Published on December 18, 2013
OECD – Fifth Meeting of the Working Group on Investment Zones in Iraq Session 2 MENA Regional PPPs - Lessons for Iraq 28 April 2013
PFI and PPP structures PPP Structure commonly shown as.. Public Authority Debt funding ~80-90% Contractor A Design Contractor B Build Special purpose vehicle Operator C Lifecycle Operator D Hard FM Equity funding ~10-20% Operator E Soft FM Operation & Maintenance Contracts Page 2 For presentation purposes: no reliance Operator F Energy Management
PPP Risk transfer to the private sector Public Sector Private Sector Risk transfer from public sector to private sector EPC Design-Bid-Build Design-Build Build-TransferOperate Build-OperateTransfer DBOM DBFOM BOO Outsourcing Privatization Key: Page 3 Public Sector Risk Private Sector Risk For presentation purposes: no reliance
Successful PPP’s in the MENA Region Project cost/ concession period Debt: Equity (%) Debt Margins (bps) Sponsor(s) Banks Financial Close TAV Airports Holding, Saudi Oger, Al Rajhi groups Arab National Bank, National Commercial Bank, SABB and SMBC July 2012 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 Medinah Airport Expansion (KSA) • US$ 1.2 b • 25 years Qurrayah IPP (Saudi Arabia) • US$ 3.0 b • 20 years 74:26 Muharraq Wastewater STP (Bahrain) • US$ 328m • 29 years 85:15 220 – 275 Samsung 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 – 340 GDF 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, ADWEA Bank 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 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 Mubadala Bank of Tokyo-Mitsubishi UFJ , First Gulf Bank , Crédit Agricole Group , Royal Bank of Scotland , SMBC and BNP Paribas Nov 2009 60:40 Queen Alia Airport (Jordan) • US$795m • 26 years 47:53 Zayed University (Abu University) • US$1.0 b • 10 years 83: 10 with 7% Mez - - 290 – 395 Source: IJ Online – Inspiratia - MEED Page 4 For presentation purposes: no reliance
Effectiveness of PPP Concession granted Planning Feasibility Procurement Construction Operation Commercial Close Financial Close Comments: Advocacy: Advocacy • Visioning for the Project • Monitoring of the Concession Decision Making: 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: Solid Business Case Page 5 For presentation purposes: no reliance • Determining the basis for private sector participation • Engaging market for best price against service delivered (i.e. Value for Money) • Delivery on outline case
Current strategies in various countries in the region 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 Bahrain IPP/IWPP/ waste water Privatization committee Pipeline: Social housing Libya All infrastructure sectors PPP model being considered by new government Pipeline: Transport, healthcare, education, power, refineries Egypt Delivered projects in social, utilities, transport Decree No. 238 of 2011 Egypt’s PPP Law Pipeline: Healthcare, Ports Page 6 Kuwait IWPP, social and transport PPP Law, PTB Pipeline: Many PTB projects on hold Saudi Arabia No central PPP Unit (Municipalities) Projects closed in waste water and aviation Pipeline: IWPP, transport, city development For presentation purposes: no reliance 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
Global Examples Canada PPP model supported at both federal and provincial levels 33 operational PPPs Pipeline projects focus is transport 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 Nigeria Closed deal on highway PPP PPP pipeline focused on transport and power (e.g. Lagos Airport) Page 7 UK Spain Mature PPP market with significant recent volumes of secondary market sales Pipeline projects in transport South Africa PPP Unit created in 2000 Potential PPP projects in healthcare, waste and water management to improve agricultural sector India Political will for PPP and private sector participation is strong 1,965 total PPP projects up to 2011 Opportunities in transport sector For presentation purposes: no reliance PF2 being rolled out Lack of clear pipeline of future projects, however rail and nuclear appear to be signature projects being carried forward Australia Mature PPP market Pipeline projects in education and transport aligned to the commodity industry
Partnership strategies for successful implementation of PPP Fund raising incentives • • • • • • 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 Organization and legal framework • • • • 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 Central PPP Unit • • • • 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) Government equity stake in the SPV • • • 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 Expropriation of private land Page 8 For presentation purposes: no reliance
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: • • 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 • Page 9 Lack of understanding of PPPs Preference for legacy delivery models For presentation purposes: no reliance
Key success factors to enhance PPP delivery Market creation (e.g. subsidies, grants, guarantees) PPP Law such as Egypt and Kuwait Page 10 Education (politicians decision makers and public at large) Viable projects which are bankable Identifiable pipeline of projects For presentation purposes: no reliance Public Sector drive the process and not the private sector Risk balance between private and public sector, e.g. demand risk
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) Page 11 For presentation purposes: no reliance
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) Page 12 For presentation purposes: no reliance
Questions? Page 13 For presentation purposes: no reliance
in TVET in the MENA Region ... two of which are among the good practices in PPP in the region. ... the public-private partnership.
... Managing Director at Mood MENA (Affiliate for MENA Region) ... in the MENA region are very good ... Getting public-private partnerships going: ...
Day 2 Launching the Thematic Partnerships for MENA NWC Muscat Meeting; Day 2 Launching the Thematic Partnerships for MENA NWC Muscat Meeting Dec 20, 2014
TRAINING SESSION ON PUBLIC-PRIVATE PARTNERSHIPS . Agenda . ... for infrastructure in the Southern Mediterranean region is ... Key levers available to MENA ...
As the job market in the Middle East and North Africa (MENA) region becomes ... in terms of getting them to prepare ... from good practices, ...
... scalable public-private partnerships across ... that puts partnerships at the absolute center. The good ... the MENA region, ...
MENA-OECD INVESTMENT ... 11:30-12:30 Session 2 – Analysis of the legal situation of Public-Private-Partnerships in ... Getting PPPs going: good practices ...
deficits of decent work for youth in the MENA region. ... Youth employment in the Arab region ... exchanged views and shared good practices on ...