Are you considering an Italian job?

In Italy, building public works through project finance investment (similar to PFI) has attracted banks and project sponsors for decades. As far back as the early 1930s, Italian law has provided for the financing of public infrastructure through private capital.

Road infrastructure was the first sector to benefit from private funding, with the state granting special concessions to private companies to construct and manage toll roads in the 1950s. The investment is made by a "concessionaire", who is remunerated by managing the project for a set period, for instance by charging a toll to road users.

Legislation that came into effect last August marked a turning point in project financing in Italy, providing further scope for UK investors and developers to pursue contracts. The legal framework for project finance (the "Collegato Infrastrutture") has been amended to give government responsibility for regulating large public infrastructure works (the "Legge Obiettivo") so that it can implement its modernisation policy.

To ensure financial stability of the concessionaire's investments, the Collegato Infrastrutture now allows the 30 year limit of the construction and management concession to be exceeded. It also abolishes the previous rule limiting public contributions to 50% of the project cost. Future public contributions may now be allocated on a necessity basis and the sole restriction on the amount of the public contribution will be that the investment in the project must make economic and financial sense. The Collegato Infrastrutture opens up the possibility for advance public contributions to be made at the beginning and during the construction of a project.

The construction and management concession model will no longer be limited to financing public utilities, but will also allow for concessions to be granted by publicly run bodies such as prisons and hospitals (subject to the proviso that the financial risk related to the management of such public services remains with the concessionaire). The provisions also permit the contracting authority to opt out of the obligation requiring the concessionaire to give third parties at least 30% of the project works – the parties are now free to contract out a smaller percentage.

Decree 190 (which implemented the Legge Obiettivo) provides a fast-track approval process for large public infrastructure and strategic industrial investments. It applies only to the projects listed in a specific programme approved by the Interministerial Committee for Economic Planning. The first such programme has been approved and lists about 200 projects, including the Lyon-Turin high speed railway as well as the "Mose" (the system to control tides in Venice). The programme will be reviewed each year on the proposals of ministers or the interested regions. The updated list will then be included in the yearly economic plan of the Italian government.

The projects listed in the programme are to be implemented either by means of a construction and management concession or by appointing a general contractor, which will be fully liable for the execution of the works based on definite costs and within an agreed timeframe. The general contractor must have adequate experience and qualifications for the implementation of the works as well as adequate organisational and financial resources.

However, there is a sting in the tail. Following two decisions of the Corte Costituzionale last October, the implementation of certain provisions of the legislation may have to be reconsidered. The Corte, commenting on the legitimacy of the Legge Obiettivo and the implementation regulations, ruled that delegating responsibility to the government to approve the strategic projects was unconstitutional. In the Corte's opinion, it prevented the implementation of regional laws.

Clearly, further legislative intervention is required before UK investors and developers can be comfortable with pursuing such opportunities in Italy and a draft of the legislative decree proposed by the minister for infrastructures is currently before the council of ministers.