Getting public-private partnerships going: good practices from the MENA region

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Presented at the 5th Meeting of the Working Group on Investment Zones in Iraq, MENA-OECD Investment Programme. 28 April 2013, Cairo, Egypt

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  • All the above contain elements of development with the exception of outsourcing
  • Medinah Airport Expansion: First full PPP in the Kingdom of Saudi Arabiaone of the largest infrastructure projects in the Middle East in 2012Qurrayah IPP (Saudi Arabia): Largest IPP in the world, 3 ECAs involved, Keximum payment guarantee for 100% of payment obligationsMuharraq Wastewater STP (Bahrain): First wastewater PPP in Bahrain, Closed against significant downgrading of national credit ratingPP11 IPP (Saudi Arabia): No government guarantee, Club deal rather tha syndication, Typical of the success of Saudi dealsShuweihat II IWPP (Abu Dhabi): Most recent Abu Dhabi IWPP, which follows a succession similar I(W)PPP closings in Abu DhabiParis-Sorbonne University (Abu Dhabi): First true educational PPP financing in the Gulf Debt financing oversubscribed
  • Stakeholders:MinistriesPPP UnitsCentral BankRegulators
  • PPP projects:Jordan - Queen Alia AirportOman – Barka II IWPP
  • Getting public-private partnerships going: good practices from the MENA region

    1. 1. OECD – Fifth Meeting of the Working Group on Investment Zones in Iraq Session 2 MENA Regional PPPs - Lessons for Iraq 28 April 2013
    2. 2. 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
    3. 3. 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
    4. 4. 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
    5. 5. 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
    6. 6. 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
    7. 7. 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
    8. 8. 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
    9. 9. 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
    10. 10. 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
    11. 11. 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
    12. 12. 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
    13. 13. Questions? Page 13 For presentation purposes: no reliance

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