Istanbul PPP Week 2020, Webinar Presentation

Istanbul PPP Week 2020,Webinar Presentation

5th November, 2020

Prof. Ilkwon Chae (Chief Researcher)

Global Infrastructure Institute

How to use Korea financial Investment to

mobilize Asia PPP projects(Korea’s 30 years of PPP experience)

Istanbul PPP Week ‘2020

CONTENTS

Ⅰ. Korea 30 years PPP experience

Ⅱ.

Ⅲ. Conclusion and my recommendation

How to use Korea finance to Asia PPP Project

2/25

Korea PPP Track Records (1995~2015, 30 years)

• To be activate PPP model development (BOT -> BTO -> BLT -> BTO-rs & BTO-a)

• MRG supported scheme abolishment(2006) After diminished PPP projects.(Since 2007)

121

12010000

Billion Korea

Won12000

140개

Unsolicited, MRG Introduce

PPP Track Records (1995~2016, Korea Development Institute)

BTL(Government payment) (’05)

2nd Revised PPP Act(’05)

BTL제안허용(’16)

1 1

15

4

13 14 15 15 16 19

27

79 80

95

51

3631

17

26

17

6

-

20

40

60

80

100

-

2000

4000

6000

8000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152016

Solicited (BTO) BTL Unsolicited(BTO) Project number

Solicited Projects

First PPP act(’94)

Revised PPP act(’99)

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AmendmentJan. 2005

RevisionJan. 1999

Since the formal PPP program was first introduced with the enactment of the PPP Act in 1994, the act has gone through several revisions.

Legal Framework for Korea PPP (1)

EnactmentAug. 1994

『The Private Capital Inducement Promotion Act』

『The Act on Private Participation in Infrastructure 』

· Unsolicited proposals, Minimum Revenue Guarantee

『The Act on Private Participation in Infrastructure 』

· Diversified Facility Types (35 -> 44)

· Introductionof BTL Scheme

✓ Unsolicited proposals and MRG in 1999

✓ BTL in 2005 : promoted its use in educational facilities, military

residences, environmental facilities, etc.

✓ Dispute Resolution committee in 20114/32

Hierarchy of legal and administrative framework of PPP System

▪ PPP Act

➢ PPP Act Enforcement Decrees

❖ Annual PPP Basic Plan

✓ PPP Implementation Guidelines

The Legal Status of the PPP Act

▪ The PPP Act and the PPP Act Enforcement Decrees are the

principal components of the legal framework of PPP

➢ Eligible Infrastructure types, Procurement Types, Procurement

Process, the roles of the Public and Private parties, etc

▪ The PPP Act is a special Act that precedes other Acts !!

➢ Exempts PPP projects from strict regulation in national property

management

➢ Allows a SPC to play a role of competent authority

Legal Framework for Korea PPP (2)

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❑ Both the government and a private company can initiate a PPP project

❑ Solicited Projects (1994~)

⚫ A solicited project is that the competent authority identifies a project

for private investment and announces a RFP

⚫ Competent authorities develop a potential project after considering related plans and demands for the facility. They then weight the procurement options in order to determine whether the PPP procurement is more efficient than the conventional procurement

❑ Unsolicited Projects (1999~)

⚫ For an unsolicited project, a private company (project proponent) submits a project proposal, and then the competent authority examines and evaluates the contents and value for money of the private proposal, and designates it as a PPP project

Project Initiation

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The PPP Act directs the MOSF and PIMAC to issue the PPP Basic Plan.▪ The PPP Basic Plan can be updated and adjusted more often

reflecting relevant changes, market conditions and the government needs.

The Basic Plan provides: ▪ PPP policy directions

▪ Details in PPP project implementation procedure

▪ Documentation direction

The PPP Basic Plan and PRC

Chaired by the minister of strategy and finance, convenes

whenever needed to make important decisions on PPP policies and

major projects. It consists of members from procuring ministries

and private sector experts.

▪ When deemed necessary, the PRC is able to postpone or block part of the

expenditures for PPP projects

PPP Basic Plan

Project Review Committee

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Korea government adopted the positive stipulation for eligible facilities, implying facilities that aren’t stipulated in the act can’t be implemented.

▪ Related with the strong government support or incentives for PPP projects.

▪ Reflection of consideration of the PPP Act’s legal status; The PPP Act is

a special act that precedes other acts.

Eligible Facilities in the PPP Act

Road

(3)

Port

(3)

Railway

(3)

Welfare

(4)Forestry

(2)

Energy

(3)

WaterResources(3)

Communication

(5)

Environment

(5)Logistics

(2)

15 categories

(facility types)

Education

(1)

Military Housing

(1)

Culture & Tourism

(10)

Airport(1)

PublicHousing

(1)

Revision of the Act in 2009 :

Eligible infrastructure facility types, which have been

stipulated by the Act, can also be stipulated by the

Enforcement Decree.

8/32

Private Sector

(SPC)

End-user Government

Provides Services

Pays User Fee

Grants

Operational

Rights

Transfers

Ownership

BTO

Private Sector

(SPC)

End-user GovernmentPays User Fee(If necessary)

TransfersOwnership

Provides Services

BTL

Grants Operational Rights/Pays Government Payment

Comparison of BTO and BTL Schemes

BTO and BTL types (2005 revision)

Both the concession-type (BTO) and the service purchase-type

(BTL) projects are implemented in Korea

▪ Concession-type (BTO) is popular in developing countries, while service

purchase-type(BTL)are common in developed countries

9/32

New PPP Model : BTO-rs, BTO-a (2015 Revision)

BTO BTO-rs (Risk Sharing) BTO_a (Adjusted)

Private investPrivate2(P2)

투자위험분담기준금

정부환수기준금Not guarantee

30%(Private Invest)

✓ Demand Risk to Private Investor(100%)

✓ Support to Government Construction Subsidy

✓ Private Investment 1 : Demand Risk to Private Investor burden Part1 (P1)

✓ Private Investment 2 : Demand Risk to Government burden Part2 (P2)

✓ Support to Government Construction Subsidy

✓ Private Investment, Not guarantee each percentage

✓ Government support & Payment each percentage

✓GTX-A Project (BTO-rs→BTO )

✓ New-Asan Railway Line(Government Burden 60%)

✓Water Waster Treatment Project(Government support payment 70%)

Private (p1) Investment Government

Support

70%민간투자비

10/32

❑ PPP has alleviated the government’s burden on infrastructure investment from 5% to 36% per year ( Average: 21% per year )

▪ The promotion of PPP has helped ease constraints on the government’s financial resources, enabling it to secure resources for sectors other than SOC

(*) All the figures are contract basis and thus real investment balance may be different

bil USD % of PPP

Korea PPP - Contribution both Saving Government Budget and Korea Economy Development !!

11/32

❑Waste Recycling Project under BTO Scheme

• Project: Landfill gas recycling project

• Present status: in operation phase

• Scale: 50MW energy generating

facilities, power transmission facilities

• Total investment cost: $95m

• Private sector investment: $95m

• Concession Period: 11yrs

• Minimum Revenue Guarantee

✓Guarantee Period: 11yrs

✓Requirement: excluded when the

ratio of the actual value/estimated

value is less than 10%

✓Condition: excessive profit-

sharing is applied

• User Fee

✓SMP + 5 cents/kWh

✓PPA(Power Purchase Agreement)

with KEPCP(Korea Electric

Power Corporation)

PPP Projects in Korea – Social Development

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Prof. Ilkwon Chae (Oversea Investment Advisor, KIND)

13/32

KIND’s project development always starts from listening to our clients.

Constant discussions withcompanies, governments,

banks, and MDBs

Support project preparation(M/P, F/S) and Advise on partnership/structure

Investment inequity, fund,

bond

Opportunity identified Structured bankably

[Shareholders] Korean government,

Korea Exim Bank, Korea Construction Guarantee,

Korea Land & Housing Corp., K-Water,

Korea + Incheon Airport Corps.,

KORAIL + National Railway Network,

Korea Expressway Corp.

KIND is a young governmental institution

set up in 2018 under MOLIT.

14/32

1st Half of 2019

Country Projects

Mozambique

Maputo Combined Cycle Power

VietnamHanoi agricultural and fishery Wholesale center

Indonesia Medan LRT / BRT

Kyrgyzstan Bishkek University Hospital

Turkey Istanbul Three-Story Tunnel

Indonesia Bekasi Driving Test Site

Myanmar Dala New Town Development

2nd Half of 2019

Country Projects

Bangladesh Dhaka-Chattogram Expressway

Indonesia Bantar Gebang Landfill Restoration

Georgia Tskhenistskali Hydro Power

Vietnam Dung Quat Urban Development

Mongolia Ulaanbaatar New Airport Railway

Iraq Karbala PV Power

Bangladesh 230kV, 400kV Transmission Lines

BangladeshDhaka-Mymensingh Road Improvement

Costa Rica San Jose Metropolitan Railway

Ever since KIND took over the decade-old feasibility study support program from MOLIT in 2018, the # and progresses of projects are growing.

From G2GJoint Platform

From G2GRequest

15/32

K-City Network is a new initiative of MOLIT starting from 2020, and KIND is working as the secretariat and operating institution.

16/32

Indonesia EIPP: 2020/2021 Projects

New Capital City

1) Economic Transformation Roadmap andUrban Development Plan

2) Financing / Funding strategy

3) Energy Transition Masterplan and Waste Management System

Current Capital Area

(Jabodetabek)Economic roadmap for/after Capital relocation

Korea Development Institute (KDI) – Korea EXIM Bank – KIND consortiumwon the contract for MOEF’s new program operation, EIPP.

17/32

Bangladesh’s PPP Authority and Korea’s KIND have been holding semi-annualmeetings and successfully identifying PPP projects and investors.

• Well-established PPP laws,

procedures, and project pipeline

• Diversified financing sources

• Based on trusted G2G relationship,

direct negotiation can be considered for

fast realization and promoting FDI

• Equipped with various supporting means

and investment capacity

• Constantly reviews Korean investors’

investment proposals for Bangladesh

• Also promotes investment opportunities

presented by Bangladesh government to

Korean investors and companies

Joint PPPPlatform

18/32

Within less than 2 years,

- 15 investment opportunities were introduced by Bangladesh,

- 16 investment proposals were submitted by Korea,

- 3 projects identified their investors.

19/32

TBM T/L (L=3.32km)

Turkey Eurasia Tunnel Project

Project Name Turkey Eurasia Tunnel

Project Description

• channel to connect Asia & Europe

• 14.6 Km 4 line undersea level trunnel

construction projects

• TBM(Undersea level) 3.34Km

Double Decker, connected road 9.2Km

• MRG & Turkey MOF DAA condition

• Operation from 2016 year

Owners SK Group, Korea(50%). Yapi(Turkey) (50%)

Total Cost 1.2 billion USD

ConstructionCost

800 million USD

Construction SK E&C / Yapi JV

Type BOT, PPP

1) Korea financing investment to Asia PPP case studies (1)

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Shareholders

YMSK JV EGIS

Loan Institutions

DAA

AYGM

MRG

EPC Contract O&M Contract

▪ Yapi (50%)

▪ SK Group (50%)

▪ KEXIM

▪ KSURE▪ EBRD

▪ EIB▪ Int’ Commercial Banks

▪ Local Commercial Banks

TreasuryEarly Termination Payment

VAT

exemption

Authorities

Equity (23%)

Loan

Project Company

ATAS

Loan (77%)

※ AYGM : Authority for Construction of infrastructure※ ECA (Export Credit Agency) – KEXIM, K-Sure ※ MLA (Multi-lateral Agency) – EIB (Europe Investment Bank),

EBRD (European Bank for Reconstruction and Development)※ DAA : Debt Assumption Agreement ※ MRG : Minimum Revenue Guarantee

PF Financing Structure

21/32

Project Name Laos, Xe Pian Xe Namnoy Hydropower

Project Description

• Thailand EGAT import to Cross Boarder Project (PPA)

• Hydropower capacity : 410MW

• 170Km transmission line

• Concession period : 32 years

• 2013 year Financial Close, 2019 commercial

operation

shareholdersSK E&C, Korea Westen power, Ratchaburi(Thailand), Laos government

Total cost 1 billion USD

Construction Cost

700 million USD

Construction SK E&C

PPP type BOT, PPP

Laos, Xe Pian Xe Namnoy, Hydropower Project

22/32

1) Korea financing investment to Asia PPP case studies (2)

PPA

Project Company

PNPC

Equity (30%) EGAT

EDL

RATCH (25%)

EDCFSKEC

USD 680MKWP

EPC O&M

SKEC (26%)

KWP (25%)

LHSE (24%)

USD 306M USD 714M

ODA

Loan

KTB

TEXIMOther banks

※ EGAT : Electricity Generating Authority in Thailand

※ EDL : Electricite Du Laos (Laos Electricity Authority)

※ LHSE : Lao Holding State Enterprise

※ KWP : Korea Western Power

※ KTB : Krungthai Bank (Thai’s largest state-owned bank)

※ EDCF : Economic Development Cooperation Fund

CA

Lao Gov.Debt (70%)

USD(50%)+THB(50%)

PF Financing Structure

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Conclusion : Coworking with Asia PPP center for future !!- Share idea & experience, Share prosperity

✓ How to contribute to Asia countries and people, we are ⚫ (Best Practice) Sharing Korea PPP experience and case

studies with global PPP, PF conference and webinars

⚫ Good quality and cost effective Korea Infrastructure by Public-Private Partnership Model. (To support Korea government, agencies experts, ex) share PPP knowledges and experience)

⚫ Both support to Korea financing and MDB financingwhich make to financial close deal in LICs. (Low income countries)

⚫ To be support Korea financing which lead to UMIC(Upper Middle income countries.) PPP Project

⚫ Developing countries government should support to their own infrastructure projects (especially, Demand Risk so on)

⚫ Strong support to Asia PPP centers about Institutional capacity building, HRD and regulatory reform to Korea government . 24/32

Thank you for your attention !

Prof. Ilkwon Chae (Global Infra Institute, South Korea)

[email protected] , [email protected]

Korea Phone: +82-10-2909-3973

Facebook: http://www.facebook.com/ilkwon.Chae

Linkedin : http://kr.linkedin.com/in/ilkwonChae

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mailto:[email protected]

mailto:[email protected]

❑BTL Railway Project

PPP Projects in Korea – Infrastructure Railway

• Project: The double tracked project of JeonraLine between Iksan and Sinri

• Currently in operation • Scale: construction of the double track railways

between Iksan and Sinri(34km), including the new construction of 5 railway stations

• Total investment cost: $600.5m• Construction subsidy from public sector:

$35.1m• Private sector investment: $565.4m• Government Payment: consisting of facility

lease fee and operation cost• Lease: $47m, operation: $3.7m annually for

20yrs

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Appendix – Korea PPP Cases

❑BTO Road Project

• Project: Toll collecting highway project from

West Suwon to Pyeongtaek

• Currently in operation

• Scale: 38.5km Highway including 3 junctions, 7

interchanges, 86 bridges, 1 tunnel

• Total investment cost: $1,115.4m

• Construction subsidy from public sector:

$309.9m

• Private sector investment: $805.5m

• User Fee(toll): $3.1(2012.12)


• Minimum Revenue Guarantee

✓Guarantee Period: 15yrs

✓Requirement: above 50% of the traffic

volume

✓Condition: initial 5yrs 80%, next 5yrs 70%,

the rest 5yrs 60%

PPP Projects in Korea – Infrastructure Road

27/32

❑ Senior Homes

• Project: New construction of

Hwasun senior home

• Currently in operation

• Scale: 5th storey hospital with 192

sickbeds

• Total investment cost: $15.6m



• Government Payment: consisting

of facility lease fee and operation

cost paid by central and local

government

• Lease: $1.45m, operation: $0.5m

annually for 20yrs

PPP Projects in Korea – Healthcare Sector

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❑Public Hospital

• Project: Modernization of Gongju

public medical center

• Present status: Public

announcement

• Scale: Total area of 31,409㎡

✓Hospital: 26,615㎡ with 4th

storey building, 300 sickbeds

✓Underground parking lot:

4,794㎡

• Total investment cost: $70m

• Construction initiation: 2014.04.01

• Operation under BTL scheme

period: 2016.03 ~ 2036.02(20yrs)

PPP Projects in Korea – Healthcare Sector

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❑School Project

• Project: Elementary and secondary

schools new construction project


• Scale: Two elementary schools, one

secondary school

✓A elementary school: 27 classrooms

✓B elementary school: 39 classrooms

✓C secondary school: 31 classrooms




• Government Payment: consisting of facility

lease fee and operation cost paid by local

government

• Lease: $2.2m, operation: $0.8m annually

PPP Projects in Korea – Education

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❑ National University Dormitory Construction

• Project: New construction of national

university dormitories in Gyeongnam

Province


• Scale: Two dormitories

✓A university: accommodating

more than 1,694 people

✓B university: accommodating

more than 740 people




• Government Payment: consisting of

facility lease fee and operation cost

paid by central and local government


annually

PPP Projects in Korea – Education

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❑Sewerage Project

• Project: Jincheon Sewage treatment

facilities


• Scale: Sewage treatment facilities

and ancillary facilities




• Government Payment: consisting of

facility lease fee and operation cost

paid by central and local

government


annually

• Pilot Projects for sewage treatment

facilities under BTL scheme

PPP Projects in Korea – Social Development

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Istanbul PPP Week 2020, Webinar Presentation

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