This document provides an overview of public-private partnerships (PPPs) for toll road projects. It discusses key elements for evaluating BOT project economics, including country environment, concession environment, public-private risk sharing, sponsor ability, and financial market environment. It also covers different tolling models and concepts, as well as critical risks and success factors for tolled PPP projects. The document aims to outline effective collaboration between the public and private sectors for delivering tolled bridge and highway projects.
With the increase in public debt, 100% privately funded initiatives are now re-emerging yet experience had shown earlier that early successes of privatization programs were short lived and led later to bailouts / subsidy by Governments. PPP,s are likely to remain a better way to allocate the risks based on each entity’s ability to manage , mitigate and absorb risks. This brief highlights various aspects of PPP’s in terms of explaining the various PPP’s models and PPP’s transactions types, fiscal risks in PPP’s, PPP’s best practices and how to create an enabling PPP Environment. Major MENA PPP’s projects preview of is highlighted.
With the increase in public debt, 100% privately funded initiatives are now re-emerging yet experience had shown earlier that early successes of privatization programs were short lived and led later to bailouts / subsidy by Governments. PPP,s are likely to remain a better way to allocate the risks based on each entity’s ability to manage , mitigate and absorb risks. This brief highlights various aspects of PPP’s in terms of explaining the various PPP’s models and PPP’s transactions types, fiscal risks in PPP’s, PPP’s best practices and how to create an enabling PPP Environment. Major MENA PPP’s projects preview of is highlighted.
IndusLaw recently spoke in Singapore on the subject of Projects & Project Financing in India, highlighting the broad regulatory and document structures encountered and key risks to consider
I am uploading this for the beginners those who can watch and learn how to make an presentation
This can be also helpful for those who wants to know the concept of venture capital
Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights and interests held as secondary security or collateral. Project finance is especially attractive to the private sector because companies can fund major projects off balance sheet.
Clause 14.1 The Contract Price- Understanding Clauses in FIDIC ‘Conditions of...Divyanshu Dayal
•Contract Price is an agreed amount or lump sum amount for the design, execution and completion of the works, remedying of defects and adjustments.
•The Contract Price is inclusive of all taxes, duties and fees and adjusted as per changes in legislation.
•The Contract Price is linked with variation, legislation, access to site, delay damages, provisional sum, costs, unforeseeable difficulties, employer’s risk etc.
This ppt was prepared for educational purpose, and to teach about PUBLIC PRIVATE PARTNERSHIP scheme and their models for using this scheme. Many projects now days are using this method with help of gov. parties or private parties. This methods helps in decreasing load on construction and infrastructure, and road development load from government, as they are not participating in finance of project but let the construction firm, construct the project and run by their names to recover their cost and profit for predetermined time period and on predetermined rate of recovery, either by tolling system or annuity system.
Prepared by the students of corporate finance at the MBA program of IE Business School, this presentation provides an introduction to project finance and analyzes two case studies involving project finance.
A concession can be defined as a system through which a public authority grants specific rights to an organization (private or semi-public) to build, rehabilitate, maintain and operate an infrastructure for a given period. The BOT model (Build-Operate-Transfer) is a type of concession and should not be differentiated. Variations on the BOT include the BOOT (Build-Own-Operate-Transfer) and BOO (Build-Own-Operate). This brief addresses issues like the various concession mechanisms, the shadow toll principle and commercial & financial risks ppp’s involved in the transport sector. A section is also provided on emerging PPP telematics in transport sector.
IndusLaw recently spoke in Singapore on the subject of Projects & Project Financing in India, highlighting the broad regulatory and document structures encountered and key risks to consider
I am uploading this for the beginners those who can watch and learn how to make an presentation
This can be also helpful for those who wants to know the concept of venture capital
Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights and interests held as secondary security or collateral. Project finance is especially attractive to the private sector because companies can fund major projects off balance sheet.
Clause 14.1 The Contract Price- Understanding Clauses in FIDIC ‘Conditions of...Divyanshu Dayal
•Contract Price is an agreed amount or lump sum amount for the design, execution and completion of the works, remedying of defects and adjustments.
•The Contract Price is inclusive of all taxes, duties and fees and adjusted as per changes in legislation.
•The Contract Price is linked with variation, legislation, access to site, delay damages, provisional sum, costs, unforeseeable difficulties, employer’s risk etc.
This ppt was prepared for educational purpose, and to teach about PUBLIC PRIVATE PARTNERSHIP scheme and their models for using this scheme. Many projects now days are using this method with help of gov. parties or private parties. This methods helps in decreasing load on construction and infrastructure, and road development load from government, as they are not participating in finance of project but let the construction firm, construct the project and run by their names to recover their cost and profit for predetermined time period and on predetermined rate of recovery, either by tolling system or annuity system.
Prepared by the students of corporate finance at the MBA program of IE Business School, this presentation provides an introduction to project finance and analyzes two case studies involving project finance.
A concession can be defined as a system through which a public authority grants specific rights to an organization (private or semi-public) to build, rehabilitate, maintain and operate an infrastructure for a given period. The BOT model (Build-Operate-Transfer) is a type of concession and should not be differentiated. Variations on the BOT include the BOOT (Build-Own-Operate-Transfer) and BOO (Build-Own-Operate). This brief addresses issues like the various concession mechanisms, the shadow toll principle and commercial & financial risks ppp’s involved in the transport sector. A section is also provided on emerging PPP telematics in transport sector.
Transport sectors projects are very political entities and governments are still held responsible should there be revenue short fall or distressed situation. further modes of transport do compete with each other but in a limited manner, however, global threats nowadays require certain redundancy in transport network, this affects PPP structure!
Also experience suggests that negotiations between public authorities and prospective concessionaires are rather asymmetrical, and lead to asymmetric risk sharing. Concessionaires have extraordinary bargaining powers as they know no competition exists after the concession is signed.
Ppp for solving public transport woes in indiaAmit Jain
The public transport in most of the cities are dependent on buses, auto rikshaws, cycle rikshaws which are not able to meet the demand, prone to accidents, delays & traffic jams. The cities need to create an efficient and affordable public transport services. The private sector may be invited through PPP to develop an integrated public transport system in a city. The private sector may charge an appropriate user fee (fare) from the users and earn revenue from commercial activities like advertising, renting & leasing of commercial spaces etc to cover his capital and recurring cost.
PPPs are a legitimate funding tool for development and should be embraced by governments globally. However, it should be remembered that governments need to recognize that attracting PPP investment requires an extensive marketing process that highlights their PPP readiness, including institutional capacity to manage PPP projects, the existence of an enabling environment, transparent procurement processes, and a comprehensive risk management structure.
What is BOT project what all are the criteria for the viability to get the project and case study of the project. and what all risk is been faced in this project
International Trade Laws: International Contracts of Sale of Goods Transactions, International Trade Insurance,
Patents, Trademarks, Copyright and Neighboring Rights. Intellectual property Rights, Dispute settlement
Procedures under GATT & WTO, Payment systems in International Trade, International Labour Organization and
International Labour Laws.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Smart cities are driving economic competitiveness, environmental sustainability and livability. To make a city resourceful is to make it more efficient, more attractive, and more eco-friendly, all while making a real improvement to Citizens quality of life. While financing options are not evolving quite as fast as technology, they are evolving nonetheless. Lean how to fund and finance your smart city project.
Contractor’s ability to mitigate damages can be limited if coupled with uncertainty of the duration of the delay. HOOH is recoverable in certain prolonged delay situations and has been granted by courts and amicable settlements for more than half a century. The Contractor may recover the return that he would have achieved on other work had his resources not been detained on the Works due to the delay. The presentation highlights the different formulae used in the calculations and conditions precedent to do so.
Many countries are embarking to rehabilitate its aging sewer & water network where sewer infiltration and water loss can reach 50%. The presentation highlights the strategies to tender and implement efficient rehabilitation program with a preview of trenchless technologies in rehabilitation while highlighting the technical and contractual challenges.
There is a huge need for infrastructure developments and service quality improvement at many airports markets, but public budgets are limited. PPPs can provide a solution when the resources of private and public partners are bundled where conventional privatizations are not possible. The uniqueness of each airport development requires always a tailored approach structuring a PPP.
PPPs with a fair allocation of risks and rewards provide a means to raise necessary funds and know-how on the basis of a realistic business case. Risk mitigation strategies have to be developed to protect the public and private partners, including e.g. re-definition of the airport value chain, tax advantages, direct subsidies, etc.
ITS allows support travelers of all classes and to assist in road network management and performance by using systems for information, communication, and control, to provide improved safety and an enhanced traveling experience. The presentation provides highlights on Bahrain ITS Efforts.
Renewable Energy comes from sources that do not deplete over years such as sun, wind, oceans and plants. There are numerous ways to convert primary energy forms into consumable forms of energy including heat and electricity; however, due to the intermittent nature of many renewable sources, the issue of storing electricity is of particular importance. Further its worth to note renewable energy technologies do NOT necessarily compete with each other purely based on price. It depends on geographic location, availability of space, capital costs, operational costs, and environmental concerns.
The housing crisis continues to worsen as cities are increasingly falling behind in building housing solutions. As Cities become denser, bringing the modules in by crane and dropping them atop the podium may be sometimes the only solution.
With the right use of Modular technology the gap between aesthetics and affordability can be closed.
A bridge is the key element in a transportation system; it controls both the volume and weight of the traffic. Balance must be achieved between handling future traffic volume and loads and the cost of heavier and wider bridge structure. Economic Analysis and comparisons against competing alternatives is required as Bridges are the most expensive part of a road transportation network. Monetized & Non-Monetized Benefits that will accrue like time savings to road users, benefits to business activities (and to the economy in general) and salvage value benefits like Right-of-Way and substructure use need to be assessed as well.
Facilities management sector is populated by a wide range of professionals from a variety of different backgrounds, many of whom have come to the profession with experience in the construction and servicing of buildings. There is little unanimity about the definition of facilities management but it’s about the effective management of place and space, integrating an organization’s support infrastructure to deliver services to staff and customers at best value whilst enhancing organizational performance.
While new software platforms & BIM had taken the facility management industry by a storm and allowed enhanced interdisciplinary collaboration, yet other changes are affecting the industry. The presentation provides insights into these factors including a preview of Global Facilities Management M&A and industry trends.
Railways are undergoing major industry changes with management and business planning at the forefront that encompasses operational, customer and intermodal competition issues with innovative technologies removing earlier barriers. The presentation highlights trends in engineering, operations, stations design, passengers’ expectations and ticketing & collection while touching on issues like network capacity, demand forecasting & fare policies.
World Bank estimated, in 2025 the production of municipal solid waste will be 2.2 billion tones worldwide. With this amount, we are more and more polluting our own environment. Seven to eight percent of the total greenhouse gas emissions arise from continued landfilling. EfW (WtE) does not only decrease the volume of waste, it also protects natural resources like land and water. There is no additional need for landfills, where leakage can occur and pollute our tap water. It also protects air and climate because the regulations by law for EfW are more stringent than for coal fired power plants or any other industry. EfW plants decrease the greenhouse gases which come from landfill.
Constructions projects have become of increasing technological complexity with relationships of those involved are also more complex and contractually varied. Additionally global trends are dramatically impacting contracting activity. Success depends on new and innovative ways to manage uncertainty and complexity.
Increasing traffic in major urban regions leads to congestion which challenges cities and urban regions in terms of mobility, pollution and safety. ITS is application of information and communications technology (ICT) to the transport sector in the interests of safer, more sustainable & more efficient movement of goods & people.
The integration of intelligent infrastructure and intelligent vehicles had gained wide acceptance yet understanding the various options without incurring unnecessary expenditure is core in ITS planning and implementation. The presentation explains various ITS portfolios, value chain and life-cycle management with focus on the appropriate level of integration.
Loay Ghazaleh, a 1986 Texas A & M Civil Engineer with MBA 2000 Finance from Thunderbird – Arizona, backed by over 25 years diverse experience in both government and private businesses in Bahrain, UAE, Jordan, India, Brazil, Philippines, Saudi Arabia & Palestine.
Warming is believed to be caused by increasing concentrations of greenhouse gases produced by human activities such as the burning of fossil fuels and deforestation. The effects of an increase in global temperature include a rise in sea levels and a change in the amount and pattern of precipitation, as well a probable expansion of subtropical deserts.
With the façade embodying up to 35% of the construction costs as well as being hugely accountable for the buildings' response to climate change, it has never been so important to understand which façade solutions deliver not only a cost effective and sustainable façade, but also one that is aesthetically pleasing and technically performing.
The Second Edition of the Rainbow Suite is considerably longer, more detailed. The update addresses issues raised by users over the past 18 years and reflects current international best practice. The presentation analysis changes in Yellow & Silver Books as they apply to EPC & PPP Contracts from the perspectives of Public Entities, Contractors and Lenders.
The high rates of non-communicable diseases combined with large expatriate populations leads GCC countries to use different strategies to control healthcare expenditure among which is the PPP solution. This presentation highlights the formula for PPP success based on international cases.
Methodology of economic corridors modelling is examined to assess the economic impact of corridor investments so that policy makers and stakeholders can purse measurable outcomes can assess progress and outcomes of investments.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Successfully Delivering PPP Tolled Bridges and Highway Projects
1. Successfully Delivering PPPTolled
Bridges and Highway Projects
Effective Collaboration Between
Public and Private Sectors
Loay Ghazaleh, MBA, BSc. Civil Eng.
Bridges / Highways Bahrain & Saudi Arabia – April 2016
2. Contents
Introduction to PPP &Tolling
Critical Elements for BOT Project Evaluation
Tolled BOT Project Economics
BasicTolling Models Comparisons
Alternative Risk And Profit Sharing Models
Concession Agreement for Highways
Successes and Failures Examples of PPP Road Projects
Finally, IJ Global Data inTolled Roads
2
4. PPP in Infrastructure
Infrastructure whether financed through traditional
methods or PPPs relies on funding sources to repay
financing, whether debt, equity, or a combination.
All infrastructure investments ultimately depend on
either user fees, government tax revenues, or a
combination of both.
Therefore, community and political support for greater
investment of government tax revenues or the imposition
of user fees is critical to expanding investment in public
infrastructure.
The challenge is for PPPs to demonstrate overall cost
savings and efficiencies that outweigh the lower-cost
financing advantage of traditional procurement.
4
5. Purpose of Public Private Partnerships
(“PPP’s”)
PUBLIC PRIVATE PARTNERSHIPS
…have many forms and seek to provide the public sector with a variety of
benefits
PROMOTE
Entrepreneurial
Development
CAPITALIZE
Additional Sources
of Private Equity
and Flexible
Corporate Debt
Structures
ACCELERATE
High Priority
Projects
TRANSFER
New Technologies
and Engineering
Techniques
BENEFIT
From Private
Expertise and
Specialized
Management
5
6. PPP’s : A Win-Win Solution For
Infrastructure Development
Government
Objectives
Private Sector
Goals
Alleviation/removal of
the Government’s role
Injection of private
capital in public
services
Increased budgetary
certainty
Introducing private
sector efficiencies
PPP
Maintaining oversight
to ensure quality
Attractive risk weighted
returns
Government guarantees
mitigate certain risks
Long-terms investment
opportunities
Upside from
operational
outperformance
To operate under a clear
regulatory framework
6
7. Un-Accounted Government Costs in
Traditional Procurement!!
Capital and operating costs are paid for by the
public sector, including costs related to cost
overruns and late delivery of the infrastructure.
Cost
Overruns
Construction
Phase
Operation & Maintenance
Phase
O&M Cost Overruns
Estimated
Investment
Costs
O&M Costs
100% Public Financing
Delays
Costs
Time
The public sector only pays over the long term once
the infrastructure has been delivered according to
contractual requirements.
Construction
Phase
Operation & Maintenance
Phase
Payment to private sector to
cover fixed and variable costs
(Incl. debt service and equity
return)
PPP
Costs
Time
7
8. Infrastructure investments inherently involve huge sunk costs and create
assets that are long-lived and are location-specific.
Creation of Infrastructure has economics both of scale and scope (i.e.,
minimum size of facilities, inelastic adjustment of capacity to demand, long
term project completion, etc..).
Transport supply systems contain elements of natural monopoly.
Demand is wide spread (difficult to target).
Revenues are usually in local currency (mismatch if foreign debt financing).
Services have an essentiality component that raise legitimate public policy
concerns of affordability.
However ………..
Transport has a great impact on economic growth and poverty alleviation.
Sound transport infrastructure allows countries to integrate to the global
economy and increases competitiveness
The Economics of Transport
Infrastructure
8
9. 9
PPP Options in Transport
Full Divestiture
Technical
Assistance
Service
Contract
Management
Contract
Lease
Contract
Concession Contract
3-5 yrs
5-15 yrs
1-3 yrs
25-30 yrs
Risktransferredcontractuallytoprivatesector
As the term increases, amount of risk allocated to the private sector is increased
Contract Duration
Limited risk transfer to private sector
Government control
Full risk transfer
No government
control
Substantial risk
transfer
Government
control
Most common
PPP model
10. BOT Contract Structure in Roads
The build-operate transfer (BOT) model is the most common
approach used to assign responsibilities for toll road development
that include ; design, construction, maintenance, toll collection,
arranging financing, and legal ownership.
BOT is a broadly defined term that encompasses build-own-operate-
transfer (BOOT), build-lease-transfer (BLT), rehabilitate-operate-
transfer (ROT), lease-rehabilitate-operate (LRO), etc.
BOT structure involves the grant of a concession (sometimes called
an authorization or a license) by a properly empowered
governmental authority (the grantor) to a special purpose company
(the concessionaire).
Under the concession, the concessionaire would agree to finance,
build, and operate a facility for a limited time, typically 20 to 35 years,
after which responsibility for the facility is transferred to the
government, usually free of charge.
10
12. Public vs. Private Toll Road Structures
Public Private (PPP)
Goals
Improve transportation
Respond to political environment
Maximize present value cash flow
Provide customers a quality product
Tolling/Revenue
Restrictions
Toll increase typically limited to
covering O&M and debt repayment
Political pressure
Toll rate covenant / committment
Set tolls at lesser of (1) market level and
(2) concession agreement limitation
Political Pressure to Public Entity
Typically no toll rate covenant
Financing
Government Funding
International Loans
Tax-Exempt Debt
Equity (15-30% of financing)
Purpose of Debt
Finance initial development and
subsequent improvements
Maximize leverage to minimize cost of
capital/maximize bid price
Traffic/Revenue
Modeling
Focus on cost recovery/downside Focus on business approach and upside
for equity
Surplus Revenues
Fund capital improvements for facility
and other eligible projects
Fund capital improvements for facility
Recurring equity dividend payments
12
13. Options for Existing Toll Facilities
Maximum Public Control Maximum Private Control
13
Management Agreement
Long Term Concession
Agreement
Privatization
Management contract up to
15 years
Long term lease (can be
up to 99 years). Public
maintains title ownership
Ownership of asset
/ title Acquisition
Management contract
subject to termination
similar to other vendor
contracts
Public can reclaim
revenue and operations
of asset in event of non-
performance or default
Private Entity has
ownership,
operating flexibility
and responsibility
Private Entity manage road
and receives fixed
compensation with limited
incentives tied to revenues
Private Entity has
operating
risk/management
responsibility
No limitation on
tolling
Public Entity retains overall
operating risk/management
responsibility
Various types of limits on
possible revenue
Bears full risk
14. Toll Charging Concepts
14
Road tolls were levied traditionally for a specific access (e.g. city) or
for a specific infrastructure (e.g. roads, bridges). The evolution in
technology made it possible to implement road tolling policies based
on different concepts.
The different charging concepts are designed to suit different
requirements regarding purpose of the charge, charging policy, the
network to the charge, tariff class differentiation etc.
Time Based Charges and Access Fees: a road user has to pay for a given
period of time in which he may use the associated infrastructure. For
practically identical access fees are charged, the user pays for the access
to a restricted zone for a period or several days.
Motorway / Passage Tolling: Tolling can be used for charging bridges,
tunnels, mountain passes, motorway concessions or for the whole
motorway network of a country.
Distance or Area Charging: In a distance or area charging system
concept, vehicles are charged per total distance driven in a defined
area. Some toll roads charge a toll in only one direction like city-bound
15. View on the Use of Tolls Generated
from Roads
15
Tolls are Government fiscal revenue to be allocated to any sector
Tolls are used to reduce congestion and negative environmental
effects, thus tolls should be used in these areas alone.
THERFORE Allocation is;
BEST; Explicit dedication to the facility (roads)
Okay; General dedication to system (network)
Poor; General dedication to transport
BAD; General purpose revenue
NOTES;
Fuel tax and tolling are complimentary!
Toll roads are supplementary in the roads system, not fulfilling the basic
needs of the system / network!
16. Success Factors & Criticism on Tolling
16
Success Factors for Tolling
Win public respect and support
Demonstrate a real dedication to solving congestion
Adopt measurable performance results
Accept public consumer sovereignty
Criticism!
The traffic diversion resulting from the tolls can increase
congestion on the road system and reduces its usefulness.
By tracking the vehicle locations on tolled roads, drivers are
subject to restriction of their freedom of movement (excessive
surveillance!).
Tolling is for affluent time focused society!!!
18. Critical Elements for BOT Project
Evaluation
In order to attract private capital, a toll road project must
have strong project economics , good Country & concession
Environment and balanced contract structure which result
from a combination of the following elements:
Country Environment
Concession Environment
Public-Private Risk Sharing
Sponsors’ Ability
PROJECT Economics [PPP Model / Project Viability]
Financial Market Environment
Financing Structure
18
19. Country Environment
A stable economic and political environment is
critical for attracting investment to a project and
limiting the need for government assumption of risk.
The environment can be evaluated on the basis of
macroeconomic stability in terms of;
Country Risk Rating (Institutional Investor Rating)
Standard & Poor’s Rating (Long Term Sovereign Debt
Ratings)
Annual Inflation Rate, Annual GDP Growth, Local
Interest Rate
19
20. Concession Environment
The concession environment refers to the policy, laws, and
procedures a country has in place to support the implementation of a
concession program, including:
Overall Road Concession Policy;
Is the government committed to a concession program that is
coordinated with its broader transportation policy?
Are there successful concessions made thus far?
Concession Legislation;
Has the government enacted legislation to encourage concessions
generally and to authorize toll road concessions specifically?
Concession Process;
Are the concession term and regulatory mechanism conducive to
attracting long-term private capital?
Is the bidding process competitive, transparent, and based on
reasonable evaluation criteria?
20
21. Public-Private Risk Sharing
In principle, in private toll road development risks should be assigned to the public or
private entity “best able to control or mitigate their effect”.
Also it is to be noted, the transfer of risks and responsibilities to the private sector
would increase the scope of innovation leading to efficiencies in costs and services.
The main risks facing private toll road projects include pre-construction, construction,
traffic and revenue, currency, force majeure, tort liability, political, and financial.
These risks must all be addressed in a manner satisfactory to debt and equity
investors before they will commit to project funding.
The private sector is primarily responsible for construction, financing and toll
collection (operation), while the public sector retain legal ownership of the facilities.
In order for a project to obtain financing, public participation may be required in
areas such as acquisition of right-of-way, all political risk, and, in some cases, traffic
and revenue risk.
Finally, even though technical parameters is generally output oriented to allow room
for the Concessionaire to innovate and add value, HOWEVER, design responsibility is
shared, with the public sector taking the lead in the preliminary design (including
route alignment, number of lanes, interchanges, etc.).
21
22. Major Risks in an Infrastructure Project
22
Risk Category Example of Downside Risk
Design Design flaws
Construction Construction cost overruns
Delays to completion
O & M Higher operations costs
Higher maintenance costs
Performance Periods of service unavailability
Lower service quality
Policy New competing capacity
Demand (Revenue) Lower utilization than initially forecasted
Financial Higher interest rates
Less favorable exchange rates
Political Adverse Law Change , NewTaxes
23. Sponsor’s (Investors’s) Ability
A project company is generally a consortium of parties with
focused specialty required for the development of toll road
project.
The sponsor(s) of the project must have sufficient track records
in executing a number of similar projects in the area and must
be able to assign appropriate team of people at various stages
of project development to coordinate the complex process.
The team at the early stage must have an expertise not only in
the technical aspect of the project but the financial and legal
aspects in order to construct financial model and to draft
essential contracts using outside experts in the areas.
Also Sponsors’ ability to assume “necessary” project risk is
considered critical since it is very rare for a toll road project to
be financed on a purely nonrecourse basis.
23
24. GlobalPPPRoadsInvestors
24
Country Company
China China Railway Construction Corporation (CRCC)
China China State Construction Engineering Corporation (CSCEC)
Australia Colonial First State Global Asset Management - First State
Investments
Luxembourg Cube Infraestructure Managers
Switzerland Edmond de Rothschild Group
Italy F2i SGR
Germany Fraport
USA (United States of America) Global Infrastructure Partners (GIP)
UK (United Kingdom) iCON Infrastructure
China Industrial and Commercial Bank of China (ICBC)
Australia Industry Funds Management (IFM Investors)
Hungary Intertoll Europe
South Korea Korail
Kuwait Kuwait Investment Authority (KIA) -Wren House Infrastructure
Management
Malaysia Malaysia Airports Holding Berhard (MAHB)
Mexico Mexico Infrastructure Partners (MIP)
Russia Mostotrest
UK (United Kingdom) Resonance Asset Management LLP
USA (United States of America) Star America Infrastructure Partners
Canada Stonebridge Financial Corporation
USA (United States of America) Stonepeak Infrastructure Partners
Colombia SURA asset management
Australia Transurban
Turkey YDA Insaat
25. PROJECT Economics
[PPP Model / Project Viability]
PPPs have traditionally used
THE BASIC USER FEE
The private partner collects and retains all fees from consumers of the
service. This model allocates all demand risk and (therefore revenue risk)
to the private partner.
AVAILABILITY PAYMENTS
The government collects any revenue from users (or charges fuel tax)
and makes fixed, recurring (usually annuity) payments to the private
partner provided the asset meets contracted quality standards.
Because availability payments do not vary with assets use, the
government bears all the demand and revenue risk.
New “incentive” models are emerging that apply principles from the
regulation of privately-owned energy (electric power, gas and oil
pipelines) and telecom infrastructure to PPP projects namely;
These models include; THE RATE OF RETURN MODEL, PRICE CAP
MODEL, and “REVENUE SHARING” Model (s)
25
26. Example of A possible Bad Outcome
0
50
100
150
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$ million
Payment
Forecast revenue
Actual revenue
Guaranteed revenue
26
27. Financial Markets Environment
Financing structure of a project is generally composed of the equity of
sponsors and other investors with debt financing of various sources,
which sometimes includes that of the governments and involves
various financial markets;
Foreign equity investments,
Local equity investments,
Foreign commercial bank loans,
Domestic commercial bank loans,
ECA (Export Credit Agencies) loans and guarantees,
Multilateral Agencies loans and guarantees,
Bilateral Official Development Assistance,
Domestic and foreign bond markets,
Infrastructure equity funds,
Subordinated loans,
Financial structure and financial closing of private toll road project may
significantly be affected by the conditions of these markets at the time
of financial closing.
27
28. GlobalPPPFundSources
28
Manager Location Infrastucture Fund
United Arab Emirates Bunyah GCC Infrastructure Fund
Kenya African Renewable Energy Fund (AREF)
France Meridiam Infrastructure Africa Fund
Morocco Infrastructure Fund (MIF)
South Africa Emerging Africa Infrastructure Fund Limited (EAIF)
Africa50 Infrastructure Fund
MENA Infrastructure Fund II LP
Infrastructural, Developmental and Environmental Assets (IDEAS)
Managed Fund
Islamic Development Bank Infrastructure Fund II
MENA Infrastructure Fund LP
UK (United Kingdom) Pantheon Global Infrastructure Fund II
BTG Pactual África FIMM Fund
IFC Global Infrastructure Fund, LP
JCM Capital's Clean Power Infrastructure Fund VI
Argan Infrastructure Fund (ARIF)
InfraMed Infrastructure
South Africa Pan African Infrastructure Development Fund (PAIDF)
South Africa Pan-African Infrastructure Development Fund 2 (PAIDF 2)
African Infrastructure Investment Fund 2 (AIIF2)
UK (United Kingdom) Actis Energy 3
Convergence Partners Communications Infrastructure Fund (CPCIF)
UK (United Kingdom) GCP Sovereign Debt Infrastructure fund
Nigeria ARM Infrastructure Fund (ARMIF)
Nigeria ARM-Harith Infrastructure Fund (ARMHIF)
29. Financing Structure
Most private toll roads are undertaken on a project finance basis, whereby
investors rely on the performance of the project for payment rather than the
credit of the sponsor. This is also known as “Limited Recourse Financing”, in
which lenders have limited recourse to the sponsors for payment.
A primary benefit of project finance structure is that it allows sponsors to
keep the project debt off their balance sheet, leverage their resources and to
share project risks with lenders.
For the construction of the toll road, the intention would be for the
concessionaire to receive sufficient revenues during the operational phase to;
Service the debt that would be provided by the banks and financial
institutions (the project lenders);
Cover the concessionaire’s working capital and maintenance costs;
Repay the investment of the investor (s) who are initiating the project (the
sponsors),
Provide a reasonable profit for the sponsors and other investors
To provide enhanced security to the lenders and greater stability to the
project operations, all financial inflows and outflows of the project are to be
routed through an “Escrow Account”.
29
30. Project Financial Internal Rate of Return: IRR ≥ 12%
Equity Internal Rate of Return (or Return on Equity): ROE ≥ 16%
Loan Life Cover Ratio: LLCR ≥ 1.2
Annual Debt Service Cover Ratio: ADSCR ≥ 1.2
30
The Usual Financial Indicators Target
PPIAF Financial Model – Link
32. PPP Project Economics
Project economics refers to the costs of developing,
constructing, and operating a project relative to the
revenue it generates. This is typically measured in terms of
Net Present Value or Internal Rate Of Return on investment
OR equity.
The project economics of a toll road are influenced by a
number of factors;
Project Function: congestion relievers, inter-city arteries,
development roads, or bridges and tunnels
Physical Characteristic: new facility or expansion, length
and capacity, geography, toll collection mechanism.
Market Demand: actual or expected traffic levels,
predictability of expected traffic, willingness of user to
pay tolls.
32
33. Financial Viability of A Highway Tolled
Project
Detailed studies by engineering experts and financial advisers,
including traffic and revenue projections, construction cost
estimates, preliminary design documents for the project, and
financial feasibility studies are essential to ensure;.
Proper mitigation and unbundling of risks;
Symmetry of obligations between the principal parties;
Precision and predictability of COSTS & REVENUES;
The critical elements that determine the financial viability of a
highway tolled project are;
TRAFFIC VOLUME
INTEREST & EXCHANGE RATES
REVENUES
CONCESSION PERIOD
GOVERNMENT SUBSIDY / GRANTS (VIABILITY GAP FUNDING)
33
34. Traffic Volume
A green field BOT toll road project, has a typical cost and revenue
profile of capital intensive business where the break-even point is
high and if such revenue threshold level is not attained, huge loss
would occur.
Therefore, the project economics of toll road development is very
sensitive to the threshold level of traffic volume, thus proper risk
allocation becomes paramount
It is generally recognized that economic growth will have a direct
influence on the growth of traffic and that the Concessionaire cannot
manage or control this element.
Therefore, The rate of growth of traffic risk is allocated to the
Concessionaire ONLY in situations of near natural monopoly or when
existing traffic volumes can be measured with reasonable accuracy.
Usually Authorities provides for extension of the concession period
in the event of a lower than expected growth in traffic. Conversely,
the concession period shall be reduced if the traffic growth exceeds
the expected level.
34
35. High Sensitivity to Interest & Exchange
Rates
If the toll road is financed on highly leveraged and
floating interest rate basis, as most of toll road
projects are, the amount of debt service payment in
the beginning years may become considerable.
Therefore, the project economics is very sensitive to
the level of interest rate as this rate will be
compounded over the life of the project!
Financing transport facilities and services (local
currency based) in the foreign debt markets adds
substantial risk in the absence of a stable currency
exchange rate.
35
36. Revenues
Where the project is viable without grants, bidders will be asked to make a financial offer to
the Government, in the form of;
A Flat Concession Fee Per Annum for the concession period
Availability Payment (Government pays for capacity)
Sharing Percentage
(Minimum) Rate of Return / Price CAP Threshold
Generally, the revenue share quoted for the initial year is increased for each subsequent
year (ascending revenue share) by an agreed percentage (tied to inflation). The same
applies to Rate of Return / Price CAP models were adjustments are carried out periodically.
The magnitude of the price adjustment depends in part on the price elasticity of demand,
i.e. the responsiveness of demand to a price change. In general demand responsiveness
tends to be low for infrastructure services because as there are few substitutes readily
available.
While a variable tolling policy is essential for managing demand and reducing congestion
(like allowing frequent users discounted rates or having seasonal or off peak discounts) , yet
this variability in revenues which is undesirable!
A toll road project in general has a long start up operating years in loss due to its long lump-
up period for the traffic level to stabilize. Therefore the sponsors of the project would have
to wait for many years before they start enjoying dividends form the project.
Tolled highways also should be open to use without any payment of tolls until free service
lanes are provided to ensure local support for the project and avoid legal challenges or local
opposition arising out of easement rights.36
38. Concession Period
The concession period is determined depending on the
volume of present and projected traffic. Concession
should cease when full capacity of the road is reached as
toll paying users should not be subjected to congested
highways.
The concession period can be extended “marginally” for
improving project viability as the growth of traffic
(reaching capacity) would not permit very long
concession periods.
The present value of projected revenues, after say 20
years, is comparatively low from the Concessionaire’s
perspective, thus further extensions may not be desired!
38
39. Government Subsidy / Grants (Viability
Gap Funding)
Generally, Bidders seek an appropriate capital grant/subsidy from the
Government to reduce the capital cost to arrive at an acceptable rate of
return.
In the context of a PPP transaction based on pre-stated single financial
parameter competitive bidding, the public sponsor would select the bidder
most likely to deliver the project at the lowest lifecycle cost (least subsidy),
thus maximizing value for taxpayers.
In this bidding type all project parameters such as the concession period, toll
rates, price indexation and technical parameters are clearly stated upfront,
and short-listed bidders will be required to specify only the amount of grant
sought by them.
The project grant sometimes reach up 20% of the project cost, where such
assistance is inadequate for making a project commercially viable, an
additional grant can sometimes be used towards O&M.
THE MORE Government subsidies, the lesser the program of highway
development will be, thus it is important to rely on cost-effective designs and
to combine them with a phased investment to enable a more efficient and
sustainable highway development.
39
40. Example of Basic Data Modeled
Financial Input Traffic Input
40
Concession term: 30 years
Construction Cost:----
Road length: ---- km
Construction Expenditure;
Year 1: 15%
Year 2: 30%
Year 3: 30%
Year 4: 25%
1st Year Operating Cost: ----
Increase in operating expenses: --%
Capital structure:
Equity,20%;
Subsidies, 0%
Nominal interest rate: 7% per year
Loan grace period: 4 years
Loan repayment period: 15 years
Discount rate (real terms): 8%
Inflation: 4% per year
VAT: 21% , Corporate Tax: 0%
Opening year Daily Traffic:
------ Vehicles/Day
Traffic Composition:
Cars, 70%
Trucks, 25%
Buses, 5%
Average Toll Rates;
Cars = X
Trucks = 3X
Buses = 2X
Traffic Growth Rate : 3%
41. Questions Typically Answered by
Financial Modeling
41
Estimate the minimum toll
rate per average vehicle for
the project to be able to
attract private sponsors.
[Note: This toll rate can be
obtained by trial and error by
varying the “Cash Flow” so the
financial indicators calculated
are just above the minimum
required threshold]
Estimate the minimum
weighted average toll rate in
$/veh-km.
If the initial average annual
daily traffic (AADT) increases
by 10%, what will be the effect
on the minimum toll rate?
Estimate the minimum
required amount of
government contribution (i.e.,
subsidies) that would lead to
more acceptable (affordable)
toll rates.
How does the project financial
internal rate of return (IRR)
vary with the amount of
subsidies? [Note; IRR is
independent from the financial
structure of subsidies, equity,
and credit].
What would be the impact on
ROE of an increase in subsidies
from 0 to 10%?
Assuming there will be no
capital grants ,estimate the
minimum annual required
payment by the government
(availability payment) during
the first year of operation.
Determine the financial criteria
to use in the bidding
documents, so as to facilitate
the evaluation of financial
proposals in the case of
competitive selection of
concessionaires
42. Eurasia Tunnel
42
Grantor: Republic of Turkey Ministry
of Transport, Maritime Affairs and
Communication General Directorate
of Infrastructure Investments (AYGM)
Guarantor : Republic of Turkey
Undersecretariat of Treasury
Concessionaire : Avrasya Tüneli
İşletme İnşaat ve Yatırım A.Ş. (ATAŞ)
Equity investors :
Yapı Merkezi İnşaat ve Sanayi A.Ş. and SK
Engineering & Construction Co. Ltd
Yapı Merkezi İnşaat ve Sanayi A.Ş. and SK
Engineering & Construction Co. Ltd Joint
Venture (YMSKJV)
Total Investment: $1.245 billion
Equity: $285 Million
Loan: $960 Million
Concession period :29 years
Construction Period : 55 month
Operation Period:24 years, 5 months
Traffic guarantee: 68,000
vehicles per day.
Concessionaire returns: 30% of
revenue over guarantee to
Grantor.
Toll: $4.00 (+18% VAT) for
cars.
Debt financing
$500m. Direct loans: EIB,
EBRD, Korea EximBank.
$210m. Commercial bank
loans guaranteed by Korea
Export Insurance
Corporations: Sumitomo
Mitsui Banking Corporation,
Standard Chartered Bank,
Mizuho Bank.
$200m. EIB loan guaranteed
by three Turkish commercial
banks.
44. Features Of the Basic Models
44
Real Tolls Shadow Tolls
Availability/ Performance
Base Mechanisms
Road users pay
for use of the
asset
No actual tolls are collected from
public. Total cost of project falls on
public purse.
Concessionaire is paid for making
road available for public use by the
Authority. Sometimes mixed with
real tolls
Often some form
of subsidy/ very
long concession
period are
needed.
Concessionaire is paid by Authority on
road use – the more the road is used
the more the concessionaire is paid!
The concessionaire pays a non-
availability payment to authority for
road or lane closures out of toll
revenue.
Accurate traffic
volumes
forecasts are
critical to meet
debt service and
equity return for
sponsors.
Usually a banding mechanism, which
applies different tolls to different levels
of traffic is adopted. Commonly;
Amount of deduction/ non-
availability payment usually
determined by reference to factors
including:
Base Case – designed to service
senior debt but not to provide
return on equity
Length of project road that is
unavailable
Higher Bands – provide a return
on equity
Number of lanes affected
Top Band – usually has a toll rate
of zero to cap amount payable to
concessionaire
Duration (& time of day) of
unavailability
45. Comparisons Of the Basic Models
45
Real Tolls Shadow Tolls
Availability/ Performance
Base Mechanisms
Zero cost to the
Government
Can introduce PPP structures
where environment is
perceived to be hostile to real
tolls.
Absence of traffic/ revenue risk
simplifies project
Government has
fiscal space to
fund other projects
Prepare way for real-tolled
roads by cultivating an
industry to take traffic risk
Lower level of due diligence
needed
Reluctance by
investors to
become involved!
Multiple sources of funding
can be drawn on by
concessionaire.
Reduces financing risk on
concessionaire – making
project cheaper
High traffic risk to
the concessionaire
Mechanism of traffic risk
transfer (bands) reduce
complexity of project and
reduce level of due diligence
required
Removes emphasis on
monitoring traffic flows during
operational period
Potential consumer
resistance to
paying for road use
Indirect charge to users like
fuel Tax! No consumer resistance
47. Emerging PPP Toll Models
New “INCENTIVE” models are being adopted from the utility industry
based on the merits that some investors are attracted to being able
to share the project’s upside with the government in return for some
protection from downside demand risk.;
Also, this is driven in part by the slow growth of project bond
markets, Basel III Banking reforms, and conservatism among senior
debt lenders to structure PPPs to mitigate or retain risks that private
investors no longer find acceptable.
Such models include; “The Rate Of Return Model”, “Price Cap Model”,
and “SHARING” models
In a PPP contract, the initial rate of return, price cap or sharing would
be negotiated between the private partner and project sponsor as
part of the competitive bidding process used to award the PPP.
Also in the PPP contract returns outside the sharing range would be
addressed with respect to payments mechanism (price adjustments,
or a combination) between the project sponsor and private partner.
47
49. The Concept of Rate of Return Model
The rate of return model balances consumer and investor interests by
placing a limit directly on the allowed rate of return on investment, and
setting a regulated price on the service which can be adjusted at set
intervals
The concept of a “fair” return in the context of public utility regulation
may include considerations such as whether the return;
1. Is sufficient to maintain the firm’s financial viability
2. Enables the utility to attract additional capital
3. Is comparable to the return earned by other companies with similar
risks.
The rate of return model protects consumers from excessive rates by
setting a regulated price that approximates what the price would be if
the utility had to compete with similar firms instead of operating as a
monopoly franchise.
In practice, the realized rate of return which depends on the regulated
firm baseline assumptions of cost and demand may differ from the rate
assumed in the regulatory process.
49
50. The Application of a “FAIR” Return
The price is calculated to explicitly allow the private firm to recover its
costs and earn a (RoR) on its “RATE BASE,” or its “WEIGHTED AVERAGE
COST OF CAPITAL”
Allowable Price = [O&M + Depreciation + Taxes + (Rate Base* RoR)] /
Demand
In this model, the regulated firm — or PPP —has to contend with demand
risk until the allowable price is adjusted, either at the next scheduled rate
hearing or by a short-term revenue stabilization measure implemented by
the regulator.
The time between price adjustments carries implications for risk-sharing
and the incentive to operate efficiently and must balance the public
interest in avoiding sharp toll hikes with the private sector’s need for a
financially viable project. For instance;
A long wait until the price can increase places more of the demand risk
on the private firm while providing a strong incentive to hold down
costs;
A shorter wait until the price can increase places less of the demand
risk on the private firm and provides less incentive to lower costs.50
51. Actual Versus Expected RoR Example
For a given level of demand, operations and maintenance cost risk effect is illustrated by
the two lines (Blue & Green) that are parallel to the red line.
51
52. Price Adjustment Effect on O&M and Demand
OPERATION & MAINTENANCE RISK
Regulated price adjusts slowly ; Provide strong incentive for cost efficiency and technical
innovation however;
No protection from profit squeeze if costs are higher than expected – Firm Bears Risk
Firm realizes long term benefits from improved operation efficiency
Regulated price adjusts quickly; Has the effect of low incentive for cost efficiency and
technical innovation
Firm protected from profit squeeze if costs higher than expected – Consumer Bears Risk
No longer long term benefits from improvements in operating efficiency
DEMAND RISK
Regulated price adjusts slowly; Private firm realized revenue gain on the upside but absorbs
lower revenue on the downside
Higher than expected demand yields long term revenue gains and higher RoR
Lower than expected demand causes long term revenue shortfall and lower RoR
Regulated price adjusts quickly; Consumer realize lower price on the upside but absorb
higher prices on the downside
Higher than expected demand leads to rapid fall in regulated price, no change in RoR
Lower than expected demand leads to rapid fall in regulated price, no change in RoR
52
53. Wrap Up on the Rate of Return Model
The RoR Model provides the firm with greater
protection against demand risk than does the basic
user fee model; it also affords better protection
against operations and maintenance cost risk than
the user fee and availability payments models.
However, the RoR Model provides somewhat less
incentive for cost cutting than user fee and
availability payment contracts because price is
eventually reduced to reflect cost savings or
eventually raised to reflect cost increases.
53
55. The Concept of Price “CAP” Model
The maximum allowable price, or “CAP”, would be allowed to increase
at a rate tied to, but below, inflation as measured by the Consumer
Price Index (CPI) for example, and expressed as a proportion:
Allowable price this year = Allowable price last year * (1+CPI – Rate of
Productivity Improvement)
The rationale for deducting the Firm “Rate of Productivity
Improvement” is to allow consumers to benefit from such
improvements.
Productivity Improvement Examples; the rate of traffic flow per year on
say a bridge might be increased by using automated toll collection
facilities or by installing traffic congestion management technology on
approaches to the bridge.
Regulators also may allow a firm to adjust prices in response to factors
beyond its control that have pronounced financial impact on the firm,
such as an industry-specific tax change, new legislation, or a force
majeure (e.g., floods, hurricanes and tornadoes). This factor can be a
positive or negative adjustment.
55
56. Incentives in the CAP Model
In the price cap model, the firm has a built-in incentive to minimize costs because the focus of regulatory
control is price, not profit;
There is an added incentive than the user fee model to improve efficiency and reduce costs beyond the
level required by the productivity factor to boost profit potential , however, a high preset productivity
factor may deter or exclude many potential bidders.56
57. Demand Risk in the CAP Model
Similar to the basic user fee model, under a pure price cap model, demand risk is entirely
borne by the private partner.
If demand falls short or exceeds expectations, the firm’s total revenue will rise or fall
proportionately (the dashed black line).57
58. Wrap Up on the “CAP” Model
The Price CAP Model enables the project sponsor to transfer all
demand risk to the private partner because price cannot be
increased in response to a demand shortfall, as in the basic user fee
model.
At the same time the Price CAP Model provides protection to
consumers against large and unanticipated price increases which may
make the project more attractive to project sponsors and local
stakeholders.
The Price CAP Model encourages the private partner to be more cost
efficient than does the user fee model by motivating the firm to do
better than the productivity factor considering profits are not directly
constrained. (note; the private firm retains all gains from productivity
improvement in the basic user fee model).
Where the project sponsor sets the productivity factor (and its
frequency to keep it aligned with changes in actual performance) will
determine both the extent of consumer price protection and the
attractiveness of the project to potential partners: a moderate
productivity factor increases private partner’s efficiency incentives,
but too high may deter or exclude many potential bidders.58
60. The Concept of the “Sharing Models”
Risk sharing contracts can directly align sponsor and investor interests and
expands the universe of acceptable deals compared to cases where the
parties’ risk preferences and return expectations are not well-served by
other models.
In the Sharing Models, the Investor are required to share the project’s upside
potential with the government, in turn, provides some protection from
demand risk on the downside.
A risk-sharing contract should be flexible enough to provide investors and
public sponsors with a set of acceptable risk-return tradeoffs over a range of
uncertain future demand. In particular, a sharing contract can balance
The investor’s willingness to share a portion of the project’s upside potential in
return for getting some downside risk protection, with
The sponsor’s willingness to provide a degree of downside protection in
exchange for a share of the project’s upside gain.
In a contract negotiation, both sides take positions based on their own
forecasts of demand and project performance; an effective contract will
allocate risks and returns in a way that is acceptable to both parties.
Return = [Revenue – (O&M + Depreciation + Taxes)] /Fixed assets.
60
61. Example 1: 50% Proportional Sharing Of
High And Low Returns
The private partner retains all profits in a central range, corresponding to the most likely
outcomes, while permitting profit-sharing outside that range. The solid blue lines represent the
private sector return above and below the negotiated return thresholds.61
62. Notes on the Proportional Sharing Graph
In the “central” range, the contract operates like a pure price cap with
the private partner assuming all of the demand risk.
Also In the “central” range, the incentives for cost efficiency and
exposure to operations and maintenance risk are the same as in the
price cap model.
The private partner keeps all of the return between the negotiated
thresholds in the “Intermediate” demand range while shares 50% of
the returns in the low and high regions.
The closer the blue line is to the dashed black line, the more, the more
incentives and risk exposures resemble the price cap model. (The
upward-sloping dashed black line represents the rate of return under a
pure price cap model).
The closer the blue line is to the horizontal, the more incentives and
risk exposures resemble the RoR model with very frequent (i.e.
instantaneous) price adjustments.
In the low range the public sector is still exposed to demand risk, but
the magnitude of the exposure is reduced compared to the RoR model.
62
63. Example 2: Minimum Profit Guarantees
and Maximum Profit Cap
Complete downside protection to the private partner is provided in exchange for a limit on
the upside (The Solid Red Lines).
63
64. Notes on the Profit Guarantees Graph
The upward-sloping dashed black line represents a pure price CAP
model in which the private partner bears all of the demand risk.
The private partner keeps all of the return between the negotiated
thresholds in the Intermediate demand range and assumes all of the
demand risk.
In the no-sharing (central) range, the contract operates like a pure
price cap model without any sharing, and incentives for cost
efficiency and exposure to operations and maintenance risk are the
same as in the price CAP model.
In both the Low and High demand ranges, demand risk, incentives for
cost efficiency, and exposure to operations and maintenance risk
match the RoR model.
Compared to the Proportional Sharing Model, the magnitude of the
subsidy to the private partner or payments to the project sponsor is
larger.
64
65. Benefits of SHARING” Models
Sharing models retain the private partner’s financial incentive to increase
profits while aligning the interests of government and investors.
Arrangements that include sharing when returns fall below contracted RoR
thresholds partially insulates the private firm from the demand shortfall,
reduces the risk that the project company enters bankruptcy or seeking
contract renegotiation
If demand is much higher than expected, the government will receive
revenue which it can deploy to make other investments, lower taxes, or
retire debt.
The sharing of returns above an upper threshold will dampen the private
partner’s incentive to raise prices to a level that would drive returns above
the threshold.
Relatively risk-averse investors or investors with low confidence in the
demand forecasts may be willing to accept a maximum return cap in
exchange for being fully protected if returns are much lower than expected.
Investors who are willing to assume greater risk and are more optimistic
about demand may prefer the Proportional Sharing Model because it offers
higher return potential in exchange for less protection on the downside.
65
66. Demand Risk Country Examples!
Whether government should bear demand risk
in toll roads is therefore controversial
Chile, Colombia, Korea, and Spain, for
example, have provided revenue guarantees
(often in return for upside risk sharing).
Italy and Turkey gave revenue guarantees for
privately financed railways in the nineteenth
century.
Australia, Canada, United States have not
given guarantees.
66
68. The Public Entity (the “Owner”) typically maintains title to the asset and enters into a long-
term Concession and Lease Agreement with the Concessionaire (the “Operator”)
The Concession Agreement must fully anticipate any issue that could possibly arise during the
term of the lease
Public Goals for Agreement Private Goals for Agreement
Transfer operating risk to Private Entity
Ongoing protection of public interest from the
concession granted to the winning bidder
Ensure long-term viability of toll road asset
(operating and maintenance standards)
Certain employment restrictions (non-
discrimination, fair wages, conflict of interest)
Ensure that Private Entity expands system
in a manner consistent with economic
development and demographic needs
Maintain flexibility regarding method of
performing repairs and replacements
Maximize flexibility regarding employment
Maintain public responsibility for law
enforcement and some environmental issues
Maximize ability to benefit cost efficiencies
including modern tolling strategies and
technologies
Minimize risk of future competing toll roads
and freeways
Ability to assign Concession Agreement
and/or grant leasehold mortgage
68
Public Versus Private Party Goals
69. Concession Agreement for Highways
The regulatory and policy framework is a pre-requisite for attracting private
investment with improved efficiencies and reduced costs, necessary for
accelerating growth.
Negotiation of a concession agreement include a detailed allocation of risks
and responsibilities among the various project participants
Typical issues in Concession Agreement that are important for the parties
involved;
Monitoring and Supervision
User Fee Setting Mechanism
Financial Close
Support and Guarantees by the Government
Right of Substitution
Force Majeure
Termination Clauses
Other issues include; dispute resolution, suspension of rights, change in law,
insurance, defects liability, indemnity, compensation / public grievances, user
protection and disclosure of project documents.
69
70. Monitoring and Supervision
Day-to-day interaction between the Government and the Concessionaire
need to be kept to the minimum, “hands-off” approach, but checks and
balances need to be in place to ensuring full accountability of the
Concessionaire. The Government shall be entitled to intervene only in the
event of a material default.
Before commencing the collection of user fee, the Concessionaire will be
required to subject the Project Highway to specified tests for ensuring
compliance with the specifications relating to safety and quality of service
for the users.
Operational performance combined with an elaborate and dynamic
mechanism to evaluate and upgrade safety and quality of service on a
continuing basis is a must as PPP incentivizes cost-cutting.
Quality must be “contractible” meaning translated into contractual terms
that can be readily verified by the government that include measures on
traffic management, police assistance, emergency medical services and
rescue operations.
Maintenance standards and workforce wages need to be enforced strictly to
avoid tendencies to reduce costs.
70
71. Typical Questions in Tolled Roads
Performance Metrics
Operations
• Is traffic speeds
satisfactory?
• TrafficVolumes &
Occupancy /
congestion
requirements
• Is pricing
dynamic? –
reflects discounts ,
time of day, etc.
• Is there violation
enforcement (toll
evasion)
• Maintenance
Targets
Political/
Stakeholder
• What to Do with
Excess Revenue?
• Social equity and
environmental
justice
• Relationship to
transit
• Business rules and
operating policies
Customer
• Does it take me
where I want to
go?
• Do I feel safe?
• Is it reliable?
• Is it easy to
understand and
use?
• Does it solve my
problem?
• Value =What else
could I spend my
money on?
Financial
• Will tolls cover
capital and
operating costs?
• Financing
mechanism
• Lender
requirements
• Pricing for
throughput vs.
revenue
71
72. User Fee Setting Mechanism
A balanced and precise mechanism for determination of
user fee need to be specified for the entire concession
period including any inflation indexation since this would
be of fundamental importance in estimating the revenue
streams of the project and, therefore, its viability.
Full or at bar indexation is not favored in tolled projects,
as that would require the users to pay more for a
declining (more congested) level of service when they
should be receiving the benefit of a depreciated fee.
Also a high inflation indexation percentage would also
add to uncertainties in the financial projections (revenues)
of the project.
72
73. Financial Close
The scope of the project needs to be defined with precision and
predictability in order to enable the Concessionaire to determine its
costs and obligations and therefore is able to make the financial close.
NOTE; Additional works can be undertaken within a specified limit,
only if the entire cost thereof is borne by the Government at usually
no additional profit to the concessionaire.
Generally a time limit of 180 days for achieving financial close, failing
which the bid security is forfeited (the time limit can sometimes be
extendable up to another 120 days on payment of a penalty) .
By prevalent financial conditions, this is a tight schedule, which is
achievable only if all the project parameters are well defined and the
requisite preparatory work has been undertaken.
Handing over possession of the required land ( or substantial
portions thereof) and obtaining of environmental clearances are
among the conditions precedent to a financial close.
73
74. Support and Guarantees by the
Government
By way of comfort to the lenders, loan assistance from the
Government can sometimes be stipulated for supporting debt
service obligations in the event of a revenue shortfall resulting
from political force majeure or default by the Government.
Also Guarantees have been used to protect the Concessionaire
from construction of competing roads, which can upset the
revenue streams of the project.
NOTES;
1. Additional toll ways generally are allowed, after a specified
period and / or upon compensation to the Concessionaire by
way of an extended concession period for example.
2. If persistent congestion develops on the privately operated
facility, the Government should have the opportunity to add
capacity serving similar origins and destinations;
74
75. Right of Substitution
It is project revenue streams that constitute the bulk of
securities. Lenders require assignment and substitution rights
so that the concession can be transferred to another company
in the event of failure of the Concessionaire to operate the
project successfully.
Assignments and Security Documentation in Concession
Contract to Project Lenders
Assignment of Concession Contract
Assignment of Construction Contract
Assignment of Operation & Maintenance Contract
Charges over Bank Accounts
Liens & Pledges over Movable Property
Mortgages Over Land
Assignment of Insurances
Assignment of Performance Bonds
75
76. Force Majeure
Provisions for dealing with force majeure events, in
particular, protection to the Concessionaire against
political actions that may have a material adverse
effect on the project.
76
77. Termination
In the event of termination, usually a compulsory buy-out is
executed by the Government, as neither the Concessionaire nor the
lenders can use the highway in any other manner.
Political force majeure and defaults by the Government can qualify
for adequate compensatory payments to the Concessionaire to guard
against discriminatory or arbitrary action by the Government.
Termination payments need to be quantified and pre-determined to
provide predictability. The project debt is usually “fully” protected
by the Government in the event of termination, except for two
situations,
When termination occurs as a result of default by the Concessionaire,
usually a percentage of the debt will be protected (can reach 90%).
In the event of non-political force majeure such as Act of God
(normally covered by insurance), then generally 90 per cent of the
debt not covered by insurance can be protected.
If the Concessionaire fails to “COMMISSION” the project owing to its
own default, no termination payment would be due.
77
79. Success
Procurement process
was transparent
Focus on creating
public awareness
(tolling culture)
Government learned as
program developed and
made adjustments
Attracting international
firms brought finance,
credibility, know-how
etc.…
Failure
Combination of small
contract duration and low
traffic resulted in high tolls.
Existence of free roads
contributed to financial
distress of concessionaires
Public resistance
(willingness to pay not
assessed)
Overly optimistic traffic
forecasts studies
Undefined public
contribution of funds.
Lessons learned Worldwide in Toll Roads
79
80. CASE: Hungary M1/M15
Toll Motorway Project
Hungary M1/M15 was the first toll
motorway tendered and implemented
in Central and Eastern Europe.
Construction of motorway was
finished in 1995 on schedule and
within budget.
Traffic volumes were about 40% lower
than anticipated, despite the forecasts
being prepared by independent
experts.
High toll rate did not cover for the low
volume. Instead, it led to a court case
by dissatisfied road users.
As a result, the concessionaire was
unable to service its debt and
ultimately the government had to take
over the concession at a high cost.
Strong emphasis should be
put on forecasting revenues
and costs as part of the
feasibility study.
Overestimation of revenues
can bankrupt the
concession
Lesson: Solid Revenue and Cost
Estimations
80
81. COUNTRY CASE: Portugal weak
management of its PPP program
Portugal pursued its first PPPs in the
mid-1990s to more efficiently build
new infrastructure
The government PPP unit suffered
from lack of experience with PPP
projects and inexperienced staff
As a result, Portugal’s early PPPs were
subject o constant delays and cost
overruns– by 2003, the country’s PPP-
related liabilities amounted to 10% of
GDP
Weak public sector capacity was
evident in insufficient risk transfer to
the private sector and delays in giving
government approvals on essential
land and environmental aspects
Institutional Arrangement should
ensure coordination, technical
support and that checks and
balances are appropriately
applied
Lesson: Strong Institutional
Arrangements
81
82. Strong international competition requires to use international best
practices in preparing, procuring and monitoring PPP projects
KEY SUCCESS FACTORS INCLUDE:
Careful planning of PPP project
Solid revenue and cost estimate
User willingness to pay and communication plan
Extensive feasibility study with use of PPP experts
Compliance with contractual agreement
Appropriate Legal and Regulatory Framework
Strong Institutions with appropriate resources
Competitive and transparent procurement
Mitigation and flexibility in managing macro-risks
Summary of Lessons from Successes
and Failures
82
83. 83
PPPs are complex and time demanding structures that required full time
dedicated resources from the public sector entities responsible
transport infrastructure development.
Consideration should be given to a Coordinating Transport PPP Unit that
should ensure;
Well planned projects with realistic parameters to promote competitive
bidding.
Highly structured bids; RFP, pre-qualification, bidding, detailed face-to-face
negotiations.
Performance-based Operation , Maintenance and Management Contracts
Smart tools for public subsidy
Projects structure to withstand dips in traffic
Limitations on Capital Leverage : EBITDA/debt and EBITDA/finance charges
Built in scheduled renegotiations every 5 years for contract maintenance
Smart and effective risk mitigation products supporting PPPs if it goes wrong!
The Best Tool To Successes is Project
Planning & Structure!
85. 85
About half of active transport deals are in Asia Pacific.
Worldwide, transport comprises nearly a third of global pipeline and
procurement deal value. That is second only to oil and gas. .
By deal count, the United States is the busiest country for transport
deals, with 22 transactions progressing towards completion in the past
nine months.
IJ Global recorded more infrastructure finance for the transport sector
in 2015 than in any previous year since 2008.
2015 - IJ Global Data in Tolled Roads
86. 2015 Sponsors League – MENA Region
86
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1 Saudi Aramco 3,247 2 16
2 Sumitomo Corp 3,047 1 15
3 ACWA Power 2,643 9 13
4 ACWA Holding 1,617 2 8
5 Mubadala Development Company 1,274 2 6
6 Shikun & Binui 535 1 3
7 Abengoa 535 1 3
8 Air Products and Chemicals 530 1 3
9 Moroccan Agency for Solar Energy 500 2 2
10 Sahara Petrochemical 467 1 2
87. 2015 Mandated Lead Arrangers (MLA’s)
League – MENA Region
87
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1 Sumitomo Mitsui Financial Group 1,661 8 13
2 Mitsubishi UFJ Financial Group 1,658 7 13
3 Mizuho Financial Group 1,350 7 10
4 HSBC 1,045 5 8
5 Banque Saudi Fransi 584 4 5
6 Samba Financial 480 5 4
7 BNP Paribas 416 3 3
8 National Bank of Abu Dhabi 402 3 3
9 Bank Muscat 402 3 3
10 First Gulf Bank 369 3 3
88. 2015 Development Finance Institutions
(DFI’s) League – MENA Region
88
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1
Japan Bank for International
Cooperation
2,767 3 49
2 World Bank 400 2 7
3 European Investment Bank 371 3 7
4 KfW 307 4 5
5 National Commercial Bank 304 2 5
6
Overseas Private Investment
Corporation
275 2 5
7 European Union 216 2 4
8 African Development Bank 216 2 4
9 Agence Francaise de Development 216 2 4
10 Clean Technology Fund 130 3 2
89. 2015 Legal Advisors League – MENA
Region
89
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1 White & Case 12,179 5 20
2 Dentons 8,292 2 14
3 Milbank, Tweed, Hadley & McCloy 8,125 1 14
4 Chadbourne & Parke 3,720 7 6
5 Allen & Overy 3,592 11 6
6 Norton Rose Fulbright 3,036 5 5
7 Ashurst 2,427 4 4
8 King & Spalding 2,395 2 4
9 Shearman & Sterling 2,206 5 4
10 Hajji & Associes 2,000 2 3
90. 2015 Financial Advisors League –
MENA Region
90
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1 HSBC 10,868 3 27
2 Sumitomo Mitsui Financial Group 8,125 1 20
3 Greengate 8,125 1 20
4 Synergy Consulting 3,201 4 8
5 Ernst & Young 2,000 2 5
6 Alderbrook 2,000 2 5
7 Deutsche Bank 1,070 1 3
8 Goren Capital 1,070 1 3
9 TASC 1,070 1 3
10 Mitsubishi UFJ Financial Group 863 1 2
91. 2015 Technical Advisors League –
MENA Region
91
Rank Company
Total
(US$ m)
Deals
Market
Share (%)
1 Lummus Consultants International 8,125 1 41
2 Nexant 8,125 1 41
3 Parsons Corporation 1,070 1 5
4 Mott MacDonald 990 3 5
5 Fichtner 590 1 3
6 Lahmeyer International 355 2 2
7 Poyry 305 1 2
8 A. Epstein & Sons International 135 1 1
9 DNV GL 30 1 less than 1
92. 92
By aligning investor and Government interests considering their
different risk preferences and return expectations, the potential
to increase the number of PPP deals and increase the odds of
the projects’ long-term success becomes bigger.