Recent amendments to Italian legislation on project financing, concessions and public private partnerships
On 5 May 2017, the long awaited Legislative Decree 19 April 2017 n. 56 was finally published in the Official Journal of the Italian Republic (S.O. n. 103).
The 19 April Decree is aimed at amending a substantial number of provisions contained in the Legislative Decree of 18 April 2016 n. 50 (the Code of Public Contracts) which enacted European Directives 2014/23/UE, 2014/24/UE and 2014/25/UE, and is intended to simplify the public contracts legislative framework.
The original version of the Code was widely criticized by commentators and stakeholders, with a first revision made in summer 2016 deemed incomplete and unfit for purpose. After a year of further review and discussion, the Italian Government has now passed a more articulate statutory instrument aimed at overcoming the original criticism and embracing the constructive comments that were raised.
Some of the amendments are particularly interesting for developers, infrastructure funds and financiers given that they (to a certain extent) positively affect the legislative framework of concessions, PPP contracts and project financing unsolicited proposal procedures. The main revisions can be summarized as follows.
• The notion, and definition, of operational risk has been substantially qualified, with reference to the absence of unforeseen events
• The notion of a PPP contract continues to make reference to Eurostat decisions. It has, however, appropriately been clarified that such rulings are limited to, and shall be applied solely to, public budget protection reasons
• The statutory limit on public sector financial support, including grants and guarantees, has been raised from 30 per cent to 49 per cent of the investment value, including financial costs
• Definitive design (progetto definitivo) approval is deemed (and has therefore been construed) as a condition precedent to the signing of the concession agreement
• Failure to reach financial close is still deemed as a termination event. Timing for closing the funding gap and reaching financial close with financiers or bond underwriters has been reduced from 24 to 18 months from the signing of the concession agreement
• The termination amount owed by the grantor to the concessionaire, should an agreement on the financial rebalance of the concession not be reached, expressly excludes the reimbursement of any unwinding cost suffered under the existing interest rate hedging agreements
• The termination amount owed by the grantor to the concessionaire in case of default by the awarding authority, or the withdrawal of the awarding authority for public interest reasons, is now expressly extended, without limitation, to the reimbursement of any unwinding cost suffered under the existing interest rate hedging agreements. This provision is particularly welcomed and is substantially inspired by a concept already affirmed by the Italian Corte dei Conti in an opinion rendered in 2014. This long disputed issue can be finally be considered as settled, strengthening the bankability of the future concessions.
• The step-in rights of the financiers are further detailed
• Unsolicited proposals for project financings will be garnished with the 2 per cent “bid bond” regulated under Article 93 (Garanzie per la partecipazione alla procedura), instead of the 10 per cent performance bond under Article 103 (Garanzie definitive).
• Unsolicited proposals can be submitted for any kind of PPP, and will no longer be limited to concessions and long lease contracts
The Decree will come into force on May 20, 2017, 15 days after its publication.