Expert article

UDC 336.15:338.49

Professor Slaana Benkovi, PhD* Faculty of Organizational Sciences, University of Belgrade Milo Milosavljevi, BSc Faculty of Organizational Sciences, University of Belgrade Assistant Professor Slaana Barjaktarovi-Rakoevi, PhD Faculty of Organizational Sciences, University of Belgrade

PRIVATE AND PUBLIC CAPITAL PARTNERSHIP IN THE FINANCING OF INFRASTRUCTURAL PROJECTS

Abstract: Growing infrastructure needs in the last few decades have made it necessary to partially finance infrastructure projects from private sources. Since the motives of private capital in project financing and realization may significantly differ from those of the public authorities, it is of crucial importance to define clearly the direction and magnitude of cooperation between the private and the public sectors in the planning, building, financing and operation of infrastructure systems. However, the State plays a key role in managing and developing concessions and public-private partnerships through its institutions and organizations, regardless of the range of authorization delegated to the private sector. The main reason for this definitely lies in the high socio-economic value of infrastructure projects. Thus, when financing infrastructure projects with both public and private sources, it is necessary to determine and precisely define in advance the responsibilities and obligations of all project participants, particularly those linked to security, quality and level of user fees. In this paper, we present basic models of public and private sector cooperation in the financing and realization of infrastructure projects as well as organizational forms of public-private partnership (PPP). Key words: public-private partnership, infrastructure, project financing JEL classification: h54, G38

1. Introduction In the past few decades, the need for financing infrastructure projects in many countries throughout the world has been growing more rapidly than the
*

E-mail: benkovic.sladjana@fon.rs

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314 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi sources of funding,1 i.e., sources of capital from which these projects could be financed. T. Merna and C. Njiru2 have concluded in their study that developed countries set aside $200 billion, or 4% of their national output, one fifth of total investments and 40-60% of public investments into infrastructure. Public funds and countries borrowing capacities are becoming insufficient to satisfy growing needs for infrastructure.3 As a result, many countries have begun to harmonize and design legal regulations that will encourage private sector participation in the development, financing, operationalization and coownership of infrastructure projects. The idea of including private firms in the realization of traditionally public infrastructure projects has given birth to the appearance of public-private partnerships.4 According to Miller and Lessard,5 at the end of the previous millennium, the private share in total infrastructure investment varied between the lows of 9% and 13% in Germany and France and the extreme highs of 47% and 71% in the US and Great Britain, respectively. The partnership of public and private capital is not a form of monopoly. More precisely, this type of cooperation cannot be realized without legal regulations, since this type of financing requires a precise definition of the responsibilities, rights and obligations of the participants from both the public and the private sectors, especially those tied to safety, quality and user fee level (i.e., profitability). Since the motive of private actors in the realization of infrastructure projects lies in earning an adequate rate of financial return, which should be proportional to that potentially available by investing in other projects of similar risk, the structure of private and public capital partnership is formed in such a way as to ensure such a result. Thus, it can be said that partnerships of state and private capital are joint investments in which entrepreneurs and the state cooperate, pooling their strengths in order to ensure that the realization of infrastructure projects will be faster and more efficient. More precisely, the idea behind this approach can be defined as an attempt to improve the efficiency and innovativeness of infrastructure project realization, through the engagement of a private sector that is prepared to contribute to the improvement of public services at a substantially lower cost.6 Project engage1 2 3

N. Gil, S. Beckman, Infrastructure Meets Business: Building New Bridges, Mending Old Ones, California Management Review, 51 (2), 2009 T. Merna, C. Njiru, Financing Infrastructure Projects, Thomas Telford, London, 2002 h. Smit, L. Trigeorgis, Valuing Infrastructure Investment: An Option Games Approach, California Management Review, 51 (2), 2009 The World Bank and the International Finance Corporation: Investing in the Environment, The World Bank, Washington, D.C., 1992 R. Miller, D. Lessard, The Strategic Management of Large Engineering Project: Shaping institutions, Risks, and Governance, Massachusetts Institute of Technology, IMEC Research Group, 2003 J. E. de Bettignies, W. T. Ross, Public private partnerships and the privatization of financing: An incoplete contracts approach, International Journal of Industrial Organization, 27

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Private and public capital partnership in the financing of infrastructural projects 315 ments initiated on the basis of public and private capital investment vary between the exclusive participation of private capital, but with government approval and guarantees, and investments in which private sector partners are recognized as financial support to the state in project sponsorship. The extremes of purely public and purely private financing do not fall into the domain of public-private partnership. In accordance with the above, the inclusion of the private sector is becoming increasingly frequent, especially in the area of infrastructure projects, within which transportation projects serve as perhaps the most representative examples of such partnership. By their nature, toll booths, bridges, airports and railroads accumulate sufficient revenues from user fees to become attractive to the private sector, while being of crucial importance for the development of a socioeconomic community. 2. Alternative ways of infrastructure financing According to the opinion of numerous authors, neither totally public nor totally private financing, realization and management of infrastructure projects are sustainable over the long term.7 hodge and Greve8 note that almost all relevant definitions begin from the assumption that the model of public-private partnership is good, being founded on the benefits of both the private and the public sectors. The financing of infrastructure projects is traditionally secured from several different sources: State sources (donations, loans or loan guarantees); Suppliers of investment equipment (mostly construction firms and equipment suppliers); Bilateral and multilateral funds (through donations and loans); Lines of credit (securing adequate credit support for the main sponsor); Capital investment from private sources, from the issuance of securities on the part of institutional investors. The last two categories are especially sensitive, not only to conditions characteristic for the capital markets, but to the credit value of companies on the market. This is all the more so because most developing countries do not have at
(3), 2009, pp. 358-368 J. B. Miller, Applying Multiple project Procurement Methods to a Portfolio of Infrastructure Projects, Procurement Systems: A Guide to Best Practice in Construction, E&N Spon., 1999 G. hodge, C. Greve, The Challenge of Public Private Partnerships: Learning from International Exerience, Edward Elgar Publishing Ltd., London, 2005

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316 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi their disposal either the financial sources or a credit rating sufficiently adequate to allow them to finance their most important infrastructure projects. Therein lies the reason why such countries must seek sources of financing in the private sector. Some countries have made progress in that regard, and analyses show that a large regional concentration of public-private partnership contracts has been formed, primarily in Latin America, followed by Southeast Asia,9 which indicates the presence of private capital financing of projects by way of concessions, and the approval of loans based on the strength of projected project cash flows. 3. The structure of partnership financed by public and private capital Different forms of partnership for financing projects through the partnership of public and private capital are especially significant in the field of infrastructure. The structure of such partnerships is quite multifarious, but all of them are centered on the responsibility, risk and returns that the project brings.10 Definitions of public-private partnership vary, but all of them share certain characteristics: (1) public-private partnership always concerns the cooperation of two or more parties (of which at least one is of a public character); (2) each party is a principal; (3) the relationship is long-term, stable and based on mutual or complementary benefits; (4) each participant transfers material or non-material resources into the partnership; and (5) risk and responsibility are distributed among all the sides in the partnership.11 According to Finnerty,12 the specific nature of each project requires an appropriate partnership structure, depending on the answers to the following questions: Who will be responsible for designing and building the project? Who will secure the funds for building? Who will arrange the financing? Who will be officially responsible for securing the project assets, and for what period? Who will manage the project funds, and for what period? Who will be responsible for securing all of the planned revenues from the project?
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10 11

12

A. Akintoye, M. Beck, C. hardcastle, Public Private Partnerships: Managing Risks and Opportunities, Blackwell Publishing Company, London, 2003 European Commission: Guidelines for Successful Public Private Partnership, 2003 A. Akintoye, M. Beck, C. hardcastle, Public Private Partnerships: Managing Risks and Opportunities, Blackwell Publishing Company, London, 2003 D. J. Finnerty, Project financing: asset-based financial engineering, John Wiley & Sons, Inc., New Jersey, 2007

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Private and public capital partnership in the financing of infrastructural projects 317 In the case of exclusively private funds, the answer to all the above questions should be provided by the party performing the project from its own funds. however, infrastructure projects can have a mix of public and private responsibility. For example, a private company may be responsible for the design, building, financing and operationalization of the entire project. In such circumstances, the state will not secure any capital, i.e., it wont take on the responsibility for securing the revenues, but will be responsible for the activity of the project after its realization, i.e., in the following period of about 40 years. Public-private partnership (PPP) is an evolving concept. From rudimentary partnerships characterized by a high level of informality, public-private partnerships have transformed into a contractual and institutionalized relation of the public and private sectors, encompassing a wide range of organizational models.13 Some of them include significant state and private responsibilities connected with planning, financing and realization. Numerous varieties of new models of public-private partnerships have been developed, in order to deal with various challenges placed before public-private partnerships in specific situations and sectors. Consequently, the synergy created within the partnership can be expanded into specific niches of infrastructural development.14 Models of public-private partnership differ depending on the participation of private capital in the project responsibility and will, thus, be presented in the work in accordance with that criterion. It is easily observable that the list of models is not complete, but that the basic structure is included: 1. Permanent franchise model a model financed by private capital investors, who manage the project on the basis of a government-approved franchise. The investors retain right to the assets, and the entire financial aid connected with the projects realization is secured by the private investors. The government assures the safety and the quality of the service and, perhaps, the fee for using the good or service. The permanent franchise model is the most flexible of all, as it allows the securing of private sector funds through the issuance of securities. In any case, from the aspect of innovativeness of projects and presence of economic risk, the market for securities both debt and equity securities is available only if the project has already operated successfully for a period of several years and has an acceptable profitability rate.
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14

C. Koch, M. Buser, Emerging Metagovernance as an Institutional Framework for Public Private Partnership in Denmark, International Journal of Project Management, 24 (7), 2006, pp. 548-556 M. Milosavljevic, S. Benkovic, Modern Aspects of Public Private Partnership, Perspectives of Innovations, Economics and Business, Vol. 3, 2009, pp. 25-28

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318 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi 2. The BOT model BOT project may be described as a project based on a concession granted on the part of the party granting the concession (usually a public or state agency) to a consortium or concessionaire (usually from the private sector), which is supposed to build (which includes financing, design, project implementation management, etc.), operate (including operation and business management of buildings and facilities, maintenance, provision of services, fee collection in order to cover the financial and investment costs), and transfer the building or plant in operational condition and without additional costs to the concession granting party at the end of the concession period.15 BOTbased infrastructure building schemes have gained in importance over the past several years. In return for reclaiming ownership, the state most often seeks (limited) credit support for loans that accompany the project. 3. The DBFO model Design-Build-Finance-Operate (DBFO) model, is a type of financing in which the private entity is expected to design, finance, build and operate the project. In almost all cases, the public sector retains ownership over the infrastructure objects, while DBFO models vary in practice in terms of the degree of financial responsibility transferred onto the private sector.16 A longterm leasing contract gives the private entity the right to use the projects infrastructure and to draw earnings during the lease period. After the expiry of the leasing period, the public authority operates the project infrastructure autonomously, or hires another party to do it in its name. 4. The BBO model Buy-Build-Operate (BBO) model is a form of financing infrastructure projects by which a private company buys an already existing facility, modernizes or expands it, and uses it as a profit-oriented public facility. Undeveloped, damaged or overly congested highways, bridges and airports are good examples of projects requiring this kind of financial structure. The BBO model will perhaps prove to be especially interesting in the coming years, as many public facilities will require repair or expansion. 5. The LDO model Lease-Develop-Operate (LDO) is a model of project financing by which a private company leases an already existing, state-owned facility and its land. The private company then uses (exploits), develops and operates the facility in accordance with a contract on earnings distribution, together with the host government over a certain time period. The host government retains the right of legal ownership. The LDO model is exceptionally attractive when private actors lack the capacity of fully paying the purchasing price of the
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M. M. Kumaraswamy, X. Q. Zhang, Governmental Role in BOT-led Infrastructure Dvelopment, International Journal of Project Management, Vol. 19, 2001, pp. 195-205 US Department of Transportation: PPP Options, Federal Highway Administration, 2006: http://www.fhwa.dot.gov/policy/2006cpr/pdfs/chap13.pdf

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Private and public capital partnership in the financing of infrastructural projects 319 existing facility (as is the case with e.g. the BBO model). The LDO model is, at the same time, very useful in distributing risk between representatives of the public and private sectors, when there is certainty that the project will also incur some monetary losses. 6. The additional adjustment model is a form of project financing based on the idea that private companies can often be an option of expanding existing stateowned facilities. Private companies own the legal right of ownership, or part ownership. The most important advantage of this model lies in the fact that it facilitates shared ownership, as well as the fact that the private company is not responsible for any debts previously incurred for the building of the central facility. 7. The temporary privatization model is a form of project financing where a private company takes over operation and maintenance of an existing stateowned facility, e.g. a bridge that needs repair. The private company then proceeds to expand or repair the facility, runs it and collects the fees, until it covers the costs of expansion or repair (including a reasonable return on invested capital), or until the temporary franchise license expires, after which the legal ownership rights are restored to the state. 8. The speculative development model is a form of project financing based on the identification of still unidentified social needs. With the approval of the host government, the project company initiates the procedure of planning and of securing licenses at its own expense, fully assuming the accompanying risk. Much later, after the project company furnishes proof of the projects feasibility and develops a usable design, the host government takes part in some process adjustments and may also contribute to the financing of the project. This model has been tested in various forms on several projects in the US. 9. The model of capturing value seeks to increase the share of benefits brought by private investors through participation in commercial activities intended for public use. For example, the value of land and earnings from its sale can be increased, which results in the creation of added value when taxes are levied, from which other projects, e.g. in the field of transportation, can be subsequently financed. Since actors from the private sector are not interested in creating any added value, capturing of value is often achieved by a non-working partnership between the state and economic actors, i.e., by creating special taxes or monetary limitations tied to new projects. Existing economic actors, as well as potentially new actors, can be taxed on a one-time basis or on the basis of a rate set in accordance with the value of their property, which increases along with property value. The taxes, or collected fees, are then distributed into funds for the financing of certain projects of signifiVol. 7 (2) 2010: pp. 313-326

320 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi cance for the development of the countrys infrastructure. In certain cases, the inflow is sufficient to support the issuance of state bonds, which may occasionally provide additional capital needed for financing a new infrastructure project. 10. The user fee model is specific in the sense that the government of the host country, or its public authority, participates in the signing of a contract with the project company. The user contract thus obligates the host government to make sufficient payment for all the contingent projects tied to the main project. Only after the project is realized, the host government receives its user fee, i.e., its money is returned. The user fee model of financing is usually used in the course of connecting with large investment projects financed from private sources, intended for public use. The model exposes the public authority to the credit risk that accompanies the project. Thus, the contract itself often contains a clause by which the public authority issues a loan guarantee for the project. 4. Legal provisions that negatively affect the partnership of public and private capital All the models of project financing, except the capturing value model and the user fee model, put private actors in the position of the leading entity in the areas of project planning, financing and operation. According to Kwak,17 it is necessary to establish a well-defined but not overly bureaucratized legal and administrative business environment. The initiative and readiness of the private sector to participate in projects of public significance greatly depends on the complexity of social, economic, legal, ecological and other conditions. Most legal provisions regarding public-private capital partnership are encumbered by a common shortcoming the misallocation of high costs and risks between the public and the private sector, especially in the early phases of project realization. Inadequate risk distribution and lack of an environment in which private sector partners can obtain an adequate rate of return on investment can lead to dissolution of the partnership. Legal provisions that discourage the inflow of private capital in the realization of infrastructure projects, for which the public sector is most often responsible, are, according to Finnerty,18 most often based on the following:
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Y. h. Kwak, Y. Y. Chih, C. W. Ibbs, Towards a Comprehensive Understanding of Public Private Partnerships for Infrastructure Development, California Management Review, 51 (2), 2009 D. J. Finnerty, Project financing: asset-based financial engineering, John Wiley & Sons, Inc., New Jersey, 2007

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Private and public capital partnership in the financing of infrastructural projects 321 Demanding the possibility of amending already agreed-upon legal approvals within the project contract, after the negotiation process with the state agency has already ended, which creates a very unfavorable and uncertain environment. This type of partnership is referred to as an incremental partnership.19 Namely, the private investor is in a situation in which he is expected to assume the risk pertaining to delays, contract modification and the removal of agreed-upon items from the contract, for all the cost-connected items included in contract-related negotiations with the public sector. Demands on the investor to secure significant funds through the issuance of bonds or to secure significant monies for insurance. In such circumstances, private sector investors are expected to invest substantial funds in planning, designing and approving the issuance of securities on the basis of which capital for the project will be secured. As the securing of funds through the issuance of securities most often pertains to the issuance of bonds, it is clear that securing guarantees for such securities will bring increased costs, as well as increased financial risk. Consequently, the project may turn out to be totally unacceptable for the private sector. Still, it should be emphasized that it is possible to secure a franchising act for ordinary bonds, where the speed of building the facilities is clearly and precisely outlined, and whereby the governments agency costs are controlled, and cooperation with private sector investors is defined. however, the level of funds that are necessary to set aside for insurance from certain types of risk is sometimes unacceptable for private sector investors, due to the high costs they have to incur. Namely, adequate insurance coverage must be accurately set so as to enable the restoration of the facilities to their original purpose, and so that the debt connected with the project can be returned in its entirety following events such as natural catastrophes, caused by fire or quakes. Allowing relative exemptions from various forms of restrictions that may be imposed by a future political structure that sponsors the project. By exposing the public-private financing of the project to certain types of risk, future policy is changed, especially policy that may create unexpected competition in the projects realization and, thus, increase the projects economic risk connected with inadequate realization of future earnings. This may prevent the realization of the project, that is, the financing of the project itself on the part of the private sector. Allowing (or demanding) momentary regulation in case certain problems arise, by precisely defining the fee rates, i.e., the rates of return on investment. The fee rate or the leading rate of return should be agreed in

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M. Milosavljevic, S. Benkovic, Modern Aspects of Public Private Partnership, Perspectives of Innovations, Economics and Business, Vol. 3, 2009, pp. 25-28

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322 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi advance and be under the supervision of an agency that controls the costs and deals with private sector investors. Thus, for example, public use of transportation facilities is difficult to predict, as these are projects that are substantially more price sensitive compared to electrification or water supply facilities. As a result, potential investors in the are of transportation infrastructure and similar projects require insurance against potential losses during the construction phase, which means that the commission that evaluates the feasibility of facilities intended for public use will not be able to anticipate even the initial operations. Barring the local government from participating in the realization of the project. Often the capacity of the project to be financed from private sources depends on the readiness and ability of the local government to secure a certain level of financial, as well as political support. Thus, investors may think that the local government should completely finance the projects realization, without analyzing the amount of funds necessary for that endeavor. Private sector investment certainly contributes to and helps the local government to successfully realize projects of significance. Such participation also aids in the imposition of changes projected and planned by the host government. Thus, the reduction of public-private partnership may result in a higher risk level for the country and for the project itself. Demands on private investors to use or improve the use of the governments procurement methods. Considering the fact that private capital is exposed to risk, private sector investors have the right to insist on the most efficient way of performing public procurement. Procurement is regulated by the government and most often includes a tendering process that accommodates the participation of actors from the private sector. Demands on the part of government for a detailed project design before the building process can begin. Experience has shown that designing, i.e., a technique by which the building process begins even before a detailed plan is completed, brings savings in the construction phase of the realization of a public good or service. In that sense, waiting for a government permit regarding the acceptance of a detailed plan before initiating the building process can only increase the costs of the projects realization.

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Private and public capital partnership in the financing of infrastructural projects 323 5. Provisions that support partnership based on the engagement of public and private capital According to Finnerty,20 some legal provisions help improve business operations and risk control, thus providing support for partnerships based on the engagement of public and private capital. They are based on the following: They allow private investors to propose a sustainable and developmentoriented project (i.e., they do not force the private investor to choose between those that the public authority has already defined and set as priority goals). Due to their profit-orientedness and motivation, private investors are often more motivated than state agencies to identify and locate attractive opportunities related to development projects. Securing government support in the process of planning, permit collection, securing land and resolving conflicts that may arise between members of the government and the agency issuing the permit. The comparative advantage of the host government lies in the fact that the local government of a specific region can significantly contribute to the process of improving the projects realization. Use of the host governments partial or complete research connected with the environmental surroundings and land. The high cost of producing studies related to the projects ecological contribution often represents a powerful leverage, which basically attracts private sector investors to participate in the realization of infrastructure projects. Securing loans to cover the projects capital costs. Such loans improve the projects financial feasibility by reducing the amount of funds that need to be obtained from private sources. Also, they allow the public sector to participate in the distribution of earnings that the project brings under positive circumstances. Securing the legal basis tied to projects that are the result of private initiative. The building of airports and highways often encompasses added insurance tied to employee safety. Road tolls often bring special problems, due to which state patrols that control the highways must be accorded a certain advantage. In such circumstances, the state can (and often does) approve these services on a contractual basis. Defining the differences related to taxes connected to regional or state outlays, and postponement of their payment. Delayed payment of taxes often represents a way in which the state can invest in a project without directly investing financial resources. Exempting projects that are realized on the principle of partnership from certain taxes, if they are connected to the purchase of materials neces20

D. J. Finnerty, Project financing: asset-based financial engineering, John Wiley & Sons, Inc., New Jersey, 2007

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324 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi sary for project realization. Many states make tax exemptions when it comes to incoming materials necessary for project realization, since that is a form of investment in infrastructure owned by the state or local government. In that sense, this principle is often used in the financing of infrastructure projects with public (state) and private capital. Defining the limitations related to badly projected sources of financing (the projects liabilities). In many countries, the government as the supreme organ enjoys a higher level of protection for the placement of its financial resources into infrastructure projects than do private investors. Securing the free (or subsidized) use (by lease or sale) of state land or acquiring the right to that land on the basis of relevant provisions. Generally, it can be said that the granting of land for use is basically the simplest way for the public sector to participate in the realization of specific infrastructure projects. however, at the same time, it also represents the biggest obstacle for private investors. In that sense, it is very important to adequately use the influence at the governments disposal in such situations. Approving the commercial side of the project. The commercial aspect is an accompanying part of carrying out infrastructure projects. The earnings gained through commercial activity can make the project attractive even in circumstances in which it would be totally unacceptable to investors in the financial sense. 6. Conclusion Project financing is a potentially useful way of promoting the development of a countrys important resources, i.e., of building facilities and providing services of significance for its development. The use of project financing in certain situations depends on whether that type of financing ensures the lowest costs during project realization, taking into account social benefits and costs, as well as the benefits and costs to private capital investors. Governments throughout the world have accepted partnerships based on the engagement of public and private capital in the financing of projects, as a moving force for the realization of various services, such as activities tied to the improvement of education, transportation, health care, as well as their correction. Guided by the experience of Great Britain as a pioneer in this field and its experience in financing projects of socio-economic significance from private funds during the early 1980s, the concept of public-private capital partnership in the financing of infrastructure projects has been, in the meantime, accommodated and accepted on all levels of implementation in countries throughout the world. There is no single definition related to financing through the partnership of the private and public sectors. Depending on the country being considered, the Megatrend Review

Private and public capital partnership in the financing of infrastructural projects 325 term covers various forms of transactions, where the private sector is given the right to operate over a longer period of time, to bear the responsibility traditionally reserved for the public sector, beginning with short-term contracts (which are characterized by limited sources of capital or where there is no capital at all), concessionary contracts (which may provide for the design and building of basic capital assets together with providing a wide range of servicing and financing of the complete construction and operation), all the way to joint investment with shared ownership between the public and private sectors. Generally speaking, partnerships between the public and private sectors fill the space between the traditional realization of projects and total privatization. The partnership of public and private capital is a mode of financing which greatly contributes to the overcoming of problems that characterize infrastructure projects of countries, especially those undergoing processes of development and economic advancement. It is certain that, under such circumstances, various forms of capital structuring are feasible, especially when risk and return on investment are acceptable for both participants in the realization of the project. It is especially important to note that the level of interest of private investors will depend on the risk and the rate of return on investment, to the extent that these are deemed reasonable and acceptable. References

Akintoye, A. Beck, M. hardcastle, C.: Public Private Partnerships: Managing Risks and Opportunities, Blackwell Publishing Company, London, 2003 De Bettignies, J. E, Ross, W. T.: Public private partnerships and the privatization of financing: An incomplete contracts approach, International Journal of Industrial Organization, 27 (3), 2009, pp. 358-368 Deloitte: Closing Americas Infrastructure Gap: The Role of Public Private Partnership, A Deloitte Research Study, 2009 European Commission: Guidelines for Successful Public Private Partnership, 2003 Finnerty, D. J.: Project financing: asset-based financial engineering, John Wiley & Sons, Inc., New Jersey, 2007 Gil, N. Beckman, S.: Infrastructure Meets Business: Building New Bridges, Mending Old Ones, California Management Review, 51 (2), 2009 hodge, G. Greve, C.: The Challenge of Public Private Partnerships: Learning from International Exerience, Edward Elgar Publishing Ltd., London, 2005 Vol. 7 (2) 2010: pp. 313-326

326 Slaana Benkovi, Milo Milosavljevi, Slaana Barjaktarovi-Rakoevi

Koch, C. Buser, M.: Emerging Metagovernance as an Institutional Framework for Public Private Partnership in Denmark, International Journal of Project Management, 24 (7), 2006, pp. 548-556 Kumaraswamy, M. M. Zhang, X. Q.: Governmental Role in BOT-led Infrastructure Development, International Journal of Project Management, Vol. 19, 2001, pp. 195-205 Kwak, Y. h. Chih, Y. Y. Ibbs, C. W.: Towards a Comprehensive Understanding of Public Private Partnerships for Infrastructure Development, California Management Review, 51 (2), 2009 Merna, T. Njiru, C.: Financing Infrastructure Projects, Thomas Telford, London, 2002 Miller, J. B.: Applying Multiple project Procurement Methods to a Portfolio of Infrastructure Projects, Procurement Systems: A Guide to Best Practice in Construction, E&N Spon, 1999 Miller, R. Lessard, D.: The Strategic Management of Large Engineering Project: Shaping institutions, Risks, and Governance, Massachusetts Institute of Technology, IMEC Research Group, 2003 Milosavljevic, M. Benkovic, S.: Modern Aspects of Public Private Partnership, Perspectives of Innovations, Economics and Business, Vol. 3, 2009, pp. 25-28 Smit, h. Trigeorgis, L.: Valuing Infrastructure Investment: An Option Games Approach, California Management Review, 51 (2), 2009 The World Bank and the International Finance Corporation: Investing in the Environment, The World Bank, Washington, D.C., 1992 US Department of Transportation: PPP Options, Federal highway Administration, 2006: http://www.fhwa.dot.gov/policy/2006cpr/pdfs/ chap13.pdf

Paper received: May 20th, 2010 Approved for publication: June 1st, 2010 Megatrend Review