PPP will be built into industrial facilities

A bill has been submitted to the State Duma, the adoption of which will make it possible to implement projects for the reconstruction and construction of not only state-owned, but also private industrial facilities using the mechanism of public-private partnership. This opportunity will be given to projects that correspond to the technology taxonomy and cost more than 10 billion rubles. In this case, the private investor must invest at least 15% of their own funds in the project, and the state’s participation will be limited to 50% of all project costs. Experts believe that the new opportunity will be in demand, but note that it will not make industrial PPP projects widespread.

Senators Andrei Kutepov and Alexey Sinitsyn introduced a bill to the State Duma that would expand the capabilities of the public-private partnership (PPP) mechanism. Currently, industrial PPP projects are not particularly common due to regulatory restrictions: the PPP law allows the use of this mechanism only for projects for the reconstruction of state-owned enterprises. Removing this barrier has been discussed for a long time – at the end of last year, the Ministry of Economy developed a project that would allow private facilities to be reconstructed through PPP (see Kommersant, December 25, 2023).

The introduced project is in many ways similar to that prepared by the Ministry of Economy, but provides slightly broader opportunities: within the framework of PPP, not only the reconstruction of private industrial facilities is allowed, but also the construction of new ones on private plots. This is explained by the fact that now the creation of industrial facilities within the framework of PPP is allowed only on land owned by the state. As First Deputy Head of the Ministry of Economy Ilya Torosov explains, his department, as well as the Ministry of Industry and Trade, took part in the development of the senators’ project – following a discussion with business and banks, it was decided to expand the capabilities of the PPP mechanism in industry, “so that support measures would cover the largest number of enterprises.”

Requirements for projects: compliance with the taxonomy of technological sovereignty (list of priority types of production – see “Kommersant” dated April 18, 2023) and cost from 10 billion rubles. The investor’s own funds must be at least 15%. The participation of the public party is limited to 50% of all project costs (according to the general rule for PPPs – less than 100%). The remaining 35% can be credit funds. Such agreements will be concluded only at the federal level as a private initiative. The draft includes guarantees for the private party – in the version proposed by the Ministry of Economy in December, there were risks of the object being transferred to the state in case of early termination of the agreement by the court due to a significant violation by the private partner of its terms. Now, in such cases, the object does not go to the state if the private investor compensates for costs and losses. Substitution of a private partner is also not allowed.

Alisa Berman, head of the directorate for legal support of projects at the National PPP Center (VEB.RF group), notes that the possibility of concluding PPP agreements in relation to private industrial facilities is a solution that is in demand and expected on the market. But still, the draft, she adds, contains provisions that raise questions, for example, the expert considers the choice of the private initiative procedure to be “legally unsound” (with private ownership of the object, the participation of alternative investors is virtually impossible). It would be more rational, she believes, to provide for the conclusion of an agreement by decision of the government.

According to Olesya Khityanik, senior lawyer at Kept Legal Practice, if the amendments are adopted, PPP will become an alternative to special investment contracts. Director of TeDo legal practice Anna Batueva, however, believes that the bill “will not make PPP in industry for private facilities and on private land a mass product,” since it already contains restrictions (only the federal level and only a project that corresponds to the taxonomy). Alisa Berman also notes this: “It is not obvious why such an opportunity is not extended to the regional level, where the need for such projects is high – without this limitation, the positive effect could be higher.”

Evgenia Kryuchkova