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)
3/32
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)
5/32
❑ 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
6/32
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
7/32
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
12/32
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)
20/32
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
23/32
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
25/32
❑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
26/32
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)
• Concession Period: 30yrs
• 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
• Private sector investment: $15.6m
• Concession Period: 20yrs
• 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
28/32
❑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
29/32
❑School Project
• Project: Elementary and secondary
schools new construction project
• Present status: in operation phase
• Scale: Two elementary schools, one
secondary school
✓A elementary school: 27 classrooms
✓B elementary school: 39 classrooms
✓C secondary school: 31 classrooms
• Total investment cost: $61.62m
• Private sector investment: $61.62m
• Concession Period: 20yrs
• 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
30/32
❑ National University Dormitory Construction
• Project: New construction of national
university dormitories in Gyeongnam
Province
• Present status: in operation phase
• Scale: Two dormitories
✓A university: accommodating
more than 1,694 people
✓B university: accommodating
more than 740 people
• Total investment cost: $43.1m
• Private sector investment: $43.1m
• Concession Period: 20yrs
• Government Payment: consisting of
facility lease fee and operation cost
paid by central and local government
• Lease: $3.6m, operation: $2.5m
annually
PPP Projects in Korea – Education
31/32
❑Sewerage Project
• Project: Jincheon Sewage treatment
facilities
• Present status: in operation phase
• Scale: Sewage treatment facilities
and ancillary facilities
• Total investment cost: $22.8m
• Private sector investment: $22.8m
• Concession Period: 20yrs
• Government Payment: consisting of
facility lease fee and operation cost
paid by central and local
government
• Lease: $1.8m, operation: $0.3m
annually
• Pilot Projects for sewage treatment
facilities under BTL scheme
PPP Projects in Korea – Social Development
32/32
Top Related