Public-Private Partnerships as a Way of Financing and Supporting Utility Companies

Introduction

For the last twenty years, the public in the Republic of North Macedonia has been dealing with the topic of public utility companies, their efficiency and their economic operation. The public utility companies in the Republic of North Macedonia are continuously in debt, and this seriously affects the services they provide to the citizens. In continuity, the Government of the Republic of North Macedonia, for a certain period of time, pays funds to the municipalities from the state budget so that they can discharge the debts of the utility companies. The last such financial intervention by the Government took place in 2017, which paid all the debts of the municipalities and their utility companies. Unfortunately, only 5 years later, today, the majority of utility companies are again over-indebted, and the topic of the way those companies are managed is being raised again. The possibility of creating public-private partnerships in the area of delivering communal services appears as one of the possible solutions for this situation.

Public-private partnership in the Republic of North Macedonia is regulated by the Law on Concessions and Public-Private Partnership, and such partnership is established by contract. Namely, according to the Law on Concessions and Public-Private Partnership, public-private partnership means a form of contractually regulated, long-term cooperation between the public partner and the private partner, which is characterized by the following:

• 1.

  The private partner undertakes the obligation to provide a public service for the end users in areas of the public partner's competence and/or the obligation to provide the public partner with the necessary prerequisites for providing a public service to the end users and/or activities under its competence:

• 2.

  In order to fulfill the obligations from point a), the private partner can undertake to:

  • –

    finances, designs, builds and/or reconstructs/renovates a public infrastructure facility, operates and maintains a new facility and/or reconstructed/renovated a public infrastructure facility or

  • –

    uses, manages and maintains an existing facility of public infrastructure or

  • –

    any combination of the above-mentioned obligations as long as the combination of those obligations is aimed at fulfilling the objectives set in point 1);

• 3.

  When undertaking the obligation from points 1) and 2), the private partner usually assumes a significant part of the risks related to financing, construction, demand and/or availability and other such actions, management, maintenance and technical risks, depending on what was agreed upon during establishment the public-private partnership is determined on a case-by-case basis;

• 4.

  Each partner in a public-private partnership for the duration of the public-private partnership will take responsibility for risk events that are in his sphere of influence, or the responsibility is shared in order to achieve optimal risk management for the duration of the partnership, among other things, with using management, technical, financial and innovation capabilities of the private partner and by promoting the exchange of skills and knowledge - experience between the public and private partner, without the same being in contradiction with point 3);

• 5.

  In exchange for the undertaken obligations, the public partner may grant the private partner a concession for public work or a concession for public service or compensate him through payment;

• 6.

  The public partner can also enable the private partner to perform certain commercial, and economic activities, in addition to the obligations from points 1) and 2), determined in the contract, but only if there is no other possible way to ensure the necessary level of cost efficiency of private participation and reasonable return on investment;

• 7.

  The public partner can transfer certain real rights to the private partner necessary for the performance of contractual obligations.