Description of PPP project to rehabilitate road between port of Lome and Ouagadougou.

1. LOME
OUAGADOUGOU
Road Corridor and Transport
Facilitation Project

2.  The Lomé-Cinkansé-Ouagadougou Corridor is the backbone of Togo’s road
network, and the only road linking all the regions of the country. The corridor
is also very important for the sub-region’s landlocked countries (Mali,
Burkina, Niger), particularly Burkina Faso, because the Lomé Port Authority
(PAL) is currently one of the main transit port for its overseas trade.
 Total estimated project cost : 282.5 M EUR
PROJECT PRESENTATION

4. PROJECT PRESENTATION
 The main objective of Lomé-Ouagadougou transport corridor is, in addition to
improving the condition of the road and travel, to facilitate regional integration
between Burkina Faso and Togo, was well as within the WAEMU/ECOWAS zone.
 The road connects land-locked Burkina Faso, Mali, and Niger with the port of
Lomé. The project will rehabilitate about 300 km of road sections which are
currently in bad condition, between the two capitals, and key transport
facilitation measures along the Lomé-Ouagadougou corridor.
 The project consists in the rehabilitation of 303 km of road in very bad or bad
condition, with 150 km in Togo and 153 km in Burkina Faso, as well as the
improvement of transport facilitation along the corridor. The expected outcomes
are increased transit traffic and trade, reduced general transportation costs,
improved road safety, and the creation of jobs for youths and women.

5.  CONSTRUCTION RISK : Delay and overhead costs in the rehabilitation of the infrastructure.
ALLOCATED TO CONCESSIONAIRE / PRIVATE SECTOR
 DEMAND & REVENUE RISKS :Lower traffic than expected. Not enough revenue to repay CAPEX and
generate sufficient IRR.
ALLOCATED TO GOVERNMENT (Payment capacity or minimum guaranteed revenue)
 O&M RISKS : Operator will support expenses associated with O&M expenses which can be inflated
by large traffic or natural events (Rainy season).
ALLOCATED TO CONCESSIONAIRE / PRIVATE SECTOR.
 FINANCING & INTEREST RATE : Failure to reach financial close. Increase in interest rates in the
case of floating rates denominated debt.
ALLOCATED TO CONCESSIONAIRE / PRIVATE SECTOR. Can be mitigated by the involvement of DFIs
 LAND ACQUISISTION : Road is already existing. No risk.
Road PPP risk Matrix World Bank
PROJECT RISKS & ALLOCATION

6. PROJECT RISKS & ALLOCATION
 FOREIGN EXCHANGE RISK : Loans & Equity would likely be denominated in hard currency (USD /
EUR) whereas revenue will be collected in FCFA. Risk is particularly high for USD denominated debt
(USD not pegged to FCFA unlike EUR).
ALLOCATED TO CONCESSIONAIRE / PRIVATE SECTOR
 FOREIGN EXCHANGE POLICY : To service the debt & pay dividend, payments will be made outside
the WAEMU zone which will require the authorization of the BCEAO (West African Central bank). If
this CB authorization were to be denied or delayed risk of default on commercial debt is high.
ALLOCATED TO CONCESSIONAIRE / PRIVATE SECTOR
 REGULATORY RISKS : Change in tariff policy.
TARRIF SHOULD BE INSCRIBED IN CONCESSION AGREEMENT
 ENVIRONMENTAL RISKS : Mitigated by contractor track record + Brownfield project.
 POLITICAL & SOVEREIGN RISKS : West Africa is prone to political instability which can affect the
project profitability / feasibility.
ALLOCATED TO THIRD PARTY THROUGH PURCHASE OF AN INSURANCE
 FORCE MAJEURE
ALLOCATED TO THIRD PARTY THROUGH PURCHASE OF AN INSURANCE

7.  EPC COST REDUCTION : Construction contractors is usually incentivize to
terminate construction within time and budget.
 O&M EXPENSES OPTIMIZATION : Operators revenues depends on traffic which
itself depends on quality of infrastructure, creating an incentive for the
operator to invest in proper O&M expenses.
 REDUCING CONSTRAINT ON PUBLIC FINANCE : PPP will reduce the
immediate public spending in a context of constrained public budget.
 EFFICIENCY GAINS : More efficient maintenance & operation will decrease
transportation costs, increase traffic generating positive economic
externality and increasing regional trade. Operational efficiency can be
maximize through a capacity payment made by the governments of
Burkina & Togo, depending on pre-determined criteria.
RATIONALE FOR PPP

8.  Project Presentation (french)
 http://www.afdb.org/en/news-and-events/article/the-afdb-approves-road-
improvement-and-transport-facilitation-project-on-lome-ouagadougou-
corridor-9448/
 Financing Road Infrastructures
SOURCES