Examples of Successful and Unsuccessful PPPs

Successful PPPs

UK M6 Toll (M6 Toll Road, United Kingdom)

Essence: A 27-km toll section bypassing Birmingham. Opened in 2003, the first toll road in the United Kingdom.

Concessionaire: Midland Expressway Ltd (now Brindleyplace PE)

Lessons:

The road has operated without interruption for 20 years
Traffic is below forecasts (drivers avoid the toll), but the structure has survived
An example that a PPP can work even with conservative traffic if properly structured

Barakah Nuclear Power Plant (UAE)

Essence: The first nuclear power plant in the Arab world (4 reactors, KEPCO — South Korea), Abu Dhabi.

Structure: ENEC (Emirates Nuclear Energy Corporation, state-owned) — 60%, KEPCO — 20%, banks — 20% debt financing.

Peculiarity: Not a classic PPP, but an example of successful public-private cooperation in a major infrastructure project ($24.4 billion).

Lessons:

Technical transfer and training of local specialists
Long-term partnership (60-year life cycle)

Crossrail (Elizabeth Line, London)

Essence: 118-km metro line through London, opened in 2022. £18.25 billion CAPEX.

Structure: Public financing (TfL, DfT), but with participation of private companies in construction and operations (Mixed Public-Private model).

Lessons:

Large-scale infrastructure projects require flexible state involvement even when construction is private
3-year delay and €3 billion cost overrun — managing large projects remains complex

Unsuccessful PPPs

Metronet (London Underground, PFI)

Essence: In 2003, the London Underground was partially privatized through the PPP PFI system. Metronet received contracts to upgrade most of the lines.

What went wrong: Metronet went bankrupt in 2007. The state was forced to buy out the company, spending about £3 billion over the planned costs.

Reasons:

Underestimating the complexity of building within an operating metro
Conflicts among Metronet shareholders (contractors who performed the work themselves → conflict of interest)
Inadequate risk allocation in the contract

Korea High Speed Rail PFI and Excessive MRG

Essence: South Korea actively used PPPs in road construction in the 2000s with Minimum Revenue Guarantees (state guarantees of minimum revenue).

What went wrong: Traffic was below forecasts (the forecasts were optimistic). The state was obligated to compensate concessionaires under MRG → state expenditures significantly exceeded the planned amount.

Lessons: Revenue guarantees remove demand risk from the private operator → they remove the incentive for accurate forecasting during negotiations → the state bears unexpected expenses.

Reform: Korea significantly reduced MRG and switched to a more balanced risk allocation.

Chile Urban Highway Concessions

Essence: Chile is one of the pioneers of PPPs in Latin America, a program since the 1990s.

Problems: A number of urban toll roads faced legal disputes due to changes in concession terms by the government (tariff changes, bypass roads). Concessionaires won costly arbitration cases.

Lessons: The state should not create competing free infrastructure that threatens the profitability of a concession.

Critical Success Factors for PPPs

1. Adequate risk allocation: Risks should be held by the party best able to manage them.

2. Realistic demand forecasts: Optimistic forecasts are a systemic problem (Optimism Bias). Use of independent reviewers (traffic advisers, demand consultants).

3. Competent government counterpart: A weak public party = unequal negotiating positions = expensive contracts.

4. Stability of regulatory/political environment: The state should not change the terms after the contract is signed.

5. Real competition in tender: Without competition, the state overpays. At least 3 financially capable participants.

6. Value for Money Analysis: Comparing PPP to the cost of traditional public procurement (Public Sector Comparator) before choosing the model.