GIB2015_Structuring Sustainable Infrastructure Projects_IISD Panel

This presentation was held during the 5th GIB

Summit, May 27-28 2015. The presentation and

more information on the Global Infrastructure Basel Foundation are available

on www.gib-foundation.org

The next GIB Summit will take place in Basel, May 24-25, 2016.

The information and views set out in this presenation are those of the author(s) and do not necessarily reflect the opinion of the Global Infrastructure Basel Foundation. Neither the Global Infrastructure Basel Foundation nor any person acting on its behalf may be held responsible for the use of the information contained therein.

Why are Sustainable Infrastructure Projects so difficult to structure?

Co-‐hosted by the Interna0onal Ins0tute for Sustainable Development

Oshani Perera, Director, Public Procurement and Infrastructure Finance David Uzsoki, Sustainable Finance Specialist

www.iisd.org ©2015 The Interna0onal Ins0tute for Sustainable Development

Jan van Schoonhoven Counsellor in Infrastructure and PPP

Sharing Netherlands and EU knowledge on PPP Role: Understand to role of governments and vica versa -‐  Seconded to UNECE (Manager PPP centre) -‐  Special advisor to the Minister Infrastructure of the Netherland -‐  Infrastructure Team World Economic Forum -‐  Advisor for World Bank (special Africa) -‐  Board Director PPP Centre Kazakhstan -‐  Senior Fellow at InternaKonal InsKtute for Sustainable Development -‐  Netherlands PPP projects in Asia (Myanmar, Bangladesh etc.) -‐  Advisor PPP Suez Channel

Understanding Risk form a government perspecKve

LIGHT BULB VERSES LED BUSINESS CASE PRESENTED BY A CONSORTIUM THAT

DOESNOT UNDERSTAND THE GOVERNEMENT RETRUN OF INVESTMENT IN 5 YEARS

REAL LIFE FOR A CIVIL SERVANT

BUSINESS CASE PRESENTED BY A CONSORTIUM THAT UNDERSTAND THE GOVERNEMENT

2020

LED IS DANGEROUS FOR CHILDEREN AND PREGNANT WOMEN, WAIST IS RADIO ACTIVE -‐  IMMEDIATE REPLACMENT

-‐  BACK TO BULBS -‐  MILLIONS GONE

-‐  RETRUN OF INVESTMENT IN 5 YEARS -‐  BUT WILL BE RESPONSIBLE FOR THE IMPLEMENTATION AND THE AFTER SALES

-‐  TAKE THE RISKS OF MAILFUNCTION

12.06.15 12.06.15 Building Europe Together with Public Private Partnerships 5

C.R.E.A.M. Europe PPP Alliance About Us

C.R.E.A.M. Europe PPP Alliance Public Private Partnership Association Avenue de l`Opale 1 Appart. 5 B – 1030 Brussels MasterPPPlan Competence Centre Duerrstrasse 1 D - 80992 Munich www.cream-europe.eu

Dipl.-Ing. Zoran Jelic EU Project Co-ordinator [email protected]


PPP=Complex Project Development Comparison Plan vs Reality

12 Juni 2015 9

Marcial Bustinduy

Principal Sustainable Transport Specialist

An intro to EBRD European Bank for Reconstruction and Development

•  IFI founded in 1991 to promote transition to market economies in 35 countries

•  Owned by 64 countries and two intergovernmental institutions (AAA/Aaa rated)

•  Largest single investor in the region: In 2014, €8.9 billion invested in 377 projects

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•  Principles: Transition Impact, Sound Banking, Additionality

•  Invests across all sectors: Infrastructure, ICA, FI, Energy & Natural Resources, SME, etc.

•  Tailored financial options with public and private sector (incl. debt, equity, PPP, etc.)

EBRD approach to overcome barriers •  Development sound legal framework

•  Capacity building/Institutional Development

•  Advice on deal structuring (eg. Environmental risks, Procurement PP&R)

•  DD: Mobilization of experienced advisors

•  Development of well balanced contracts: Public Service Contracts

•  IPPF (Infrastructure Project Preparation Facility)

•  Tailored financing options, incl. debt/equity: - Sovereign - Sub-sovereign - PPP

•  Long term maturities, incl. local currency debt

Financing

Technical Cooperation

Policy Dialogue

12 Juni 2015 11


Q & A – Round 1



PPP=Lifecycle Risk Management Risk Matrix

Risk Type Mitigation

Pre-completion - Cost over-runs - Delays (a) Fixed price turnkey contracts

(b) Warranties / penalties / incentives (c) Fixed project specification (d) Strong contractors

Post-completion - Revenue forecasts - Revenue build-up - Operating costs - Management failure

(a) Committed supply contracts (b) Committed off-take contracts (c) Strong operators (d) Performance guarantees

Technical - Performance - Environmental - Safety

(a) Warranties (b) Proven technologies (c) Public consultation and approval

Financial - Structure: debt/equity ratio, eg. 75/25 - Structure: return on capital - Structure: risk / reward ratio - Foreign exchange - Interest rates - Debt service cover - Taxation

(a) Equitable ROE, ( eg. 15-20 %) (b) Acceptable cover ratios ( e.g 1.5 -2.0) (c) Escrow and reserve accounts (d) Dividend constraints (e) Loan syndication (f) Insurance / financial derivatives (g) Standby funding arrangements

Legal - Regulatory framework? - Concession law? (a) Experienced lawyers.

(b) Clear, simple documents

Political - Regime stability - Force majeure aggt. - Political intervention

(a) Clear regulatory regime (b) Investment insurance (c) IFI support

•  Signed by all CoO in Agreement of Establishment •  Mitigates country risk based on positive previous experience •  B-lenders share the benefits

15

EBRD: a partner to leverage finance

IFI with preferred creditor status

•  Focused on the “nearly there” countries to reach investment grade •  Agenda in development

Credit enhancement guarantees

•  Partial Credit Guarantees to mitigate technology risk •  Proven efficiency to push for market penetration

Mobilization of Climate Finance

STARTEGIC PROCURMENT STEERINGWHEEL OF THE SHIP OF STATE

HIGH LEVEL

•  LAW AND REGULATION • WHAT YOU ARE ALLOWED •  THE BOUNDARIES

MOST FORGOTTEN

•  STARTEGIC PROCUMENT •  UNDERSTAND THE BUSINESS (OWN AND PRIVATE SECTOR) •  GETTING VALUE FOR MONEY

NORMAL STEP

•  PROCURMENT • WHAT YOU WANT •  SHORT TERM AN PRICE


Q & A – Round 2


5th GIB Sustainable Infrastructure Summit

WIFI hhonors-‐public Conference Code:MTG2531

#gib-‐summit

GIB2015_Structuring Sustainable Infrastructure Projects_IISD Panel

Government & Nonprofit

Transcript of GIB2015_Structuring Sustainable Infrastructure Projects_IISD Panel