Ghana: PPP and PFI

1. Funding Infrastructure
by Public-Private Partnerships (PPP)
and Private Finance Initiatives (PFI):
Ghana
The Project Company (Ghana) Ltd
Tony Hagan BSc MSc CEng MICE

2. Contact:
TonyHagan@talk21.com

3. Issues Considered
• Public-Private Partnerships (PPP)
• Ghana: Economic and Social Infrastructure
• Ghana: PPP Opportunity Areas
• The Benefits of PPP Schemes
• The Differences between the Public and Private Sectors
• Delivering Infrastructure Projects for Ghana
• Financing PPP Schemes and Role of Banks
• Keys to Successful PPP Schemes
• The Project Company (Ghana) Ltd

4. Public-Private Partnerships (PPP)

5. What are PPPs?
Key feature of a PPP is that it involves a risk
sharing relationship between Public and
Private Promoters, based on a shared
commitment to achieve a desired public
policy outcome

6. What are the aims of a PPP?
• PPPs aim to introduce Private Sector Resources
and/or Expertise in order to help provide and
deliver Public sector Assets and Services
• The term PPP is used to describe a wide variety
of working arrangements from loose, informal
and strategic partnerships, to design, build,
finance and operate (DBFO) type service
contracts and formal joint venture companies

7. How are PPPs Structured?

8. What are the steps?
Project Preparation Service Provider Selection Contract Management
• Service Need
(Output specs over time)
2. Option Appraisal
(Report on options)
3. Business Case
(affrdblty./public interest)
4. Project Dev.
(team, PSC, plan)
5. Bid Preparation
(EOI/ Short listing, RFP)
6. Bid Evaluation
(prf. bidder, value for $)
7. Final Negotiation
(sign contract, finc. close)
8. Contract Mgmt.
(construction,
commissioning,
monitoring,
dispute settlement,
continuing
communications
Project/
Funding
Approval
Bid Doc
Approval
Project
Finalization
Review
What are the Steps in PPPs?

9. What characteristics have PPPs got?
Characterised by the Public Sector:
• Entering into contracts to acquire services, rather than procuring an
asset
• Specifying the service requirement on the basis of outputs, not
inputs
• Linking payments to the private sector to the level and quality
services actually delivered
• Often requiring a ‘whole life’ approach to the design, building and
operation of project assets
• Seeking optimal risk transfer to the private sector
• Requiring private partner to be responsible for raising some, or all,
of investment finance required
• Utilising diverse payment mechanisms, such as market revenue,
shadow tolls, capacity availability payments and so on

10. What are the ingredients of a good PPP?
Contractual arrangement should be based on:
• Substantial risk transfer
– allocation of risks to parties best able to
manage them
4. Quality of service & output specification
– focus on services associated with procured
assets
5. Performance-related rewards
– payment only if performance standards met
6. M&E plan over life of contract
– achievement of whole-life performance

11. PPPs and Value For Money (VFM)
• Key consideration in launching a PPP
programme should be ensuring Value For
Money (VFM)
• PPPs facilitate and create incentives for
On-time and On-budget Projects
• Achieving optimal allocation of risk is the
most important factor in structuring a PPP

12. What are the Pre-requisites?
Clear policy and legal frameworks
– Rationale for use of PPPs & legal powers to contract out services
– Dispute resolution procedures
– Oversight of fiscal costs
Oversight procedures providing checks & balances
1) Project preparation – business case & value-for-money
2) Provider selection – guidelines for pre-qualification & tender
3) Contract management – M&E, performance-linked
payments/penalties
Support functions
1) Information dissemination – data, networking, training
2) Guidance – model contracts, tools, case studies
3) Catalytic functions – political/advisory support, funding
Needed: Transparency, Competition, Monitoring,
Empowered Public

13. PPPs Need:
• Appropriate selection of projects ( a PPP
will never cure a weak project)
• A clear and stable legal framework
• Skilled and experienced people in the
public sector
• Experienced and creditworthy private
sector partners

14. What are the Benefits of PPPs?
• Risk transfer to private sector
– Commercial know-how & managerial skills
– Best-practice technologies & innovation
• Enhanced government accountability
• Entrepreneurship & local enterprise development
• Private finance
– Government payments can be leveraged by citizen user fees
and/or government cost savings
Result: Faster deployment of better services

15. How have PPPs developed elsewhere?
• New investment in public infrastructure via PPPs has
included:
- Airports
- Railways
- Roads
- Bridges
- Tunnels
- Environmental facilities (waste incinerators and water
treatment plants)
- Public Buildings (offices, schools, hospitals and prisons)

16. The PPP Outsourcing Path
Infrastructure Provision and ManagementInfrastructure Provision and Management
Identification
Interaction
CitizenCitizen CompanyCompany LandLand VehicleVehicle LegalLegal
TaxationTaxation
Procur.Procur.
OtherOther
PolicyPolicy
Legis.Legis.
Reg.Reg. Enfor.Enfor.
Electoral
Electoral
W
ebsite
ServicesServices
NaturalOutsourcingPath
Database
Judic.Judic.
Infrastructure Provision and ManagementInfrastructure Provision and Management
Identification
Interaction
CitizenCitizen CompanyCompany LandLand VehicleVehicle LegalLegal
TaxationTaxation
Procur.Procur.
OtherOther
PolicyPolicy
Legis.Legis.
Reg.Reg. Enfor.Enfor.
Electoral
Electoral
W
ebsite
ServicesServices
NaturalOutsourcingPathNaturalOutsourcingPath
Database
Judic.Judic.

17. Pattern of PPPs and Experience to Date
• PPPs sectorally concentrated – transport
(road, rail, estuarial crossings) as well as
Education and Health
• Other sectors (waste, environment, ports,
energy and social housing) yet to reach
‘critical mass’ for competitive market to
emerge

18. Experience to Date
• Most countries commence PPP in the
transport sector but develop into other
scetors as VFM is proven and PPP
expertise established
• PPP structures demonstrate considerable
national variations – PPP techniques
succeed because they can be adaptable
to specific financial, political and socio-
economic priorities of each country

19. Ghana: Economic and Social Sector Infrastructure

21. Agriculture and Infrastructure: Priority Policies and Targets, 2007 – 2009…1
• Agriculture modernization: The aim is to go beyond subsistence
agriculture and increase agricultural productivity
• Close the Infrastructure Gap:
– Roads; The target is to have more than 55% of the entire
national road network in good condition by 2009 up from
the current (2006) indicator level of 45%
– Energy; The target is (I) to install a total of about 300
Megawatts of additional capacity (approximately 17% of
installed capacity) in 2007; (II) To develop and construct
new power stations, (II) Explore alternative sources of
energy
– ICT; Increase teledensity by at least 27% annually, and
increase internet access by an annual rate of not less than
2%.

22. Education: Priority Policies and Targets, 2007 – 2009…2
• In Education the objectives are:
– increase access to and participation in education and training at
all levels
– bridge gender gaps in access to education in all districts
– improve the quality of teaching and learning;
– improve efficiency in the delivery of education services
– promote science and technology education at all levels with
particular attention to increased participation of girls.
Consequently, the target is to:
- achieve literacy rate (i.e. proportion of adult population able to
read and write) of about 68.20%;
- Gross Enrolment Rate (GER) at the Primary level of 97.80%, JSS of
80.40% and SSS of 31% by 2009.
- In doing this, effort will be made at achieving Gender Parity Index
(GPI) for gross enrolment of 1 at all levels (i.e. KG, Primary, JSS
and SSS)

23. Health: Priority Policies and Targets, 2007 – 2009…3
• Health
– Expand and sustain high coverage of quality interventions
and services, particularly malaria, infant & maternal
mortality, HIV/AIDS etc
– Target for HIV/AIDS: 50% ARVs coverage from the current
3.2%;
– HIV/AIDS prevalence reduced to 2.0% by 2009 from 3.2%
now
• Water supply: The target is to increase access to above 60% by
2009.
• Good Governance: The focus will be on
- Strengthening the process of decentralization
- Improve existing institutional capacities including
Parliament
- Fostering greater civic responsibility

24. Challenges to the attainment of the Overall Objective of the Medium Term
Development Framework (GPRS II)…1
• One of the key assumptions underlying the attainment of
the minimum GDP growth of 8% and per capita GDP of
US$686 over the medium term (by 2009) is increased
investment in the key sectors of the economy,
particularly in the area of infrastructure (i.e. energy,
roads and railways, ICT, etc)
• The recent analysis of the investment needs for the key
sectors of the economy indicates a total investment
requirements of about US$10,555.5 million over the
period 2007-2009, of which GOG revenue projections
amounts to US$3,115.7 million (about 30% of the
estimated requirement).
• This leaves an average financing gap of about
US$3,518.5 million per annum.

25. Challenges to the attainment of the Overall Objective of the
Medium Term Development Framework (GPRS II)…2
This gap is expected to be filled by:
• Resource mobilization through grant finance and budget
support.
• external loans on concessional terms with a minimum
grant element of 35%.
• Non-concessional loans to be limited by specific projects
in any specific year.
• The implication of this is that development partners have
to scale up resource support to Ghana which currently
stands at about US$1,306.25 million per annum.

26. Global Partnership for Development...1
• Strengthening the partnership between Ghana and her
Development Partners has been central to the formulation,
implementation and monitoring of the GPRS.
• The principles of the partnership are based on the Paris Declaration
and include:
• strengthening country’s ownership of the development
process,
• ensuring the alignment of development partner support on
national priority,
• ensuring harmonisation of donor procedures and country
systems
• and use information to improve decision making.
• ensuring mutual accountability in relation to resource flow
and results achieved through the implementation of national
strategy

27. Global Partnership for Development...2
• Within this framework GOG expect an increased in the
current level of donor support over the next 3 years.
• The GOG expect more loans on concessional terms with
a minimum grant element of 35% as against non-
concessional loans.
• The GOG expects more budget support instead of
projects loans which is difficult to coordinate and
manage. This will allow for integration of aid flows into
the planning, implementation, monitoring and evaluation
phases of the budget cycle.

28. Conclusions
• Achieving an accelerated growth, with employment creation
and poverty reduction, will require massive investment in
priority sectors of the economy.
• The country has come far with the help of its Development
Partners and fiscal prudence on the part of Government in the
achievement of some remarkable progress which makes the
future bright.
• There is the need to maintain the momentum of growth and
the achievement of the Millennium Development Goals.
• To do this concerted efforts must be made towards investing
in some key areas of the economy.
• This will require scaling up of resources on the part of
Government and its Development Partners to make it feasible.

29. Ghana: Economic Sector

30. Economic Sector Overview...1
• Well endowed with Natural Resources (gold, timber, industrial
diamonds, bauxite, manganese, fish, rubber, hydropower, petroleum,
silver, salt and limestone)
• Ghana has roughly twice the per capita output of the poorest countries
in West Africa
• Heavily dependent on international financial and technical assistance
• Gold and cocoa production, and individual remittances, are major
sources of foreign exchange
• The domestic economy continues to revolve around agriculture, which
accounts for about 35% of GDP and employs about 55% of the work
force, mainly small landholders
• Ghana signed a Millennium Challenge Corporation (MCC) Compact in
2006, which aims to assist in transforming Ghana's agricultural sector

31. Economic Sector Overview...2
• Ghana opted for debt relief under the Heavily Indebted Poor
Country (HIPC) program in 2002, and is also benefiting from the
Multilateral Debt Relief Initiative that took effect in 2006
• Thematic priorities under its current Growth and Poverty Reduction
Strategy (GPRS-II), which also provides the framework for
development partner assistance, are:
- Macroeconomic stability;
- Private sector competitiveness;
- Human resource development;
- Good governance and civic responsibility
• Sound macro-economic management along with high prices for gold
and cocoa helped sustain GDP growth in 2008

32. Economic Sector Overview...3
Industries:
• Mining
• Lumbering
• Light Manufacturing
• Aluminium Smelting
• Food Processing
• Cement
• Small Commercial Ship-Building

33. Economic Sector Infrastructure
• Energy and Bio-Energies (Power Plants, Hydro-
electric Plants, Networks and Renewable
Energies)
• Environment (Water Networks, sewage
Facilities, Sanitation and De-salination)
• Information and Communications Technologies
(Backbones, Regional Inter-connections..)
• Transport (Roads, Highways, Railways, Ports
and Airports)

34. Economic Sector Infrastructure: Energy and Bio-Energies
ELECTRICITY
Electricity - production: 8.204 billion kWh (2006 est.)
Electricity - consumption: 6.76 billion kWh (2006 est.)
Electricity - exports: 755 million kWh (2006 est.)
Electricity - imports: 629 million kWh (2006 est.)
WHY EXPORT 755 TO THEN IMPORT 629??????????????
PARTICULARLY AS PRODUCING MORE THAN COMSUME
WHY ARE ELECTRICITY CUTS SO PREVALENT??????????

35. Economic Sector Infrastructure: Energy and Bio-Energies
OIL
Oil - production: 7,571 bbl/day (2007 est.)
Oil - consumption: 49,300 bbl/day (2006 est.)
Oil - exports: 5,709 bbl/day (2005)
Oil - imports: 45,520 bbl/day (2005)
Oil - proved reserves: 15 million bbl (1 January 2008 est.)
CONSUME DAILY ABOUT 7 TIMES AS MUCH OIL AS PRODUCE DAILY
AND HAVE TO IMPORT MASSIVE AMOUNTS YET HAVE OIL (PROVED
RESERVES) OF 15 MILLION BBL???????????

36. Economic Sector Infrastructure: Energy and Bio-Energies
NATURAL GAS
Natural gas - production: 0 cu m (2007 est.)
Natural gas - consumption: 0 cu m (2007 est.)
Natural gas - exports: 0 cu m (2007 est.)
Natural gas - imports: 0 cu m (2007 est.)
Natural gas - proved reserves: 22.65 billion cu m (1 January 2008 est.)
MASSIVE AMOUNT OF NATURAL GAS RESERVES YET ZERO
CONSUMPTION AND PRODUCTION????????

37. Economic Sector Infrastructure: Energy and Bio-Energies
Comment
• Growth in electricity production averaged 4.2 percent a year between 1980 and 1996.
In 1998 electricity production was 6.206 billion kilowatt-hours (kWh), 99.9 percent of
which was from hydroelectric sources. In the same year, electricity consumption was
5.437 billion kWh and exports were 400 million kWh, while 65 kWh of electricity were
imported. Hydroelectricity is generated at the Akasombo and Kpong power plants,
which traditionally supply virtually all of the country's electricity needs, as well as
provide exports to Benin and Togo.
• Total dependence on hydroelectricity makes Ghana vulnerable to variations in
rainfall, and power shortages reached crisis-point in 1998. This has stiffened resolve
to provide alternative sources of electric power, including a recently built oil-and gas-
fired power station. There are also plans for a number of gas-fired plants, using
imported gas and gas from the Tano fields. The Tama oil refinery was being
expanded and prepared for privatization in 1997-99. The U.S. Export-Import Bank is
to provide guarantees to cover drilling in the Tano off-shore natural gas fields and
construction of pipelines, plus loan financing for operations and maintenance work.

38. Economic Sector Infrastructure: Environment
Environment - current issues:
• recurrent drought in north severely affects agricultural
activities;
• deforestation;
• overgrazing;
• soil erosion;
• poaching and habitat destruction threatens wildlife
populations;
• water pollution;
• inadequate supplies of potable water

39. Economic Sector Infrastructure: Information and Communication Technologies
Telephones - main lines in use: 376,500 (2007)
Telephones - mobile cellular: 7.604 million (2007)
Telephone system:
general assessment:
• outdated and unreliable fixed-line infrastructure heavily concentrated in
Accra; competition among multiple mobile-cellular providers has spurred
growth with subscribership about 35 per 100 persons and rising
domestic:
• primarily microwave radio relay;
• wireless local loop has been installed

40. Economic Sector Infrastructure: Information and Communication Technologies
international: country code - 233;
• landing point for the SAT-3/WASC fibre-optic submarine cable that provides
connectivity to Europe and Asia;
• satellite earth stations - 4 Intelsat (Atlantic Ocean);
• microwave radio relay link to Panaftel system connects Ghana to its
neighbours (2007)
Radio broadcast stations: AM 0, FM 86, shortwave 3 (2007)
Television broadcast stations: 7 (2007)
Internet country code: .gh
Internet hosts: 24,018 (2008)

41. Economic Sector Infrastructure: Transport...1
Airports: 11 (2008)
Airports - with paved runways:
• total: 7
over 3,047 m: 1
2,438 to 3,047 m: 1
1,524 to 2,437 m: 3
914 to 1,523 m: 2 (2008)
Airports - with unpaved runways:
• total: 4
914 to 1,523 m: 3
under 914 m: 1 (2008)
Pipelines:
• oil 5 km; refined products 309 km (2008)

42. Economic Sector Infrastructure: Transport...2
Railways:
• total: 953 km
narrow gauge: 953 km 1.067-m gauge (2006)
Roadways:
• total: 62,221 km
paved: 9,955 km
unpaved: 52,266 km (2006)
Waterways:
• 1,293 km
note: 168 km for launches and lighters on Volta, Ankobra, and Tano rivers; 1,125 km
of arterial and feeder waterways on Lake Volta (2008)
Merchant marine:
• total: 4
by type: petroleum tanker 1, refrigerated cargo 3
foreign-owned: 1 (Brazil 1) (2008)
Ports and terminals:
• Tema

43. Ghana National Transport Policy

45. Economic Sector Infrastructure: Transport
Comment
• There are 39,409 kilometres (24,490 miles) of roads, of which 11,653
kilometres (7,241 miles) were paved in 1997. In 1997 there was a 953-
kilometer (592-mile) railway network (currently undergoing major
rehabilitation) of narrow gauge. The railway connects Accra, Kumasi, and
Takoradi, the major mining areas, to the sea ports. The railway network also
provides passenger services from the interior of Ghana to the main sea
ports at Tema (near Accra) and Takoradi.
• The main waterways include the Volta, Ankobra, and Tano Rivers, which
provide 168 kilometers (104 miles) of year-round navigation, and Lake
Volta, which provides 1,125 kilometres (699 miles) of arterial and feeder
waterways. The main ports are at Takoradi and Tema. There were 12
airports in 1999, 6 of which had paved runways.

46. Ghana: Social Sector

47. Social Sector Infrastructure
• Health (Urban and Rural Hospitals)
• Education (Schools, High Schools and
Universities, Cultural centres, Libraries..)
• Social Housing
• Leisure and Sport (Stadiums..)

48. Social Sector Infrastructure: Health

49. Social Sector Infrastructure: Education

50. Social Sector Infrastructure: Social Housing

51. Social Sector Infrastructure: Leisure and Sport

52. Ghana: Economic and Social Stimulus Plan...1
This plan is suggesting aims to stimulate employment,
certain critical economic sectors, and government spending
in Ghana
•"You've got to look at the whole picture"
•Focus stimulus spending on infrastructure development
•Front-end investments for longer-term benefits
•Job creation and tax cuts in the country
•Stimulate vital sectors of the economy such as energy and
health care
•Make consumption easier/cheaper for everybody
•Infrastructure investments could help make the economy
and Ghanaian more competitive internationally.

53. Ghana: Economic and Social Stimulus Plan...2
The Implementation of the Stimulus Plan
•The stimulus plan again would again boast the country's
Infrastructure, including the highways;
•Need to modernize government buildings and other public
infrastructure;
•Need to provide clean water, flood control, and other environmental
investments; there would also be public transit and rail infrastructure
improvement.
•Local school districts would be increased to prevent educational
service cutbacks and also to help modernize higher education
programs
•Need to transform the Ghanaian energy by pumping money into the
sector to make it more efficient
•Need to repair public housing and make it affordable for the low
income earners

54. PPP Opportunity Areas

55. PPP Sector Highlights around the World

56. PPP Infrastructure Projects in Africa 1996-2006

57. Infrastructure Development in Africa…1

59. Infrastructure Development in Africa…2

60. Infrastructure Development in Africa…3

61. The Benefits of PPP Schemes

62. The Benefits of PPP Schemes

63. Opportunity Sectors in Ghana

64. PPP Opportunity Sectors in Ghana
•

65. Concessive and Non-Concessive PPPs

66. Ghana: Possible Infrastructure Sectors for PPP

67. Infrastructure Meets Business

68. Ghana: Possible Infrastructure Sectors for PPP

69. Asset Procurement Options under PPP

70. The Differences between
The Public and Private Sectors

71. Differences between the Public Sector and
Private Sector

72. PPPs and PFI
Delivering Infrastructure
Projects to Ghana

74. Selecting an Appropriate PPP / PFI Model

75. Government / Public Sector Authority
and The Project Company (Ghana) Ltd

76. Parties Involved in PPP Projects

77. Key Phases of the PPP Project Process

79. Outline of the Procurement Process

80. Contractual Structure of The PPP

81. Contract Management Structure

82. Structure of Project Governance

83. Financing Infrastructure Projects

84. Stages of Project Selection

89. Financing PPP Schemes

91. Public versus Private Contract Costs

92. Public Sector Costs vs. Private Sector Costs

93. Breakdown of Total Costs

94. Different PFI Cost Structures

95. Comparing Costs of PPP and Government Debt Finance

96. Typical PPP / PFI Bidding Process Costs

97. Cashflows to Shareholders

98. Role of Banks in PPP....1

99. Role of Banks...2

100. Role of Banks...3

101. Role of Banks...4

102. Keys to Successful PPP Schemes

103. Key to Successful PPP Schemes...1

104. Key to Successful PPP Schemes...2

105. The Project Company (Ghana) Ltd

106. The Project Company (Ghana) Ltd
The Private Finance Initiative (PFI) Model

107. Decision Tree for PPP

108. The Project Company (Ghana) Ltd
PPP Structure

109. The Project Company (Ghana) Ltd
Services We Deliver

110. Our Company Aims

112. Our Business Profile

113. We Look Forward to Working with You
The Project Company (Ghana) Ltd

114. End of Presentation
Thank You