Expanded methodology

• What is included in the PPI database?
• What is captured in each record?
• How are records updated?

• Is this truly an infrastructure project?
• Is there truly private participation in the provision of services or private ownership of the infrastructure assets?
• Does the project serve the public?
• Is this one PPI project or several?
• Has the project achieved financial closure?
• Did the project reach financial closure after 1983?
• Is the project at least minimum size?

• Energy: Natural gas transmission and distribution and/or electricity generation, transmission, and distribution.
• Telecommunications: Fixed and mobile access and long distance service.
• Transport: Airports, railways, seaports, and roads.
• Water: Potable water treatment and distribution, and sewage collection and treatment.

• Resellers (such as those of electricity or telecommunication services). These are companies do not operate or own physical assets involved in the provision of those services. Instead, they provide infrastructure services by reselling the installed capacity of infrastructure operators. Some examples are companies that lease transport capacity from long-distance carriers to provide long-distance phone services or companies that buy electricity or natural gas in bulk to resell to final customers in a liberalized market.
• Movable assets (buses/airplanes) for which there is a viable secondary market. The exception is the rolling stocks for railways (see the description of railways later ).
• Incinerators and stand-alone or solid waste projects.
• Project or contracts of insignificant magnitude (e.g., a single windmill).

• Management or lease contracts.
• Concessions.
• Greenfield projects or new projects that are developed and operated by the private sector.
• Privatization or divestiture of previously government-owned projects.

• Supply and civil work contracts.
• Technical assistance contracts.
• Subcontracting or contracting out. This is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing in infrastructure companies could include maintenance, billing, or marketing.
• Turnkey contracts or construction contracts. Turnkey contracts are often called "EPC" or "Engineering, Procurement, Construction" contracts.
• Operation and maintenance contracts. These usually refer to the engineering operation of the physical assets and training of local staff. These contracts do not involve management of infrastructure asset or project company.
• Contracts through which a private consortium commits to build an infrastructure facility and own it for a period of time, but the facility is transferred to a state-owned enterprise or public entity for its operation soon after its construction is concluded. This type of contract aims at providing finance for building to facilities to state-owned enterprises rather than transferring operational risk of infrastructure facilities to the private sector.

• A corporate entity can include components in several segments or sectors, such as railroads and rolling stock or a power plant with an adjoining water treatment facility.
• If, prior to the privatization of a project, company, or sector, various activities or assets are unbundled into several segments (e.g., generation, transmission, and distribution) and at least one corporate entity is created for each segment. This split creates as many database entries as corporate entities that were created.
• A corporate entity can be divested in many stages, and all of them constitute one project as long as the project company is divested as a single business unit, and each new tranche increases the level of private participation in the single business unit. An example of this is the divestiture of Telefonos de Mexico.
• Expansion of an existing PPI project (e.g., a second power plant) is recorded as a continuation of a single project, UNLESS a new, additional corporate entity is created (often with a new legal contract or operating license). Exceptions are expansions of infrastructure assets developed under a lease or management contract. In these cases, expansions or new assets are usually funded by the government or donors and do not represent a new PPI project.
• When a PPI project contract concludes and a new contract is tendered for the same assets, two project contracts should be recorded in the database even though they are for the same physical assets. The record of the concluded project should indicate contract expiration in the description and project status fields. The record should also refer to the subsequent project.
• When projects in the PPI database merge, the way that projects are recorded varies according to the type of merger:
  
  • Merger by acquisition or purchase merger: This kind of merger occurs when one project company purchases another one. The purchase is made by cash or through the issue of some kind of debt instrument. Records of purchasing and purchased projects are updated with the acquisition, but while the record of the purchasing company keeps operational status and would be revised in future updates, the record(s) of purchased company(ies) are changed to merged status and no longer would be updated. All historic information for each merged project (investment figures, development bank support, sponsors, etc.) before the merger should be kept in the corresponding original record. No information in operational projects should reflect events that took place before the merger.
  • Consolidation mergers: With this merger, a brand new company is formed and both companies are bought and combined under the new entity. Records of merging projects are updated with the acquisition information and their status is changed to merged and no longer would be revised in future updates. In addition, a new record for the combined company is created, and the financial closure is the year of the merge. The new record is the one that would be revised in future.
• When there are spin-off projects from a project (parent project) in the database, spin-off and parent projects are recorded as follows:
  • Parent project: This record should keep all historic information before the spin-off, but should also be updated to reflect services provided by the parent project. For project description, the historic information until year of the separation should be recorded. For annual investment and development bank support, information before the spin-off took place should be kept as part of the parent company. After the spin-off year, investment and development bank support fields should only track information regarding the new parent company.
  • Spin-off projects: Project information should be entered as if the year of the spin-off was the financial closure year. Consequently, annual investment and development bank support in the record should be tracked since the spin-off year. The description should indicate from which parent company this spin-off was formed.

• Total investment commitments should be at least for US$1 million, unless it is a divestiture, lease contract, or management contract.
• Private ownership should constitute at least a minimum level, which greenfield projects, and management and lease contracts, private sponsors or consortiums should own at least 25 percent of the PPI contract to qualify as a PPI project. The threshold is arbitrary, but it is intended to ensure that private sponsors own a substantial part of the PPI contract.
• For divestiture, at least 5 percent of the equity in the company should be transferred to the private sector to be considered a PPI project. This threshold applies for the first transaction of a privatization, but does not apply for subsequent tranches in multiple tranche divestitures. See the section, Is this one PPI project or several?

• Electricity: Activities required for the provision of electricity. It includes the segments of generation, transmission, and distribution of electricity.
• Generation: Facilities needed for production of electricity, including the power plant.
• Transmission: Facilities needed to transfer power produced from the power plant to the distribution facility, such as the grid. Excludes the cables connecting the power plant to the grid, because they are captive transmission lines. For instance, a power plant may need a secondary transmission line to transfer its electricity output to the grid. But the existence of that secondary transmission line does not imply that the corporate entity that owns the facilities is in the business of providing transmission capacity for facilities that sell electricity directly or indirectly to the public.
• Distribution: Facilities needed to transfer power transmitted from the grid to the users, such as the cables connecting the grid to the converter and the cables connecting the converter to the users.
• Natural gas: It includes the segments of transmission and distribution pipelines. Excludes gas exploration and production. Note that if the gas is used as an input by a power plant, the project belongs to electricity subsector and the generation segment.
• Transmission: Facilities required to transfer gas from gas field to the main pipeline system, such as pipes, pressure regulators, etc.
• Distribution: Facilities required to transfer gas from the main pipeline system to individual users, such as pipes.

• Fixed access: Networks that connect individual users for telephone service with fixed or limited mobility phones in a defined geographic area within a country.
• Mobile access: Networks that connect individual users for telephone service with mobile phones in a defined geographic area within a country.
• Long distance: Networks that connect individual users for telephone service located in different geographic areas defined as local areas within a country, or with individuals in other countries.

• Airport includes physical infrastructure (terminal, runway, tower), but no rolling stock or stands under concession.
  • Runway: Facilities required for take-off and landing of planes and air traffic towers.
  • Terminal: All airport physical facilities (e.g., terminal buildings, airplane hangars, connecting transport links within the immediate vicinity of the airport), except runway, shopping, restaurant/lodging, and other services. Note: A 30-km motorway connecting city to airport would be listed under the Road subsector.
• Railway includes track, terminals, rails, and rolling stock. Subway systems and/or monorails are also considered railway.
  • Passenger: Provision of transport service for people and also rolling stock within a metropolitan area or between multiple metropolitan areas.
  • Freight: Provision of transport service for goods and also rolling stock within a metropolitan area or between multiple metropolitan areas.
  • Fixed assets: Facilities for provision of rail service within a metropolitan area or between multiple metropolitan areas, including rails, signal devices, communications equipment, etc., but not including rolling stock.
• Road includes all facilities necessary for land transport, but excludes buses and automobiles.
  • Bridge: Facility for elevated land crossing, including attached toll collection equipment.
  • Tunnel: Facility for below-ground crossing, including attached toll collection equipment. Note: the UK channel train would be classified as Road/Tunnel, not as Rail.
  • Highway: Facilities for overland transport, including attached toll equipment.
• Seaport includes terminal facilities and surrounding waterway, but excludes shipping companies.
  • Terminal: On-land terminal.
  • Channel dredging: Construction and maintenance of waterways surrounding docking facilities.

• Treatment plant: Includes all facilities necessary for storing and delivering potable water to users or processing wastewater.
  • Potable water treatment plant: Facilities for processing water for human consumption, including allocation of water resources; capacity construction for storage; bulk supply generation; and desalination.
  • Sewage treatment plant:Facilities for storage, processing and disposal of wastewater, such as a wastewater treatment plant. The facilities should treat wastewater from water utilities.
  • Potable water and sewage treatment plant:When the two types of plants mentioned above are included in the project.
• Utility: Includes all facilities necessary for storing and delivering potable water to users, including pipes and devices for measuring consumption, for transfer of potable water to individual users.
  • Water utility without sewerage: Facilities necessary for storing and delivering potable water to users, but do not include sewerage services
  • Water utility with sewerage:Facilities necessary for storing and delivering potable water to users and include sewerage services.
  • Sewerage collection:Facilities for intake and routing of wastewater, such as sewers, pipes, and cesspools.
  • Sewerage collection and treatment: Facilities for storage, processing, and disposal of wastewater, such as a wastewater treatment plant. The facilities should treat wastewater from water utilities.

• Project identity
• Financial closure
• Status
• Type of private participation
• Sector
• Contract terms
• Systems
• Contract award method and bid criteria
• Sponsors
• Government support
• History
• Development bank support

• Most commonly occurring/recent name in English. It could be either project company name or asset name.
• Most commonly occurring/recent name in project country language. In this case, only use English symbols because other language symbols are not recognized by the database.
• A name related to the location, sector, or description of the project.

• Abbreviated names/acronyms.
• Old names.
• Other multiple names.

• East Asia and Pacific
• Europe and Central Asia
• Latin America and the Caribbean
• Middle East and North Africa
• South Asia
• Sub-Saharan Africa.

• Local: The country’s stock exchange.
• International: Any stock exchange outside of the country.

• For management and lease contracts, a contract authorizing the commencement of management or lease service must be signed between the public entity granting the contract and the private consortium, assuming the operation of the services, and a starting date for the management or lease contract is established. The date of contract signing should be stated as financial closure date.
• For concessions projects, financial or contractual closure is reached when the concession contract is signed, and the date for the transferring the operations is set. Signing the concession contract creates a legally binding commitment of equity holders (project sponsors) to provide or mobilize funding for the project. The date of contract signing should be stated as financial closure date. If such information is not available, then the date in which the private consortium started operating the project should be considered as the financial closure date.
• For greenfield projects, financial closure is defined as the existence of a legally binding commitment of equity holders or debt financiers to provide or mobilize funding for the project. The legally binding commitment to provide funding is usually achieved through the signing of a loan or debt, which must account for a significant part of the project cost (25 percent). Thus project funding is secured for the construction of the facility. The date of loan signing should be taken as the financial closure date. When greenfield projects are primarily funded through equity contributions, at least temporarily, the progress of project construction (25 percent) could indicate the projects’ financial closure. In these cases, the year in which progress of project construction is reported should be used as financial closure year.
• For divestitures, the equity holders must have a legally binding commitment to acquire the assets of the facility. This usually occurs at the signing of the share purchase contract, and the signing date should be used as financial closure date. If that information is not available, there are two possible dates:
  • The date on which the private consortium took over the project or company operations should be indicted as financial closure date for divestitures involving the transfer of project/company operations to a private consortium.
  • The date on which the first group of shares were sold for divestitures transactions which do not involve the transfer of project or company operations to a private consortium (as long as they represent at least 5 percent of project equity). These transactions are usually done through stock exchanges, and sales are finalized soon after the winning offers are selected.

• Construction for facilities that are still being built.
• Operational for projects that have started providing services to the public.
• Concluded for those in which the contract period has expired and was neither renewed nor extended by either the government or the operator.
• Cancelled for projects from which the private sector has exited in one of the following ways:
  • Selling or transferring its economic interest back to the government before fulfilling the contract terms.
  • Removing all management and personnel from the concern.
  • Ceasing operation, service provision, or construction for 15 percent or more of the license or concession period, following the revocation of the license or repudiation of the contract.
• Distressed for projects from which the exit of the private sector has been formally requested or a major dispute is ongoing. The private component is on the verge of exiting or has exited in one of the following ways:
  • Government termination.
  • International arbitration.
  • Contract termination.
• Merged for projects that have been acquired by other projects in the database and consolidated in one project.

• Management contract. Management contracts transfer responsibility for managing a utility to a private operator, often for three to five years. The simplest management contracts pay a private operator a fixed fee for performing managerial tasks. Other management contracts offer greater incentives for efficiency by defining performance targets and basing the fee in part on their fulfillment. The payments are typically made up of a fixed sum and an incentive-based fee for achieving specified results. Most of the operational risk remains with the government, and the private contractor is not legally responsible for providing the service. Some critical challenges in the design of management contracts therefore are determining which targets are measurable and under the control of the operator and deciding how sensitive the operator’s remuneration should be to the achievement of these targets. Another challenge is determining what powers the operator should have over, for example, employment. Under many management contracts, the utility employs the staff, except for a few top managers.
• Lease contract (including affermage contracts). The term "affermage-lease" is used here for a class of arrangements under which an operator is responsible for operating and maintaining the business, but not for financing investment. The difference between affermages and leases is technical: under a lease, the operator retains revenue collected from customers and makes a specified lease payment to the contracting authority, which the authority can use to pay for investment. Under an affermage, the operator and contracting authority share revenue from customers. The operator pays the contracting authority an affermage fee, which varies according to demand and customer tariffs, and retains the remaining revenue.

• Rehabilitate, operate, and transfer (ROT). A private sponsor rehabilitates an existing facility, then operates and maintains the facility at its own risk for the contract period.
• Rehabilitate, lease or rent, and transfer (RLT). A private sponsor rehabilitates an existing facility at its own risk, leases or rents the facility from the government owner, then operates and maintains the facility at its own risk for the contract period.
• Build, rehabilitate, operate, and transfer (BROT). A private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period.

• Build, lease, and transfer (BLT). A private sponsor builds a new facility largely at its own risk, transfers ownership to the government, leases the facility from the government and operates it at its own risk up to the expiry of the lease. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
• Build, operate, and transfer (BOT). A private sponsor builds a new facility at its own risk, operates the facility at its own risk, and then transfers the facility to the government at the end of the contract period. The private sponsor may or may not have the ownership of the assets during the contract period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
• Build, own, and operate (BOO).A private sponsor builds a new facility at its own risk, then owns and operates the facility at its own risk. The government usually provides revenue or payment guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
• Merchant. A private sponsor builds a new facility in a liberalized market in which the government provides no revenue or payment guarantees. The private developer assumes construction, operating, and market risk for the project (for example, a merchant power plant).
• Rental. Electricity utilities or governments rent mobile power plants from private sponsors for periods ranging from 1 year to 15 years. A private sponsor places a new facility at its own risk, owns and operates the facility at its own risk during the contract period. The government usually provides revenue guarantees through short term purchase agreements such as power purchase agreement for bulk supply facilities.

• Full. The government transfers 100 percent of the equity in the state-owned company to private entities (operator, institutional investors, and the like).
• Partial. The government transfers part of the equity in the state-owned company to private entities (operator, institutional investors, and the like). Share sales can be done in tranches. The private stake may or may not imply private management of the facility.

• Telecommunications fixed access: cable, microwave, VSAT, and WLL (Wireless Local Loop).
• Electricity generation: coal, diesel, geothermal, hydro, natural gas, nuclear, steam, waste, and wind.
• Seaport terminal: container terminal, dry bulk terminal, liquid bulk terminal, and multipurpose terminal.

• Merged.
• Reawarded after cancellation.
• Reawarded after conclusion.
• Contract renewal.
• Spin-off.

• There is more than one independent system (electricity or water utilities, railway network or airport) included in the PPI contract. For instance, a lease contract to operate the water systems or airports of three cities has multiple systems, if the water system or airports of each city is independent of the other. There is more than one physical infrastructure that can provide the respective infrastructure services on its own. Examples are two distinctive roads in one PPI contract, or two power or water plants in a contract.

• Federal/national.
• State/provincial.
• Local.

• Competitive bidding.
• Competitive negotiation.
• Direct negotiation.
• Unsolicited proposals.

• Highest new investment.
• Highest price paid to government.
• Lowest cost of construction or operation.
• Lowest subsidy required.
• Lowest tariff.
• Other.

• Fixed government payments: This is when a government agrees to provide a fixed amount of cash to cover the total or part of the project cost. The payment can be made either in installments or all at once. Examples of this type of government contributions are availability payments for roads and government subsidies which are defined in project tenders for the minimum subsidy. The government obligation payment is included in the "investments in physical assets" total for projects in which the private party takes some investment risk/decisions: concessions, divestitures and greenfield projects.
• Variable government payments: This is when a government agrees to cover the total or part of the project cost by providing cash whose total amount varies depending on some criteria stipulated in the project contract. They include payments defined based on fixed physical or service units (e.g. cost per new connection and shadow tolls) and a demand responses (number of new connections installed and traffic levels, respectively). They also include payment obligations determined by the deficit between either operation and maintenance cost and project revenues or investment cost and project revenues. The government obligation payment is included in the "investments in physical assets" total for projects in which the private party takes some investment risk/decisions: concessions, divestitures and greenfield projects.
• Payment guarantee: This is when a government agrees to fulfill the obligations of a purchaser (typically a state-owned-enterprise) with respect to the private entity in the case of nonperformance by the purchaser. The most common example of this is when a government guarantees the fixed payment of an off-take agreement (e.g., a Power Purchase Agreement or Water Purchase Agreement) between a private entity and the state-owned enterprise.
• Debt guarantee: This is when a government secures the borrowings of a private entity. That is, a government guarantees repayment to creditors in the case of a default by a private entity.
• Revenue guarantee: This is when a government sets a minimum variable income for the private operator; typically this income is from user fee payments by end-use customers. This form of guarantee is most common in roads with minimum traffic or revenue set by a government.
• Exchange rate guarantee: This is when a government protects a private entity from fluctuations in the value of the local currency. For example, the government will agree to reimburse the private entity for losses on debt services if the value of the local currency dips by, say, 20 percent or greater.
• Construction cost guarantee: This is when a government protects a private entity from potential cost overruns in the construction phase of a project.
• Interest rate guarantee: This is when a government protects a private entity from fluctuations in interest rates. Basically, this is the same concept as an exchange rate guarantee with respect to local interest rates.

• If payments are total lump sums to be paid within the first year of the contract, then the total amount of license fees, concession or lease payments, or divestiture revenues should be entered in the year of financial closure. The year of investment should be the same than financial closure year.
• If payments are annual lump sums to be paid during the contract length, then the interest rate included in the contract for late payments should be used as a discount rate to estimate the present value of such payment stream. The present value should be entered as the investment in the year of financial closure. The year of investment should be the same than financial closure year.
• If payments linked to specific share sales are defined in different transactions (for instance, divestitures done in phases over a few years), then investment in government assets should be entered in the year the transaction took place.

• For the projects other than telecommunications ones, the total cost of developing or expanding the facility during the entire contract length is entered as investment data in the year of financial closure. The database records project company commitments in this field, so the amount agreed at financial closure is the one that is recorded in this field. The year of investment should be the same than financial closure year. For agreed further expansions (e.g., additional power plants) under the same contract, the investment commitments involved in the expansion are recorded in the year the expansion was agreed. When investment commitments under the PPI contract change due to contract renegotiation, investment commitments are adjusted to the revised figure. Finally investment commitments for rental projects do not include the total asset cost. Instead, they are recorded in an amount which is proportional to the ratio of project’s contract period over the asset’s expected life.
• For telecommunications projects that the private parties control and for some large energy utilities also controlled by private parties and for which investment obligations are defined by quality indicators, annual investments on facility expansion and modernization are entered as investment data in the year of investment. This information is usually obtained from annual reports of companies. For telecommunications projects or large energy utilities that are control by state-owned enterprises or public entities, no investment in facilities is reported.

• Number of kilometers is used for road, railway, energy transmission, and telecommunications long-distance carrier projects.
• Installed megawatts are used for electricity generation projects.
• Thousands of cubic meters per day is used for water treatment plants.
• Thousands of installed connections is used for telecommunications network and water or electricity distribution projects.
• Throughput (thousand of TEU per year) is used for seaport terminals.
• Population (thousand) is used for electricity and electricity distribution projects when information of installed connections is not available.

• For energy distribution, water distribution, and telecommunications projects, the capacity is tracked for all years where information is available. In telecommunications network, the cumulative number of subscriber or installed connections should be entered. In energy and water distribution projects, the cumulative number of household connected should be entered. In the case of water projects, which have different number of connections for water and sewerage services, the number entered should be the number of connections for potable water services. Do not add up number of connection for water and sewerage services or report total population in the project’s serving area.
• For electricity generation, energy transmission, water treatment, and transport projects, the data represent the expected capacity of the fully operational project.
• For water and sewage treatment plants, make sure to convert figures into thousand cubic meters per day.

• Capacity: The year in which capacity was financed or achieved, depending on how a project expands capacity. For projects, whose capacity expands in discrete phases such as electricity generation, energy transmission, water treatment, and transport projects, the year of capacity is usually the year of financial closure. For a project whose capacity can be increased continuously, such as energy distribution, water distribution, and telecommunications projects, years of capacity are the years for which capacity information is available. Ideally, for the second type of projects information on capacity should be entered for all years after financial closure.
• Investment: The year in which investments are committed to the project or in which the transactions take place for divestitures that are phased or where investment requirements are defined by requirements on service coverage and quality and data are available (such as for large privatized electricity and telecommunications companies).
• Percentage private: The year in which the percentage ownership of the project company by private sponsors is reported.

• Equity. Multilateral institutions, except for the Inter-American Development Bank, the World Bank, and the International Development Association are allowed to invest in equity.
• Guarantees. Two types of guarantees are covered:
  • Political risk coverage against currency inconvertibility, expropriation, war/civil disturbance, and breach of contract.
  • Partial credit guarantees, which turn medium-term finance into a longer-term arrangement by guaranteeing longer maturity or offering liquidity guarantees in the form of put options and take-out financing.
• Loans. Direct loan using the multilateral institution funds (also referred to as A-loan).
• Quasi-equity. These products have both debt and equity characteristics and some of them are convertible debt, subordinated loan investments, and preferred stock and income note investments (also referred to as C-loan).
• Risk management. The risk management products, or derivatives, allow project companies to hedge currency, interest rate, or commodity price exposure. Some of them are currency and interest rate swap, options and forward contracts and derivatives.
• Syndication. A multilateral institution arranges the financing with the resources of other investors, but the institution is always the lender-of-record (also referred to as B-loan).

• Factiva.
• A review of the specialized publications. Specialized sources include: Project Finance International, Project finance, reports of rating agencies, Global Power reports, Energy in East Europe, Power in Asia, Power in Latin America, Power in Asia, country reports of US EIA, Global Water Intelligence, MIGA’s FDI, Privatization barometer, African forum for utility regulation, and Energy regulators regional association.
• Google.
• Sponsor websites or public agencies granting the PPI contracts.
• Multilaterial agencies websites including press releases and annual reports.

• Project companies.
• Developers and sponsors.
• Government agencies granting the PPI contract.
• Regulatory agencies