Workshop on Implementing PPP projects in Sierra Leone Timothy J. - - PowerPoint PPT Presentation
Workshop on Implementing PPP projects in Sierra Leone Timothy J. Murphy David Livingston Freetown, July 9-12, 2013 1 21008613 Who We Are David Livingston PPP Advisor, Ryerson University Chief of Staff to Premier CEO of
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Legal & Institutional Structures for PPPs in Africa
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Canada in mid to late 90s, however, really
deals procured each year
solutions include:
support
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A total of ~ $50bn Canadian PPP Projects have been awarded to 2012
Ontario (~$23bn) British Columbia (~$10bn) Quebec (~$7bn) Alberta (~$5bn)
Hospital
Hamilton
Mental Health (CAMH)
Centre
Centre Project
Building
Renewal Initiative
Manitoba (~$0.3bn)
Facility
l’Universite de Montreal (CHUM)
Centre (MUHC)
Atlantic Canada (~$2.1bn)
Treatment and Wastewater Treatment Facility
Canada (Federal $1.1bn)
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Ontario British Columbia Quebec Municipalities
Centre
MaRS Centre
and Storage Facility
Integrated Health and Wellness
Rapid Transit System
Scarborough LRT Lines
Women’s Redevelopment Project
Treatment Plant Project
Replacement Project
Hospital Replacement Project
Other
Saskatchewan
Decontamination Facility
Alberta
Wastewater Treatment
Management
Canada (Federal)
Canada Development Project
Crossing
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One-off P3s can be risky for the public sector
price it properly
markets that do fewer P3s
Insufficient long term capital Counterparty risk Inefficient and lengthy process
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Assess needs, ascertain mandate, manage
Create structure to enable participation and
Build capacity Ensure sustainability
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The Role Of Stakeholders In The PPP Process
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Finance / Treasury / PM / Pres.
Clear powers Political independence Expertise in decision making Low turnover
Technical / legal / financial
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Is there technical ability in marketplace? Are there local companies capable?
Consider BF training?
What is financial appetite locally? Investor knowledge?
Market tour? Israel example Banks vs. bonds Lifeco’s Pension funds of unions Local content requirements
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Bureaucratic leadership to point of market readiness? Shorten the process
Increases interest Less cost Less uncertainty of closing Reduces time for political backlash or new party
Legitimacy tool for value Clear, transparent assessment; pre-decision to proceed with P3
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Coordinates government approach Decision-making authority on like-to-have vs. must-have Keeps process moving Assesses market risk appetite (when is no bid a real risk?)
3 bidders:
Ontario IT example
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Lender commitment to close at bid
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Government Stakeholders
President/Premier Finance/Central Agency Procurement Agency Line
Ministries/Bureaucracy Political System
Elected Representatives Media Opinion Leaders Business Community
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Public Sector employees/unions Affected employees Construction workers/unions Pension funds
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Civil Society Organizations
Think Tanks CCPPP Lawyers
Private Sector
Construction Sector Equity Investors Banks Bond Investors
International
Development Banks Commentators/academics Business Press
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Why lenders matter How lenders consider risk:
any) and which are borne/mitigated via third party support
Actions: perform detailed analysis of:
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Equity Providers
Actual $$ Debt to equity ratio
Actions:
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Bonding & subguard Reserves
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Contractor capabilities Timeline Construction price Contingencies
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Bonding & subguard Reserves
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Crown or a Crown agency? If not, is there Crown funding or Crown financial
World Bank, ADB, other support Guarantees
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E.g. an alternative funding structure to include subordinated funding
E.g. (i) Project Co (ii) Authority (iii) shared
Commercial in confidence enquiry
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Building up to revenue projects? Ontario: early projects were build-finance: P3s with
Then availability-based design build finance
Then usage risk variations.
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Bankability as a restriction on usage Separation of construction and operating risk
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Predictability and reliability of revenue
Project vs. balance sheet finance
Government willingness to accommodate lenders
Market experience and competition
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The PPP Cycle
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Understanding the PPP cycle from project
Challenges in each stage of the cycle Group discussion on the PPP cycle Examples and cases Q&A
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Government decision Project timing a joint decision with Procuring
Budget critical
Authority delegation
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Validate budget Define Output Specifications Confirm market interest Confirm timing Develop relationship with project owner Procure Advisors
Maintenance
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2) Carry out a thorough feasibility study that:
1. Compares public sector provision with private sector provision and that takes into account affordability, value for money and risk transfer 2. Considers the rate of return on equity acceptable to both parties 3. Uses accurate information in its calculations and projections 4. Avoids unnecessarily high design specifications 5. Considers all the financing options before committing to
6. Involves all the necessary stakeholders 7. Identifies all the risks of a particular project, allocates them to particular parties and devises risk mitigation strategies 8. Requires treasury approvals at key stages of the project preparation process
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7) Provide political guarantees to investors where
8) Develop capacity at the national, provincial and
1. Sharing expertise and experiences with other governments and government departments; 2. Creating a PPP Unit in the Ministry of Finance, other relevant ministry or National Treasury to plan, negotiate, implement and monitor PPPs; 3. Establishing PPP Facilitation Units in national and regional development finance institutions (DFIs); and 4. Developing good transaction skills (legal, financial, negotiation and industry specific skills) in the relevant government institutions.
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9) Ensure process integrity and legitimacy:
1. Implementing mechanisms to guarantee transparency at all stages in the tendering process. These mechanisms must include setting procurement specifications, open public hearings for major government contracts, and the final selection of contractors; and 2. Involving independent agencies such as Transparency International to oversee the bidding process and commit government institutions and private bidders to an integrity pact.
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10) Pre-empt public complaint and suspicion by:
1. Preparing the group for private sector participation by making structural reforms and raising tariffs to approach cost recovery levels; 2. Communicating decisions around privatization and PPPs to the public to build consensus and transparency; 3. Providing policy clarity in the areas of free basic services in concession areas; 4. Considering the extent to which a project or particular bidder will contribute to the local socio-economic environment; and 5. Assessing the political commitment to a particular project from government institutions.
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PPP Structuring
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PPP Procurement
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Procurement cycle Procurement strategies Pre-qualifying bidders Bid process Negotiation with bidders Basis for award Dealing with unsolicited bids Examples and cases Q&A
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NPV vs. nominal
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A successful public tendering process creates
Unsolicited proposals based on privately defined
Many countries do not have to processes in place
Governments have less opportunity to clearly
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Difficult to attract investors for rural areas due to the
Poor infrastructure leads to higher upfront capital
Many private investors are wary of these high-cost
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Volatility in the commodity market creates investor
The history of excessive taxes and expropriation
High capital expenditure for a high risk business
Poor infrastructure imposes high cost for accessing
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Example:
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Many transport projects, such as ports and toll
Inherent exposure to the risk of market demand for
Concession periods following infrastructure
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Widespread mistrust between farmers and the
Low productivity, poor farming infrastructure, high
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