Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 312 and 317 together.

During the life of the PPP contract (typically 25 years after construction), a portion of the unitary payment is adjusted annually by an inflation factor to reflect changes in a general inflation index specified in the contract (the Consumer Price Index or the Harmonised Index of Consumer Prices). This indexable portion represents costs incurred by the PPP company over the operational period (e.g., facilities management, maintenance, and lifecycle costs); it excludes construction and finance costs. As part of the annual indexation process, the indexable portion is adjusted by the actual inflation rate over the preceding 12-month period. The indexable portion for each project depends on the specific features of the project, i.e., the operational period costs as a proportion of the total costs will differ by project. For the PPP projects procured by the NDFA up to 2024, the average indexable portion is circa 34%.

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 314 and 315 together.

PPPs have been very useful in facilitating the delivery of important infrastructure, particularly in previous years when the Exchequer was seriously constrained in terms of its ability to fund infrastructure directly. PPPs, and their use of private finance on an off-balance sheet basis, enabled projects to proceed which would not otherwise have been deliverable on the basis of Exchequer funding alone.

A new Investment Policy Framework for PPPs was introduced in 2015 which sought to limit the total financial exposure associated with all PPPs (existing plus new/planned) in any individual year to 10% of the aggregate Exchequer capital allocation for that year. Following a review by an expert group carried out in 2018 it was recommended that the policy should return to the original budget control mechanism, whereby, the capital value of PPPs should be charged to the capital allocation of Departments, effectively meaning that there will be no distinction between procurement options for budgetary control purposes and the 10% cap on PPP costs introduced in 2015 should no longer apply.

The following table sets out the amounts allocated towards PPP costs in 2024 relative to the overall allocation given on an individual Vote basis.

Paschal Donohoe (Dublin Central, Fine Gael)
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I can confirm to the Deputy that all PPP unitary payments are classified as capital expenditure. PPPs are generally considered to mean projects financed and constructed by the private sector and remunerated by deferred annual payments (unitary payments) from the Exchequer for the design, build, operation and maintenance of the project. Upon completion of the construction of the project it is made available for public use and is paid for by the State and/or users over an extended period (typically 20-25 years), after which the asset comes into State ownership. When a PPP is classified as ‘off balance sheet’ from a General Government perspective, the initial capital cost of the project does not impact on the General Government Balance (GGB) over the construction period, nor does the debt associated with the project impact on General Government Debt (GGD). Rather, the cost of such projects is spread over the lifetime of the projects, by way of annual unitary payments.