Leases and Affermage Contracts
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Leases and affermage contracts are generally public-private sector arrangements under which the private operator is responsible for operating and maintaining the utility but not for financing the investment.
When to choose Leases / Affermage Contracts In the case of a lease the rental payment to the authority tends to be fixed irrespective of the level of tariff collection that is achieved and so the operator takes a risk on bill collection and on receipts covering its operating costs. In the case of affermage the operator is assured of its fee (assuming that the receipts are sufficient to cover it) and it is the authority that takes the risk on the rest of the receipts collected from customers covering its investment commitments. The awarding authority in each case remains responsible for financing and managing investment in the assets – which is supposed to come, at least in part, from the rental payment/ surcharge. Some affermage arrangements the operator designs and manages the investment program. In France and some other civil law countries the key provisions establishing the affermage are set out in the law and so a typical French affermage contract will be relatively short in comparison to an equivalent document in a common law jurisdiction.
Leases and Affermages differ from management contracts principally in that:
Key Features of Leases and Affermage Contracts
Examples of Leases and Affermages
Related Content
PPP Arrangements/Types of PPP Agreements
Page Specific Disclaimer*Note: Although the key features of each category are summarized, there is overlap between the categories and the name given to a particular agreement may not reflect this classic categorization. Care should also be taken to identify whether a specific classification is enshrined in the laws of the host country, as in the case of many civil law jurisdictions where there are strict definitions of "concessions" and "affermages". The sample agreements included in this section are not the full range of agreements associated with infrastructure projects. They agreements are NOT intended to be used as "models". Legal advice should be sought in the preparation and drafting of an agreement to ensure that it is appropriate and workable in the circumstances of a particular project, sector and country. Find Terms and Conditions of this website here.
Utility Restructuring, Corporatization, Decentralization, and Performance Contracts
Type of ResourceCivil Works and Service Contracts
Type of ResourceManagement/Operation and Maintenance Contracts
Type of ResourceLeases and Affermage Contracts
Type of ResourceConcessions Build-Operate-Transfer (BOT) and Design-Build-Operate (DBO) Projects
Type of ResourceJoint Ventures / Government Shareholding in Project Company
Type of ResourceFull Divestiture / Privatization
Type of ResourceContract Plans / Performance Contracts
Type of ResourceStandardized Agreements, Bidding Documents and Guidance Manuals
Type of Resource
Additional Resources
Energy and Power PPPs
Type of ResourceWater & Sanitation PPPs
Type of Resource