Principles of public‐private partnership financing – Polish experience
| Published date | 05 July 2013 |
| DOI | https://doi.org/10.1108/JPIF-10-2012-0049 |
| Pages | 329-344 |
| Date | 05 July 2013 |
| Author | Anna Wojewnik‐Filipkowska,Dariusz Trojanowski |
| Subject Matter | Property management & built environment |
ACADEMIC PAPER
ERES 2012 – JPIF JOINT AWARD WINNER,
BEST PAPER IN REAL ESTATE FINANCE
Principles of public-private
partnership financing – Polish
experience
Anna Wojewnik-Filipkowska and Dariusz Trojanowski
Investment & Real Estate, University of Gdansk, Sopot, Poland
Abstract
Purpose – Public-private partnerships (PPP) are contractual relationships influenced by different
legal traditions. The main purpose of the paper is to provide insight into the principles of PPP
financing and the impact of two legal provisions in Poland.
Design/methodology/approach – Appropriate regulation and documentation were investigated.
Discounted subsidies, internal rate of return (IRR), economic internal rate of return (EIRR) were
calculated and risk was analysed for three variants of a selected case study.
Findings – The two PPP-related legal provisions are well-suited for cooperation, although they do
not generally correlate. Partnership is just one of the available modes of cooperation; therefore,
a complete financial and economic analysis should be performed to prove value for money.
Research limitations/implications – The paper was limited to one case study in three variants.
Additional cases can be studied to confirm the findings and increase the usefulness of the
methodological framework and improve its application.
Practical implications – The interrelation of the two PPP-related legal provisions is useful for
public managers searching for partners and private investors looking for opportunities. Since the
proposed framework supports assessing investment advantages from the perspective of the two
provisions, it supports decision makers. The experience of the Polish market also may support
development of public-private partnerships in other countries.
Originality/value – The two PPP-related legal provisions are compared to determine which
provides the optimal method for management of PPPs. Studying both successful and abandoned
projects can help towards better management and understanding of PPPs. The work is novel
providing insights into PPP financing from a legal perspective and addressed financial
consequences.
Keywords Public-privatepartnership, Private finance, Infrastructure, Poland
Paper type Research paper
1. Introduction – study justification, aim, methodology
Investment activity in the public sector is not only economic in character. Public
investment differs significantly from the private investment in terms of objectives,
financial analysis and sources of funding (Markowski, 1999; Alford, 2001; Gertner et al.,
2007; Misterek, 2008). Its main objectives include infrastructure improvement, creating
employment, environmental protection and economic stimulus (Ustawa, 2001). Local
government investments are geared towards improving the local community, and not
just the profit of an individual. Investment selection is therefore primarily influenced
The current issue and full text archive of this journal is available at
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Received June 2012
Accepted December 2012
Journal of Property Investment &
Finance
Vol. 31 No. 4, 2013
pp. 329-344
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-10-2012-0049
Principles of
PPP financing
329
by statutory requirements and economic drivers rather than financial prudence. A
specific feature of public sector investments is the wide range of positive impacts,
which are shown in Figure 1.
The most important tasks stemming from public sector investment include
(Misterek, 2008; Markowski, 1999):
.better access to public service;
.improvement of the local community’s standard of living;
.positive impact outside the region – for example, investments in roads improve
the living standard of users from the region and the outside of the region;
.economic activation of the region;
.encouragement of growth;
.creation of employment;
.improvement of the ecological situation of the region; and
.increase in income base for future years.
Public investment mainly involves infrastructure and real estate (Finkenzeller et al.,
2010) and is characterized by continuity and a systematic burden on the budget. This
burden results from infrastructure use, the development of local governments and the
formation of new settlement areas (Misterek, 2008). What is more, financing public
investments involves the cost of the infrastructure maintenance. The specificity of
public investment there fore results from both real es tate and infrastructur e
characteristics, as shown in Table I.
The key problem with public investment is the choice of an appropriate financing
model. Funding is limited by the extent of investors’ resources, while financial markets
offer many potential funding sources (grants, debt instruments, equity instruments).
Traditionally, infrastructure investment is a domain of the public sector, but this is
impractical due to budget constraints. Private sector investment is therefore desirable.
A private partner provides access to substantial capital and optimal financial
structuring, and can speed up important investments.
Figure 1.
External effects of the
public investment
Spatial effects
of different
scale Direct and
undirect
economic
effects
External effects
Ecological
effects
Local
quantitative
effects
Functional and
qualitative
effects Public
investment
Source: Based on Jarosinski (2003) and Misterek (2008)
JPIF
31,4
330
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