(I C R C)

ACCELERATED PPP PROCUREMENT OPTIONS FOR EMERGING
MARKETS – DELIVERING HIGH QUALITY PPPs, VFM AND
INFRASTRUCTURE SERVICE AT SPEED

ENGR. CHIDI IZUWAH
ED, PPP RESOURCE CENTRE, INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
Abuja , November 2012
Infrastructure Concession Regulatory Commission

(I C R C)
Presentation Outline
1. Infrastructure & the Economy and ICRC
2. PPP Procurement Lessons
3. PPP Procurement Time Challenge
4. PPP Procurement Acceleration Options
5. Invest in Nigeria Value Proposition

2

Infrastructure Concession Regulatory Commission

(I C R C)
Infrastructure & the Economy
	
  
If Nigeria was a three legged stool I
would say its stability and future depends
on how well and how fast we tackle the
infrastructure problem – the shaky leg of
the stool
Dr. Ngozi Okonjo-Iweala – HMF/CME

Infrastructure Concession Regulatory Commission

(I C R C)
Africa is BIG! and full of Opportunities

W Europe

USA
China
Africa represents:
20% of global land area
13% of global population
2 % of global economic output
• North-South cross-Continental flight : 11 hours
• 5 time zones

India

Infrastructure Concession Regulatory Commission

(I C R C)
......Nigeria centre of the world

Infrastructure Concession Regulatory Commission

(I C R C)
Projections (Top 20 League)
Goldman Sachs projections places Nigeria as;
•  the 20th largest economy by 2025 on the basis of GDP
•  21st on per Capita Income (2025).
•  12th largest economy if Nigeria maintains its growth trajectory
to 2050, overtaking Korea, Italy and Canada on GDP.

Infrastructure Concession Regulatory Commission

(I C R C)
ICRC - Who are we
The ICRC is the FGN s regulatory agency
charged with catalysing public and
private efforts/resources for the
development and implementation of a
world class PPP framework towards the
development of world class brownfield
and greenfield infrastructure for the
benefit of Nigerians
www.icrc.gov.ng
Infrastructure Concession Regulatory Commission

(I C R C)
Classical Major PPP Transaction Steps
Decision to enter
PPP Process –
Priority Projects

PPP Road Map and
Framework

Appoint Team

Procurement
Publication and
Announcements

PPP Preparation
Studies and
Business Case

Select Advisers

PPP
Prequalification

Prepare and Issue
Bidding
Documents

Conduct Partner
Procurement

Implementation,
Service Delivery
and Monitoring

Negotiation and
Contract Signing

Bid Evaluation and
Award

Infrastructure Concession Regulatory Commission

(I C R C)
PPP	
  LIFECYCLE	
  in	
  line	
  with	
  Na2onal	
  Policy	
  
§ Project Identification

Preliminaries

§ Project Prioritization
§ Project Selection

Development Phase

NEEDS ANALYSIS
PPP OPTIONS APPRAISAL
VALUE FOR MONEY
AFFORDABILITY
SUSTAINABILITY
PRELIM RISK MATRIX
VIABILITY/BANKABILITY
VGF
OBC
OBC APPROVAL

Procurement Phase

TRANSACTION ADVISER
EoI AND RFP
BIDDING
BIDDERS CONFERENCE
BID EVALUATION
VALUE FOR MONEY TEST
PREFERRED BIDDER
FULL BUSINESS CASE
FEC APPROVAL

Implementation Phase

TECHNICAL ADVISER
MONITOR DESIGN AND
CONSTRUCTION
COMMISSIONING TEST
VERIFY OUTPUT
REQUIREMENTS
CONTRACT MANAGEMENT

PREPARING AND IMPLEMENTING EFFICIENT
AND EFFECTIVE PPP TRANSACTIONS

Infrastructure Concession Regulatory Commission

(I C R C)
Typical Power Project Structure / Timeline - IPP
Offtaker – Corporate
Customer, Bulk Trader

Sponsor Vehicle
(Private Investors)

Power Purchase
Agreement

Shareholders
agreement
(Equity)

Project Company
Institutional
Investors

Other Service
Providers

Commercial
Lenders
Financing
Agreements

Shareholder
loan
agreement

EPC Contract

EPC Contractor

Development / Finance (3 Years)

DFIs/MFIs

O&M
Contract

Fuel Supply
Agreement

Operations &
Maintenance
Contractor

Generation
License, Permits

NERC/ESIA/Other
Government

Fuel Supplier

Construction (1 – 5 Years)

Operations (10 – 30 Years)

Infrastructure Concession Regulatory Commission

(I C R C)
Project Development Cycle Timing
•  The PPP project development cycle is rigorous...time !!!

Development
Phase
9 months

Procurement
Phase

Implementation
Phase

12 months*

3 – 5 years

*
§ Needs Analysis

§ Transaction adviser

*
§ Technical Adviser

§ PPP Options appraisal

§ EoI and RFP

§ Project Monitoring

§ Value for Money

§ Bidding

§ Commissioning Test

§ Affordability

§ Bidders Conference

§ Verify Output

§ Sustainability

§ Bid Evaluation

Requirements

§ Prelim Risk Matrix

§ Value for Money Test

§ Contract management

§ Viability/Bankability

§ Preferred Bidder

§ VGF assessment

§ Full Business Case

§ OBC approval

§ FEC Approval

* Indicative timelines

11

Infrastructure Concession Regulatory Commission

(I C R C)
… PPP & TIME CHALLENGE
•  The biggest challenge to procuring infrastructure via PPP is
time
•  Procurement of infrastructure can be an intensely political
process
•  Politicians are keen (to produce infrastructure quickly; to
preserve their decision making prerogatives; to reward
supporters)
•  PPPs require:
–  TIME to undertake a proper feasibility study/business case
–  TIME to secure approvals
–  TIME to conduct a fair, equitable, transperent and
competitive procurement process.
Infrastructure Concession Regulatory Commission

(I C R C)
PPP Time to Deliver Case Study from Canada
and Nigeria
•  Alberta s southeast(P3) and southwest Edmonton ring roads are
the most comparable pair.
•  The Edmonton Ring Road was part of a long-standing provincial and
city commitment to create a highway trade corridor linking
Alberta to the United States and Mexico.
•  The P3 project was delivered two years earlier than the
conventionally procured project (P3 4yrs)
•  Lekki Toll Road from Inception to Financial Closure 5 to 6yrs

Infrastructure Concession Regulatory Commission

(I C R C)
WHAT WE NEED!
Typical impact!

FASTER PPP!
S!

… through a rapid and simple process!
standardized across all PPP deals to ensure that"
all deals get done quickly and accurately!

BETTER PPP!
S!

… through PPP structures that ensure optimal!
allocation of deal roles, risks and"
responsibilities between public and private sector"

MORE PPPs!
Execute a greater number of PPP transactions"
to increase the quantum of private investment!

Reduce!
time by!

50%!
Increase!
value by!

40-!
50%!
Increase!
capacity by!

90%!

Infrastructure Concession Regulatory Commission

(I C R C)
Forumula 1 Approach to PPPs

§  Fast
§  Safe
§  Reliable
§  Rules known
§  Competent team members
§  Timing is known to all
§  Records especially time is
transperently kept and monitored
§  Commitment by all
§  You need a Formula 1 type
ecosystem to make it fast

Infrastructure Concession Regulatory Commission

(I C R C)
Infrastructure Leadership Quote from Other Lands
Contents

We	
  told	
  them	
  we	
  will	
  give	
  them	
  roads	
  to	
  bring	
  their	
  
products	
  on,	
  schools	
  to	
  send	
  their	
  children	
  to,	
  
hospitals	
  and	
  clinics	
  to	
  improve	
  their	
  health.	
  
	
  
We	
  cannot	
  waste	
  our	
  8me.	
  
	
  
We	
  have	
  to	
  work	
  fast	
  to	
  show	
  results	
  for	
  we	
  are	
  judged	
  
by	
  our	
  performance,	
  not	
  what	
  we	
  promise	
  

Tun Abdul Razak Hussein – Prime
Minister of Malaysia 1970 - 1976
Infrastructure Concession Regulatory Commission

16
(I C R C)
PPP Acceleration
–  Have Robust and Well communicated legal and regulatory
framework, PPP Manual etc (Minimize rework get
permission to copy and adapt from others – use WBI,
AfDBi, ADBi, UNESCAP leverage)
–  Use PPPIRC of the World Bank
–  Agree PPP Pipeline at highest levels
–  Extensive Capacity building
–  Have a PPP Centre of Excellence
–  Pre Qualify and Enpanel Consultants and TAs
–  Standardization – PPP Manual, OBC, RFQ, RFP, Contracts,
Financial Model
–  Model Concession Agreements
–  Leverage learnings from others (Assignments for Staff)
–  Have regular PPP fora with all stakeholders
Infrastructure Concession Regulatory Commission

(I C R C)
PPP Acceleration
–  PPP Units in MDAs
–  Have P5 Network
–  Creative Use of High Quality Unsolicited Proposals from
Credible Sponsors
–  Use the New Delhi Metro and Chinese Delivery Approach
–  Use balance sheet of government via appropriate
instruments to incentivize the private sector and kickstart
investments (VGF, IFF etc)
–  Use creative approaches like Annuity or availability PPPs
–  Exploit Scale (Use program approach to create scale)

Infrastructure Concession Regulatory Commission

(I C R C)
Creative Approach - Annuity Concession Model for eg.
Roads
•  In order to accelerate use of PPP to improve roads in Africa, it is
proposed that annuity payments concession model should be
considered as a viable option.
•  Annuity Concessions are a variant of the Build Operate Transfer
(BOT) PPP model in which the private operator is remunerated
via a fixed, periodic payment ("annuity") from the government
rather than through toll proceeds.
•  Under these PPP contracts, the private operator is responsible
both for constructing the road, as well as for operating and
maintaining it for a fixed period of time.
•  However, this option significantly reduces revenue risk for the
private sector and also incentivizes the private sector to then
propose innovative financing and construction options

19

Infrastructure Concession Regulatory Commission

(I C R C)
Annuity Concession Model eg. Roads
Shorter Project Development Cycle
•  Under annuity concession model the project lifecycle could
be significantly shortened as depicted below:
Development
Phase

Procurement
Phase

Implementation Phase

6 months

TBD

§ Financial and Transaction Advisor Appointed

§ Technical Adviser

§ Financial Model Completed

§ Project Monitoring

§ EOI and RFP Bidding

§ Commissioning Test

§ Bidders Conference

§ Verify Output Requirements

§ Bid Evaluation

§ Contract management

§ Value for Money Test
§ Preferred Bidder
§ Full Business Case
§ Federal Executive Council Approval

20

Infrastructure Concession Regulatory Commission

(I C R C)
Formula 1 PPP Delivery Methodology
Faster PPPs : Implement a new standardized rapid process to accelerate!
deals by approximately 50%, enabling PPP to deliver their expected!
DISGUISED CLIENT EXAMPLE"
impact early - by Mckinsey and Company!
Current timeline!
48 wks"

2 wks"

Evaluation!

Cabinet!
approval!

12-14 months"

2 wks"

From!
Negotiation of Concession Agreement!

Cabinet!
approval!

2 wks"
Signing!
of conces-!
sion agree-!
ment!

~100!
weeks1!

Issues identified!
Incomplete evaluation of"
proposal upfront"
Approvals made without"
sufficient basis"

To!

Lengthy negotiation process due to lack of"
timely and effective decision making"
Lack of strong perspective of ideal outcome"
due to poor upfront analysis"

Filter!
pro-!
posal!

Eval-!
uate!

Direct negotiation!
Prep. RFP!

Key areas of improvement!
Establish decision gates"
( screening )"
Define and syndicate"
upfront project plan"

SOURCE: McKinsey analysis"

Call tender!

Evaluate bids!
and negotiate!

Evaluation to include"
(in parallel)"
– Market-backed"
assessment"
– Leverage Term"
Sheet"

Final-!
ise!

Reduce"
time by!
50%!
40-50!
weeks1!

Standardize approach"
for similar PPPs:"
– Front-load analyses and"
decisions on Key Terms"
– Batch approvals"
– Guided comprehensive"
RFP process"

Focus on legal "
negotiations"
Streamline governance"

Accelerated!
completion of PPPs!
deals!
McKinsey & Company"

| 9"

Infrastructure Concession Regulatory Commission

(I C R C)
The Indian PPP Story
1.  India was in desperate need to upgrade its infrastructure in order
to accommodate its economic growth potential
2.  Government decided to aggressively apply PPP to complement
conventional project delivery
3.  Leading to an increasing number of PPP projects in past decade
4.  Making India one of the leading PPP markets today
5.  Front mover focus on the roads sector
6.  Supported by a well established, coherent and cohesive enabling
environment and process standardization
7.  Including a set of relevant financial instruments
8.  Leading to significantly improved infrastructure

22

Infrastructure Concession Regulatory Commission

(I C R C)
PPP Ambition
Government decided to aggressively apply PPP to complement conventional
project delivery

USD 1,000 billion
30%

40%

USD 514 billion
30%
USD 222 billion

70%

20%
20%

2002 - 2007

2007 - 2012
Public

2012 - 2017

PPP

Sources: 10th, 11th and 12th Five Year Plan

23

Infrastructure Concession Regulatory Commission

(I C R C)
PPP Status
Making India one of the leading PPP markets today
…and value in USD billion

In terms of number of projects…
UK 2008

935

1
India 2009

450

Mainland Europe 2001
-2008

50

215

Korea 2007

126

Canada 2010

50

145

Australia 2005

100

South Africa 2009
1Including

100

55
32

19

projects in tender

Sources: University of Sydney, IFSL, The Conference Board of
Canada, National Treasury South Africa, Ministry of Strategy and
Finance in Korea, PPP India database, adapted by VandenBroek
Consulting
Infrastructure

24

Concession Regulatory Commission

24
(I C R C)
PPP Framework
Supported by a well established, standardized, coherent and cohesive enabling
environment (The PPP Ecosystem)
PPP Program
To date some 450 projects delivered
through PPP and governments intends to use PPP for
up to 40% of its upcoming infrastructure investments

Policy Pillar
•  Periodic Five Year
Plan clearly
indicate PPP
targets per sector
•  Guidance is
provided by
Guidelines and
Model Concession
Agreements
•  Various state level
PPP Laws
(Infrastructure Acts)
or PPP policy
statements

Institutional Pillar
•  Department for
Economic Affairs
coordinates and
support PPP
•  Most States
established PPP
Cells
•  PPP Approval
Committee
•  Panel of Transaction
advisors for expert
support
•  Nationwide Training
program developed

Financial Pillar
•  India Infrastructure
Development Fund
•  Viability Gap Fund
•  Fiscal incentives
•  India Infrastructure
Finance Company
Ltd
•  Several state
specific funds to
facilitate PPP

Local conditions: Significant need for infrastructure in a rapidly growing economy hampered by fiscal constraints

25

Infrastructure Concession Regulatory Commission

(I C R C)
PPP Institutional Framework
PPPs can only be effective if built on a solid, clear and
transparent PPP policies, laws and institutions

4th PPP
Transactions
3rd PPP Institutions
2nd PPP Laws
1st PPP Policies

Infrastructure Concession Regulatory Commission

(I C R C)
Quick Roll Out PPP Case Studies on
Medical, Agriculture, Market and Road
PPPs from Lagos, India, UK etc

Infrastructure Concession Regulatory Commission

(I C R C)
POWER PPP - AKUTE/ADIYAN WATER WORKS –
12.15MW IPP
•  12.15	
  MW	
  provided	
  by	
  4	
  x	
  3	
  MW	
  GE	
  
Jenbacher	
  gas	
  engines	
  
•  13km	
  natural	
  gas	
  pipeline	
  connected	
  to	
  
exis2ng	
  natural	
  gas	
  infrastructure	
  	
  
•  $25.5	
  million	
  total	
  installed	
  cost	
  
•  12	
  month	
  construc2on	
  period	
  and	
  	
  
commenced	
  	
  opera2ons	
  in	
  January	
  2010	
  
•  10	
  year	
  PPA	
  with	
  LWC	
  
•  Facility	
  Agreement	
  
	
  

Benefits	
  to	
  LWC	
  
•  Constant,	
  reliable,	
  affordable	
  power	
  for	
  
LWC	
  (40%	
  savings)	
  
•  Improvement	
  in	
  water	
  delivery	
  –	
  (85%	
  vs	
  
32%)	
  
•  Service	
  level	
  coverage	
  increased	
  by	
  95%	
  
28

Infrastructure Concession Regulatory Commission

	
  	
  28	
  

(I C R C)
Medical/Hospital PPP Framework
Private
Operator

$
• 
• 
• 
• 
• 
• 
• 

Ministry of Health

PPP	
  Agreement	
  

Detailed designs
Capital financing
Construction
Medical supplies & equipment
Clinical services
Maintenance
Non-clinical services

New	
  
Hospital	
  	
  

$
•  Sector Policies and Strategy
•  Service Package
•  Reimbursement for all clinical and
non-clinical services
•  Performance monitoring
•  Joint Services Committee

•  Staffing and Training

MEDICAL MOBILE UNITS (MMU)

Infrastructure Concession Regulatory Commission

(I C R C)
AGRIC EQUIPMENT MODEL PPP GUJARAT INDIA – ESTABLISHMENT OF
AGRICULTURAL TRACTOR AND Contents RESOURCE CENTRES
IMPLEMENTS
q  Objective – Facilitate Farm Mechanization and

Productivity
q  Public Partner – Government of Gujarat India
q  Private Partner – John Deere Tractors India/USA
q  Role of Private Partner
▪  Establish centers with 500 tractors and 13
different implements per centre.
▪  Provide Trained Operators and Mechanics
▪  Provide Extension Support Services
▪  Train 1000 locals as tractor operators and 500 as
mechanics.
q  Role of Government
▪  Provide land and revenue guarantees on
minimum guarantees (Note if utilization exceeds
minimum by agreed percentage excess
revenue is 50/50 with government).
q  Role of Farmers – Use tractors and pay only for
operating and maintenance costs. Provide via
cooperatives provide individuals to be trained as
tractor operators and mechanics.

Infrastructure Concession Regulatory Commission

30
(I C R C)
State Road PPP – Ahmadabad Mehsana Toll Road Company Limited
Contents
(AMTRL); Gujarat India
q 
q 

Private Partner – AMTRL and Public Partner – PWD GoG
Scope BoT Ahmadabad to Mehsana
▪  Widening & Strengthening of Existing 51.6 km long road from
two lanes to four lanes divided carriageway and construction
of continuous service roads on either side.
▪  Widening & Strengthening of Existing 11.5 km long two lanes
Kadi - Kalol Spur road.
▪  Bypass of 2.3 km long at Sertha village on left side of the
existing road.
▪  2 Nos. Main Toll Plazas one Ahmadabad side and other
Mehsana side at Km 20+000 and Km 65+500 respectively and
two intermediate toll plazas at Chhatral and Nandasan
respectively.
▪  2 Nos. Road over Bridges (RoB) & 2 Nos. Minor Bridges, 1 No.
Road under Bridge (RuB) and 5 Nos. Underpasses of minimum
size of 5 m x 3 m and 5 Nos. Cattle Crossings of minimum size 3
m x 2.1 m.
▪  Provision of retro-reflective signboards to improve road safety
with very good riding quality to enhance user comfort.
▪  Toll Rates are based on road user benefits including savings in
Vehicle Operating Costs, Fuel and Time.
▪  Round-the-clock Highway Patrolling
▪  24 hours Ambulance services
▪  Extensive tree plantation and transplantation of 1500 nos. trees.
Provision of roadside arboriculture and landscaping.
▪  Completed 8 months ahead of schedule and under budget

Infrastructure Concession Regulatory Commission

31
(I C R C)
PPP for Truck Stop Facility UK
Malaysia

Currently in Africa trucks stop at will on the Highways near cities, denying
throughput of essential traffic – the economic arteries of many nations; potential
PPP project could develop income streams from service provision
Infrastructure Concession Regulatory Commission

(I C R C)
Nigerian PPPs First Mover Projects Pipeline

- 
- 
- 
- 
- 

Power (Hydro Gencos)
Transport (Roads)
Trasport (Rail and Ports)
Urban Infrastructure (FCT)
Social (Hospital)

Infrastructure Concession Regulatory Commission

(I C R C)
Thoughts Points for All – Invest in Nigeria
q  Consistent Democratic Government
for 13 Years
q  Fighting corruption in Public and
private sectors
q  Policy consistency and long term
planning framework
q  Reform in critical sectors: Energy,
Financial, Civil Service
q  Growth in the Non-oil Sector:
Telecom, Agriculture, Services
q  Ratings Upgrade
34

Infrastructure Concession Regulatory Commission

(I C R C)
Private TO NIGERIA….TRANSFORMED BY PPPs This
WELCOME Sector Strengths
is the year ......2020.....!!!!

923,764,000 Square
Metres of Oppurtunities

Infrastructure Concession Regulatory Commission

(I C R C)
ICRC – Passion That Will Make A
Difference - THANK YOU

Poverty anywhere is a threat to security
everywhere

CONTACT DETAILS:
Engr. Chidi Izuwah Snr
Executive Director, PPP Res. Centre,
Infrastructure Concession Regulatory Commission
Email: c.izuwah@icrc.gov.ng
Website: www.icrc.gov.ng
Infrastructure Concession Regulatory Commission

(I C R C)

African ppp doc 1

  • 1.
    (I C RC) ACCELERATED PPP PROCUREMENT OPTIONS FOR EMERGING MARKETS – DELIVERING HIGH QUALITY PPPs, VFM AND INFRASTRUCTURE SERVICE AT SPEED ENGR. CHIDI IZUWAH ED, PPP RESOURCE CENTRE, INFRASTRUCTURE CONCESSION REGULATORY COMMISSION Abuja , November 2012 Infrastructure Concession Regulatory Commission (I C R C)
  • 2.
    Presentation Outline 1. Infrastructure& the Economy and ICRC 2. PPP Procurement Lessons 3. PPP Procurement Time Challenge 4. PPP Procurement Acceleration Options 5. Invest in Nigeria Value Proposition 2 Infrastructure Concession Regulatory Commission (I C R C)
  • 3.
    Infrastructure & theEconomy   If Nigeria was a three legged stool I would say its stability and future depends on how well and how fast we tackle the infrastructure problem – the shaky leg of the stool Dr. Ngozi Okonjo-Iweala – HMF/CME Infrastructure Concession Regulatory Commission (I C R C)
  • 4.
    Africa is BIG!and full of Opportunities W Europe USA China Africa represents: 20% of global land area 13% of global population 2 % of global economic output • North-South cross-Continental flight : 11 hours • 5 time zones India Infrastructure Concession Regulatory Commission (I C R C)
  • 5.
    ......Nigeria centre ofthe world Infrastructure Concession Regulatory Commission (I C R C)
  • 6.
    Projections (Top 20League) Goldman Sachs projections places Nigeria as; •  the 20th largest economy by 2025 on the basis of GDP •  21st on per Capita Income (2025). •  12th largest economy if Nigeria maintains its growth trajectory to 2050, overtaking Korea, Italy and Canada on GDP. Infrastructure Concession Regulatory Commission (I C R C)
  • 7.
    ICRC - Whoare we The ICRC is the FGN s regulatory agency charged with catalysing public and private efforts/resources for the development and implementation of a world class PPP framework towards the development of world class brownfield and greenfield infrastructure for the benefit of Nigerians www.icrc.gov.ng Infrastructure Concession Regulatory Commission (I C R C)
  • 8.
    Classical Major PPPTransaction Steps Decision to enter PPP Process – Priority Projects PPP Road Map and Framework Appoint Team Procurement Publication and Announcements PPP Preparation Studies and Business Case Select Advisers PPP Prequalification Prepare and Issue Bidding Documents Conduct Partner Procurement Implementation, Service Delivery and Monitoring Negotiation and Contract Signing Bid Evaluation and Award Infrastructure Concession Regulatory Commission (I C R C)
  • 9.
    PPP  LIFECYCLE  in  line  with  Na2onal  Policy   § Project Identification Preliminaries § Project Prioritization § Project Selection Development Phase NEEDS ANALYSIS PPP OPTIONS APPRAISAL VALUE FOR MONEY AFFORDABILITY SUSTAINABILITY PRELIM RISK MATRIX VIABILITY/BANKABILITY VGF OBC OBC APPROVAL Procurement Phase TRANSACTION ADVISER EoI AND RFP BIDDING BIDDERS CONFERENCE BID EVALUATION VALUE FOR MONEY TEST PREFERRED BIDDER FULL BUSINESS CASE FEC APPROVAL Implementation Phase TECHNICAL ADVISER MONITOR DESIGN AND CONSTRUCTION COMMISSIONING TEST VERIFY OUTPUT REQUIREMENTS CONTRACT MANAGEMENT PREPARING AND IMPLEMENTING EFFICIENT AND EFFECTIVE PPP TRANSACTIONS Infrastructure Concession Regulatory Commission (I C R C)
  • 10.
    Typical Power ProjectStructure / Timeline - IPP Offtaker – Corporate Customer, Bulk Trader Sponsor Vehicle (Private Investors) Power Purchase Agreement Shareholders agreement (Equity) Project Company Institutional Investors Other Service Providers Commercial Lenders Financing Agreements Shareholder loan agreement EPC Contract EPC Contractor Development / Finance (3 Years) DFIs/MFIs O&M Contract Fuel Supply Agreement Operations & Maintenance Contractor Generation License, Permits NERC/ESIA/Other Government Fuel Supplier Construction (1 – 5 Years) Operations (10 – 30 Years) Infrastructure Concession Regulatory Commission (I C R C)
  • 11.
    Project Development CycleTiming •  The PPP project development cycle is rigorous...time !!! Development Phase 9 months Procurement Phase Implementation Phase 12 months* 3 – 5 years * § Needs Analysis § Transaction adviser * § Technical Adviser § PPP Options appraisal § EoI and RFP § Project Monitoring § Value for Money § Bidding § Commissioning Test § Affordability § Bidders Conference § Verify Output § Sustainability § Bid Evaluation Requirements § Prelim Risk Matrix § Value for Money Test § Contract management § Viability/Bankability § Preferred Bidder § VGF assessment § Full Business Case § OBC approval § FEC Approval * Indicative timelines 11 Infrastructure Concession Regulatory Commission (I C R C)
  • 12.
    … PPP &TIME CHALLENGE •  The biggest challenge to procuring infrastructure via PPP is time •  Procurement of infrastructure can be an intensely political process •  Politicians are keen (to produce infrastructure quickly; to preserve their decision making prerogatives; to reward supporters) •  PPPs require: –  TIME to undertake a proper feasibility study/business case –  TIME to secure approvals –  TIME to conduct a fair, equitable, transperent and competitive procurement process. Infrastructure Concession Regulatory Commission (I C R C)
  • 13.
    PPP Time toDeliver Case Study from Canada and Nigeria •  Alberta s southeast(P3) and southwest Edmonton ring roads are the most comparable pair. •  The Edmonton Ring Road was part of a long-standing provincial and city commitment to create a highway trade corridor linking Alberta to the United States and Mexico. •  The P3 project was delivered two years earlier than the conventionally procured project (P3 4yrs) •  Lekki Toll Road from Inception to Financial Closure 5 to 6yrs Infrastructure Concession Regulatory Commission (I C R C)
  • 14.
    WHAT WE NEED! Typicalimpact! FASTER PPP! S! … through a rapid and simple process! standardized across all PPP deals to ensure that" all deals get done quickly and accurately! BETTER PPP! S! … through PPP structures that ensure optimal! allocation of deal roles, risks and" responsibilities between public and private sector" MORE PPPs! Execute a greater number of PPP transactions" to increase the quantum of private investment! Reduce! time by! 50%! Increase! value by! 40-! 50%! Increase! capacity by! 90%! Infrastructure Concession Regulatory Commission (I C R C)
  • 15.
    Forumula 1 Approachto PPPs §  Fast §  Safe §  Reliable §  Rules known §  Competent team members §  Timing is known to all §  Records especially time is transperently kept and monitored §  Commitment by all §  You need a Formula 1 type ecosystem to make it fast Infrastructure Concession Regulatory Commission (I C R C)
  • 16.
    Infrastructure Leadership Quotefrom Other Lands Contents We  told  them  we  will  give  them  roads  to  bring  their   products  on,  schools  to  send  their  children  to,   hospitals  and  clinics  to  improve  their  health.     We  cannot  waste  our  8me.     We  have  to  work  fast  to  show  results  for  we  are  judged   by  our  performance,  not  what  we  promise   Tun Abdul Razak Hussein – Prime Minister of Malaysia 1970 - 1976 Infrastructure Concession Regulatory Commission 16 (I C R C)
  • 17.
    PPP Acceleration –  HaveRobust and Well communicated legal and regulatory framework, PPP Manual etc (Minimize rework get permission to copy and adapt from others – use WBI, AfDBi, ADBi, UNESCAP leverage) –  Use PPPIRC of the World Bank –  Agree PPP Pipeline at highest levels –  Extensive Capacity building –  Have a PPP Centre of Excellence –  Pre Qualify and Enpanel Consultants and TAs –  Standardization – PPP Manual, OBC, RFQ, RFP, Contracts, Financial Model –  Model Concession Agreements –  Leverage learnings from others (Assignments for Staff) –  Have regular PPP fora with all stakeholders Infrastructure Concession Regulatory Commission (I C R C)
  • 18.
    PPP Acceleration –  PPPUnits in MDAs –  Have P5 Network –  Creative Use of High Quality Unsolicited Proposals from Credible Sponsors –  Use the New Delhi Metro and Chinese Delivery Approach –  Use balance sheet of government via appropriate instruments to incentivize the private sector and kickstart investments (VGF, IFF etc) –  Use creative approaches like Annuity or availability PPPs –  Exploit Scale (Use program approach to create scale) Infrastructure Concession Regulatory Commission (I C R C)
  • 19.
    Creative Approach -Annuity Concession Model for eg. Roads •  In order to accelerate use of PPP to improve roads in Africa, it is proposed that annuity payments concession model should be considered as a viable option. •  Annuity Concessions are a variant of the Build Operate Transfer (BOT) PPP model in which the private operator is remunerated via a fixed, periodic payment ("annuity") from the government rather than through toll proceeds. •  Under these PPP contracts, the private operator is responsible both for constructing the road, as well as for operating and maintaining it for a fixed period of time. •  However, this option significantly reduces revenue risk for the private sector and also incentivizes the private sector to then propose innovative financing and construction options 19 Infrastructure Concession Regulatory Commission (I C R C)
  • 20.
    Annuity Concession Modeleg. Roads Shorter Project Development Cycle •  Under annuity concession model the project lifecycle could be significantly shortened as depicted below: Development Phase Procurement Phase Implementation Phase 6 months TBD § Financial and Transaction Advisor Appointed § Technical Adviser § Financial Model Completed § Project Monitoring § EOI and RFP Bidding § Commissioning Test § Bidders Conference § Verify Output Requirements § Bid Evaluation § Contract management § Value for Money Test § Preferred Bidder § Full Business Case § Federal Executive Council Approval 20 Infrastructure Concession Regulatory Commission (I C R C)
  • 21.
    Formula 1 PPPDelivery Methodology Faster PPPs : Implement a new standardized rapid process to accelerate! deals by approximately 50%, enabling PPP to deliver their expected! DISGUISED CLIENT EXAMPLE" impact early - by Mckinsey and Company! Current timeline! 48 wks" 2 wks" Evaluation! Cabinet! approval! 12-14 months" 2 wks" From! Negotiation of Concession Agreement! Cabinet! approval! 2 wks" Signing! of conces-! sion agree-! ment! ~100! weeks1! Issues identified! Incomplete evaluation of" proposal upfront" Approvals made without" sufficient basis" To! Lengthy negotiation process due to lack of" timely and effective decision making" Lack of strong perspective of ideal outcome" due to poor upfront analysis" Filter! pro-! posal! Eval-! uate! Direct negotiation! Prep. RFP! Key areas of improvement! Establish decision gates" ( screening )" Define and syndicate" upfront project plan" SOURCE: McKinsey analysis" Call tender! Evaluate bids! and negotiate! Evaluation to include" (in parallel)" – Market-backed" assessment" – Leverage Term" Sheet" Final-! ise! Reduce" time by! 50%! 40-50! weeks1! Standardize approach" for similar PPPs:" – Front-load analyses and" decisions on Key Terms" – Batch approvals" – Guided comprehensive" RFP process" Focus on legal " negotiations" Streamline governance" Accelerated! completion of PPPs! deals! McKinsey & Company" | 9" Infrastructure Concession Regulatory Commission (I C R C)
  • 22.
    The Indian PPPStory 1.  India was in desperate need to upgrade its infrastructure in order to accommodate its economic growth potential 2.  Government decided to aggressively apply PPP to complement conventional project delivery 3.  Leading to an increasing number of PPP projects in past decade 4.  Making India one of the leading PPP markets today 5.  Front mover focus on the roads sector 6.  Supported by a well established, coherent and cohesive enabling environment and process standardization 7.  Including a set of relevant financial instruments 8.  Leading to significantly improved infrastructure 22 Infrastructure Concession Regulatory Commission (I C R C)
  • 23.
    PPP Ambition Government decidedto aggressively apply PPP to complement conventional project delivery USD 1,000 billion 30% 40% USD 514 billion 30% USD 222 billion 70% 20% 20% 2002 - 2007 2007 - 2012 Public 2012 - 2017 PPP Sources: 10th, 11th and 12th Five Year Plan 23 Infrastructure Concession Regulatory Commission (I C R C)
  • 24.
    PPP Status Making Indiaone of the leading PPP markets today …and value in USD billion In terms of number of projects… UK 2008 935 1 India 2009 450 Mainland Europe 2001 -2008 50 215 Korea 2007 126 Canada 2010 50 145 Australia 2005 100 South Africa 2009 1Including 100 55 32 19 projects in tender Sources: University of Sydney, IFSL, The Conference Board of Canada, National Treasury South Africa, Ministry of Strategy and Finance in Korea, PPP India database, adapted by VandenBroek Consulting Infrastructure 24 Concession Regulatory Commission 24 (I C R C)
  • 25.
    PPP Framework Supported bya well established, standardized, coherent and cohesive enabling environment (The PPP Ecosystem) PPP Program To date some 450 projects delivered through PPP and governments intends to use PPP for up to 40% of its upcoming infrastructure investments Policy Pillar •  Periodic Five Year Plan clearly indicate PPP targets per sector •  Guidance is provided by Guidelines and Model Concession Agreements •  Various state level PPP Laws (Infrastructure Acts) or PPP policy statements Institutional Pillar •  Department for Economic Affairs coordinates and support PPP •  Most States established PPP Cells •  PPP Approval Committee •  Panel of Transaction advisors for expert support •  Nationwide Training program developed Financial Pillar •  India Infrastructure Development Fund •  Viability Gap Fund •  Fiscal incentives •  India Infrastructure Finance Company Ltd •  Several state specific funds to facilitate PPP Local conditions: Significant need for infrastructure in a rapidly growing economy hampered by fiscal constraints 25 Infrastructure Concession Regulatory Commission (I C R C)
  • 26.
    PPP Institutional Framework PPPscan only be effective if built on a solid, clear and transparent PPP policies, laws and institutions 4th PPP Transactions 3rd PPP Institutions 2nd PPP Laws 1st PPP Policies Infrastructure Concession Regulatory Commission (I C R C)
  • 27.
    Quick Roll OutPPP Case Studies on Medical, Agriculture, Market and Road PPPs from Lagos, India, UK etc Infrastructure Concession Regulatory Commission (I C R C)
  • 28.
    POWER PPP -AKUTE/ADIYAN WATER WORKS – 12.15MW IPP •  12.15  MW  provided  by  4  x  3  MW  GE   Jenbacher  gas  engines   •  13km  natural  gas  pipeline  connected  to   exis2ng  natural  gas  infrastructure     •  $25.5  million  total  installed  cost   •  12  month  construc2on  period  and     commenced    opera2ons  in  January  2010   •  10  year  PPA  with  LWC   •  Facility  Agreement     Benefits  to  LWC   •  Constant,  reliable,  affordable  power  for   LWC  (40%  savings)   •  Improvement  in  water  delivery  –  (85%  vs   32%)   •  Service  level  coverage  increased  by  95%   28 Infrastructure Concession Regulatory Commission    28   (I C R C)
  • 29.
    Medical/Hospital PPP Framework Private Operator $ •  •  •  •  •  •  •  Ministryof Health PPP  Agreement   Detailed designs Capital financing Construction Medical supplies & equipment Clinical services Maintenance Non-clinical services New   Hospital     $ •  Sector Policies and Strategy •  Service Package •  Reimbursement for all clinical and non-clinical services •  Performance monitoring •  Joint Services Committee •  Staffing and Training MEDICAL MOBILE UNITS (MMU) Infrastructure Concession Regulatory Commission (I C R C)
  • 30.
    AGRIC EQUIPMENT MODELPPP GUJARAT INDIA – ESTABLISHMENT OF AGRICULTURAL TRACTOR AND Contents RESOURCE CENTRES IMPLEMENTS q  Objective – Facilitate Farm Mechanization and Productivity q  Public Partner – Government of Gujarat India q  Private Partner – John Deere Tractors India/USA q  Role of Private Partner ▪  Establish centers with 500 tractors and 13 different implements per centre. ▪  Provide Trained Operators and Mechanics ▪  Provide Extension Support Services ▪  Train 1000 locals as tractor operators and 500 as mechanics. q  Role of Government ▪  Provide land and revenue guarantees on minimum guarantees (Note if utilization exceeds minimum by agreed percentage excess revenue is 50/50 with government). q  Role of Farmers – Use tractors and pay only for operating and maintenance costs. Provide via cooperatives provide individuals to be trained as tractor operators and mechanics. Infrastructure Concession Regulatory Commission 30 (I C R C)
  • 31.
    State Road PPP– Ahmadabad Mehsana Toll Road Company Limited Contents (AMTRL); Gujarat India q  q  Private Partner – AMTRL and Public Partner – PWD GoG Scope BoT Ahmadabad to Mehsana ▪  Widening & Strengthening of Existing 51.6 km long road from two lanes to four lanes divided carriageway and construction of continuous service roads on either side. ▪  Widening & Strengthening of Existing 11.5 km long two lanes Kadi - Kalol Spur road. ▪  Bypass of 2.3 km long at Sertha village on left side of the existing road. ▪  2 Nos. Main Toll Plazas one Ahmadabad side and other Mehsana side at Km 20+000 and Km 65+500 respectively and two intermediate toll plazas at Chhatral and Nandasan respectively. ▪  2 Nos. Road over Bridges (RoB) & 2 Nos. Minor Bridges, 1 No. Road under Bridge (RuB) and 5 Nos. Underpasses of minimum size of 5 m x 3 m and 5 Nos. Cattle Crossings of minimum size 3 m x 2.1 m. ▪  Provision of retro-reflective signboards to improve road safety with very good riding quality to enhance user comfort. ▪  Toll Rates are based on road user benefits including savings in Vehicle Operating Costs, Fuel and Time. ▪  Round-the-clock Highway Patrolling ▪  24 hours Ambulance services ▪  Extensive tree plantation and transplantation of 1500 nos. trees. Provision of roadside arboriculture and landscaping. ▪  Completed 8 months ahead of schedule and under budget Infrastructure Concession Regulatory Commission 31 (I C R C)
  • 32.
    PPP for TruckStop Facility UK Malaysia Currently in Africa trucks stop at will on the Highways near cities, denying throughput of essential traffic – the economic arteries of many nations; potential PPP project could develop income streams from service provision Infrastructure Concession Regulatory Commission (I C R C)
  • 33.
    Nigerian PPPs FirstMover Projects Pipeline -  -  -  -  -  Power (Hydro Gencos) Transport (Roads) Trasport (Rail and Ports) Urban Infrastructure (FCT) Social (Hospital) Infrastructure Concession Regulatory Commission (I C R C)
  • 34.
    Thoughts Points forAll – Invest in Nigeria q  Consistent Democratic Government for 13 Years q  Fighting corruption in Public and private sectors q  Policy consistency and long term planning framework q  Reform in critical sectors: Energy, Financial, Civil Service q  Growth in the Non-oil Sector: Telecom, Agriculture, Services q  Ratings Upgrade 34 Infrastructure Concession Regulatory Commission (I C R C)
  • 35.
    Private TO NIGERIA….TRANSFORMEDBY PPPs This WELCOME Sector Strengths is the year ......2020.....!!!! 923,764,000 Square Metres of Oppurtunities Infrastructure Concession Regulatory Commission (I C R C)
  • 36.
    ICRC – PassionThat Will Make A Difference - THANK YOU Poverty anywhere is a threat to security everywhere CONTACT DETAILS: Engr. Chidi Izuwah Snr Executive Director, PPP Res. Centre, Infrastructure Concession Regulatory Commission Email: c.izuwah@icrc.gov.ng Website: www.icrc.gov.ng Infrastructure Concession Regulatory Commission (I C R C)