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“Investment diagnosis doubtful”

Denis Kachkin, the Managing Partner at Kachkin & Partners, considers the first amendments to the new federal law on public-private partnership to be possibly made this year.

In the PPP scheme, businesses prefer projects with a clear financial model, predictable and controllable risks and acceptable level of profitability, experts say. But its regulatory base has too many loopholes for investors to count on stable profitability.

Denis Kachkin, managing partner of Kachkin & Partners, is skeptical about the project of the public-private hospital. «We didn’t evaluate investment prospects of this project. It is likely to be interesting for many companies, but we think that serious complications can arise at the stage of legal risks assessment,» believes the expert. According to him, the project is supposed to be implemented based on a regional PPP model, which in its current form is in its final days. The new federal law on PPP will come into effect from the beginning of 2016 – it will change the rules completely and create higher risks for all projects, structured according to the existing regional legislation. The concession law is amended twice or thrice annually. «I am sure that the same destiny awaits the new law No. 224-FZ on PPP. Maybe we will see the first amendments even this year, before it goes into effect,» predicts Kachkin.

Alexandra Koroleva, head of the civil projects department at GC Hosser, named lack of life cycle contracts in the health care sector as one of the restrictions, which decrease the efficiency of PPP projects in the industry. This means deficit of long-term cost planning for services and incapability to enable continuous diagnostic and treatment process. Lack of approved methods for calculation of operating costs also matters, as it complicates the process of justification for compensations, sufficient for high-quality maintenance. There are also gaps in the compulsory health insurance rate structure: investment costs (capital expenditures and fund raising costs) are not present there, as well as equipment modernization costs above 100,000 rubles.  Finally, lack of approved standards and operation methods influences the implementation perspective of this scheme. «Professional operation can extend the useful life of equipment by 20-25% and reduce downtime of medical equipment because of breakdown to 1-3% of operational time per year,» calculated the expert.

By the way

After the meeting, Prime Minister formulated a number of tasks aimed at entrenchment of the PPP model in the social sphere. Thus, Ministries of Economic Development, Healthcare and Finance were requested to elaborate issues of state-owned health care facilities taking part in concession agreements on the grantor’s side. Such changes will make the preparation of objects for concession a lot easier. Another decision was changing the list of life cycle contracts. After amendment to the cabinet of ministers’ resolution dated November 28, 2013 No. 1087, it will finally include health care facilities. Amendments will also be implemented into the Land Code: it will allow to provide land for projects, supported by transactions of investment attraction to federal infrastructure objects.

Maxim Shumov

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Denis Kachkin

Managing Partner,
Head of Infrastructure
and PPP Practice, attorney

Download VCARD
Denis Kachkin

Managing Partner,
Head of Infrastructure
and PPP Practice, attorney

Download VCARD

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