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Presented at the 5th Meeting of the Working Group on Investment Zones in Iraq, MENA-OECD Investment Programme. 28 April 2013, Cairo, Egypt
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OECD – Fifth Meeting of the Working Group on Investment Zones in Iraq
Session 2 MENA Regional PPPs - Lessons for Iraq
28 April 2013
For presentation purposes: no reliancePage 2
Debt funding~80-90%
Special purpose vehicle
Public Authority
Equity funding~10-20%
Contractor ADesign
Operator ESoft FM
Operator FEnergy
Management
PFI and PPP structuresPPP Structure commonly shown as..
Operation & Maintenance Contracts
Operator CLifecycle
Contractor BBuild
Operator DHard FM
For presentation purposes: no reliancePage 3
PPP Risk transfer to the private sector
Private Sector Risk
Public Sector Risk
DBFOM
Public Sector Private Sector
Design-Bid-Build
Design-Build
Build-Operate-Transfer
DBOM
BOO
Privatization
Build-Transfer-Operate
EPC
Key:
Outsourcing
Risk transfer from public sector to private sector
For presentation purposes: no reliancePage 4
Successful PPP’s in the MENA Region
Project cost/concession period
Debt: Equity (%)
Debt Margins(bps)
Sponsor(s) BanksFinancial Close
Medinah Airport Expansion (KSA)
• US$ 1.2 b• 25 years 60:40 -
TAV Airports Holding, Saudi Oger, Al Rajhi groups
Arab National Bank, National Commercial Bank, SABB and SMBC
July 2012
Qurrayah IPP(Saudi Arabia)
• US$ 3.0 b• 20 years
74:26- ACWA Power, Samsung C&T ,
MENA Infrastructure Fund, SEC
BSF, NCB, Standard Chartered, HSBC, Samba, SABB, ANB, SMBC and KfW plus equity bridge providers
Dec 2011
Muharraq Wastewater STP(Bahrain)
• US$ 328m• 29 years
85:15 220 – 275Samsung Engineering, Invest AD, United Utilities
Credit Agricole CIB, Natixis, Sumitomo Mitsui Banking Corp.
July 2011
PP11 IPP (Saudi Arabia)
• US$ 2.1 b• 20 years
75:25 250 – 340GDF Suez, Al Jomaih Group, Sojitz, SEC
Credit Agricole, Standard Chartered, EDC, KfW, Societe Generale, Intesa, CIC, Alinma Bank, NCB, BSF and Samba
June 2010
Shuweihat II IWPP (Abu Dhabi)
• US$ 2.7 b• 25 years
79:21 260 GDF Suez, Marubeni, ADWEABank of Tokyo Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., KfW BankenGruppe plus 10 others
Oct 2009
Paris-Sorbonne University (Abu Dhabi)
• US$ 412m• 28 years
85:15 200 - 275 Mubadala Calyon, Bank of Tokyo Mitsubishi UFJ, SMBC, Royal Bank of Scotland, BNP Paribas, First Gulf Bank
Dec 2008
Queen Alia Airport (Jordan)
• US$795m• 26 years
47:53 175
Aeroport de Paris Management (AdPM), J&P Overseas, J&P Avax, Abu Dhabi Investment Company (ADIC), Engineering and Development Group, Noor Financial Investments
Crédit Agricole Group , Europe Arab Bank, Natixis, Islamic Development Bank, IFC
Nov 2007
Zayed University (Abu University)
• US$1.0 b• 10 years
83: 10 with 7% Mez
290 – 395 Mubadala Bank of Tokyo-Mitsubishi UFJ , First Gulf Bank , Crédit Agricole Group , Royal Bank of Scotland , SMBC and BNP Paribas
Nov 2009
Source: IJ Online – Inspiratia - MEED
For presentation purposes: no reliancePage 5
Effectiveness of PPP
Advocacy
Decision
Making
Solid
Business
Case
OperationConstructionFeasibilityPlanning
Concession granted
Comments:
Advocacy:
• Visioning for the Project• Monitoring of the Concession
Decision Making:
• Agreement to take into transaction phase based in market testing
• Selection of appropriate SPV• Intervention when output specifications not
delivered
Solid Business Case:
• Determining the basis for private sector participation
• Engaging market for best price against service delivered (i.e. Value for Money)
• Delivery on outline case
Procurement
Commercial CloseFinancial Close
For presentation purposes: no reliancePage 6
Current strategies in various countries in the region
Saudi Arabia No central PPP Unit
(Municipalities) Projects closed in waste water and
aviation Pipeline: IWPP, transport, city
development
Egypt Delivered projects in social,
utilities, transport Decree No. 238 of 2011 Egypt’s
PPP Law Pipeline: Healthcare, Ports
Libya All infrastructure sectors PPP model being considered by
new government Pipeline: Transport, healthcare,
education, power, refineries
Jordan Transport, however attempted
using PPP on renewable projects
Privatisation law in 2000 followed up by PPP regulations in 2008
Pipeline: water, transport
Qatar PPP framework under development Healthcare, education, housing, IWPP Pipeline: Education, healthcare,
housing, IWPP
Kuwait IWPP, social and transport PPP Law, PTB Pipeline: Many PTB projects
on hold
Bahrain IPP/IWPP/ waste water Privatization committee Pipeline: Social housing
UAE IPP/IWPP, Social,
transport
Abu Dhabi No PPP Legislative
framework No defined pipeline
Dubai PPP legislation in
process Pipeline: Transport
Oman Power and water (IPP/IWPP) Regulation comment Pipeline: Education, healthcare,
housing
For presentation purposes: no reliancePage 7
Global Examples
Australia Mature PPP market Pipeline projects in
education and transport aligned to the commodity industry
South Africa PPP Unit created in
2000 Potential PPP
projects in healthcare, waste and water management to improve agricultural sector
UK PF2 being rolled out Lack of clear pipeline of future projects,
however rail and nuclear appear to be signature projects being carried forward
India Political will for PPP
and private sector participation is strong
1,965 total PPP projects up to 2011
Opportunities in transport sector
Nigeria Closed deal on
highway PPP PPP pipeline focused
on transport and power (e.g. Lagos Airport)
USA Total of 34 states
(including Puerto Rico) possessing dedicated P3 legislation
All Sectors,, however key sectors include transport (e.g. Chicago Midway Airport), social accommodation, and renewables
Canada PPP model supported at
both federal and provincial levels
33 operational PPPs Pipeline projects focus is
transport
Spain Mature PPP market with significant recent
volumes of secondary market sales Pipeline projects in transport
For presentation purposes: no reliancePage 8
Partnership strategies for successful implementation of PPP
Fund raising incentives
Expropriationof private land
Organizationand legal
framework
Central PPP Unit
Government equity stake in
the SPV
• Subsidies e.g. interest accrued on loans• Investment grants for construction• Coordinating with financial institutions to provide medium/long term financing (i.e.
refi-risk, subsidise accrued interest etc)• Examples include Egypt Authorities covering changes in base rate but not
margins• Where necessary, authority expropriate land for use by the private investor• Provision of infrastructure ready sites with plots enabled through connections to
the utilities grid• Examples include Dubai and Bahrain free zones
• Significant relaxation of regulatory impediments and restrictions• Investment in public sector procurement authorities• Transparent and consistent tendering process• Examples include Kuwait’ Law 2007 with Dubai also drafting a PPP law
• Captures lessons learnt for future projects• Consistent assessment and benchmarking of projects by Higher Committee• Fair and transparent approach to procurement• Examples include Kuwait’s Partnerships Technical Bureau (PTB)
• Ultimate form of risk sharing• Enables control of the project through regular government intervention• Examples include Omani IWPP transactions and latest Treasury advice from UK
For presentation purposes: no reliancePage 9
Challenges in MENA countries
• PPPs have been implemented on an ad hoc basis expect in the Power and Utilities sector
• Only 2 countries have established PPP units (Egypt and Kuwait)
• Limited forward looking planning for the implementation of projects has resulted in too many projects being considered as PPPs and abandoned for a variety of reasons:
• Lack of understanding of PPPs
• Initial launch of a mega project rather than a project which is ”bite size”
• Not involving all the stakeholders from the outset
• Very rosy business case impeding bankability
• Lack of availability of funding from local sources as well as long term financing
• Preference for legacy delivery models
For presentation purposes: no reliancePage 9
For presentation purposes: no reliancePage 10
Key success factors to enhance PPP delivery
PPP Law such as
Egypt and Kuwait Education
(politicians decision
makers and public at
large)
Market creation
(e.g. subsidies,
grants, guarantees)
Identifiable pipeline of projects
Viable projects
which are bankable
Public Sector drive the process and not the
private sector
Risk balance between
private and public
sector, e.g. demand risk
For presentation purposes: no reliancePage 10
For presentation purposes: no reliancePage 11
PPP Laws and process some best practices
• Based on international precedents (PFI, PF and PPP)
• Open, Fair and Transparent Process (competition yields best outcome)
• Step-in Rights (Government and funders)
• Default Obligations (debt repayment)
• Role of the Public Sector (accepting certain risks)
• Independent Certifier
• Arbitration
• Partnership is a 2 way street (win-win)
For presentation purposes: no reliancePage 11
For presentation purposes: no reliancePage 12
Kuwait PPP law and guidelines highlights
• Developed by the World Bank based on international practices and precedents
• Dedicated single PPP unit
• Structure: Higher Committee, Partnerships Technical Bureau, Public Entity (decision making)
• Published Guidebook and pipeline
• Joint Stock Company and Initial Public Offering (spreading the wealth)
For presentation purposes: no reliancePage 12
For presentation purposes: no reliancePage 13
Questions?