Public private partnership and public private partnership project finance modelling

It has been quite a long time that the governments have suffered from shortage of funds in the attempts of investing infrastructure projects in different industries including health, transportation, urban development, and water supply. Until very recently privatization emerged as a solution in respect of relieves from financial burdens of government. Similarly, Engineering Procurement Construction Financing (EPCF) model contributed a great deal of support to funding large scale infrastructure projects. However, all these models were not sufficient to save the governments either to undertake debts on their treasury or to face huge amounts of recourse losses. Public Private Partnership which is extraordinarily flexible, very versatile and enforcing the strong sides of private sector and public authority, has been carried into effect over the past few decades. PPP used in the recent years in Turkey for realization of city hospitals, airports, bridges and other infrastructure projects, emerged in 1980 in UK then spread over the world is a kind of partnership between the private and public sectors where private sector undertake financial risks and public sector undertake to supply public services in long term investment projects. As seen from the definition, the most distinctive factor of public private partnership is that the risks and funding of the large scale social and economic projects put in service by public sector and need high budget, are in the responsibility of private sector. Public Private Partnership accommodates many sub-models in its entirity. Build-Operate-Transfer, Build-Lease, Design-Build-Finance-Operate, Build-Own-Operate models can be given as examples. But, it should be noted that the only restriction in Public Private Partnership about how to share liabilities and how to establish benefit-cost relations, simply depends on the creativity of the sides. The projects which are realized with PPP provide lots of advantages in terms of both public and private. The most important one of these advantages is that public sector produce services with better quality, well equipped and in a faster way due to the budget flexibility, management skills, dynamism, creativity and technology that the private sector provide to public. In addition, economic growth is achieved as a result of the services provided by the welfare of the society. On the other hand, private sector becomes able to maximize its profit as serving for a common purpose with the public and thus he gets the chance to prove himself at home and abroad by his name and well-being. During the stage that the project comes into life, PPP Financial Modelling is a source for evaluation of the project in terms of feasibility and investment profitability depending upon the assessment of numerical data resulted from the studies of financial capacity, budget, credibility, cash flow (from project and equity), balance sheet and other technical data. In financial modelling, the expectation is that the depth coverage ratio and the internal rate of return of the investment should remain at the level above the banks would accept. In case that these criteria are fulfilled simultaneously, the investment can be entitled as "feasible" for both public and private sides. The aim of this study is to explain what the Public Private Partnership is, in which areas it is used and demonstrate profit analysis of the PPP in terms of both public and private sector through the Build-Operate-Transfer model and the methodology of public private partnership project financing model adapted to the nickel mine operation. In this thesis, a thorough understanding of Public Private Partnership concept is given taking into consideration of all application aspects and cases faced in application in order to achieve a study to contribute to those who are indulged in Public Private Partnership by some reasons. Key Words: Public Private Partnership, Public Private Partnership Project Finance Modelling