Adjusted capital value of off-balance sheet PPP of Dutch central government 2010-2015

The source adds the following information: "The adjusted capital value of off-balance sheet public private partnerships (PPP). The adjusted capital value is the initial contractual capital value, progressively reduced over time on the basis of estimates or actual data (in order to reflect better the GFCF and debt impact if the government were to take over the assets during the contract period).

Public-private partnerships (PPPs) are complex, long-term contracts between two units, one of which is normally a corporation (or a group of corporations, private or public) called the operator or partner, and the other normally a government unit called the grantor. PPPs entail significant capital expenditure to create or renovate fixed assets by the corporation, which then operates and manages the assets to produce and deliver services either to the government unit or to the general public on behalf of the government unit.

In a PPP contract, the corporation acquires the fixed assets and is the legal owner of these assets during the contract period, in some cases with the backing of the government. The contract often requires the assets to meet the design, quality, and capacity specified by government, to be used in the manner specified by government to produce the services required by the contract, and to be maintained in accordance with standards defined by government.
As with leases, the economic owner of the assets in a PPP is determined by assessing which unit bears the majority of the risks and which unit is expected to receive a majority of the rewards of the assets. The asset, and thus the gross fixed capital formation, will be allocated to this unit. If the majority of the risk is for the partner, then the assets are on the partner’s balance sheet and off the balance of the government sheets. If the majority of the risk is for the government, then assets are imputed on the balance sheet of the government’s account together with an imputed debt for the government. The main risk and reward elements to be assessed are:
(a) construction risk: costs overruns, additional costs resulting from late delivery, not meeting specifications or building codes, and environmental and other risks requiring payments to third parties;
(b) availability risk: additional costs such as maintenance and financing, and incurrence of penalties because volume or quality of the services do not meet the standards specified in the contract;
(c) demand risk: demand for the services is higher or lower than expected;
(d) residual value and obsolescence risk: the asset will be worth less than its expected value at the end of the contract and the degree to which the government has an option to acquire the assets;
(e) the existence of grantor financing or granting guarantees, or of advantageous termination clauses, notably on termination events at the initiative of the operator.

* The number provided for 2015 is provisional