PPP in Uzbekistan: A Guide for Investors

Public-private partnership (PPP) is a legally formalized cooperation between a public partner and a private partner for a specified period, based on the pooling of their resources for the implementation of a project. The purpose of a project is to address economic, social, or infrastructure objectives through private investment and/or the introduction of advanced management expertise. The PPP Law also governs concession projects but does not apply to production sharing agreements or public procurement.

For an investor, PPP is attractive because the state may provide an asset, land, support, guarantees, a tariff or payment mechanism, while the private partner may provide financing, construction, reconstruction, operation, management, or maintenance of the asset.

Who Can Be an Investor

A private partner may be an individual entrepreneur, a legal entity, or an association of legal entities registered in Uzbekistan or in a foreign country. This means that a foreign investor may participate in a PPP project directly, through a consortium, or through a special purpose vehicle (SPV) established for the implementation of a specific project.

In practice, for major projects it is advisable to establish an SPV in Uzbekistan, as this facilitates obtaining permits, opening bank accounts, entering into contracts with contractors, arranging land rights, obtaining financing, and interacting with the public partner.

Key Principles of Investor Protection

The law establishes the fundamental principles of PPP: equality of the public and private partners, transparency of procedures, competitiveness, objectivity, and prevention of discrimination and corruption. Of particular importance to foreign investors is the fact that private initiators, bidders, and private partners, including foreign persons, are guaranteed a non-discriminatory legal regime.

In practical terms, these principles mean that tender conditions must be clear, evaluation criteria must be determined in advance, and the selection of a private partner must be competitive, except where the law permits direct negotiations.

Authorized Authority

Under the procedural regulations approved by Resolution of the Cabinet of Ministers No. 720, the Ministry of Economy and Finance of the Republic of Uzbekistan is the authorized state authority. A project office — the PPP Project Center — has been established within the Ministry, and the operation of a PPP Fund is also envisaged.

For an investor, this means that key documents relating to projects above specified thresholds must be coordinated through the authorized authority, including the project concept, project appraisal document, tender documentation, and draft PPP agreement.

What Projects Are Suitable for PPP

Before a project is launched, it undergoes a preliminary assessment. The project must be aimed at addressing economic, social, or infrastructure objectives; provide for improvements in the quality or coverage of services; involve private investment or advanced management expertise; have performance indicators, demonstrated demand, and an allocation of risks; and comply with the term requirements applicable to a PPP agreement.

Typical PPP sectors include energy, roads, water supply, healthcare, education, sports, municipal infrastructure, transport, public facilities, digital services, and social infrastructure facilities.

Project Value Thresholds

Project Value	Approval / Coordination Authority	Practical Significance for the Investor
Up to and including USD 1 million	Public partner independently	Simpler procedure, usually a single-stage tender
Over USD 1 million up to and including USD 10 million	Public partner subject to coordination with the authorized authority	Approval of the concept, tender documents, and draft agreement is required
Over USD 10 million	Cabinet of Ministers	Higher level of approval and increased project preparation requirements
Over USD 10 million	Project information must also be published on the Source platform to enhance investment attractiveness	Important for international investors and project financing

The threshold rules for approval of a project concept are established by the PPP Law, while Resolution of the Cabinet of Ministers No. 720 additionally provides for the use of the Source platform for projects valued at more than USD 10 million.

How an Investor Can Enter a PPP Project

Option 1. Participation in a Tender for a Publicly Initiated Project

The public partner develops the project, publishes an announcement, conducts a tender, selects the winner, and enters into an agreement. A single-stage tender is conducted for projects valued at up to USD 1 million. For projects valued at more than USD 1 million, a two-stage tender is conducted unless there are specific legal grounds for another procedure.

Option 2. Private Initiative by an Investor

The investor independently prepares the project concept and project appraisal document and submits them to the potential public partner. The public partner reviews the private initiative and decides whether to approve or reject it. If the concept is approved, it is published in order to identify interest from other potential bidders.

If no other party expresses interest within 45 days, the public partner may proceed to direct negotiations with the private initiator and enter into the agreement without a tender. If another bidder expresses interest, a tender is conducted. If the private initiator does not win the tender, it is entitled to reimbursement of the actual costs incurred in preparing the project, in an amount not exceeding 1% of the total project value.

Option 3. Direct Negotiations

An agreement may be concluded without a tender in cases provided by law, including: ensuring national defense capability and security; where a particular person holds exclusive rights, land, real estate, or other property that constitutes an essential condition for the project; or in cases expressly determined by acts of the President or the Cabinet of Ministers.

Key Investor Documents

Document	Purpose	Key Points to Consider
PPP Project Concept	Substantiates the project, its value, financing sources, profitability, and relevance	Must demonstrate public benefit and advantages for the parties
Project Appraisal Document	Sets out project value, financing, and the technical and organizational solution	It is important to include the financial model, demand, risks, CAPEX/OPEX
Financial Model	Demonstrates project viability and the payment mechanism	Payback period, sensitivity analysis, etc.
Risk Matrix	Allocates risks between the state and the investor	Land, tariffs, demand, currency risk, construction, operation
Draft PPP Agreement	Principal contractual document	Must be acceptable to lenders
Qualification Documents	Demonstrate experience, resources, and financial stability	The applicant must not be undergoing liquidation, reorganization, or insolvency proceedings

Resolution of the Cabinet of Ministers No. 720 requires the project concept and project appraisal document to be prepared in accordance with the prescribed annexes. If the project requires financing from the state budget, an opinion from the Ministry of Economy and Finance is required regardless of the project value.

Tender: What Is Evaluated

Tender documentation must include qualification requirements, the location of the facility, technical and economic parameters, timelines for design, construction, financing, reconstruction, operation, and maintenance, minimum service-quality requirements, the amount of financing or property to be provided by the state, allocation of risks, settlement currency, evaluation criteria, the language of the bid, and the terms of bid security.

Evaluation criteria may include the amount of payments, tariffs, the amount of funds contributed by the private partner, the amount of state support, design, construction and operation periods, the project implementation period, and technical, technological, functional, and innovative advantages.

PPP Agreement: Mandatory Terms

A PPP agreement should be as detailed as possible. It must include the parties, subject matter, obligations and liability, allocation of risks, technical and economic indicators, timelines for works and services, the procedure for transferring rights to infrastructure, the procedure for providing land, tariffs, security for obligations, payments, procedures for amendment and termination, early termination compensation, monitoring, insurance, project documentation, liability, dispute resolution, employment matters, representations and warranties, requirements concerning ownership interests in the private partner, confidentiality, and definitions.

The term of a PPP agreement may not be less than 3 years and may not exceed 49 years. Amendment, supplementation, or termination of an agreement for projects valued at more than USD 1 million requires coordination with the authorized authority, while for projects valued at more than USD 10 million, coordination with the Cabinet of Ministers is required.

Land and Property

The public partner may transfer to the private partner property, the PPP facility, or other assets required for the implementation of the project for possession and use. Land plots required for the project are leased to the private partner for the term and on the conditions specified in the PPP agreement.

If the public partner does not hold a permanent use right to the required land plot, the plot must first be allocated to the public partner and subsequently leased to the private partner. The rent is equivalent to the land tax, taking applicable benefits into account. Failure to provide the land plot constitutes grounds for unilateral termination of the agreement by the private partner.

The key conclusion for an investor is that, before submitting a proposal, it is necessary to verify the legal status of the land, cadastral information, urban-planning restrictions, encumbrances, availability of connections to infrastructure, and the lease term.

Payments and State Support

The PPP revenue model may be based on user charges paid by consumers, availability payments made by the state, payments by the private partner to the state, revenue sharing, or a combination of these mechanisms. Budget funds for availability payments and other payments must be included annually in the expenditure side of the relevant budget throughout the term of the agreement.

Potential support measures include subsidies, including minimum guaranteed revenue support; contributions in the form of assets and property; budget funds for payment of part of the cost of goods, works, or services; budget loans, borrowings, grants, and credit lines; additional guarantees; tax benefits and preferences; and other guarantees and compensation.

It is advisable for the investor to set out state support separately either in the PPP agreement or in a state support agreement. If the support affects the State Budget, it must be coordinated before the project concept is approved.

Protection of Investors and Lenders

The law provides a mechanism for protecting the private partner against changes in legislation. If a change in legislation directly increases the private partner's costs or reduces its revenues, the private partner may claim a compensatory increase in availability payments or user charges, a one-off compensation payment, or an amendment to the agreement, provided that such protection is stipulated in the PPP agreement. An exception applies to general changes in taxes and fees, other than discriminatory changes affecting a specific project.

Direct agreements with the public partner or private partner are important for lenders. Such agreements may provide for lenders' rights in the event of replacement or removal of the private partner, payments upon early termination, information-sharing arrangements, and mechanisms for reducing termination risk. The private partner may also provide security to lenders, including rights under the PPP agreement, pledges of shares, assignments of rights, profits, and amounts receivable.

Register, Monitoring and Reporting

After execution of the agreement, the public partner must, within 3 business days, submit the project concept, project appraisal document, and agreement to the authorized authority for inclusion in the PPP Project Register. Following registration, information about the project is published on official websites and the open data portal. Resolution of the Cabinet of Ministers No. 720 also provides that documents not included in the register have no legal force.

Reports on all projects, regardless of their value, must be submitted every 6 months. The public and private partners are responsible for the timeliness, completeness, and accuracy of such reports.

Investor Legal Due Diligence Before Submission of an Application

Review Area	What to Check
Public Partner	Authority, rights to the facility, existence of a decision to launch the project
Land	Permanent use rights, cadastral records, encumbrances, designated use, access to utility networks
Facility	Technical condition, need for reconstruction, ownership rights
Finance	CAPEX, OPEX, tariffs, government payments, budgetary obligations
Demand	Users, ability to pay, social significance
Permits	Licenses, construction permits, environmental assessment, sanitary requirements
Currency	Foreign-currency revenues, foreign-currency costs, devaluation risk, possibility of indexation
Taxes	VAT, corporate income tax, withholding tax, tax benefits
Financing	Ability to pledge rights, direct agreement
Termination	Compensation upon early termination, procedure for transfer of the facility
Disputes	Jurisdiction, arbitration, governing law, enforcement of decisions and awards
Anti-Corruption	Conflicts of interest, tender transparency, compliance procedures

Recommendations for Investors

1. Start with a preliminary concept rather than a full feasibility study. First assess the public partner's interest, the legal status of the facility, and whether the PPP structure is feasible in principle.
2. Prepare a financial model from the outset. Without calculations of CAPEX, OPEX, etc., availability payments, and sensitivity scenarios, it will be difficult to substantiate the project.
3. Ensure a clear allocation of risks. Construction risk is usually borne by the investor, but land, permitting, political/regulatory, and tariff risks should be transferred or compensated for through the agreement.
4. Include a mechanism for indexation of payments and tariffs. This is particularly important where the investor's costs depend on foreign currency, imported equipment, inflation, or long-term maintenance.
5. Include a change-in-law provision. Compensation for changes in legislation should be expressly stipulated in the agreement; otherwise, the level of protection will be weaker.
6. Require bankable financing provisions. These should include a direct agreement with lenders, step-in rights, security over rights under the agreement, and compensation upon early termination.
7. Verify budgetary availability. If the project depends on availability payments or subsidies, it is necessary to ensure that the relevant payments are provided for in the budget throughout the entire term of the agreement.
8. Do not execute the agreement without its annexes. The implementation schedule, KPIs, tariff methodology, payment formula, risk matrix, reporting procedure, procedure for transfer of the facility, and form of the relevant acceptance/transfer certificate should form part of the contractual package.