Chilean Experience inRegulation of Roads PPP          Patricio Mansilla       Chemonics International        Lima - August...
Agenda 1.Chilean Institutional Framework 2. Roads Regulatory Strategy in Chile 3. Key elements of the Chilean PPP Case   3...
1. Chilean Institutional Framework
Chilean Institutional Structure Comptroller                                                                        Health ...
Chilean Institutional Structure
Chilean Institutional Structure
Solicited and Unsolicited Proposals
Chilean Project Cycle
Total Concession Investment      US$8.000 million
Chilean Infrastructure Investment
Pension Funds (Sept. 2007)
2. Roads Regulatory Strategy in              Chile
PPP Design                         Regulatory                          System  Economic                                 Pr...
Private Sector Participation                              Reform                            Health SystemReform to the    ...
Legal System                                Regulatory                                 SystemConcession Law No900         ...
Long Term Minimum            Income GuaranteeRevenues                             CURRENT                             REVE...
Revenue Sharing MechanismRevenues                                Current                               Revenues           ...
2.1. Panamerican Highway (Road 5)
Panamerican Higwhay 1995-1998US$ 2,100 million                              Road 5   1590 Kms.                            ...
Business Design                Business Design                  N                         (P  Q + S F + S V ) t - (O & M)...
Tariff System•   Natural Monopoly. No alternative roads•   Sequential and Competitive Bidding•   Transport Modeling to det...
Business DesignGeographic           Tariffs relatively similar along the  Equity             highway according to the serv...
Panamerican Highway
Panamerican Highway• Risk Sharing Mechanism• Feasibility Studies prepared by the Chilean  government and available for the...
Cross Subsidy (Million US$/year)       8,18                                                            7,02               ...
Tariff System (US$/100 kms)La Serena – Los VilosLos Vilos - Santiago  Santiago - Talca   Talca - Chillán                  ...
2.2.Urban Roads
Santiago in the Nineties                             Population: 5 millionEconomic Development                            ...
Santiago Infrastructure Plan•   Public Transportation Modernization•   Enlargement of the Metro System•   Enlargement of S...
R-57Urban PPP Roads     Urban Road System1.   Autopista Costanera Norte                                   R-2.   Sistema N...
Santiago Infrastructure Plan                                   1T• Three tariffs:   Valley US$ 0,05/km   Peak US$ 0,06/km ...
East-West Urban System• Sequential Bidding Mechanism:      • Variable 1: “Payment for goods and rights (BD)"            Pa...
Urban Road Concession: East-West            Urban System                                               Results            ...
Urban Roads Bidding Results
3. Key Elements of the Chilean           PPP Case
3.1. Lessons Learned
Lessons Learned• Lesson 1: Competition is an important first step for road  regulation and prequalification is an importan...
Lessons Learned• Lesson 4: Regulation strategy must be included in early  stages of the project cycle. Economic variables ...
3.2. Trends in Road Regulation
Trends in Road Regulation• Trend 1: Vertical Integration of Regulation versus  Independent Regulator• Trend 2: Application...
Thank you!!          Chemonics del Peru              51-1-2422011patricio.mansilla@chemonicsdelperu.com          www.chemo...
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Patricio Mansilla - Chilean Experience in Economic Regulation of Roads PPP

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Patricio Mansilla - Chilean Experience in Economic Regulation of Roads PPP

  1. 1. Chilean Experience inRegulation of Roads PPP Patricio Mansilla Chemonics International Lima - August 16, 2008
  2. 2. Agenda 1.Chilean Institutional Framework 2. Roads Regulatory Strategy in Chile 3. Key elements of the Chilean PPP Case 3.1 Lessons learned 3.1 Trends in the Road Regulation
  3. 3. 1. Chilean Institutional Framework
  4. 4. Chilean Institutional Structure Comptroller Health Ministry, Justice Ministry, Finance Ministry Civil Aviation Direction, Railroad Company Local Governments Ministry of Public Works PPP Unit Responsible for the complete PPP project Cycle
  5. 5. Chilean Institutional Structure
  6. 6. Chilean Institutional Structure
  7. 7. Solicited and Unsolicited Proposals
  8. 8. Chilean Project Cycle
  9. 9. Total Concession Investment US$8.000 million
  10. 10. Chilean Infrastructure Investment
  11. 11. Pension Funds (Sept. 2007)
  12. 12. 2. Roads Regulatory Strategy in Chile
  13. 13. PPP Design Regulatory System Economic Private Sector Structure Participation PPP DesignInstitutional System Business Design and Procedures
  14. 14. Private Sector Participation Reform Health SystemReform to the Reform to the Education Pension System Private Sector Participation in the Chilean EconomyForeign Investment Privatisation Promotion
  15. 15. Legal System Regulatory SystemConcession Law No900 Complementary LawMinistry of Public Works Ammendments Project Finance Law
  16. 16. Long Term Minimum Income GuaranteeRevenues CURRENT REVENUES GOV. PAYMENT TO CONCESSION P Time
  17. 17. Revenue Sharing MechanismRevenues Current Revenues IMG 50% Gov. 50% Conces P Time (years)
  18. 18. 2.1. Panamerican Highway (Road 5)
  19. 19. Panamerican Higwhay 1995-1998US$ 2,100 million Road 5 1590 Kms. Los Andes Túnel El Melón La Serena Valparaíso Los Vilos San Antonio SANTIAGO SANTIAGO Talca Chillán Collipulli Temuco Río Bueno Concepción Puerto Montt
  20. 20. Business Design Business Design N (P  Q + S F + S V ) t - (O & M) tNPV = - CAPEX +  t =1 (1 + CAPM) t Monopoly Financial Regulation Regulation
  21. 21. Tariff System• Natural Monopoly. No alternative roads• Sequential and Competitive Bidding• Transport Modeling to determine tariffs• Second best tariffs to reduce deadweight loss• Efficient and equity criteria to implement the tariff system and affordable for the users.
  22. 22. Business DesignGeographic Tariffs relatively similar along the Equity highway according to the service level Horizontal Users pay according to his category Equity Vertical Local Users or Frequent Users can Equity receive a special payment treatment Generational Users pay for a service level during a Equity specific period of time.
  23. 23. Panamerican Highway
  24. 24. Panamerican Highway• Risk Sharing Mechanism• Feasibility Studies prepared by the Chilean government and available for the bidders• Quality of Service: Guarantee by prizes and fines• International Pre qualification and sequential bidding• International Road Shows
  25. 25. Cross Subsidy (Million US$/year) 8,18 7,02 5,85 3,51 -2,34 -7,02 -8,18 -9,35 25
  26. 26. Tariff System (US$/100 kms)La Serena – Los VilosLos Vilos - Santiago Santiago - Talca Talca - Chillán US$Complete Self Funded Chillán - Collipulli Collipulli - TemucoTemuco - Río BuenoRío Bueno - Pto Montt 26
  27. 27. 2.2.Urban Roads
  28. 28. Santiago in the Nineties Population: 5 millionEconomic Development 10,3 Million of trips per day 135 cars / 1000 persons 65%: Public TransportationRate Growth: 6% annually 35% : Private Transportation Lack of Public Investment Transport System with huge operation problems
  29. 29. Santiago Infrastructure Plan• Public Transportation Modernization• Enlargement of the Metro System• Enlargement of Suburban Trains• PPP for the main urban roads• Economic regulation for the private transportation• Enhancement of the local transportation infrastructure• Traffic control system improvement
  30. 30. R-57Urban PPP Roads Urban Road System1. Autopista Costanera Norte R-2. Sistema Norte – Sur R-68 683. Américo Vespucio Sur4. Américo Vespucio Norte 215 Km.5. Sistema de Telepeaje R- R-78 78 R-5 R-5 Sur Sur
  31. 31. Santiago Infrastructure Plan 1T• Three tariffs: Valley US$ 0,05/km Peak US$ 0,06/km Congestion US$0,12/km 2T• Tariff adjustment RPI + 3,5% annually.• Concessionaire can do 3T tariff management.
  32. 32. East-West Urban System• Sequential Bidding Mechanism: • Variable 1: “Payment for goods and rights (BD)" Payment by the sponsor of the concessionaire before to create the concessionaire company. • Variable 2: Investment Plan • Variable 3: Payment from the Government
  33. 33. Urban Road Concession: East-West Urban System Results •Investments: US$385 million •Length: 42 kilometers •Reduce gas emission •Reduce contamination •Reduce congestion •Reduce travel time from Las Condes to the Santiago Airport•Implementation of the electronic toll road system “free flow” which let to theusers go through the road without stop to pay tolls.•The number of accidents in the road is very low and it reach 8 in average permonth.
  34. 34. Urban Roads Bidding Results
  35. 35. 3. Key Elements of the Chilean PPP Case
  36. 36. 3.1. Lessons Learned
  37. 37. Lessons Learned• Lesson 1: Competition is an important first step for road regulation and prequalification is an important strategy to mitigate the adverse selection (concessionaire) problem.• Lesson 2: Competition is not able to solve the incomplete contract problems. Every risk must be carefully studied. Technical studies to estimate the official investment cost of the PPP project.• Lesson 3: Low balling and Winners Curse
  38. 38. Lessons Learned• Lesson 4: Regulation strategy must be included in early stages of the project cycle. Economic variables to define the bidding winner.• Lesson 5: Transport and financial Models, must be considered in the Regulatory studies to have a consistent PPP model.• Lesson 6: Incomplete contracts must include in a easy way the potential conflict resolution issues like easy buy out or way out, negotiation mechanisms, new investments treatment.
  39. 39. 3.2. Trends in Road Regulation
  40. 40. Trends in Road Regulation• Trend 1: Vertical Integration of Regulation versus Independent Regulator• Trend 2: Application of Least Present Value of Revenues• Trend 3: Unsolicited Proposals• Trend 4: Intermodal Competition (Minimum Revenue Guarantee)• Trend 5: Total Integration of the Transport Model- Financial Model and Regulatory Model (secuential or simultaneous)
  41. 41. Thank you!! Chemonics del Peru 51-1-2422011patricio.mansilla@chemonicsdelperu.com www.chemonics.com

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