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The current state of Italian project finance is the result of a trend initiated more than 20 years ago, when public resources started to become scarce and the construction or infrastructure needed private funds to be carried out.
First came the realisation of energy plants – especially the renewables sector with the CIP6 regulation, which started in 1992 – where project finance started to be used in Italy on the basis of the UK experience. Such project finance schemes were initially purely private and fostered by public subsidies in the sale of green energy to the state. In the light of the success of such structures, the Italian state in the late 1990s passed a specific regulation to use project finance schemes to finance, build and operate public infrastructures in the context of European framework legislation on public works. The procedure, in brief, provided that private sponsors could submit autonomously to the authorities’ projects to finance, build and operate public infrastructure.
In the case of ‘cold’ infrastructure, public grants are available to subsidise business plans; public subsidies, however, need to comply with Eurostat rules and need only cover a minority part of the investment. This procedure has passed through many legislative changes in the past decade and is now regulated under Article 153 et seq. of the Italian Act for Public Works, which provides a specific procedure for selecting sponsors in public PFI schemes. Such schemes are extensively utilised in a wide range of infrastructures in Italy, with particular focus on hospitals and roads. Purely private PFI schemes are still used in the energy sector, with a specific focus on renewable and photovoltaic projects.
These schemes are financed by major Italian banks, and their development has been helped by the setting up of regional public agencies that direct and manage all the major public PFI schemes dealing with infrastructure, but also urban regeneration programmes that involve the disposal of public assets.
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Reproduced with permission from Law Business Research Ltd.
This article was first published in The Projects and Construction Review, 3rd edition (published in July 2013 – editor Júlio César Bueno).
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