Almaty Ring Road PPP (BAKAD)kzppp.kz/.../2015/11/BAKAD_Roadshow_London_IFC_Presentation.pdf ·...

Almaty Ring Road PPP (BAKAD)

London, December 9, 2014

Ministry of Investments and Development

of Republic of Kazakhstan



Subject Slide

Introduction 3

Technical parameters 7

Financial structure 13

Contractual aspects 22

Tender process 30

Contents

2



Project Snapshot

• Part of the “Western China – Western Europe”

transnational highway

• Population served1 – c. 2,000,000

• Greenfield bypass toll road

• Length – 66 km (4/6 lanes)

• CAPEX – est. $680m

• Remuneration based on availability payments

• Currency risk mitigation mechanism

• Other standard project finance features (incl.

termination, arbitration, step-in provisions, etc.)

3

[1] Includes Almaty and three neighbouring districts, 2014.



Importance of BAKAD

Infrastructure

Construction of a key link in the “Western China – Western Europe”

transnational highway

Reduction of commuting time to Almaty

Signalling effect

First large PPP in Kazakhstan

First large infrastructure project outside of the Oil&Gas sector financed

with private capital

Pipeline of road projects

4



Project Team

5

IFC Lead Transaction Advisor

PPP TA Unit (Kazakhstan)

Archaeology

Expedition (Kazakhstan)

Sweco International (Sweden)

Design Institute

“TRTI” (Sweco) (Russia)

Design Institute

“Dortrans” (Kazakhstan)

Engineering Center

Astana (Kazakhstan)

Kocks

Consult (Germany)

Gide Loyrette Nouel (France/Russia)

Colibri

Law Firm (Kazakhstan)

Ernst & Young (Russia/

Kazakhstan)

EBRD Mobilized grant to co-finance project preparation

Ministry of Investments and Development (Automobile Roads Committee)

Other stakeholders:

• JSC “Kazakhstan Center for Public-Private Partnership” (PPP Center): Regulator under Ministry of National Economy

• RSE “Gosexpertiza” (Independent State Expert Review): Regulator under Ministry of National Economy

• Local municipal and regional authorities (akimats): Public-sector beneficiaries of the project



Subject Slide

Introduction 3




Tender process 30

Contents

6



Technical Parameters: Overview

7

27 k vehicles

Operations period c. 15.5 years

19 viaducts

April-October construction season

Cost of Construction (US$ m)

Year 2 Year 3 Year 4 Year 5 Year 1 Total: US$

680m 163 33 86 114 285

66 км long

4/6 lanes

Construction period 50 months

23 toll plazas

21 bridges 12 intersections

23 entrances



Technical Parameters: Construction

Parameter Unit Total

Construction length (length) km 66

Road category -- Ι-а

Design speed km/h 150

Number of traffic lanes

А) on sections Stake 0-55 and Stake 570-660

B) on sections Stake 55-570

-

-

4

6

Traffic lane width m 3.75

Road shoulder width m 3.75

Width of the hard part of the road shoulder m 2.5

Width of median m 6.0

Width of safety strip near the median m 1.0

Carriageway width

A) with 4 lanes

B) with 6 lanes

m

m

4х3.75

6х3.75

Width of pavement

A) with 4 lanes

B) with 6 lanes

m

m

22

29.5

Width of roadbed

A) with 4 lanes

B) with 6 lanes

m

m

28.5

36

8



Technical Parameters: CAPEX

9

• Estimated cost of construction:

US$680 m

• CAPEX estimated by GoK’s advisors

based on:

Detailed designs

Local methodology for cost

estimation

• Approved by Gosexpertiza

• Bidders allowed to review CAPEX

estimates during bidding process

86

114

285

163

33

0

50

100

150

200

250

300

Year 1 Year 2 Year 3 Year 4 Year 5

Cost of Construction (US$ mln)



Technical Parameters: Traffic

10

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

P1-P2 P2-P3 P3-P4 P4-P5 P5-P6 P6-P7 P7-P8 P8-P9 P9-P10 P10-P11P11-P12

Nu

mb

er o

f V

eh

icle

s

Road Segment

Average Annual Traffic Volumes, 2018

Heavy trucks/buses Medium trucks/buses Light trucks/buses Cars

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

P1-P2 P2-P3 P3-P4 P4-P5 P5-P6 P6-P7 P7-P8 P8-P9 P9-P10 P10-P11P11-P12

Nu

mb

er o

f V

ehic

les

Road Segment

Average Annual Traffic Volumes, 2038

Heavy trucks/buses Medium trucks/buses Light trucks/buses Cars

TRAFFIC STUDY

• Transport model based on economic development

forecasts, 2 traffic counts and a WTP/O-D survey

• Unique vehicles entering motorway begin at 78,495 vpd

and rise to 112,650 vpd by 2038

• Average Daily Traffic:

2018: 27,308 vpd

2038: 44,344 vpd

• Substantially, all traffic is local (commuters)

Proportion of trucks increases over time (western

China-Western Europe Corridor)

• Traffic expected to be remarkably stable given variable

weather conditions throughout the year

Cross-section traffic figures

Weighted average Cars Trucks

(% total) (% total) (real vpd) (equiv. vpd) (real vpd) (equiv. vpd)

2018 forecast 88 12 27,308 32,838 1,327 1,543

2038 forecast 78 22 44,344 56,970 2,211 2,858

Total AADT Peak hour



Technical Parameters: Tolling

11

TOLLING STRATEGY

• Toll rates set by GoK

• Concessionaire to collect tolls on behalf of GoK and

transfer toll revenue to the state budget

• Concessionaire to supply tolling equipment

• “Open” toll system

Flat fee upon entry

No ‘main carriageway’ toll plazas

“Congestion charge” approach

• 23 toll plazas (15 + 8)

• GOK interested in creating conditions for seamless

transition between toll roads to be developed in

Kazakhstan

To be discussed with short-listed bidders

Comparison of proposed tolls against benchmarks

Toll rate

(KZT) Min Max

Class 1 - light vehicles 343 489 240

Class 2 - minivans 399 570 240

Class 3 - light trucks 456 651 325

Class 4 - heavy trucks 536 765 385

International benchmark Suggested gross

toll rates

Toll Plaza

Intersection



Subject Slide

Introduction 3




Tender process 30

Contents

12



Transaction Structure

13

• 20-years BTO

• Traffic revenues collected by concessionaire and transferred to GoK

• Concessionaire remunerated through front-loaded availability payments

• Paid in local currency but government to compensate for currency fluctuations

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Year 11Year 12Year 13Year 14Year 15Year 16Year 17Year 18Year 19Year 20

Availability Payments (illustrative)

Compensation other expenses Investment Cost compensation






Investment Cost Compensation

14

Investment cost compensation – Fixed

Cost of construction including interest during construction (LIBOR + 3%) and other elements

Paid during first years of operation (to mimic debt repayment schedule)






Compensation of Other Costs

15

Compensation of other costs– Fixed

OPEX, REPEX, tax, cost of capital and other costs

Paid during operations period





Compensation other expenses Investment Cost compensation FX compensation

Currency Risk Compensation

16

Currency risk compensation – Variable

Additional public subsidy to compensate for any devaluation-depreciation of KZT Vs US$ above 5%

(cumulative)



Availability Payments

17

AVAILABILITY PAYMENTS, A SUM OF

• Investment cost compensation

Cost of construction and other

Paid during first [10] years of operation (to mimic debt repayment schedule)

• Other cost compensation

OPEX, REPEX, tax, cost of capital and other costs

Paid during operations period

• Currency risk compensation

Additional public subsidy to compensate for any devaluation-depreciation of KZT Vs US$

• Other

Performance penalties, other

• Credit rating Kazakhstan: BBB+ (S&P), Baaa2 (Moody’s)

• Strong interest from lenders: IFC, EBRD and ADB



Risk Matrix

18

Type of risk Grantor Concessionaire

Land expropriation

Financing risk

Inflation and cost overruns

Commissioning of road; meeting hand-back standards

Availability of road; meeting operating standards

Traffic risk

Currency fluctuations

Termination payment; discriminatory change in law



Transaction Structure: Modifications

MODIFICATIONS SINCE PREVIOUS INVESTORS CONFERENCE

• Traffic risk: Transferred to GoK

Availability payments applicable to “projects of exceptional significance”

• FX risk: Transferred almost fully to GoK

Government to compensate for currency fluctuations above 5%

• Bankability: Step-in rights for lenders allowed

Government to sign a Direct Agreement with lenders

• Dispute resolution mechanism: International arbitration outside of Kazakhstan applicable to PPPs

International arbitration allowed even if SPV is registered in Kazakhstan

• Limited incentives for private sector efficiency

Availability payment not adjusted for efficiency gains

• Tender process:

Two-stage tender process allowed

• Mandatory use of local templates for the preparation of bidding documents

International templates approved and adapted to local legislation

19



Land Expropriation

20

STATUS OF THE LAND ACQUISITION PROCESS

• Land expropriation process near completion

96% of landplots have been acquired

Completion of land expropriation and delivery of the site is a condition precedent to the Concession

Agreement

Grantor will provide the land free of any encumbrances, with no adverse claims pending in court



Subject Slide

Introduction 3




Tender process 30

Contents

21



Legal & Institutional Framework (1)

• Strong political will and clear government policy to promote BAKAD project

• Stable institutional framework dedicated to concessions, including a PPP Center set up to implement

the policy framework and to assist in the selection of PPP projects

• Established legal and regulatory framework, including the Law of the RK on Concessions No. 167-III

dated 7 July 2006 (as amended) and tender rules that allow a fair and transparent selection of

concessionaires

• BAKAD project awarded in the form of a concession by Order of the Government of the RK No. 1518

dated 31/12/2013. Recognized as a project of special importance (Order of the Government of the RK

No. 1060 dated 7/10/2014)

• Established investment protection (against illegal acts of state bodies, against nationalization and

requisition, right to use and dispose of revenues)

22



Legal & Institutional Framework (2)

• Enhanced attractivity of the Kazakh legal and regulatory framework, thanks to recent legal amendements

allowing:

Signing of the concession agreement by the SPV itself

Conclusion of a direct agreement

International arbitration in case of a dispute between resident entities

Mitigation of FX risk through adjustment of availability payments

Provision of termination payments in line with best practices

23



Contractual Aspects of the Concession (1)

24

• Concession Agreement based on international best practices and Kazakhstani law

CONTRACTING PARTIES

• Government of Kazakhstan acting through the Ministry of Investments and Development (Grantor)

• A resident SPV created by Successful Bidder (Concessionaire)

CONDITIONS PRECEDENT (CP)

• Delivery of Site to the Concessionaire

• Execution of financing agreements, fulfilment (waiver) of all conditions precedent thereto

• Provision of construction works programme and submission of design to Grantor

• Delivery of construction bond

• Obtaining all necessary consents by Concessionaire; delivery of certificates of insurance

DURATION OF THE CONCESSION

• CPs to be fulfilled <6 months from signature of Concession Agreement

• Construction period starts when all CPs are fulfilled ("Commencement Date") and last <50 months from

Commencement Date

• Operation period starts when certificate of acceptance of the construction works is issued and ends 20

years after Commencement Date




25

FINANCIAL ISSUES

• Concessionaire responsible for arranging financing

• Direct agreement between Grantor, lenders and Concessionaire

• Availability payments to be paid semi-annualy during period of operation as exclusive source of

compensation

• Availability payments to be adjusted if certain risks materialize (MAGA, FX, etc)

INTERFACE ISSUES

• Grantor can exercise control over compliance with contractual terms/conditions via Grantor

Representative, approving Concessionaire’s annual programme, monitoring of records (in particular in

respect of toll collection), disclosure obligations and Grantor step-in (conduct of required actions)

• Sections of “WC – WE” corridor will also be tolled (incl. Almaty-Khorgos): interoperability implications




26

LABOR

• Concessionaire to comply with Equator Principles and Law.

• No specific local content requirements for project.

ENVIRONMENTAL

• Concessionaire to conduct environment and social assessment, and establish an Environmental

Social Management System.

• Concessionaire responsible for strictly complying with Law and Equator Principles relating to protection

of environment, health and safety.

OPERATIONAL PERFORMANCE REQUIREMENTS

• Deductions to availability payments, in case of:

defect(s) (immaterial, material or dangerous): i.e. deviation from GOST/SNiP requirements;

non-performance: i.e. failure to comply with detailed technical, reporting or other requirements;

unavailability: i.e. closure of any lane or lanes / entries to user traffic.




27

VARIATION PROCEDURE

• Concession Agreement provides for a variation procedure in line with PFI standards, subject to

Kazakhstani budgetary procedures when compensation is to be paid by Grantor.

STABILIZATION PROVISIONS

• Subject to strict conditions, Concessionaire entitled to compensation through adjustment of

availability payments and/or extension of time and/or relief in event of:

Adverse Government Action;

Force Majeure;

Qualifying Change in Law.




28

TERMINATION PAYMENTS

• Concessionaire Default: (1) – (5)

• Grantor Default or Prolonged AGA: (1) + (2) + (3) – (5)

• Prolonged Force Majeure: (1) + (4) – (5)

With:

(1): lowest of: (i) Capital Expenditure already incurred, or (ii) “Cost of the Concession Object”, multiplied by:

(percentage of ICC remaining due at Termination Date) × 0.9

(2): termination costs

(3): an amount, which when taken together with dividends (or other distributions) paid by the

Concessionaire and equity invested or other forms of investment on or before Termination Date taking into

account the actual timing of all such payments, gives a real internal rate of return of 13%.

(4): mitigation costs.

(5): insurance proceeds received by the Concessionaire.



Subject Slide

Introduction 3




Tender process 30

Contents

29



Tender Requirements

• Form of the bidders: single entity or consortium

• Access of the bidders to a virtual data room

• Bid applications shall comprise:

First stage bid application, to be submitted at Step I (qualification stage)

Second stage bid application, to be submitted at Step II, including:

• Feasibility study (“TEO”, including technical and financial offers)

• Bid security, in the form of a bank guarantee or in the form of a deposit (equal to 0.1% of value of

concession object)

• Contents of the applications: 1 printed original, 1 printed copy, 1 electronic copy

• Language of the applications: Kazakh or Russian. Additional electronic copy in English is recommended

• Bid application validity period: 12 months from date of expiry of the second stage bid application

submission deadline

30



Qualification Criteria

31

STEP I – BIDDERS QUALIFICATION

Main qualification criteria:

• Financial and material resources for the project: Participated over last 10 years in at least 2 projects

satisfying any of the 3 following categories:

category 1: investment in a project of construction or reconstruction of motor roads >US$40 mln; or

category 2: >=2 contracts as general contractor in a project of construction and (or) reconstruction

of motor roads with >=4 traffic lanes in similar climatic conditions >US$190 mln; or

category 3: assets (book value) of a project operated (managed) >US$190 mln.

• Bidders must have a net worth of not less than 10% from the value of the concession object



Slide 31: Qualification Criteria

32

STEP II – SUBMISSION OF SECOND STAGE BID APPLICATIONS

• Technical criteria: pass / fail review of compliance with technical specifications of the project + sign

undertaking to contribute no less than 10% of cost of concession object in the form of equity

• Financial criterion: minimum amount of government support discounted at 8%

• Technical evaluation carried out by MID, Expertiza and PPP center.

• Financial offers of only those bidders who passed the previous stage will be opened

• Bid approved by expert reviews, meeting technical criteria and providing for lowest discounted

availability payments is designated as first-ranked bid



Tentative Tender Schedule

33

Event Tentative Timelines

Deadline for requests for clarification at Step I January 3, 2015

Deadline for submission of Bids for Step I February 3, 2015

Invitation to submit documents for Step II End of February 2015

Deadline for requests for clarification at Step II June 29, 2015

Deadline for submission of documents for Step II July 29, 2015

End of evaluation phase at Step II Not later than end of November 2015

Negotiations with the first-ranked bidder Within 6 months from designation of the best bid

Bid approval and announcement of the successful

bidder Within 1,5 month from end of negotiations

Signing of the concession agreement Within 90 days from announcement of the successful bidder

Almaty Ring Road PPP (BAKAD)kzppp.kz/.../2015/11/BAKAD_Roadshow_London_IFC_Presentation.pdf ·...

Documents

Transcript of Almaty Ring Road PPP (BAKAD)kzppp.kz/.../2015/11/BAKAD_Roadshow_London_IFC_Presentation.pdf ·...