Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 1 “Different PPP...

Istanbul, 08th November 2006

PPPs for Infrastructure Financing in the MENA Region

11

““Different PPP Designs in the MENA Different PPP Designs in the MENA

Region”:Region”:Establishing an Effective Legal & Contractual FrameworkEstablishing an Effective Legal & Contractual Framework

Frequently Asked Questions on PPPs:Frequently Asked Questions on PPPs:

The EIC ResponseThe EIC Response

Frank KehlenbachFrank Kehlenbach

BIAC Representative / Director of European International ContractorsBIAC Representative / Director of European International Contractors

PPPs for Infrastructure Financing PPPs for Infrastructure Financing in the MENA-Regionin the MENA-Region



22

TTOOPP TTRRAANNSSPPOORRTTAATTIIOONN DDEEVVEELLOOPPEERRSS 22000044No. of Concession/P3 Projects

CompanyUnder Contract* Active Proposals

ACS Dragados (Spain)Ferrovial / Cintra (Spain)MIG / Macquarie Bank (Australia)Laing / Equion (UK)Sacyr Vallehermoso (Spain)Abertis / La Caixa (Spain)FCC (Spain)OHL (Spain)Cheung Kong Infrastructure (China)Vinci / Cofiroute (France)Hochtief (Germany)Acciona / Necso (Spain)EGIS Projects (France)Skanska (Sweden)Alstom (France)Alfred McAlpine (UK)Balfour Beatty (UK)Bouygues (France)Impregilo (Italy)Bechtel (US)AMEC (UK)Siemens (Germany)BRISA (Portugal)New World Infrastructure (China)Bombardier (Canada)Fluor (US)ABB (Switzerland)Amey (UK)Strabag (Germany)Bilfinger Berger (Germany)Jarvis (UK)Transurban (Australia)KBR Brown & Root (US)

4523222019191717161514131087776666666444433321

181441

13281

2219156

148710

227666229542

1111435

* road, bridge, tunnel, rail, port, airport concessions + public-private partnerships over $50m put under const./oper. since1985. Source PWF database

European international contractors take a leading role in developing the world’s TRANSPORT infrastructure, such as toll roads, railroads, ports and airports, but some diversification into other sectors.

European contractors have developed over the past decades expertise not only to build infrastructure facilities, but also to design, operate and finance these structures in industrialised as well as in emerging & developing countries.

About EIC - About EIC - ExperienceExperience1



33

Bigger Market

International Financing

Institutions must reserve

sufficient funding for

infrastructure investments in

developing countries

Promotion of Public-Private

Partnerships

Better Market

Quality-Based

International Competition

(due to project life-cycle costing)

About EIC - About EIC - GoalsGoals

Fair Market

Balanced Contract Conditions

Effective Dispute Settlement

International Arbitration

Ethical Market

Corruption-free

environment

Environmentally sound

and sustainable projects

1



44

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Y ear

in b

illio

n U

S$

East Asia and Pacifi c Europe and Central Asia Latin America and the Caribbean

Middle East and North Af rica South Asia Sub-Saharan Af rica

PPP Developing Markets OverviewPPP Developing Markets Overview

World RegionsWorld Regions

Investment in Infrastructure with Private Participation in Developing

Countries (1990 - 2005) by Region

Regions ranked by Investment in US$ mil (1990-2005)

416 (43%)

41 (4%)

71 (7%)

36 4 (%)

182 (19%)

224 (23%)

LAC EAP ECA AFR SA MENA

Source: World Bank PPI Database

WO

RLD

TO

TA

L: 9

70 b

illion

US

$2

”Asia

n C

risis”



55


Infrastructure SectorsInfrastructure Sectors

Sectors ranked by Investment in billion US$ (1990-2005)

306 (32%)

142 (15%)

50 (5%)

472 (48%)

Telecom Energy

Transport Water & Sewage


SE

CTO

RA

L T

OTA

L: 9

70 b

illion

U

S$

2

453

19

273

34

126

16

33

17

0

50

100

150

200

250

300

350

400

450

500

in b

illio

n US$

Telecom Energy Transport Water

Sector

Total & Cancelled / Distress Projects



66

PPP Developing Markets OverviewPPP Developing Markets OverviewFocus:Focus: MENAMENA Region ( Region (excluding Extractive Industriesexcluding Extractive Industries))

Sectors ranked by Investmentin million US$ (1990-2005)

15,141 (36,5%)

2,072 (5%)

679(1,5%)

23,312 (57%)

Telecom Energy

Transport Water & Sewage


ME

NA

TO

TA

L: 4

3.5

billion

US

$2

In the MENA Region, the

dominance of the telecom and

the energy sectors is even

more obvious than on average

(94%).

Around 72% of investments

accumulated in only 3 countries,

i.e. Morocco (38%), Egypt

(17.5%) and Algeria (16.5%).

Projects in the transport

sector comprised airports (588

million), seaports (1.300 million)

and railroads (182 million).



77

World Bank statistics suggest that telecom projects (ca. 50%) are easier to set up in

lower income countries, due to comparably lower up-front investment costs.

Many projects in the energy sector (ca. 33%), since there is the possibility of agreeing

on long-term off-take agreements a either with a government entity or an independent

power producer. This model has triggered criticism from many angles.

Some transport projects (15%) may be “commercially viable” if they are structured

around insulated assets frequented by industrial clients, e.g. airports, seaports,

freight rail.

Other transport projects with socio-economic benefits, such as toll roads, bridges

and tunnels and passenger rail, as well as water & sewerage projects apparently are

less often structured as a PPP, since they relied in the past on (non cost-covering tariff)

payments by private customers and thus were “not commercially viable”.


Lessons Learned on PPP StructuringLessons Learned on PPP Structuring

2



88

Published in April 2003

Based on the broad experience of EIC member

companies as concessionaires in preparing for

PPP projects in the transport sector

Advise to Governments, Contr. Acting

Authorities and International (Financial)

Organisations in structuring PPP projects

Comprises 21 recommendations for the

technical and financial implementation of

PPP projects

EIC White Book on BOT/PPPEIC White Book on BOT/PPP

Basic FeaturesBasic Features3



99

1 GENERAL PRECONDITIONS

– Ensure true Government Support

– Create a PPP Task Force

– Enhance Country Legal Framework(Accounting, Taxes, Procurement)

2 PROJECT PREPARATION

– Put in place sound procurement strategy

– Present comprehensive, reliable project documentation

– Provide for a steady and secure payment mechanism

– Agree on affordable level of tariffs

3 TENDER PROCESS

– Use Pre-qualification of bidders

– Ensure Transparency & Confidentiality throughout process

– Present clear award criteria

– Reimburse Bidding Costs

– Unsolicited Bids ??? (outside EU )

4 RISK MITIGATION

– Provide for optimal risk

identification & allocation

– Invite financial risk mitigation

through IFIs, ECAs, etc.

EIC White Book on BOT/PPPEIC White Book on BOT/PPP

21 Recommendations21 Recommendations3



1010

EIC on FAQs on PPPEIC on FAQs on PPP

Political Arguments on PPPPolitical Arguments on PPP3

Value for Money ? – Life cycle approach

Off-balance Financing ? – Not always

Government Flexibility ? – Public duties

Government Control ? – Retained

Public Sector Comparator ? – Reliable?

Complexity & Costs ? – Can be limited

Re-negotiations in PPP ? – 20-30 years

(Increase of) Tariffs ? – Right Blend

State Subsidies ? – non-viable PPPs

Role of SMEs ? - Important

Role of architects & consultants ? - dito

Labour rights ? – state responsibility

Sustainability of PPPs ? – Definitely



1111

Challenges for PPPsChallenges for PPPs

Public sector skills

Legal and regulatory sector-

specific framework

Steady revenue flows

Transaction costs, right

blend of public and private

funds (Role of IFIs /EU)

Political & Economic risks

Benefits of PPPsBenefits of PPPs

Project life-cycle approach

Project completion on time

+ on budget

Project operation according

to pre-defined standards

Risk transfer to the private

sector (e.g. interface risk)

Additional private funds

4 ConclusionConclusion



1212

WORLD Bank PPP Working Paper (2003)

“Whatever policies countries choose, governments cannot avoid the inescapable

realities that infrastructure services have to be paid for, whether provision

is public or private.

Most of the concerns about the sustainability of private infrastructure really

reflect the difficulties governments have in sustaining cost-recovering

tariffs and

commercial principles in these sectors...

The real issue is not public infrastructure versus private infrastructure. Put this

way, it is more simple the argument is about less infrastructure versus

more.”

ConclusionConclusion4



1313

EIC ContactEIC Contact

Address: EIC SecretariatKurfuerstenstrasse 129, D - 10785 Berlin, Germany

Phone: ++49 (0)30 /21286-244

Fax: ++49 (0)30 /21286-285

E-mail: [email protected]

Internet: www.eicontractors.de

Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 1 “Different PPP...

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