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Bridging the gap – meeting the needs of PPP projects

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David Freer

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Bridging the gap – meeting the needs of PPP projects

  1. 1. Bridging the gap – meeting the needs of PPP projects David Freer, Alex Sundakov, Vishal Joshipura July 2016
  2. 2. Presentation Outline a) Paper Objectives b) Public Private Partnerships: Overview c) What normally happens d) What can alternatively happen – an example e) How to make this the norm
  3. 3. Paper Objectives • PPPs are popular for transport projects – They however have a spotty track record of meeting traffic projections • One potential reason for this track record is that traffic advisor and the financial advisor often do not work in harmony on such projects • The traditional approach for developing transport projects does not work for PPPs • We worked on a project where the two advisors worked as a team successfully • We want to share this experience with you…
  4. 4. Public Private Partnerships • Long term contract between public and private sector • Concessionaire is compensated based on performance • Most PPPs are project financed – Only project cash flows available to repay debt • PPPs may or may not transfer revenue risk to the private sector – Where revenue risk is transferred, traffic forecasting is critical Some Australian examples..
  5. 5. What normally happens Traffic Expert Financial Expert Develops T&R model and forecasts Conducts financial analysis using T&R forecasts They start and end in isolation
  6. 6. What normally happens
  7. 7. What normally happens Traffic Expert Financial Expert Develops T&R model and forecasts Conducts financial analysis using T&R forecasts Complains that: - Traffic forecasts need to be higher - Several additional sensitivities required - T&R model is not reliable Complains that: - Traffic forecasts should be conservative - T&R budget needs to be higher - Others do not understand the complexities of traffic forecasting
  8. 8. What normally happens Traffic Expert Financial Expert Develops T&R model and forecasts Conducts financial analysis using T&R forecasts What drives this disconnect? × Different Incentives × Lack of Subject Matter Knowledge of the other expert × Lack of Communication × Insufficient Budgets
  9. 9. Where we want to get to
  10. 10. What could happen: Dhaka-Chittagong Expressway • Largest PPP in Bangladesh (US$3.5bn) • One year feasibility assessment • Traffic advisor and financial advisor worked in-sync throughout the process • High quality analysis appreciated by the client • On time and on budget project delivery
  11. 11. What could happen: Dhaka-Chittagong Expressway Success Drivers Constant Communication Final Delta Plan Results Framework and Monitoring Template Additional Concept Notes Draft strategies BDP2100 team outputs Investment Plan team outputs Initial findings Report Investment Plan Feb Oct Outline of Investment Plan Stakeholder Feedback Report Initial Ranking of projects and identification for Programs Mar Apr May Jun Jul Aug Sep Nov Dec Revisions to Investment Plan (if necessary) GED Project proposals
  12. 12. What could happen: Dhaka-Chittagong Expressway Success Drivers Knowledge Sharing • T&R advisor explained approach and interdependencies • Financial advisor explained impact of T&R forecasts on viability analysis and fiscal impact on government • Constant sharing of progress updates, information gaps and expected delivery timeframes Similar Incentives • Feasibility study separated from transaction advisory • Fixed fee assignment – no success fees for financial advisor Project Management • Project plan required constant communication and exchange of information • Strong overall project leadership
  13. 13. How to make this the norm • At Project Inception, clarify roles and responsibilities • Formalize ways to engage regularly (in-country missions, scheduled check-ins, easy access to information) • Take time to educate team-members on work required and interdependencies between tasks • Align incentives as much as possible • Change mind-sets! – Client and consultants
  14. 14. Banora Point Upgrade, New South Wales, Australia Thank You

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