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Public Payment Guarantees: mitigating the risk of payment defaults by public entities
Public Payment Guarantees (PPGs) facilitate State mobilization of private expertise and investment in development projects by limiting the risk incurred by the private sector. It can be mobilized for concession contracts and public-private partnerships (PPPs).
Objectives
- Facilitate the mobilization of expertise and private investors by mitigating the risk of payment defaults by public entities
- Strengthen long-term partnerships between the public sector and private sector for the achievement of the Sustainable Development Goals
Am I eligible?
In a country on the OECD DAC list, you wish to invest safely in new markets and sustainable infrastructure. You are willing to engage in a long-term public-private partnership.
You represent:
- An investor
- A State or public entity
- A bank issuing letters of credit for a risk concerning a State or public entity
To find out about our solutions tailored to your needs
Benefits
- Maturity of 20 to 25 years
- Covers payment defaults on long-term contracts
- Pricing based on risk assessment
- Personalized assistance throughout the project lifespan
The PPG mechanism
The Public Payment Guarantee is a mechanism that mobilizes a State or public entity, a commercial bank and AFD around an investor leading a public-private partnership project.
For full details about the mechanism
Type: Guarantee
Contracts guaranteed: Commercial, PPP and concession contracts (subject to tariffs being consistent with sector practice)
Risks covered: Uncontested payment defaults by public entities or States (the debt is recognized but remains unpaid) on long-term contract maturities. Compensation for breach of contract is excluded from the PPG
Amount: Between €5 million and €50 million (non-revolving)
Sovereign recourse: With or without recourse to the State shareholder of the public entity
Maturity: 20 to 25 years maximum, depending on whether sovereign recourse is possible
Arrangements: Surety under French law
Pricing:
• Appraisal fee of 0.5%
• Guarantee fee calculated on the basis of the risk
