José Andrade CostaExecutive Secretary for Public-Private Parternship Program

PUBLIC-PRIVATEPUBLIC-PRIVATEPARTNERSHIP PROGRAM OFPARTNERSHIP PROGRAM OF

THE STATE OF BAHIATHE STATE OF BAHIA

FINANCE DEPARTMENTExecutive Department of PPP’s Program

Bahia Trade Association – ACBApril 28, 2005

 

Fiscal Restrictions

STATE’S REVENUES ENTAILED (2004)

PERSONNEL

60,0%

HEALTH AND EDUCATION (EXCEPT PERSONNEL)

13,6%

PUBLIC DEBT (EXTRA AND INTERN-LIMITS)

17,7%

OTHERS STATE SECTOR (EXCEPT PERSONNEL)

0,7%

PASEP, C&T AND POVERTY FUND

2,8%

TOTAL

94,8%

Public-Private Partnerships Bahia’s Project

Non-Shared

Revenues

Shared

Revenues

Evolution of Shared and Non-Shared Federal Revenues (1988 – 2004)

44,35%

76,18%55,65%

23,82%

1988 1990 1992 1994 1996 1998 2000 2002 2004

Real Variation (IPCA) of Federal Collection of Taxes - 2004 / 2003

R$ Billions

2004 2003 2004 / 2003

SHARED TAXES 137,9 132,6 4,00%

INCOME TAX 106,4 102,6 3,65% IDUSTRIALIZADE TAX 23,6 21,7 8,73% CIDE (FUEL TAX) 7,9 8,3

(3,92)%

NON SHARED TAXES 172,9 148,8 16,21%

SOCIAL SECURITY 79,2 65,7 20,60% FINANCIAL MOVEMENT 27,6 25,4 7,45% NET PROFIT 20,3 18,5 9,66% SOCIAL PROGRAM 20.1 19,1 4,89%

( PRICES OF DECEMBER/04 – IPCA)

 

Favorable Institutional Environment for Investment

  PPP/Bahia – Economic Growth

GDP BRAZIL X GDP BAHIA

YEAR Brazil Bahia

1999 0,8 2,2

2000 4,4 3,9

2001 1,3 1,0

2002 1,9 1,2

2003 0,5 3,0

2004 4,9 9,9

AVERAGE 2,3 3,5

 

Public Debt

PPP/Bahia – Fiscal Indicators

Fiscal Responsibility Law

EvolutionLegal Limit

2002 2003 2004

Dívida/RCL2,00

times1,82

times1,63

times1,42

times

Personnel and Duties

Limits Máximum Prudential2004/

Accomplished

Personnel 60% RCL 57% RCL 48,3% RCL

* RCL = Net Revenue

 

Characteristics of Bahia’s PPP Law

Lately existing legislative overviewLately existing legislative overviewLately existing legislative overviewLately existing legislative overview

GENERAL AGREEMENT LAW(LAW 8.666/93)

GENERAL CONCESSION LAW(LAW 8.987/95)

• Works, services and procurement to Public Authority • Payment as performed (monthly measured)• There is not private financing • Budgeting resources• Services: contractual terms no more than 5 years

• Services and public works to the Public in general • Compensation due to service provision• Tariff system• Supplementary tariff absent

The laws did not prevent PPP shapingAnd neither did they stimulate it

Placing PPP’s Subject

Concepts and CharacteristicsConcepts and CharacteristicsConcepts and CharacteristicsConcepts and Characteristics

Placing PPP’s Subject

Long-term agreement for service provision, entered into by the public sector and the private entity;

Private entity commits itself to provide a certain quantifiable utility: road kilometers, imprisoning positions, hospitals beds,.

Compensation according to performance indicators. Financing: Private entity’s attribution Payment: After the enterprise performance and

according to its use and results, by means of tariff charges, which can be fully or partially supplemented by the State.

Typical modeling: The private entity designs, builds, manages and maintains it.

Traditional modeling and PPP’sTraditional modeling and PPP’sTraditional modeling and PPP’sTraditional modeling and PPP’s

Investment estimated

costs

Investment estimated

costs

Non-planned costs

Non-planned costs

Del

ayD

elay

Estimated CostsEstimated Costs

Non-planned CostsNon-planned Costs

Construction Phase

Construction Phase

Operating PhaseOperating Phase

5 10 15 years 5 10 15 years

No payment until the

construction is completed

No payment until the

construction is completed

Payment based on performance (targets)

Payment based on performance (targets)

Construction Phase

Construction Phase

Operating PhaseOperating Phase

Traditional Public Agreement Public-Private Partnership (PPP) Agreement

•FINANCING FINANCING ACQUISITIONACQUISITION

Placing PPP’s Subject

How does the Legislative Bill define PPP agreement?How does the Legislative Bill define PPP agreement?How does the Legislative Bill define PPP agreement?How does the Legislative Bill define PPP agreement?

It is a concession agreement (Law No. 8.987/95), either as sponsored or administrated.

Sponsored concession is the public service or work concession when it involves in addition to tariffs charged to users, a monetary consideration for services provided by the public partner to the private partner.

Administrated concession is the service provision agreement in which the Public Administration is the direct or indirect user, even when involving completing the work or goods supply and placement.

The common concession addressed in the Law No. 8.98795 is not a public-private partnership when no monetary consideration for services provided by the public partner to the private partner is involved.

Definition

PPP’s ContextPPP’s ContextPPP’s ContextPPP’s Context

Context

It was first used in England, in 1992. Maastricht Treaty in 1991 and European

UnionFiscal Accountability Law - Brazil. Fiscal constraint macro-economic

environment.Relative depletion of the investing

capacityThe State is unable to fulfill the demands.The construction of new concepts and

practices for Public Authority performance is required.

PPP’s operating areasPPP’s operating areasPPP’s operating areasPPP’s operating areas

Context

Prisons and courts Hospitals Military facilities IT Systems Public lighting Schools Sports facilities Roads and bridges Light railways systems Wastage management Low-income houses Universities Government buildings

PPP, internationallyPPP, internationallyPPP, internationallyPPP, internationally PPP projects already implemented:

‣ All United Kingdom countries ‣ Spain‣ France ‣ Portugal‣ Germany ‣ Greece

‣ Holland ‣ Italy ‣ Australia ‣ Sweden ‣ Norway ‣ Japan ‣ South Africa ‣ Hungary ‣ Mexico ‣ Poland ‣ Chile

On going or in study PPP’s: ‣ Brazil ‣ Canada ‣ Singapore ‣ Malaysia ‣ Romania

Context

Essential ConcernsEssential ConcernsEssential ConcernsEssential Concerns

Creation of a benchmark to attract private

investments, aiming at strengthening the

State infrastructure.

To prevent the use of such benchmark to

defraud the fiscal strictness and imbalance

the State finance.

To explore supplementary services to provide

the project with better financial sustainability

and to reduce the tariff impact.

PPP-Bahia

Fiscal Accountability

Limits for annual expenditureLimits for annual expenditureLimits for annual expenditureLimits for annual expenditure

Expenses must not exceed 5% of the Current Net Income.

In the Federal Law, 1% of the CNI ended by prevailing.

the State is prevented to enter into new agreements if the established limit is exceeded.

Concepts, principles and transparencyConcepts, principles and transparencyConcepts, principles and transparencyConcepts, principles and transparency

Minimum amount: The monetary expression of an amount higher than R$ 20 million prevailed.

Total access to data and reports, including for any reviews.

Inclusion in the Quadrimester Report on Fiscal Management and submitted in Public Hearing;

PPP-Bahia

Essential Clauses to PPP’s Agreements

Essential clausesEssential clausesEssential clausesEssential clauses

Sharing with the public administration of economic profits, resulting from the risk reduction of partnership financing, and of ascertained productive gains when performing the agreement;

Pledged installment withholding, in the last years of the agreement, to ensure the wholeness of the enterprise, which will be released after the agreement termination.

Creditor’s ProtectionCreditor’s ProtectionCreditor’s ProtectionCreditor’s Protection

Pledged and personal guarantee or insurance;

Issuance of performance certificates directly and in favor of the project financing institution;

Financing entity allowed to receive payments trough the obligor fund.

PPP/Bahia - Guarantees

Creditor’s ProtectionCreditor’s ProtectionCreditor’s ProtectionCreditor’s Protection

Obligor Fund.

Association with State Resources, including the Royalties’ and CIDE’s, other than taxes.

The contractor may collect receivables of the contracting party from third parties, other than taxes.

PPP/Bahia - Guarantees

PPP/Bahia - Guarantees

Obligor FundObligor FundObligor FundObligor Fund

Creation of the Obligor Fund for the PPP of the State of Bahia – FAGE Bahia.Guarantee with a contribution up to 30% of the annual obligations paid by treasury resources; Sources:

‣ 20% from the Royalties, while the 30% is not reached and up to 20% after exceeding the ceiling or if equal to it;

‣ 20% from CIDE (idem Royalties); ‣ other budgeting resources and additional credits; ‣ The Fund’s financial applications; ‣ Internal and external credit operations; ‣ donations, allowances, contributions and legacies.

PPP/Bahia - Control and Management

Management Council - Composition Management Council - Composition

Management Council of the PPP Program:I - the Finance Secretary (Chairman);II - the Planning Secretary (Deputy Chairman);III - the Administration Secretary;

IV - the Government Secretary; V - the State Attorney General; VI - up 2 members, at the Governor free discretion.

State Secretary Head Officers, with direct interest on a certain partnership;

PPP/Bahia - Control and Management

Executive Department and Regulatory AgenciesExecutive Department and Regulatory Agencies

Executive Secretary for the Management Council, associated with the Finance Secretariat.

Regulatory Agency Roles (AGERBA).

PPP-Bahia

Priority AreasPriority AreasPriority AreasPriority Areas

Education, health and social welfare;

Public transports (roadways, railways, ports and

airports);

Sanitation;

Safety, defense, justice and imprisonment

system;

Science, research and technology, including

information technology;

Agribusiness (irrigated agriculture and

agricultural-industrialization);

Other public areas of social or economic interest.

Major Projects to be PerformedMajor Projects to be Performed

Ocean Outfall

Roadways and Railways

Prisons

Child Custody Institution

PPP-Bahia

Implementation of New Outfall and Supplementary Works

A second Ocean

Outfall Customer’s assistance

- Salvador

- Lauro de Freitas

- Existing Basin

Densifications

TITLEBASIN LIMITS

SYSTEMS’ LIMITS

LIMITS BETWEEN OUTPOURINGS

MUNICIPAL DISTRICT LIMITS

RISING STATION

PREVIOUS CONDITIONING STATION

INTERCEPTOR

PRESSURE PIPES

OCEAN OUTFALL

Implemented basins that contribute to the Rio Vermelho OutfallImplemented basins currently contributing (provisional) to the Rio Vermelho Outfall and final contribution to the Jaguaribe Outfall

Basins planned to be implemented in the second phase which will contribute to the Jaguaribe Outfall

• Work Characteristics Land outfall:

• 1,509 m of extension and

• 1600 mm of diameter

(CONTINUED)

Previous Conditioning

Station (ECP) to a flow of

3.m3/s

Ocean Outfall:

• 3,648 m of extension

• 5,9 m3/s capacity.

Investment: R$ 260

million

Implementation of New Outfall and Supplementary Works

TITLEBASIN LIMITS

SYSTEMS’ LIMITSLIMITS BETWEEN OUTPOURINGS

MUNICIPAL DISTRICT LIMITS

RISING STATION

PREVIOUS CONDITIONING STATION

INTERCEPTOR

PRESSURE PIPES

OCEAN OUTFALL

Implemented basins that contribute to the Rio Vermelho OutfallImplemented basins currently contributing (provisional) to the Rio Vermelho Outfall and final contribution to the Jaguaribe Outfall

Basins planned to be implemented in the second phase which will contribute to the Jaguaribe Outfall

It will serve a population of approximately 1,900,000 inhabitants. Implementation of the Jaguaribe system will provide sanitation services to an area of approximately 20,000 hectares.Improvement of the users’ life quality and reduction of expenditure on the public health sector.Possibility to fulfill all basin sanitation depletion with significant densification, in Salvador and its metropolitan region, without damages to tourism - major economic activity and attraction of such cities, as well as preventing the spreading diseases transmitted by water.

Enterprise’s Benefits

Other Depletion Systems

WATER SEWERASSISTED

POPULATION INVETIMENTO (R$x 1.000) (*)

Camaçari 137.200 99 20 109.800 22.200,00

Eunápolis 93.500 95 5 74.800 19.000,00

Feira de Santana 457.600 95 35 366.000 55.600,00

Ilhéus 168.800 97 43 135.000 17.000,00

Teixeira de Freitas 118.800 90 6 95.000 23.700,00

Vitória da Conquista 240.900 98 45 193.000 22.800,00

TOTAL 1.216.800 973.600 160.300,00

OPPORTUNITY PERSPECTIVES WITHIN PUBLIC-PRIVATE PARTNERSHIPS (PPP)SANITATION DEPLETION

PERSPECTIVE FOR ASSISTANCE TARGET OF 80% IN DEPLETION

URBAN POPULATION

2004

CURRENT ASSISTANCE (%)

LOCATION

 

Roadways and Railways

GRAINS

FRUIT-GROWING

TOURISM

INDUSTRIAL

INFORMATION TECHNOLOGY

Main Cargo Generating Sites

PELTBAHIA

Paths Towards Development

PAPER/PULP

BA-093 Duplication- 23.3 km and Repair Services of de 81.7 km

SALVADOR

Feira deSantana

Entre Rios

Alagoinhas

Simões Filho

Camaçari

Araçás

Catu

PojucaBR-116BR-324

BA-093

Candeias

BR-101

Location:

Road Junction with BR 324 (RMS)

BR 101 road junction (Entre Rios).

Extension:

105 km

Works:

–Duplication: Road Junction of the BR 324 -Dias D'Ávila – 23.3 km;

–Repair Services: from Dias D'Ávila - BR 101 Road Junction BR 101 – 81.7 km.

Investment:

R$ 144 million.

BR - 415 Duplication

Location:

Ilhéus – Itabuna.

Extension:

27 km.

Works:

–Duplication between Ilhéus – Itabuna.

Investment:

R$ 70 million (estimate).

HIGHWAY AISLE IBOTIRAMA - ITABUNA

Location:

Ibotirama – Bom Jesus da Lapa – Brumado – Vitória de Conquista – Itabuna

Extension:

738 km.

Works:

Recovery and Suitability

Estimate Investment: R$ 317 million

EAST-WEST RAILWAY

Location:

Luís Eduardo Magalhães Municipality to road junction with FCA line at Malhada de Pedras near Brumado.

Work:

New railway segment implementation with 575 km extension.

Investment:

R$ 1.07 billion

Penitentiary System

A) Imprisonment System Place Shortage 1,367

B) Prisoners in District Prisons 4,500

C) Place Shortage (A +B) 5,867

D) Intended places included in ongoing work 2,026

E) New work requirements (C – E) 3,841

Place Requirements in the Imprisonment SystemPlace Requirements in the Imprisonment System Place Requirements in the Imprisonment SystemPlace Requirements in the Imprisonment System

(1) Municipalities:Itaberaba, Vitória da Conquista, Seabra, Irecê, Santo Antônio de Jesus and Eunápolis.

Penitentiary System

Imprisonment places 1.000Construction costs R$ 25,2 milhõesUnit annual operation R$ 11,5 milhões

Imprisonment places 3.500Construction costs R$ 101,0 milhõesUnit annual operation R$ 43,2 milhões

1 prison unit in the capital1 prison unit in the capital1 prison unit in the capital1 prison unit in the capital

6 inland units (1)6 inland units (1)6 inland units (1)6 inland units (1)

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