istanbul, 08th november 2006ppps for infrastructure financing in the mena region 1 “different ppp...
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Istanbul, 08th November 2006
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““Different PPP Designs in the MENA Different PPP Designs in the MENA
Region”:Region”:Establishing an Effective Legal & Contractual FrameworkEstablishing an Effective Legal & Contractual Framework
Frequently Asked Questions on PPPs:Frequently Asked Questions on PPPs:
The EIC ResponseThe EIC Response
Frank KehlenbachFrank Kehlenbach
BIAC Representative / Director of European International ContractorsBIAC Representative / Director of European International Contractors
PPPs for Infrastructure Financing PPPs for Infrastructure Financing in the MENA-Regionin the MENA-Region
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TTOOPP TTRRAANNSSPPOORRTTAATTIIOONN DDEEVVEELLOOPPEERRSS 22000044No. of Concession/P3 Projects
CompanyUnder Contract* Active Proposals
ACS Dragados (Spain)Ferrovial / Cintra (Spain)MIG / Macquarie Bank (Australia)Laing / Equion (UK)Sacyr Vallehermoso (Spain)Abertis / La Caixa (Spain)FCC (Spain)OHL (Spain)Cheung Kong Infrastructure (China)Vinci / Cofiroute (France)Hochtief (Germany)Acciona / Necso (Spain)EGIS Projects (France)Skanska (Sweden)Alstom (France)Alfred McAlpine (UK)Balfour Beatty (UK)Bouygues (France)Impregilo (Italy)Bechtel (US)AMEC (UK)Siemens (Germany)BRISA (Portugal)New World Infrastructure (China)Bombardier (Canada)Fluor (US)ABB (Switzerland)Amey (UK)Strabag (Germany)Bilfinger Berger (Germany)Jarvis (UK)Transurban (Australia)KBR Brown & Root (US)
4523222019191717161514131087776666666444433321
181441
13281
2219156
148710
227666229542
1111435
* road, bridge, tunnel, rail, port, airport concessions + public-private partnerships over $50m put under const./oper. since1985. Source PWF database
European international contractors take a leading role in developing the world’s TRANSPORT infrastructure, such as toll roads, railroads, ports and airports, but some diversification into other sectors.
European contractors have developed over the past decades expertise not only to build infrastructure facilities, but also to design, operate and finance these structures in industrialised as well as in emerging & developing countries.
About EIC - About EIC - ExperienceExperience1
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Bigger Market
International Financing
Institutions must reserve
sufficient funding for
infrastructure investments in
developing countries
Promotion of Public-Private
Partnerships
Better Market
Quality-Based
International Competition
(due to project life-cycle costing)
About EIC - About EIC - GoalsGoals
Fair Market
Balanced Contract Conditions
Effective Dispute Settlement
International Arbitration
Ethical Market
Corruption-free
environment
Environmentally sound
and sustainable projects
1
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0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Y ear
in b
illio
n U
S$
East Asia and Pacifi c Europe and Central Asia Latin America and the Caribbean
Middle East and North Af rica South Asia Sub-Saharan Af rica
PPP Developing Markets OverviewPPP Developing Markets Overview
World RegionsWorld Regions
Investment in Infrastructure with Private Participation in Developing
Countries (1990 - 2005) by Region
Regions ranked by Investment in US$ mil (1990-2005)
416 (43%)
41 (4%)
71 (7%)
36 4 (%)
182 (19%)
224 (23%)
LAC EAP ECA AFR SA MENA
Source: World Bank PPI Database
WO
RLD
TO
TA
L: 9
70 b
illion
US
$2
”Asia
n C
risis”
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PPP Developing Markets OverviewPPP Developing Markets Overview
Infrastructure SectorsInfrastructure Sectors
Sectors ranked by Investment in billion US$ (1990-2005)
306 (32%)
142 (15%)
50 (5%)
472 (48%)
Telecom Energy
Transport Water & Sewage
Source: World Bank PPI Database
SE
CTO
RA
L T
OTA
L: 9
70 b
illion
U
S$
2
453
19
273
34
126
16
33
17
0
50
100
150
200
250
300
350
400
450
500
in b
illio
n US$
Telecom Energy Transport Water
Sector
Total & Cancelled / Distress Projects
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PPP Developing Markets OverviewPPP Developing Markets OverviewFocus:Focus: MENAMENA Region ( Region (excluding Extractive Industriesexcluding Extractive Industries))
Sectors ranked by Investmentin million US$ (1990-2005)
15,141 (36,5%)
2,072 (5%)
679(1,5%)
23,312 (57%)
Telecom Energy
Transport Water & Sewage
Source: World Bank PPI Database
ME
NA
TO
TA
L: 4
3.5
billion
US
$2
In the MENA Region, the
dominance of the telecom and
the energy sectors is even
more obvious than on average
(94%).
Around 72% of investments
accumulated in only 3 countries,
i.e. Morocco (38%), Egypt
(17.5%) and Algeria (16.5%).
Projects in the transport
sector comprised airports (588
million), seaports (1.300 million)
and railroads (182 million).
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World Bank statistics suggest that telecom projects (ca. 50%) are easier to set up in
lower income countries, due to comparably lower up-front investment costs.
Many projects in the energy sector (ca. 33%), since there is the possibility of agreeing
on long-term off-take agreements a either with a government entity or an independent
power producer. This model has triggered criticism from many angles.
Some transport projects (15%) may be “commercially viable” if they are structured
around insulated assets frequented by industrial clients, e.g. airports, seaports,
freight rail.
Other transport projects with socio-economic benefits, such as toll roads, bridges
and tunnels and passenger rail, as well as water & sewerage projects apparently are
less often structured as a PPP, since they relied in the past on (non cost-covering tariff)
payments by private customers and thus were “not commercially viable”.
PPP Developing Markets OverviewPPP Developing Markets Overview
Lessons Learned on PPP StructuringLessons Learned on PPP Structuring
2
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Published in April 2003
Based on the broad experience of EIC member
companies as concessionaires in preparing for
PPP projects in the transport sector
Advise to Governments, Contr. Acting
Authorities and International (Financial)
Organisations in structuring PPP projects
Comprises 21 recommendations for the
technical and financial implementation of
PPP projects
EIC White Book on BOT/PPPEIC White Book on BOT/PPP
Basic FeaturesBasic Features3
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1 GENERAL PRECONDITIONS
– Ensure true Government Support
– Create a PPP Task Force
– Enhance Country Legal Framework(Accounting, Taxes, Procurement)
2 PROJECT PREPARATION
– Put in place sound procurement strategy
– Present comprehensive, reliable project documentation
– Provide for a steady and secure payment mechanism
– Agree on affordable level of tariffs
3 TENDER PROCESS
– Use Pre-qualification of bidders
– Ensure Transparency & Confidentiality throughout process
– Present clear award criteria
– Reimburse Bidding Costs
– Unsolicited Bids ??? (outside EU )
4 RISK MITIGATION
– Provide for optimal risk
identification & allocation
– Invite financial risk mitigation
through IFIs, ECAs, etc.
EIC White Book on BOT/PPPEIC White Book on BOT/PPP
21 Recommendations21 Recommendations3
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EIC on FAQs on PPPEIC on FAQs on PPP
Political Arguments on PPPPolitical Arguments on PPP3
Value for Money ? – Life cycle approach
Off-balance Financing ? – Not always
Government Flexibility ? – Public duties
Government Control ? – Retained
Public Sector Comparator ? – Reliable?
Complexity & Costs ? – Can be limited
Re-negotiations in PPP ? – 20-30 years
(Increase of) Tariffs ? – Right Blend
State Subsidies ? – non-viable PPPs
Role of SMEs ? - Important
Role of architects & consultants ? - dito
Labour rights ? – state responsibility
Sustainability of PPPs ? – Definitely
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Challenges for PPPsChallenges for PPPs
Public sector skills
Legal and regulatory sector-
specific framework
Steady revenue flows
Transaction costs, right
blend of public and private
funds (Role of IFIs /EU)
Political & Economic risks
Benefits of PPPsBenefits of PPPs
Project life-cycle approach
Project completion on time
+ on budget
Project operation according
to pre-defined standards
Risk transfer to the private
sector (e.g. interface risk)
Additional private funds
4 ConclusionConclusion
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WORLD Bank PPP Working Paper (2003)
“Whatever policies countries choose, governments cannot avoid the inescapable
realities that infrastructure services have to be paid for, whether provision
is public or private.
Most of the concerns about the sustainability of private infrastructure really
reflect the difficulties governments have in sustaining cost-recovering
tariffs and
commercial principles in these sectors...
The real issue is not public infrastructure versus private infrastructure. Put this
way, it is more simple the argument is about less infrastructure versus
more.”
ConclusionConclusion4
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EIC ContactEIC Contact
Address: EIC SecretariatKurfuerstenstrasse 129, D - 10785 Berlin, Germany
Phone: ++49 (0)30 /21286-244
Fax: ++49 (0)30 /21286-285
E-mail: [email protected]
Internet: www.eicontractors.de