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Brazilian PSP Program - a partnership between IFC, BNDES and IDB



Presentation on the Brazil PSP - Private Sector Participation Program, a partnership between IFC, BNDES and IDB to develop innovative infrastructure projects

Presentation on the Brazil PSP - Private Sector Participation Program, a partnership between IFC, BNDES and IDB to develop innovative infrastructure projects



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Brazilian PSP Program - a partnership between IFC, BNDES and IDB Brazilian PSP Program - a partnership between IFC, BNDES and IDB Presentation Transcript

  • IFC/BNDES/BID partnership to develop projects for private participation
  • IFC and the partnership Implica ç ões
    • Assists Governments in the infrastructure project development for PPP transactions
    • Focus on innovative sectors or projects
    • Has a revolving fund of about U$5.6 million to pay for the costs of project development charging low retainer fees, and postponing the payment to the closing of transactions
    • Takes the risk of feasibility (relevant part of the payment is success fee)
    • Largest multilateral agency focused on investing in the private sector in the developing countries
    • Offices in more than 100 countries
    • Assets of more than US$ 30 billion (approximately 13% in the infrastructure sectors)
    • Infrastructure advisory department has more than 20 years of experience on structuring innovative transactions in emerging markets
    49% 31% 20%
  • Why focus in infrastructure project development in Brazil? There is plenty money to invest, but well structured projects for private participation are still a scarce resource
    • During the privatization process of the 90’s
      • No special strategy was adopted to maintain senior planning officers in the Government
      • Lost many of the senior officers to privatized companies and to regulatory agencies
    • Currently Brazilian subnational governments have difficulties to recruit and retain people with experience and expertise in developing infrastructure projects
    Raised by private investment funds to invest in infrastructure in Brazil To be Invested in infrastructure by the Federal Government between 2007 and 2014, through the PAC program BNDES plans to finance in infrastructure from 2010-2013 IFI plans to finance under A/B loan arrangements together with commercial banks in the first semester of 2008 + + + US$ 10bn US$ 1.268bn US$ 172.8bn US$ 6.3bn
  • Objectives and principles
    • The partnership combines the local expertise of BNDES with international expertise (IFC and IDB) on project development and best practices
      • IFC has unique experience on structuring PPP transactions in innovative sectors or environments
      • BNDES has unique experience in structuring PPP transactions in Brazil
    • IFC, BNDES and IDB are committed to develop and spread local and international best practices for private participation in the infrastructure sectors
      • Transparency and competition for the projects are key to develop the PPP market
    • IFC/BNDES/IDB partnership is focused on results
      • Provide assistance to the Government from the development of the project idea until the closing of the PPP contract
      • Most of IFC/BNDES/IDB payment for the advisory services are success fees paid by the private partner that gets the award
    • IFC/BNDES/IDB are committed to the development of the country
      • Transactions are structured to generate high development impact
      • IFC/BNDES/IDB are committed to get the best deal for the Government
  • Objectives and Principles
    • Training of Government officers
      • Structuring PPP transactions is a learning by doing activity
      • IFC/BNDES are committed to train the Government officers on best practices of structuring PPPs while providing project advise
    • IFC/BNDES/IDB as financers and investors in the private sector have a deep understanding of the private sector drive and interest
      • Transactions are structured to guarantee bankability, adequate returns for investors, and environmental and social sustainability
    • IFC hires and manages the project consultants
      • As IFC rules and procedures to hire consultants are more flexible than BNDES, all consultants are hired by IFC
      • IFC coordinates and manages the day to day work of the project consultants
  • How does it work from a formal standpoint?
    • IFC/BNDES/IDB have signed a very simple Administration Agreement, which
      • Establishes the objectives and principles of the partnership
      • Regulates the contribution of each partner
      • Creates the Oversight Committee, which is a board in which each member of the partnership has a sit
      • Regulates the process of planning and reporting of the partnership
    • How the IFC/BNDES/IDB is hired by Governments in Brazil?
      • Contract single source – IFC is formally hired but mentions in the agreement that it will provide the service using the resources of its partnership with BNDES and IDB
      • Technical cooperation agreement - IFC and BNDES are hired together and mention in the agreement that they will provide the service using the resources of their partnership with IDB
  • Projects: Hospital do Suburbio
    • First PPP in the health sector in Brazil
    • Emergency hospital with 298 beds
    • Catching area: 1 million inhabitants of a very poor region in a big city in the Northeast of the country
    • Private partner has to equip, and operate clinical and non clinical services
    • The objective was to hire a high quality operator to create an example of high quality service in the public health network
    • Construction of the hospital was done under a public works contract
    • Private sector investment of about U$30 million in the life of the contract and operational costs of about U$ 45 million/year
    • The Government payment to the private partner will be of U$50 million/year
    • 10 years contract, that can be extended to more 10 years conditioned to adequate quality
    • Auction was in Feb 2010, and the winner was Promedica-Dalkia
    • Record development timeframe: IFC/BNDES/IDB was hired in Feb 2009 and PPP contract signing was May 2010
  • Projects: BA 093 road concession
    • First road metropolitan network (126 km) to be conceded to the private sector in Brazil
    • Connects the main logistic and industrial hubs of the city of Salvador and its metropolitan region (Ports, airports, and 3 industrial poles)
    • 50% of the GDP of the State of Bahia, and 70% of the industrial tax revenues of the Government are in the area of influence of these roads
    • Estimated investments of U$400 million and U$400 million of operational costs, in a 25 year concession
    • First road concession in Brazil developed using the Equator Principles
    • Most competitive concession auction since 2007 in Brazil (9 players)
    • For the auction roof tariff was R$3,35 per passenger car and the final tariff was R$2,319 (30.8% discount)
  • Projects: Pontal irrigation project
    • First Brazilian irrigation PPP
    • Involves an area of 7,717 irrigated hectares in the desert region of the São Francisco valley in the Northeast of Brazil
    • The region is already a production hub of irrigated fresh fruits with all the logistic infrastructure for this kind of production
    • It is estimated that it will generate 20.000 direct and indirect jobs
    • Estimated investment in infrastructure U$40 million (the Government has already invested about U$100 million).
    • On farm investment can be more than U$ 250 million depending on the crops chosen by the private partner
    • The PPP model that was developed for this project focus on attracting and selecting good agriculture players, instead of construction companies.
    • Requires the private players to partner with local small farmers combining the private player market, production and processing expertise with the local farmers expertise