- The PPP agreement
The public partner enters into a PPP agreement with the winner of the tender in accordance with the terms and procedures set out in the tender documentation.
A PPP agreement may be concluded for a period of up to 49 years. It shall contain the following information:
- the parties to the PPP agreement;
- the subject of the PPP agreement;
- obligations and responsibilities of the parties;
- distribution of risks between the public partner and the private partner;
- technical and economic indicators of the PPP object, which covers the essential details about the project, such as its technical and economic requirements, along with any other things that need to be built, financed, managed, or upgraded as part of the project. It also specifies the goals and duration for using these components, as agreed upon in the PPP agreement.
- etc.
2. Issues
2.1. Land issue
Land for the PPP project shall be provided to the private partner under the land lease agreement for the duration of the project. This lease arrangement is subject to the terms and duration specified in the PPP agreement and concluded with the authorised representative of the Government of Uzbekistan.
In cases where the public partner does not possess a land plot for the necessary activities, it can apply for the right to use such a land plot, which will then be leased to the private partner under the conditions stipulated in the PPP agreement.
The rent paid by the private partner for these leased land plots is equivalent to the land tax, and it considers any applicable land tax benefits. If the public partner fails to fulfill its obligation to lease the plot of land to the private partner, this can lead to the unilateral termination of the PPP agreement by the private partner. It is important to note that the termination of the PPP agreement also results in the termination of the contractual relationship related to the land plot lease, which was initially intended for the PPP project.
2.2. Guarantees and preferences for investors and lenders of PPP projects
If changes in the legislation of the Republic of Uzbekistan, effective at the time of entering into the PPP agreement, directly lead to increased costs or reduced income for the private partner within the framework of the project, the private partner, based on the ongoing project, has the right to:
- request an increase in the availability fee for the PPP object and/or payment for use.
- demand a one-time compensation payment from the public partner.
- request changes and/or additions to the PPP agreement if such provisions are stipulated in the agreement.
The specific procedures, conditions, limitations, and exceptions for applying these rights are outlined within the PPP agreement. These provisions do not apply when changes in the legislation of the Republic of Uzbekistan pertain to tax and fee adjustments made after the conclusion of the PPP agreement.
However, changes should not apply if such changes lead to discriminatory treatment of a particular project.
2.3. Interest Protection Rights
The PPP agreement may contain clauses to ensure the rights of the lender. These clauses can specify the amount of compensation to be paid to lenders in case of early termination of the PPP agreement.
In lender-led PPP projects, lenders have the option to enter into direct agreements with either the public partner or the private partner. These agreements shall address:
- The rights and obligations of lenders related to the replacement or removal of the private partner or its management.
- The obligation of creditors to receive payments due from the public partner to the private partner, as per the PPP agreement, in cases of private partner replacement or removal.
- Conditions aimed at reducing the risk of PPP agreement termination.
- Provisions regarding payments upon early termination of the PPP agreement.
- The process for sharing project implementation information and ensuring the rights and obligations of all parties involved.
Private partners can offer various forms of security to their lenders, including rights under the PPP agreement, assets, shares, rights assignment, and more. Lenders and public partners have the authority to replace the private partner or its management (step-in), as stipulated in the PPP agreement, with a new private partner or management. The new private partner shall meet the necessary requirements to fulfil the project’s work and/or services, and in such cases, no tender is conducted.
Summary
As Uzbekistan continues on its path of PPP development, it’s important to maintain a commitment to good governance, transparency, and the careful selection of projects to ensure long-term success and sustainable economic growth. With the right policies and practices in place, Uzbekistan has the potential to further attract domestic and foreign investment and continue to advance its infrastructure and public service delivery.
