Transcript HIGHWAY CONCESSIONS AND WORLD BANK GUARANTEES

Regional Seminar on PerformanceBased Management and Maintenance
Contracts
Word Bank Resource Guide and
Other Information on
Performance-Based Contracts
César Queiroz, Ph.D.
Roads and Transport Infrastructure Consultant
Arusha, Tanzania
February 2008
Presentation Outline
• World Bank Resource Guide for
Performance-based Contracting
• Additional resources
• Toolkit for PPP in highways
• From PBC to PPP
• PBC and road management
• RONET
• PBC and the distribution of risks between
the public and the private sectors
World Bank Resource Guide for
Performance-based Contracting
• Assists road agencies in developing countries to
launch or enhance a PBC program to manage
and maintain their road networks
• Contains practical documentation to
– identify a PBC approach to fit specific conditions in a
given country
– design bidding and contract documentation
– develop an efficient PBC implementation strategy
• Also useful for consultants and contractors
• Produced under a partnership between the UK
Department for International Development and
the World Bank
World Bank Resource Guide for
Performance-based Contracting
• Sample Bidding Documents
• Sample TOR for preparation of PBC
projects and support to bidding
process
• Sample TOR for Supervision
• Sample TOR for Facilitator / Trainer
• Sample Technical Specifications
• WB Technical Note No. 27 on PBC
• Actual Contracts
• Resource People
World Bank Websites on
Performance-based Contracts
• Resource Guide for Performance-based Contracting
http://www.worldbank.org/transport/roads/resourceguide/index.html
• Training Course for Performance-Based Management
and Maintenance of Roads
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:
20706624~pagePK:148956~piPK:216618~theSitePK:338
661,00.html
• Road Management Catalog
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:
20735996~pagePK:210058~piPK:210062~theSitePK:338
661,00.html
Gunter Zietlow’s Website on
Performance-based Contracts
• PBC Overview
• Sample Terms of Reference for the
Preparation and Procurement, Contract
Supervision and Facilitation, and Training
• Bidding and Contract Documents
• Training Materials
• Related Presentations
• Available at: http://www.performance-basedroad-contracts.com/
Toolkit for PPP in Highways
The toolkit is structured under five
headings and includes a library and
interactive financial simulation model
Available at the World Bank’s web site:
www.worldbank.org/highways
From PBC to PPP…but
PPPs are not new!
• Toll road at Wadesmill in Hertfordshire, UK,
established in 1663 by Act of Parliament
• 19th century concessions: toll roads,
bridges, tunnels in US; railways in France;
subway in London
• Suez (1860) and Panama (1880) canals
• Decline around 1930 (great depression)
• Resurgence in the 1980s: collapse of the
state-owned monopoly paradigm
Toolkit for Public-Private
Partnership in Highways
Financial Simulation Model
Main Financial Indicators
Debt Service Cover Ratio (DSCR)
DSCRn 
(CAFDS) n
3
 (Debt Service)i,n
1 2
i 1
ADSCRn 
(CAFDS) nn
3
 DebtService, n
i 1
where
i = number of tranches, 1≤ i ≤3
n = current year
(Debt Service) i,n = (Principal) i,n + (Interest) i,n
CAFDS= Cash Available for Debt Service
Loan Life Cover Ratio (LLCR)
maximum maturity of the three tranches

Net PresentValue
LLCRn 
j n
(CAFDS)n
Outstanding Debt n end of period
(CAFDS)
n = current year 1  2 ADSCR  DebtServic
e, n

CAFDS= Cash Available for Debt Service
Outstanding debtn end of period
The Net Present Value of the Cash Available for Debt
Service from year n+1 to the end of the maturity is
discounted at the debt interest rate
The financial tool provides the user with the minimum
LLCR
nn
n
3
i 1
Return on Equity (ROE)
end of the concession

i 1
(Equityinjected- dividends)
0
i
(1  ROE)
1 2
ADSCRn 
(CAFDS) nn
3
 DebtService, n
where:
Equity injectedi is the equity provided by the
sponsors in year i
Dividendsi are the dividends distributed to
shareholders in year i
ROE is calculated in real terms through deflated flow
(equity - dividends)
i 1
Project Financial Internal
Rate of Return (IRR)
end of the concession

1 2
ADSCRn 
(OCFBF)i

0
i
(1  IRR)
(CAFDS) nn
3
i first year of construction DebtService, n
DebtService, n
i 1
i = year
OCFBF = Operating Cash Flow Before Financing
Project Net Present Value:
Present Value of Taxes minus
Subsidies (NPV)
end of concession
(OCFBF)i
ProjectNPV 

i  year of study

i first year of construction (1  t )
1 2
ADSCRn 
(CAFDS) nn
3
DebtService, n
i 1
where:
OCFBF = Operating Cash Flow Before Financing
t = weighted average of the three rates on the tranches
of debt
The NPV is calculated for the first year of the
construction period
Estimated Minimum Toll Rate to Attract
Private Investment for a PPP Project
$/km
0.5
0.4
5,000 vpd
0.3
10,000 vpd
0.2
15,000 vpd
0.1
20,000 vpd
0
1
2
3
Construction cost, $ million/km
4
5
PBC, PPP and Road
Management
• Road condition is a key indicator of the
roads agency efficiency
• PBC and PPP have been used to improve
the condition of road networks (also to
expand)
• A new tool can help road agencies and
policy makers to assess the future
condition of a road network as a function,
inter alia, of funds available: RONET
Road Network Evaluation
Tools (RONET)
Version 1.01
World Bank
January 2008
RONET
• Developed for SSATP by the World
Bank
• Helps decision makers:
– Monitor network condition
– Plan allocation of resources
– Assess consequences of macro policies
– Design Road Asset Managements
Systems
• Developed for Africa, but can be
applied worldwide
RONET
Output
Input
Asset value
Country data
Roughness
Length of road network
Network charts
Historical data
Standards
Network monitoring
indicators
Cost of road works
Road works summary
Optimal work program
Road Network Length Matrix
Matrix of Road Classes: Overall Network Evaluation
Network
Type
Primary
Secondary
Tertiary
Unclassified
Urban
Concrete
Traffic
Category
Traffic I
Traffic II
Traffic III
Traffic IV
Traffic V
Surface Type
Asphalt
S.T.
Gravel
Very Good
Earth
Condition Category
Good
Fair
Poor
Total 5 x 5 x 5 x 5 = 625 road classes
Very Poor
Default RONET Traffic Categories
Average Annual Daily Traffic (AADT)
Illustrative Standards
Surface Traffic
Traffic
Minimum
Maximum
Average
Type
Category
Level
(veh/day)
(veh/day)
(veh/day) Standard
Earth
Traffic I
T1
0
10
5
1-lane warranted
Formation not warranted
Traffic II
T2
10
30
20
1-lane warranted
Formation warranted
Traffic III
T3
30
100
65
2-lane warranted
Gravel warranted
Traffic IV
T4
100
300
200
2-lane warranted
Gravel warranted
Traffic V
T5
300
1,000
650
2-lane warranted
Paved Surface warranted
Traffic I
T2
10
30
20
1-lane warranted
Formation warranted
Traffic II
T3
30
100
65
2-lane warranted
Gravel warranted
Traffic III
T4
100
300
200
2-lane warranted
Gravel warranted
Traffic IV
T5
300
1,000
650
2-lane warranted
Paved Surface warranted
Traffic V
T6
1,000
3,000
2,000
2-lane warranted
Paved Surface warranted
Traffic I
T4
100
300
200
2-lane warranted
Gravel warranted
Traffic II
T5
300
1,000
650
2-lane warranted
Paved Surface warranted
Traffic III
T6
1,000
3,000
2,000
2-lane warranted
Paved Surface warranted
Traffic IV
T7
3,000
10,000
6,500
2-lane warranted
Paved Surface warranted
Traffic V
T8
10,000
30,000
20,000
4-lane warranted
Paved Surface warranted
Gravel
Paved
Geometry
Pavement
Standard
Default RONET Condition Categories
• Very Good: requires only routine
maintenance (RM)
• Good: requires RM plus preventive
maintenance or spot regravelling or repairs
• Fair: requires RM plus periodic
maintenance
• Poor: requires RM plus strengthening or
partial reconstruction
• Very Poor: requires RM plus full
reconstruction
Default RONET Condition Categories
Capital Road Works Needed to Bring a Road to Very Good Condition
Condition
Category
Bituminous Roads
Gravel Roads
Earth Roads
Very Good
None
None
None
Good
Preventive Treatment
Spot Regravelling
Spot Repairs
Fair
Resurfacing
Regravelling
Heavy Grading
Poor
Strengthening
Partial Reconstruction
Partial Reconstruction
Very Poor
Full Reconstruction
Full Reconstruction
Full Reconstruction
Performance Assessment
What are the Consequences of
Applying Different Maintenance and
Rehabilitation Standards?
Road
Network
Standards
Very High Standard
High Standard
Medium Standard
Low Standard
Very Low Standard
Do Minimum
Do Nothing
Custom Standard
Performance
Assessment
Consequences
Road Works
Financial
Economic
Condition
Asset Value
Road Users
Etc.
RONET Distribution
• RONET is available for free internet
download at:
http://www.worldbank.org/afr/ssatp
• RONET CD can be obtained by contacting:
– Monique S. Desthuis-Francis
[email protected]
• Technical issues:
– Rodrigo Archondo-Callao
[email protected]
High
Allocation of Risks
Force
Account
Maintenance
Contracts
PBC
RISK
TO
PUBLIC
SECTOR
Concessions
Decreasing
Public Risks,
Increasing
Private Risks
Low
RISK TO PRIVATE SECTOR
BOO
High
Thank you!
Some Basic References
World Bank (2006). “Resource Guide for Performance-based
Contracting.” Washington, D.C.
http://www.worldbank.org/transport/roads/resourceguide/index.html
World Bank (2005). “Performance-based Contracting For
Preservation and Improvement of Road Assets.” Transport Note
No. 27. Washington, D.C.
http://www.worldbank.org/transport/roads/resourceguide/Docslatest%20edition/PBC/trn_27_PBC_Eng_final_2005.pdf
World Bank (2005). “Sample Bidding Document: Output- and
Performance-based Road Contract (OPRC).”
http://www.worldbank.org/procure/
World Bank (2003). “Toolkit for Public-Private Partnership in
Highways.” Public-Private Infrastructure Advisory Facility
(PPIAF) and World Bank.
http://rru.worldbank.org/Documents/Toolkits/Highways/index.ht
m
WB PPP-related Sites
• Toll Roads and Concessions
http://www.worldbank.org/transport/roads/toll_r
ds.htm
• How to Hire Expert Advice on PPP
http://rru.worldbank.org/Toolkits/Documents/Ad
visors/Full_Toolkit.pdf
• Labor Issues in Infrastructure Reform
www.ppiaf.org/Reports/LaborToolkit/toolkit.html
• Toolkit for PPP in Highways
http://rru.worldbank.org/Toolkits/PartnershipsHighway
s/
World Bank Websites on
Performance-based Contracts
• Resource Guide for Performance-based Contracting
http://www.worldbank.org/transport/roads/resourceguide/index.html
• Training Course for Performance-Based Management
and Maintenance of Roads
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:
20706624~pagePK:148956~piPK:216618~theSitePK:338
661,00.html
• Road Management Catalog
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:
20735996~pagePK:210058~piPK:210062~theSitePK:338
661,00.html
Basic Assumptions to Estimate the
Minimum Toll Rate to Attract Private
Investors for a PPP Project
• Concession term: 20 yrs
• Construction Cost:
$1M/km to $5M/km
• Operation cost:
$500,000/km/yr
• Equity: 14%
• Subsidies: 0
• Interest rate: 5%/yr
• Grace period: 4 yrs
• Repayment period:
14 years
• Discount rate: 10%
• Initial traffic:
5,000 vpd to 20,000 vpd
• Traffic growth: 3%
• Inflation: 6%
• Tax: 18%
• IRR ≥ 12%
• ROE ≥ 16%
• LLCR ≥ 1.0
• DSCR ≥ 1.0
Cesar Queiroz
Roads and Transport Infrastructure
Consultant
World Bank, 1818 H Street NW
Washington DC 20433 USA
Tel +1 202-473 8053
Mob +1 301-755 7591
Email: [email protected]
http://www.worldbank.org/transport
http://www.worldbank.org/highways
Cesar Queiroz is an international consultant on roads and
transport infrastructure, with main interest in publicprivate partnerships (PPP) in infrastructure, road
management and development, performance-based
contracts, port rehabilitation, improving governance,
quality assurance and evaluation, research, teaching and
training. Between 1986 and 2006, he held several
positions with the World Bank in Washington, D.C.,
including principal highway engineer, lead highway
engineer, and highway advisor. Prior to joining the World
Bank, Cesar was the deputy director of the Brazilian Road
Research Institute in Rio de Janeiro. He holds a Ph.D. in
civil engineering from the University of Texas, USA, a
M.Sc. in Production Engineering from the Federal
University of Rio de Janeiro, and a B.Sc. in civil
engineering from the Federal University of Juiz de Fora,
Brazil. Cesar was awarded the Maua Medal for his
contribution to transport development in Brazil, and is an
elected member of the Russian Academy of Transport. He
has published more than 130 papers and articles,
including being a co-author of two World Bank main
publications on PPP and performance-based contracts,
respectively the “Toolkit for PPP in Highways” and the
“Resource Guide for Performance-based Contracting.”
He has participated actively in several international
organizations, such as TRB, SHRP, OECD, PIARC, IRF.