While Polish public entities continue to express an ever-increasing interest in public-private partnerships (PPP) as a method of discharging public tasks, PPP activity has remained disappointingly slow in recent years. As can be seen from the 2009-2021 PPP Market Report by the Ministry of Regional Funds and Policies, just 24 procedures to select a private partner were launched in 2021, with PLN 627 million on the table, resulting in a paltry ten PPP contracts signed, worth PLN 172 million all told.
Nevertheless, PPP sector growth seems inevitable in Poland, if only because of the increasingly precarious financial standing of local governments across the country. Furthermore, we are seeing an uptick in the activity of public entities at the central government level, which bodes extremely well in terms of the scope and scale of future projects. This involvement of higher-level players is great publicity for the PPP formula and could galvanize local authorities into further action. This could prove to be the stimulus that will finally propel Poland’s PPP market onto a path of intensive development.
So, what are the sectors likely to stand out in the coming years? A look at some of the projects in the pipeline offers a pretty good idea of the current situation in Poland’s PPP market. What is immediately apparent is just how multifaceted and interesting this market is, despite its still-unimpressive scale.
Energy Modernization of Public Buildings in the Municipality of Koszalin
The energy efficiency sector has long been a favorite of public entities in Poland, with 25 PPP contracts already signed to date. The City of Koszalin took this path with a sizable project to modernize 32 buildings at an estimated cost of PLN 45 million. Further PPP initiatives in this sector are to be expected following the recent amendment of the Energy Efficiency Act, adopted on April 20, 2021, which opens the way for wider use of PPPs in pursuit of improved energy performance.
Construction and Maintenance of the State Archives
This is a government-sponsored venture and one of the biggest public infrastructure projects involving the construction and maintenance of five buildings to house state archives in three provinces. With an estimated cost of PLN 280 million and a projected term of contract of 28 or 29 years, its implementation will require the commitment of significant resources by both public and private partners.
Construction and Maintenance of Municipal Roads in the Municipality of Marki
This project is notable in that the Municipality of Marki, on the outskirts of Warsaw, is one of the very few local government units which has opted for a PPP solution to develop its road system. The government appears unphased by the failure of many previous large road construction projects using this formula. As part of this project, the Municipality of Marki wants to put in a storm drainage system, resurface several public roads, and build sidewalks and bicycle paths alongside them.
Construction of the Outer Harbor in the Port of Gdynia
This would be the first PPP project of this scale in the Polish maritime sector. It certainly ranks among the most interesting PPP projects currently under consideration in Europe. The envisioned wharf will be big enough to take in container ships of over 400 meters in length, with a draft of up to 16 meters, and is expected to have an annual handling capacity of 2.5 million TEU. The private partner will need to shoulder the demand risk, which means that its earnings will come from users of the newly developed infrastructure. One thorny issue here is Article 7(5) of the Polish Public-Private Partnership Act of December 19, 2008, which provides that where the private partner is to collect fees from the project users, the PPP contract must set out the maximum fees and the conditions for their variation – something that private partners are definitely not comfortable with.
Full Steam Ahead
There is no doubt that there is great PPP growth potential in many sectors in Poland. It is high time to realize this potential by introducing new procedures for selecting private partners and signing new PPP contracts. There is nothing that can boost the development of this market more than high-profile success stories, addressing the ever-growing needs of public authorities and users of public infrastructure and, not least, the expectations of potential private partners eying public projects.
By Tomasz Korczynski, Head of PPP/Infrastructure, Jakub Kot, Senior Associate, and Jacek Siwczyk, Associate, Dentons
This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
