TAKORADI, GHANA International Best... · 2015-10-28 · 8. Student Accommodation Hostels for...
Transcript of TAKORADI, GHANA International Best... · 2015-10-28 · 8. Student Accommodation Hostels for...
INTERNATIONAL PPP BEST PRACTICES AND SUCCESS
STORIES
3RD PUBLIC PRIVATE (PPP) GLOBAL CONFERENCE
26TH-30TH OCTOBER 2015
TAKORADI, GHANA
ENG. STANLEY KAMAU– DIRECTOR , PPP UNIT, NATIONAL TREASURY
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Why PPPs in Africa?
Needs, Challenges, and Prospects
1.Infrastructure is critical to the growth of Africa
2.Service levels are low and costs are high
3.Annual spending needs are US$93 billion
4.Private sector finance is an important source
5.Structural transformation of Africa
Low Service Levels
Normalized Units
SSA low-income
countries
Other low-income
countries
Paved-road density 31 134
Total road density 137 211
Main-line density 10 78
Mobile density 55 76
Internet density 2 3
Generation capacity 37 326
Electricity coverage 16 41
Improved water 60 72
Improved sanitation 34 51Source: AICD, 2010
The World Bank
High Prices and Costs
(End User Prices for SSA
and other regions)
Sub-Saharan
Africa
Other
developing
regions
Power tariffs ($/kWh) 0.02-0.46 0.05-0.10
Water tariffs ($/m3) 0.86-6.56 0.03-0.60
Road freight tariffs ($/ton-km) 0.04-0.14 0.01-0.04
Mobile telephony ($/mo.) 2.60-21.0 9.90
International telephony
($/3min. call to US)
0.44-12.5 2.00
Internet dial-up service ($/mo.) 6.70-148.0 11.00
Source: AICD, 2010
The World Bank
Infrastructure Spending Needs
US$ billion. pa
over 10 years
ICT 7.0 2.0 9.0
Irrigation 2.9 0.6 3.4
Power 26.7 14.1 40.8
Transport 8.8 9.4 18.2
WSS 14.9 7.0 21.9
Total 60.4 33.0 93.3
Capital
expenditure
Operating
expenditureTotal
Source: AICD, 2010
The World Bank
Railway, Airport, Seaport
Solid waste management
NAIROBI: COMMUTER RAIL
Infrastructure Funding Gap of US$ 2-3 Billion Annually
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Ingredients of Successful PPPs
1. Enabling Framework Issues relating to the general investment climate in a country. The areas of
focus include:
a) Macroeconomic Environment
Is there a vision/investment strategy for the country?
b) Business Climate
The attitude of the govt. & lending institutions toward businesses?
Does SL have a business strategy for private sector development?
c) Financial Environment
How are the financial raising markets in SL?
d) Legal and Governance Environment
Are contracts honored by government?
Presence of democratic & stable governance institutions
2. Demystify PPPs
PPPs is selling of Government Assets!
Government losses control!
PPPs only apply to infrastructure!
Government pursues PPPs to avoid debt!
Quality of services will decline under a PPP!
Cost of services will increase!
PPPs are more expensive and lead to excessive profits!
PPPs are a means to cut jobs and labour costs!
When to Use PPPs To close infrastructure funding gap and relieve strained
government budgets
When there is need/demand for the project: This is to attract
private investment
To create efficiency
To facilitate knowledge transfer from the private sector to the
public, (unique and innovative projects)
When there is political and community support to the PPP project
When the allocation of project risks is agreeable to both parties
When to NOT Use PPPs
When there is:
No demand/need for the investment – the project is
economically unviable;
Vendor driven (corruption);
General lack of PPP knowledge in the Public sector
PPP is not for doing BAD PROJECTS
Case of: Lima Metro, Peru (Tren Eléctrico)
The 7-station elevated metro, equipped
with 32 cars, was officially opened in
1990 but never operated, due to poor
demand;
Its operation started only 21 years
later, after enlargement to 16 stations.
Source: WBI
Cost of Cutting Corners - Empirical Evidence
There exists a large track-record of poorly managed projects resulting in;
Poor project selection
High project cost leading to unaffordable tariffs;
Protracted lengthy negotiations -Resolve important business points
before tender, not after;
Insufficient demand and poor cash flows;
Poor governance;
Delays and uncertainty which reduce bidder pool; and
Loss of public support.
Kenya PPP Projects can be initiated in two ways:
Solicited Bids
(Open &
Competitive)
PIIPs
(Unsolicited
Proposals)
Successful PPP Projects
The PPP Act, 2013
Successful PPP
Projects
Public Sector skills are
key in determining the 3
Core tests/principles in
PPP Procurement:
Value for Money;
Affordability; and
Risk Transfer (optimal
allocation).
Solicited/Competitive PPP Process
Project Identification
(Sector Diagnostic Assessments)
Project Proposal
Feasibility Study
PPP Tendering (Evaluation Report)
Negotiations & Contract Award
(Commercial Close)
Financial Close
Project Monitoring
Stages requiring PPP Committee approval
3. P
PP
LIF
E C
YC
LE
So
urc
e:
ww
w.p
pp
.go
v.za
PPP Institutional Framework
CABINET
PPP
Committee
PPP Unit
PPP Node
PPP Project
Clearance
PPP Petition
Committee
Case of: Ciudad Real Airport, Spain
The first private international airport in Spain
Cost €1,100m; 4,000m runway
Capacity: 2,500,000 pass; Demand in 2010: 33,520
Closed in April 2012 after three (3) years in operation. Source: WBI
4.
DEALING WITH UNSOLICITED PROPOSALS
Less or no competition
Low value for money
Less or lack of transparency
Generous terms
Most require fiscal support
Innovation
Knowledge
Financial resources
Capability
Even unsolicited bids can be taken through a competitive process
Swiss
Challenge
Bid
Premium
Developer’s
Fee
Best and
Final Offer
Options
Proponent is
included in the
second Stage
Proponent is
paid a fee either
by Government
or winning
bidder to
compensate for
intellectual
property
Proponent
receives scoring
advantage
during
Proponent has
option to match
winning bid
Country Examples
South Africa Indonesia Argentina
Chile
Korea
Indonesia
Philippines
Peru
Source : PPIAF 2012
Unsolicited proposals
The questions: “Shall we accept them?”
“How should we procure them?”
• Great potential tool for innovation
• Block them, or be ready for addressing them
• “no-cost-to-taxpayer” unsolicited proposals
• Learn from experience
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Case: Canal du Midi / Garonne
Riquet, a local tax collector, presented to Louis XIV this
unsolicited proposal: building a canal connecting the Atlantic
Ocean to the Mediterranean at no cost to the taxpayer or
royal purse
“mettre en risque mon bien et mon honneur à défault de réussite et, par contre-coup,
acquérant un peu de l'un et un peu de l'autre, en cas que j'en sorte heureusement”
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Case:Canal du Midi / Garonne
Riquet was awardeda perpetuousconcession in 1666, with the right to collect a specialpurpose new tax.
The canal, built in 1666-1683, was a success, but the public partner paid two thirds of its cost.
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An exception to the rule and is to be applied only where:
there is an urgent need for continuity;
costs relating to intellectual property in relation to the project design is substantial;
there exists only one person capable of undertaking the project;
there exists any of the circumstances as the Cabinet Secretary may subscribe.
Privately Initiated Investment Proposals (Section 61)
Preparation of Bankable PPP Projects
Hiring of Transaction Advisors:
A “Transaction advisor” is:
A person or persons appointed in writing by an accounting officer or
accounting authority of an institution, who has or have appropriate
skills and experience to assist and advise the institution in
connection with a PPP, including the preparation and conclusion of a
PPP agreement.
Summary of the PPP Pipeline in Kenya
Kenyatta University Hostels
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Project Details:
Accommodation for 10,000
students
20Yr concession, 50yr life
assets
24 months construction
Undergraduate Ksh.5,945
(9350)
Post graduate sharing Ksh.8,990
(500)
• Post Graduate Bedsitter
Ksh.11,963 (150)
• .
Civil Servants Housing
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CIVIL SERVICE HOUSING 10,000 units – Starehe -6,036 units at a capex of Ksh
9.3 Billion (Ksh 33,00/sqm): Starehe -1,856 units at Ksh 4.7 B, Ksh 33,627/sqm
Negotiations ongoing
2nd Container Terminal
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LANDLORD MODEL
(a)Container berths No.
20 and No. 21, (Berth
350m)
(b) Investments by KPA
– USD 420m (JICA –
300m, KPA 120m)
(c)Investments by
Concessionaire – 65 m
(d)Technical bid
evaluation complete;
(e)Petition filed b 3
bidders on the
outcome of technical
evaluation
2nd Nyali Bridge Development, operation and maintenance of a Second Nyali Bridge Draft Feasbility Report
under discussion
Detailed engineering, environmental, social and financial analysis on-going.
Final Feasibility Study report - December 2015
US$ Lower Range Upper Range
CAPEX 163 million 236 million
OPEX 1.8 million 2.175 million
NAIROBI –NAKURU- MAU SUMMIT RD
ParticularAlignment Options
Option 1 Option 2 Option 3CAPEX 116484.32 112252.77 116492.9OPEX 46647.02 45745.15 46371.81
PwC
28 July 2015
NAIROBI – MOMBASA ROAD EXPANSION
The National Treasury/PPP Unit •
Project: Involves upgrading and capacity expansionand subsequent operation and maintenance of theNairobi-Mombasa Highway
Profile of Highway: Mombasa–Nairobi Highway(A109) forms part of the Trans-African Highway(Northern Corridor)
Key transport route serving East and CentralAfrican countries from the seaport of Mombasa
Project Length : 482 Km
Estimated Capex: USD 1 BILLION
Feasibility study report submitted by TA (PWC)
RFQ to commence on December 2015
O&M of Nairobi – Thika Road (A2) Nairobi – Thika (50.4 kms)
Upgrading of road completed in Nov
2012 at a cost of USD 350million.
Project structured to recover cost
through tolling(stand alone): Ks.
7.5Bn (i.e. CAPEX – Ks. 2.78Bn and
OPEX - Ks. 4.875Bn)
No alternative road
Traffic at 135,000 vehicles a day.
Challege
O&M of Nairobi Southern Bypass Delay - traffic analysis and modelling
exercise
Assuming a traffic level of 20,000 vpd
with a 5% growth rate, CPCS envision
a 5 yr. O&M contract with a possible 2
yr. extension. Based on the projected
saturation levels, a new tender could
then be launched on the Bypass
(capacity expansion in the middle of
the concession period tends to be more
complicated and messy).
If the above is not the case, then it
might be better to require the
concessionaire to widen the road at
the start of the concession period
CPCS are to determine the full funding
requirements of the project, including
the cost of the $186 Million Chinese
Gov. loan
Other on-going PPP procurements1. 960MW Lamu Coal Fired Power plant – CAPEX $2B
– Project awarded and Environmental and Social Impact Studies on-going
as well as fund raising
2. Nairobi Multilevel Car Park at Sunken 3800 parking, 13
floors, Equity IRR -21% - RFQ
3. Kisumu Sea Port Development – Estimated at USD 200M, a
consultant preparing a feasibility study.
4. Magwagwa and Nandi Forest Multi-Purpose Dams – USD
1.8M
8. Student Accommodation Hostels for Universities i.e.
Moi University, Egerton, SEKU, KTTC and Embu University –
USD 150M- Consultant recruited (50,000 students)
9. Energy Sector projects
– 400MW Menengai:
100MW (Financial Close), 60MW RFQ – USD 480m
– 800MW Menengai Ph 2 - CONCEPT
– 800MW Bogoria-Silali Phase 1 - CONCEPT
– 800MW LNG, Dongo Kundu – CANCELLED
– 560MW Geothermal Project at Olkaria:
140MW under TA phase – USD 500M
– 300MW Geothermal Suswa - CONCEPT
– 40MW Solar at Muhoroni - CONCEPT
– 960MW Kitui Coal – FEASIBILITY STUDY
– Over 300 applications, 83 active and 18 have been approved by ERC and PPA negotiated, (83projects with a 1,611.45MW
10. Off Shore Jetty - TA
Other On-going PPP procurements/…
13. Mombasa Convention Centre –TFC under feasibility by IFC
14. Sports Stadium in Nairobi (Ngong Rd), Mombasa (Shimo La Tewa) and Eldoret – TA is in place.
15. Cancer Centres – IFC in place and feasibility study to be completed in 2 months
16. Police & Prisons Service Housing 130,000 Units:
Phase 1 of 25,000 Units - under Feasibility Study stage $500M
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Cable Car Across Likoni – Capex USD
41m, Equity- USD 26m, Debt – USD 15m,
Ksh 20 per trip
Objective to build new 10,000km of roads in 5yrs to add to current 14,000km
Contractors will design, finance, construct and maintain the roads for 8 years.
Road developers will finance the road works from debt and equity.
contracts awarded on the basis of the lowest annuity payments.
Contractors will complete works within 2yrs.
Government will start paying full annuity payment once the road has been completed to the required standards.
The contractors will be responsible for maintenance of roads for eight (8) years.
PWC hired by Treasury to assist in financial advisory
Road Annuity Programme
.
Too little:
no Value
For
Money
Optimal:
efficient sharing
of risks
Too much:
project
failureRisk Transfer
Risks in Geothermal Power
Total PPP projects …… 500 Existing projects …… 348 New projects …… 152
No. of employees transferred …... 113,440
Savings (RM billion) Annual operating expenditure …… 7.1 Capital expenditure …… 162.1 Proceeds from sale of
government equity …… 6.5
Market Capitalization of Privatized …... 159.1
Entities - 31.5.2004 (RM billion) (24%)
MALAYSIA PPP ACHIEVEMENTS SINCE 1983
ROADS/HIGHWAYS RM21.7 billion
PORTS RM7.8 billion
ENERGY/INDEPENDENT
POWER PRODUCERS RM42.3 billion
LAND DEVELOPEMNT RM13 billion
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NORTH - SOUTH EXPRESSWAY ( 848 KM )
TOLL PLAZAS - OPEN 7 NOS., CLOSED - 60 NOS.
INTERCHANGES - 76 NOS. CON. PERIOD - 42 YRS (5/88-5/2030)
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NORTH - SOUTH EXPRESSWAY
(BUKIT LANJAN INTERCHANGE)
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KUALA LUMPUR - KARAK HIGHWAY ( 60 KM )
TOLL PLAZAS (OPEN) - 2 NOS.
CONCESSION PERIOD - 32 YEARS (7/94-7/2026)
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PENANG BRIDGE (13.5 KM)
TOLL PLAZA - 1 NUMBER
CON. PERIOD - 24 YEARS & 8 MONTHS (9/93-5/2018)
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PENANG BRIDGE (MAIN SPAN)
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SHAH ALAM EXPRESSWAY (35 KM)
TOLL PLAZAS (OPEN) - 3 NOS.
CON. PERIOD - 28 YEARS & 9 MONTHS (11/93 - 8/2022)
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NORTH-SOUTH EXPRESS’Y CENTRAL LINK ( 48 KM)
TOLL PLAZAS (CLOSED) - 7 NUMBERS
CON. PERIOD - 24 YEARS & 1 MONTH (4/94 - 5/2018)
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MALAYSIAN - SINGAPORE SECOND CROSSING BRIDGE
LENGTH OF EXPRESSWAY - 44 KM, BRIDGE - 2.0 KM
TOLL PLAZAS (OPEN) - 4 NUMBERS
CONCESSION PERIOD - 30 YEARS(7/93 - 7/2023)
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DAMANSARA - PUCHONG
HIGHWAY ( 40 KM)
CABLE STAYED BRIDGE
TOLL PLAZAS (OPEN) –
4 NUMBERS
CON. PERIOD - 33 YEARS
(8/96 - 8/2029)
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SG. BESI HIGHWAY
69
AMPANG ELEVATED HIGHWAY
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WESTERN KL TRAFFIC DISPERSAL SCHEME
(KERINCHI LINK)
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WESTERN KL TRAFFIC DISPERSAL SCHEME
(PENCHALA LINK)
BRAZIL
Feasibility
studies &
contract
Bidding
process
Roll of
roads
Transport
Ministry
(2 years)
(9 months)
*BNDES Project Finance – National Developing Bank
Usually the funder of any road concession
ANTT &
*BNDES
**Lowest
tariff
SPV setup
and contract signature
(3 months)
**There are no
negotiations
between bidders
and ANTT
concerning the
contract, which
has to be
assumed as
defined by ANTT.
Changes can be
made during the
contract, subject
to equilibrium.
Contract Equilibrium
• Internal Rate of Return (IRR), as proposed by SPV on their financial model, is fixed
• (IRR of current contracts range from 4-20%-per year)
• Variable factors – tariff or duration (special cases)
• ANTT does not interfere on engineering technics but all major projects must be approved by the agency
Legth Tariff/100km(km) (US$)
NOVADUTRA Rio de Janeiro - São Paulo 402 4.87
PONTE Ponte Rio / Niterói 13.2 8.52
CONCER Rio de Janeiro - Juiz de Fora 179.9 7.02
CRT Rio de Janeiro – Teresópolis – Além Paraíba 142.5 1.80
CONCEPA Osório - Porto Alegre 121 4.94
ECOSUL Pólo de Pelotas 623.8 3.23
AUTOPISTA PLANALTO SUL Curitiba – Div. SC/RS 412.7 1.87
AUTOPISTA LITORAL SUL Curitiba – Florianópolis 382.3 0.82
AUTOPISTA RÉGIS BITTENCOURT São Paulo – Curitiba (Régis Bitencourt) 401.6 1.23
AUTOPISTA FERNÃO DIAS Belo Horizonte – São Paulo (Fernão Dias) 562.1 0.86
AUTOPISTA FLUMINENSE Ponte Rio-Niterói – Div.RJ/ES 320.1 1.93
TRANSBRASILIANA Div.MG/SP – Div. SP/PR 321.6 1.85
RODOVIA DO AÇO Div. MG/RJ - Entr.BR-116 (Dutra) 200.4 2.74
2a ETAPA – FASE I: VIA BAHIA Salvador - Div. MG/BA 680.6 1.29
BR-040/DF/GO/MG Brasília – Juiz de Fora 1.95
BR-116/MG Divisa Alegre (MG) – Além Paraíba (MG) 3.23
BR-381/MG Belo Horizonte – Governador Valadares 3.41
BR-101/ES/BA Div. ES/RJ - Entronc. BA-698 (Acesso a Mucuri) 3.71
Concessionaire Segment
1st STAGE
2nd STAGE (PHASES I e II)
3rd STAGE – PHASE II
PPPs: the South African Experience
Public Private Partnerships
“The diverse interests of different sectors can in fact, be harnessed for
the collective good. This is what PPPs are about. The public gets
better, more cost-effective services; the private sector gets new
business opportunities. Both are in the interests of the nation.”
South Africa’s Minister of Finance, Trevor Manuel, August 2004
Key PPP Regulatory Features
• Three tests for a PPP:
– Affordability
– Value for money
– Appropriate risktransfer
• Applied in a set PPP project cycle:
– Inception
– Feasibility
– Procurement
– PPP agreement management
• By the end of 2008, the South African PPP Unit had some 60 PPP projects in the pipeline, at both the national/provincial level and the municipal level, including:– Office accommodation – Management of monies in trust– Clinical services– Airports– Correctional facilities (prisons)– Emergency call centres– Fleet– Pharmaceutical supply chain services– Hospital rehabilitation– Juvenile detention centres– Provincial legislature– Eco-tourism facilities– Private sector use of state land for commercial purposes– Municipal solid waste management– Municipal water services
PPP Project History to Date,
M25 IN UK – CONGESTION – Sept. 2010.
Aug 2, 2011 Biennial Amb Conference 80
CHM and CEOs of MoI Retreat, Msa
CONTACTS
Public Private Partnership (PPP) Unit
National Treasury
P.O BOX 30007 – 00100,Nairobi, KENYA.
Tel: +254 20 - 2252299
Email: [email protected]
Website: www.pppunit.go.ke82