion of the agreement / Obligations of the parties to the Agreement / Persons related to the concessionaire / Persons related to the concessionaire / Technical expert / Ecology / Permits

II. Creating an agreement object
Financial closure / Financial closure conditions fulfilled by the concessionaire / Financial closure conditions fulfilled by the concessionaire / Preconditions for the creation of an object of the agreement / Design / Working documentation / Provision of land plots and other objects to the concessionaire / Obligations for the preparation of the territory / Construction of the object of the agreement / Fulfillment of the obligations of the concessionaire for construction / Transfer of the object of the agreement to the concessionaire / Registration of rights.

III. Operations and activities (operational stage)
Preconditions for Commencement of Operation / Operation and Operations Using the Object of the Agreement

IV. Control of the grantor. Concessionaire reporting
Concessionaire control / Concessionaire reporting

V. Financial conditions
Financing and payments / Expenses of the concessionaire for the lease of land plots / Amount of investments in the creation of the object of the agreement / Financial model / Concession fee / Tariffs / Enforcement of the concessionaire's obligations under the agreement / Necessary insurance coverage

VI. Quality assurance and responsibility of the parties
The quality of the object of agreement and services. Liability of the concessionaire / Liability of the concessor / Circumstances excluding liability

VII. Special circumstances and circumstances of force majeure
Special circumstances / Force majeure circumstances

VIII. Modification and termination of the agreement
Modification of the agreement / Termination of the agreement / Termination at the initiative of the grantor
Termination on the initiative of the concessionaire / Procedure for early termination of the agreement
Termination by agreement of the parties / Consequences of termination of the agreement /
Compensation for early termination of the agreement / Procedure for transfer (return) of the object of the agreement

IX. Dispute Resolution Procedure
General Provisions. Conciliation procedures / Conciliation commission and participation of a technical expert / Provision and binding of decisions / Judicial resolution of disputes. Applicable right

X. Pledge of rights. Replacement of the concessionaire
Pledge of rights / Grounds and procedure for replacing the concessionaire / Relationship between the terms of the agreement and the direct agreement

XI. Other provisions
Confidentiality / Intellectual Property Rights / Representatives of the Parties. Notifications, statements, approvals / Obligation to inform about the circumstances
Approval procedure

XII. The structure of the agreement. Signatures of the parties
Composition, name and terms of signing annexes and other documents by agreement /
Details and signatures

What is included in the annexes to the Concession Agreement?
Typical applications to the COP are provided for information only. They are individual for each well-designed concession project.
Description and technical and economic indicators of the object of the agreement / Description and technical and economic indicators of other property transferred by the concessioner to the concessionaire /
The procedure for transferring the object of the agreement and other property to the concessionaire / Schedule of construction and / or reconstruction of the object of the agreement / Schedule of design work / List and timing of the provision of land plots / Requirements for design, construction (reconstruction), operation / Control of the concessionaire and reporting of the concessionaire / Financing and compensation / Requirements for the financial model / Forms of the main acts / The procedure for the preparation of the territory / Basic conditions of the direct agreement /
Financing and compensations / Requirements for the Financial model / Basic conditions of the bank guarantee / Required insurance coverage / Compensation for early termination of the financial model / Procedure for payment of fines