This document provides an overview of project financing and public-private partnerships (PPPs). It begins with definitions of project financing and PPPs. It then outlines the typical stages in a project financing process, including identification, feasibility studies, equity and debt arrangements, negotiation, monitoring, repayment, and disbursement. Key aspects of project financing structures are highlighted such as high debt levels and concentrated ownership. PPP models like BOT, BOOT, and ROT are described. Critical success factors for PPPs include appropriate risk allocation, value for money, and performance management. The document concludes with details on Pakistan's PPP Unit and examples of executed, current and planned PPP projects.

1. Project Financing and Public
Private Partnership (PPP)
Presented by;
1. SYED AJMAL KAMAL
2. HAFIZ HASSAN QADRI
3. M. ASIM U.K
4. MUHAMMAD NAEEM
5. DANIYAL FAIQ
Presented to;
SIR OSAMA BASHIR SOMRO

2. Introduction –
What isProjectFinancing?
Project finance is especially attractive to the private sector because they can fund major
projects off balance sheet.
“The financing of long-term infrastructure, industrial projects and public services based upon a
non-recourse or limited recourse financial structure where project debt and equity used to
finance the project are paid back from the cash flows generated by the project.”
International Project Finance Association (IPFA) defined project financing as:

3. /
Stages in Project Financing –
Project Identification.
1
Identification of the Project
• Government announced
• Self conceived / initiated
2
Identification of market
• Product of the project
• Users of the product
• Marketability of the product
• Marketing Plan

4. Project
finance
uses
HIGH GEARING
REQUIRING LESS EQUITY
TAX BENEFITS
PUBLIC SECTOR USE
OF REVENUE
LONG TERM DEBT
FUNDING

5. Introduction –
Forwhomisitimportanttounderstandproject finance?
Financial
managers
Sponsors Lenders
Consultants
and
practitioners
Project
managers
Builders Suppliers Engineers.
Researchers Students.

6. Stages in Project Financing –
Technical and Financial Feasibility.
Technical feasibility
• Location
• Design
• Equipment
• Operations /
Processes.
Financial feasibility
• Business plan / model
• Projected financial
statements with
assumptions
• Financing structure
• Pay-back, IRR, NPV etc.

7. Sources of project finance
Equity refers to capital
invested by sponsor(s) of
the PPP project and others.
Debt refers to borrowed
capital from banks and
other financial institutions.
It has fixed maturity and a
fixed rate of interest is paid
on the principal.

8. Stages in Project Financing
– Equity arrangement.
Sponsors
Lead sponsors
Co – sponsors
Private equity participation
Angel investors – Private equity
funding
Financial institutions
Non-financial institutions.

9. Stages in Project Financing –
Negotiation and syndication.
Lenders
Banks
Non- banking financial institutions.
International lending institutions.
Syndication
Lead arranger.
Co-arrangers.
Negotiation
Pricing.
Documentation.
Disbursement.

10. Stages in Project Financing
– Monitoring and Review
Why?
• Project is running on
schedule
• Project is running within
planned costs
• Project is receiving
adequate costs.
How?
• First-hand information.
• Project completion status
reports.
• Project schedule chart.
• Project financial status
report.
• Project summary report.
• Informal reports.

11. Stages in Project Financing –
Repayment & Subsequent Monitoring
Repayments
Grace period.
Monthly installment.
Quarterly installments.
Dividends
Monitoring?
Appointment of directors
and managers.
Management meetings.
Board meetings.

12. Stages in Project Financing
– Disbursement.
Equity Disbursement
Shares application.
Shares proceeds.
Share certificates.
Loan Disbursement
Sponsor loans
Advance payments
Progress Payment

13. Conclusion – Highlights of
Project FinancingStructure.
Highly concentrated equity and
debt ownership
• One to three equity sponsors.
• Syndicate of banks and/or
financial institutions provide
credit.
• Governing Board comprised of
mainly affiliated directors from
sponsoring firms.
Extremely high debt levels
• Mean debt of 70% and as high as
nearly 100%.
• Balance of capital provided by
sponsors in the form of equity or
quasi equity (subordinated debt).
• Debt is non-recourse to the
sponsors.
• Debt service depends exclusively
on project revenues.
• Has higher spreads than
corporate debt.

14. What isPPP?
Public private partnerships (PPP) are
agreements between government and the
private sector for the purpose of providing
public infrastructure, community facilities and
related services.
The private sector enter a contract with
government for the design, delivery, and
operation of the facility or infrastructure and
the services provided.
The private sector finance the capital
investment and recover the investment over
the course of the contract.
The asset transfers back to the public sector at
the end of the contract

15. Typical structure for PPPs
Government
PPP
Agreement
Private Sector
(Special Purpose)
Loan
agreement Debt
Subcontractors
Subcontractor
Construction
Subcontractor
Operations
ShareholdingEquity

16. Why use PPPs?
• Focus on outputs
• PPPs make projects affordable
• Better value for money over the lifetime of the project
• More efficiency in procurement
• Faster project delivery with more projects in a defined
timeframe
• Risks are allocated to the party best able to manage the risk
• Better assets utilization and social and economic benefits.
• Public sector only pay when services are delivered
• Injection of private sector capital

17. Building the
foundation
for PPPs
Central PPP Unit- to lead, drive
and co-ordinate the PPP process
PPP Units in
• Department of Transport
• Department of Environment and Local
Government
• Department of Education and Science
• Department of Health and Children
• Office of Public Works
• National Roads Authority
• Rail Procurement Authority
• Courts Service

18. NEED FOR PPP(PUBLIC PRIVATE
PARTNERSHIP)
The highways sector is witnessing significant
interest from both domestic as well as
foreign investors following the policy
initiatives taken by the Government of
Pakistan to promote Public Private
Partnership (PPP) on Design, Build, Finance,
Operate and Transfer (DBFOT) basis.

19. Critical
stages of a
PPP
Initial
feasibility
Procurement
phase
Construction
phase
Operation
phase

20. SOME OF PPP MODELS ARE
GIVEN BELOW:
BUILD OPERATE AND TRANSFER (BOT)
Critical success factors in this model are:
•Shortest construction period
•Advantage of good technical solution
•Lowest construction cost and toils
•Largest share of revenue to the government
•Shortest concession period
•Safe standby credit from government in the event of cost over-run
•Least environmental impact
BUILD
OPERATE
TRANSFER

21. SOME OF PPP
MODELS ARE
GIVEN
BELOW:
A few variation in this model are:
Build, own, operate, and transfer (BOOT)
Build, own and operate (BOO); No transfer of ownership to the
private entrepreneur
Build, own, operate and lease (BOOL)
Build, own, operate and sell (BOOS)
Build, operate, lease and transfer (BOLT); The operator builds the
highway infrastructure, operates it for certain period, leases it
from the government, and finally transfer it at the end.
Build, operate,train and transfer (BOTT)

22. /
SOME OF PPP MODELS ARE GIVEN
BELOW:
LEASE DEVELOP OPERATE
Lease, develop and operate
(LDO)
The government retains
ownership of an existing facility,
receives payments from a
private lessee as specified in
the lease agreement, who, in
turn, finance and operates the
facility.

23. SOME OF PPP MODELS ARE
GIVEN BELOW:
Rehabilitate, operate and transfer (ROT)
This model is similar to BOT, the work being rehabilitation of an existing
facility.
REHABILITATE OPERATE TRNASFER

24. FACTORS AFFECTING PPP
Risk allocation
As an underlying principle, risks have been allocated to the
parties that are best suited to manage them. Project risks
have, therefore, been assigned to the private sector to the
extent it can manage them.
The commercial and technical risks relating to construction,
operation and maintenance are being allocated to the
Concessionaire, as it is best suited to manage them. The
traffic risk, however, is significantly mitigated as the
Project Highway is a natural monopoly where existing
traffic volumes can be measured with reasonable accuracy.
On the other hand, all direct and indirect political risks are
being assigned to the Authority.

25. FACTORS
AFFECTING
PPP
Local traffic
Owing to the absence of an
alternative road, highways
should be open to use by
residents without any payment
of tolls until free service lanes
are provided.
Frequent users should be
entitled to discounted rates, in
accordance with the tolling
policy.

26. FACTORS
AFFECTING
PPP
Operation and maintenance
Operation and maintenance of the
Project Highway is proposed to be
governed by strict standards with a
view to ensuring a high level of
service for the users.
In sum, operational performance
would be the most important test of
service delivery.

27. What makes
a successful
PPP?
Political will
Government commitment
PPP Champion
Clear output specification
Appropriate risk sharing
Value for money
Performance management

28. PPPU and
Pakistan
As far as Pakistan concern
about project financing and
Private Public Partnership
Units (PPPU)
Multiple projects have been
successfully completed,
executed, and some are in
work in progress and some
are in under pipeline.
According to Private Public
Partnership Units (PPPU) a
finance department of
Government of Sindh.

29. EXECUTED
or
COMPLETED
PROJECTS
(8)
HYDERABAD MIRPURKHAS DUAL CARRIAGEWAY - HMDC
Karachi Thatta Dual Carriageway Project - KTDC
Performance Based Contracts for Health Facilities -
Safety & Security at National Institute of Child H - NICH
Sindh Ambulance Service - SAS
Sindh Nooriabad Power Project - SNPC
Sir Aga Khan Jhirk Mulla Katiyar Bridge - JMK
Vehicle Inspection and Certification System - VICS

30. CURRENT
PROJECTS
(13)
50 MW POWER PLANT FOR K-IV PHASE I - 50MWPP
BRTS Green Line & Orange Line (Bus Operations) - BRTG
BRTS Yellow Line (Infrastructure) - BRTY
Contracting Out of DHQ Civil Hospital -
Dhabeji Industrial Park - DIP
Education Management Organizations - EMOs
English Medium Schools - EMS
Fish, Meat, Fruit & Vegetable Market Project - FMFVM
Ghotki-Kandhkot Bridge Project - GKBP
Khajoor Mandi Khairpur - KWDM
KMC Theme & Safari Park Project - SAFARI
Malir Expressway Project - MEW
Teachers Training Institute for Education - TTI

31. PIPELINE PROJECTS (9)
ARFA KARIM IT
CITY PROJECT -
AKITC
BRTS Blue Line
(Infrastructure) -
BRTB
Dhabeji Pumping
Station - DPS
Domicile & PRC
Automation
Project - DPRCA
Larkana Fruit &
Vegetable Mandi
- LFVM
Link Road (M9-
N5) Project -
M9N5
Livestock Farms -
LSFARMS
Mango Processing
Project - MANGO
Solar Dehydration
Plant for Dates
Project - SDPD

32. /
Conclusion:
Undertake projects for the benefit of the citizens, including the
socially and economically disadvantaged
Allows governments to approach projects hitherto
unobtainable due to lack of funding
Provide incentives to the private sector to adopt green criteria
PPPs allow the injection of private sector capital.

33. Thank
You!