Economic Policy Reform and

Competitiveness Project

Attracting Private Investment for

Urban Infrastructure

Ulan Bator – Mongolia

June 11th, 2009

Economic Policy Reform and

Competitiveness Project

Agenda

1. Private Participation: Understanding the Concept

2. Private Investment in Urban Roads

3. Urban Infrastructure Development

4. Mongolian Urban Infrastructure Challenges

Economic Policy Reform and

Competitiveness Project

1. Private Participation:

Understanding the Concept

Economic Policy Reform and

Competitiveness Project

Why to use PPP?• Excess of demand for the facility, product or service, managed

by the public sector.

• Potential increase of demand in the short/medium run for the

facility, product or service.

• Low capacity of the public sector (lack of financial resources or

inefficiencies) to increase the level of investments to close the

excess of demand or to improve the performance/efficiency and

quality of the service.

• Fast way to reach Social Responsibility/ Accountability in the

allocation of resources and sustainability.

• Cost recovery and private sector financing.

• Creation of a new industry, new formal sector in the economy.

Employment, wealth and economic growth.

Economic Policy Reform and

Competitiveness Project

Several Ways of Partnership

Joint Venture

BOT

DBOT (DBFOT)

BOO

Partial

Divestiture

Leasing

Operation and

Management

Contracts

PPP

Economic Policy Reform and

Competitiveness Project

2. Private Investment in Urban

Roads

Economic Policy Reform and

Competitiveness Project

Chile• The Concession Law establish that the Ministry of

Public Works is the public agency in charge of theconcession of public works process.

• Establish clearly the mechanism and requirements tosubmit unsolicited proposals

• Procurement procedures and bidding variables areclearly specifies.

• Encourage a competitive biding process

• Rights and obligations of the concessionarie

• Conflict resolution procedures

• Causes of contract suspension and extinction

Economic Policy Reform and

Competitiveness Project

Chile

Economic Policy Reform and

Competitiveness Project

Santiago in the Nineties

Population: 5 million

10,3 Million of trips per day

65%: Public Transportation

35% : Private Transportation

Economic Development

Rate Growth: 6% annually

135 cars / 1000 persons

Lack of Public Investment

Transport System with huge operation problems

Economic Policy Reform and

Competitiveness Project

Santiago Infrastructure Plan

• Public Transportation Modernization

• Enlargement of the Metro System

• Enlargement of Suburban Trains

• PPP for the main urban roads

• Economic regulation for the private transportation

• Enhancement of the local transportation

infrastructure

• Traffic control system improvement

Economic Policy Reform and

Competitiveness Project

PPP Urban Roads in Santiago-Chile

1. Costanera North Highway

2. North-South System

3. Américo Vespucio South

4. Américo Vespucio North

5. Radial NorOrient

6. South Urban Segment

R-57

R-5 Sur

R-68

R-78

R-68

R-78

R-5 Sur

Economic Policy Reform and

Competitiveness Project

• Three tariffs:

Valley US$ 0,05/km

Peak US$ 0,06/km

Congestion US$0,12/km

• Tariff adjustment RPI + 3,5% annually.

• Concessionaire can do

tariff management.

Santiago Infrastructure Plan

2T

3T

1T

Economic Policy Reform and

Competitiveness Project

• Concession Period: 30 years

• Bidding Mechanism:

• Tramo 1: “Payment for goods and rights (BD)"

Payment by the sponsor of the concessionaire before to

create the concessionaire company.

• Tramo 2: Investment Plan

• Tramo 3: Payment from the Government

Bidding Mechanism

Economic Policy Reform and

Competitiveness Project

Urban Road Concession: East-West

Urban SystemResults

•Investments: US$385 million

•Lenght: 42 kilometers

•Reduce gas emission

•Reduce contamination

•Reduce congestion

•Reduce travel time from Las

Condes to the Santiago Airport

•Implementation of the electronic toll road system “free flow” which let to the

users go through the road without stop to pay tolls.

•The number of accidents in the road is very low and it reach 8 in average per

month.

Economic Policy Reform and

Competitiveness Project

Economic Policy Reform and

Competitiveness Project

Economic Policy Reform and

Competitiveness ProjectLos Proyectos – Sistema Oriente - Poniente

Economic Policy Reform and

Competitiveness Project

Economic Policy Reform and

Competitiveness Project

Urban Roads Bidding Results

Economic Policy Reform and

Competitiveness Project

3. Urban Infrastructure

Development

Economic Policy Reform and

Competitiveness Project

21

Urban PPP Projects in Chile

Economic Policy Reform and

Competitiveness Project

Urban PPP Projects in Chile

Economic Policy Reform and

Competitiveness Project

23

Inkosi Albert Luthuli Hospital

23

Value to government: R4.5 billion

Signed: Dec 2001

Term: 15 years

BEE: equity 40%; subcontracting 40%

Economic Policy Reform and

Competitiveness Project

24

Montería Water PPP: The

first Water PPP in

ColombiaMONTERIA – year 2000

• Population: 300,000 (80% Low Income)

• Water production: 600 lps.

• Non revenue water: 55 %

• Metering: 0.7 %

• Revenues: $4 M

• Water Coverage: 70 %

• Connections: 36,500

• Sewerage Coverage: 30 %

• Connections: 14,600

• Capital investments: $70-80 mill

Bogota

Montería

PANAMA

VENEZUELA

BRASIL

PERU

ECUADOR

COLOMBIA

Economic Policy Reform and

Competitiveness Project

4. Mongolian Urban Infrastructure

Challenges

Economic Policy Reform and

Competitiveness Project

Energy CHP5 PPP ProjectHeating demand is expected for increase by 1000 GCal and electricity demand- by 700 MW

by 2020.

First stage, requirement to construct and operate first unit of Co-generating Heating Plant #5

(CHP- 5) in Ulaanbaatar with heating capacity of 700 GCal and generating electricity 300 MW

is faced by 2012.

International Competitive Bid was announced for procurement of Ulaanbaatar CHP-5 by

former Ministry of Fuel and Energy on August 01, 2008, requesting from Bidders to submit

proposals to construct and operate coal fired CHP with terms of IPP or BOT or BOO including

Feasibility Study, Environmental assessment and Design Drawings.

The technical proposal was opened on January 15, 2009. In spite of 26 Bidders were

expressed their interest to participate in this Bid, only one Bidder- China Datang Corporation

submitted it’s proposal.

The Bid Evaluation Committee, appointed by the Ministry of Mineral Resources and Energy is

working on the selection of the Bid proposal. On evaluation of technical proposal, the

financial proposal of the Bidder was opened on April 20, 2009. Decision from the Bid

Evaluation Committee is not yet issued at this moment.

Economic Policy Reform and

Competitiveness Project

Mongolia Challenges

• Urban Roads Infrastructure

• Energy Infrastructure

• Parking Infrastructure

• Public Buildings

• Water System

• Waste Management and Infrastructure

• Jails

Economic Policy Reform and

Competitiveness Project

Parking PPP Infrastructure