Project financing becomes an attractive tool for institutional investors such as infrastructure funds and real estate funds
The new Public Contracts Code (Legislative Decree No. 36 of 31 March 2023) has introduced important innovations in the field of public-private partnerships (PPPs), making these procedures effectively more attractive to institutional investors such as infrastructure funds and real estate funds. There are two substantial changes compared to the previous rules.
The first novelty is that, while under the old Code institutional investors could only submit project finance proposals in association with companies meeting the requirements to participate in procedures for the award of public contracts for design services, the new Code, on the other hand, authorises institutional investors to submit project finance proposals also independently. It is only after the declaration of public feasibility by the awarding body that investors are called upon to organise the composition of the future special-purpose company, thus guaranteeing themselves considerable savings in terms of time and definition of industrial strategies.
The second major novelty is that institutional investors may subcontract, even entirely, the works provided by the PPP contract to companies that meet the requirements, thus being able to manage the governance of the SPV in total autonomy. This is also in derogation of the limits on subcontracting provided for in Article 119 of the new Code, which does not allow the prevailing category of work to be entirely entrusted to third parties.
It is believed that the simplification brought by the new rules on project finance can encourage the involvement of institutional investors such as infrastructure funds and real estate funds, contributing to the development of infrastructure at a national level, as well as making the project financing finally suitable for vast PPP operations of urban redevelopment and regeneration.
Indeed, the regulatory innovations described above may be the lever and game changer that has so far failed to get the PPP off the ground in Italy for the realisation of this type of transaction through this tool.
