Transcript Why seeking for PPPs in ports? Not only for private

Public-Private Partnerships (PPP)
Workshop on PPPs in Russia
(Moscow - March 3-4, 2005)
Port sector
Michel Audigé
Lead Port Specialist
ECA region – The World Bank
The Four Main Russian Gateways to the Global Market
Distribution of Roles in The New Ports Era
Public Port and Marine Authorities
 Provide basic infrastructure (access / protection / connection)
 Establish a reliable administrative framework
 Traffic Safety and Environment Protection
 Technical regulation matters
 Promote Port Community dialogue
Commercial Terminals (Private Sector)
 Handle operational aspects
 Manage commercial risks
 Propose and implement investment policy
 Incentives for high performance and competitive tariffs
 Play a crucial role in fostering efficient logistics development
Source ADB
Definition of PPP Schemes
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Very wide spectrum, from work and service contracts to
full privatization
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Pros and Cons of PPP schemes
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In any case, a long – up to 18 months -- and complex
[two or three steps] process to ensure success, i.e.,
resulting from long term “win-win” deals
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In each case a “tailor-made” design is required
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Size matters, i.e., US$100 million minimum per deal
PPPs : Options and Challenges for Success
Key Challenges for Success:
Policy Framework (i.e., PPP legislation, institutional capacity, economic
regulation and communication program)
Transaction Design (i.e., market structure, cost recovery and affordability)
Financiability (i.e., adequate risk allocation mechanisms)
Public Sector Risk Management (I.e., assessing and monitoring
government’s commitments under PPP schemes)
PPPs : Pros. and Cons.
Pros.
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Competitive process
Increased transparency
Well designed risk
allocation
Balance sheet
consideration
Private sector efficiencies
and innovation
Commercial risk sharing
Reference EBRD 2004
Cons.
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Complexity
High transaction costs
Higher borrowing costs
than public financing
Skill deficit for
Administration
Structuring risks
Public perception and
political reactions
Why Seeking for PPPs in Ports?
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Mainly for mobilizing private financing, but also
– to improve port competitiveness [examples: Antwerp,
Mexican, and Laem Chabang ports];
– to strengthen linkage with global market [illustration:
Maersk in St. Petersburg (Transib), and Algeciras];
– to boost international trade to/from Russia with the rest of
the world [promising development of international
container trade, doubled in the present decade.]
Developments in The Container Business
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Increase in flows of containers;
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Increase in maximum vessel sizes;
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Growth of ICT and automation;
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High performance demands;
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Major international players; and
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Need for investments in terminal facilities and
modern handling equipment.
Development of The International Container Trade
(Sources: Various)
700
500
400
300
200
100
Year
20
12
20
08
20
04
20
00
19
96
19
92
19
88
19
84
19
80
19
76
0
19
73
million TEU
600
A competitive land bridge for containerized cargo?
Source: MOTC Finland - 2005
Key Factors for a Successful PPP in Ports
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Objectives of the PPP: difficult choice between two
extremes:
– Maximum revenue for Port Authority
versus
– Maximum competitiveness for port users];
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Public and transparent tendering process;
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Optimal risks’ allocation [2 slides];
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Standard timeframe for a well designed PPP; and
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Two-step vs. Three-step approach [3 slides].
Optimal Risks’ Allocation (1/2)
– Political Risks (Confiscation / Expropriation / Nationalization, Civil
Strife / War). Mitigation through International Arbitration and Risk
Guarantee (IBRD and MIGA)
– Government Performance Risks (Compliance to contractual terms
in a Concession Agreement). Mitigation through insurance and
guarantees (IBRD and MIGA)
– Environment and Safety Risks Environmental and safety
constraints to be defined in Concession Agreement
– Construction Risks Risk generally borne by Concessionaire.
Acquisition of land by Government before construction. Issue of
geotechnical risks
Optimal Risks’ Allocation (2/2)
– Technical Operation Risks Risk to be borne by Concessionaire
– Revenue Risk in existing facilities Often an acceptable risk to be
borne by Concessionaire (adequate provision on tariff in
Concession Agreement)
– Revenue Risk in newly-built facilities A major risk (traffic volume,
tariff setting, revenue in local currency). Often not possible for
Concessionaire to bear all the risk
– Financial Risks Inconvertibility/Transfer Risk to be insured. Issue
of Exchange Risk. Other risks borne by Lenders. World Bank
Partial Risk Guarantees.
Indicative Transaction Timetable [15-18months]:
(Two steps process)
Phase I: Strategic Review and Due Diligence
[6 months]
Technical/
Operational
Review
Legal
Review
Financial /
Economic
Review
Strategic Options and
Recommendations
Report
Social/
Environm’l
Review
Preliminary
Market
Assessment
Phase II: Transaction [9 months]
Bid Award
&
Closing
Info.Memo/
Marketing
Bid
PrePrequalification
Negotiate
Bid
Documents
Draft Bid
Documents
Bidder Due
Diligence/
Dataroom
Three Steps Process
1.
Pre-qualification: (Previous experience in port facilities
financing and operations, Project finance capacity)
2.
« Technical » Selection: (Essentially on the basis of a
detailed Business Plan) using «Pass or Fail» criteria
3.
Financial Selection: (on the basis of unified
documentation, i.e., draft lease / concession agreement)
– Simple selection criterion, e.g., fixed annual fee plus
royalty (per container movement) of service provided by
Concessionaire to the port users
What Is Eligible for PPP Schemes?
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In any case, PPP can only result from economically and
financially justified projects
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Size does matter [Transaction costs -> minimum project size of
US$100 million and more…]
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Private sector interest in port business [see ADB graphic]:
– Cargo handling, especially containers; and
– Marine services (towage, berthing, etc…)
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Added Value logistic services
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Port/City interface redevelopment for urban purposes
 past experience in Russia and worldwide
List of PPI in The Port Sector in The Region (1992-2003)
Source: WB PPI Database 2003
List of PPI in The Port Sector Worldwide (1992-2003)
Source: WB PPI Database 2003
Possible PPPs’ Prospects in Russia
… as listed in the Russia Transport Strategy until 2020:
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St. Petersburg and Ust Luga railway/ferry services with
Kaliningrad;
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Transshipment facilities for oil, grain and containers in the port
of Novorossiisk;
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Vostochnyy/Vladivostok ports and railways access;
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Plus logistics services and development of inland waterways:
– Astrakhan water transport node;
– the Makhachkala port; and
– Reconstruction of the Kochetov lock on the Don River.
Possible PPPs Prospects in Russia
World Bank Group comparative advantages
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Close partnership with Russian authorities
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Advisory services from either the IBRD and/or the IFC
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Skill-mix and worldwide experience
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External consultants and experts
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Reputation to act as an “honest broker”
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Increased confidence of the private sector
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Balancing interest of both Public and Private sectors
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Transparent and competitive PPP process and more
 The Port Reform Toolkit (www.worldbank.org).
WBG: Financial Support for PPP’s
Financial Products
Advisory Services /1
Hard Currency:
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Loans (Investment & Policy, IBRD, IDA)
On-lending facilities
Co-financing schemes (A/B Loans, IFC)
Guarantees (IBRD, IDA, IFC, MIGA)
Insurance (MIGA)
Equity and related products (IFC)
Institutional Building Capacity:
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Project (transaction) Execution:
Local Currency:
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Currency Conversion Option (FSL)
Currency swap
Guarantees
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/1 Includes
Partnerships with other donors
PPIAF
WSP
BNPP (Bank & Netherlands Partner)
TAF (PIDG)
FIAS
DEVCO (IFC Advisory Services)
GPOBA
Cities Alliance
PIDG (EAIF, Guarantco, Infraco – also
includes financing products)
Next Steps (1/2)
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Independent review of the Russian port sector to:
– Review the relevance of its current institutional framework and
administrative organization
– Determine the level of competition intra- and inter-ports as well as
the efficiency and relevance of regulatory mechanisms in place
– Assess the level of operational performance, tariffs and shippers’
degree of satisfaction for the service provided
– Assess current and future port capacity (in volume and by type of
cargo)
– Intermodalism and value added logistics
– Evaluate the prospects for promoting PPP schemes.
Next Steps (2/2)
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Short/medium term action plan to:
– Develop an appropriate regulatory legal framework
– Increase port capacity – and efficiency – through PPP
schemes
– Improve the overall rail, road and inland waterways
connection between the ports and their hinterland,
especially with Russia’s oil/gas production centers
– Introduce modern information and communication
technologies
– Where necessary, improve port/city interfaces to minimize
the impact of port related businesses on the functioning of
the city
Public-Private Partnerships (PPP)
Workshop on PPPs in Russia
(Moscow - March 3-4, 2005)
Спасибо!
Michel Audigé
Lead Port Specialist
ECA region – The World Bank