Transport: PORT SECTOR

Transcription

1 PPPs in Infrastructure Day 4 Session 17.2 Transport: PORT SECTOR Sabino Escobedo, TAG Financial Advisors 1

2 Day 4 Implementation & Way Forward Session 16 IFC view of PPPs Financing Advisory Session Session Transport Sector Transport Sector: MIGA in PORTS Infrastructure Session 18 Way Forward (World Bank) Day 4 Session 16 Sector Issues Ports Session 17 Overview by Participants Water Energy 2

3 Contents I. Sector background II. Recent Industry and Sector Trends III. Case Studies: EUROPE - Port of Rotterdam, Holland LATIN AMERICA - Port of Valparaiso, Chile IV. Conclusions 3

4 I. Sector Background Ports in developing countries represent a key asset for economic development Ports need to operate efficiently and be properly structured to support an increase in trade and GDP by linking countries, both coastal and landlocked, productive hinterlands and consumers to global markets Ports have a significant role in contributing toward achievement of the Millennium Development Goals through their nodal role of facilitating intermodal transport 4

5 II. Industry and Sector Trends Colombo Express - Largest Container Vessel in the World 5

6 Development of World Maritime Transport Total transport (mio tons) Source: UNCTAD Review of Maritime Transport 2007 Year Other cargo Dry bulk Crude and products 6

7 World Port Container Traffic (mio TEU) mio TEU * Year 7 Source: Containerisation International and other publications

8 Regional share: World port container traffic (mio TEU) West Europe 6% 8% 2% 2% 3% 1% 23% Far East South East Asia Mid-East Latin America 16% Oceania 39% South Asia Africa Eastern Europe 8

9 Regional share: World port container traffic (cont.) 9

10 World Top 10 container ports SingaporeThroughput (mio TEU) Hong Kong Shanghai Shenzhen Source: Yearbook Containerisation International Busan Kaohsiung Rotterdam Hamburg Dubai Los Angeles

11 Private sector involvement Governments, in particular since the 1990 s, started to invite the private sector both for capital and operational experience To date, developing countries entered into 230 projects totalling more than US$ 24.7 billion of investment in 15 years 11

12 Private sector involvement (cont.) The WB Port Reform Toolkit (Second Edition 2006) provides extensive details since not one solution fits all The Landlord Port Management Model is the World Bank s preferred option Private sector involvement will grow but Governments will continue to be the landlord, regulator and provider of basic infrastructure Governments grant a concession (Lease or BOT) for years Investment costs of new facilities may run into billions of US$ dollars 12

13 Growing involvement of private investors in port projects Private investors are flocking to the ports industry and so far have been proved right (ING source) Cargo volume increases are outpacing terminal capacity Typically investors were paying multiples times above the port group's earnings level (Source: Lloyds List November 2006) 13

14 Private participation in seaports: developing countries Projects US $ billion Projects (Source: World Bank and PPIAF, PPI Project database) Investment commitments 14

15 City - Port relationship Cities may benefit from ports: employment, tax income, economic development, but Ports may also has a negative influence on cities such traffic congestion, air, noise and light pollution and security issues Port zoning plans may lead to improved coexistence Increasing trend to move ports to Greenfield sites and redevelop the port in real estate (housing, recreation, business), marina, cruise terminal, and / or fishery facilities 15

16 City Port (Valparaiso, Chile) 16

17 Increased participation: Private Sector in Ports Investment Management Operations Maintenance Port services 17

18 port functions Port management model reasons for change service port tool port landlord port PORTS REFORM port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract 18

19 Port Management Models Type Superstructure Infrastructure Stevedoring labor Other functions Public Service Port Public Public Public Mainly public Tool Port Public Public Private Mainly public Landlord Port Public Private Private Mainly private Private Service Port Private Private Private Mainly private 19

20 Example: Landlord port model The Public Port Management: Owns, develops and maintains the infrastructure which is concessioned to private companies Is responsible for Regulation at Port Bylaws level Is responsible for nautical safety and environmental issues Other functions: either private (majority) or public Private (stevedoring) companies: own, operate and maintain their own equipment and employ their own labor 20

21 port functions port management model service port tool port landlord port reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract 21

22 Reasons for change General reasons - Increase port efficiency and competitiveness, decrease costs, increase competitive position Administrative/managerial reasons - Decrease political influence, Reduce bureaucracy in port administration,utilise foreign managerial experience and Improve management skills Financial reasons - Raise capital, Reduce public expenditures, and Broaden ownership of port assets Employment reasons - Reduce public labour force, Reduce/eliminate restrictive labour practices (Unions), Increase private sector employment and Introduce hire and fire by performance 22

23 port functions port management model service port tool port landlord port reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization port reform tools - contracting out - management contract - lease - concession boot schemes - full privatization - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract 23

24 Port Reform Tools Contracting out Management contract Lease Concession BOOT schemes Full privatization 24

25 Benefits of Port Reform Tools Improve port efficiency through PPPs Avoid monopolies Freeing up government funds for other priority projects The possible creation of new revenue streams for the Government The transfer or sharing of risks with the private sector The attraction and use of foreign investment, expertise and technology 25

26 Leasing Lease systems most used: Flat rate lease Shared revenue lease 26

27 Leasing - Flat rate lease Characteristics: Specified sum of money (usually for infrastructure) is to be paid for a specified period of time Lease is a fair return of the value of the property Inflation adjustment of the lease is optional (but recommended!) 27

28 Leasing - Shared revenue lease Characteristics: Lease is computed on the basis of a minimum lease plus a compensation (often referred to as Royalty ) per move (preferably) on a decreasing scale A model may be a combination of a fixed and variable Royalty (based on performance) The lessee guarantees a minimum annual compensation Inflation adjustment 28

29 III. CASE STUDIES 1) The Port of Rotterdam, Holland Flat Rate Lease System (Contract) 2) The Port of Valparaiso, Chile Shared Revenue Lease (Concession) 29

30 CASE STUDY: 1) The Port of Rotterdam A Flat Rate Lease System (Contract) 30

31 Flat Rate Lease system Rotterdam Municipality of Rotterdam owns land and water except for the river Rhine Municipality (through the Port Management) leases the infrastructure and provides: Site ready for building Access to site Quay wall Contract depth at quay 31

32 Flat Rate Lease system Rotterdam Private companies provide: Surfacing of site Superstructure (office buildings, workshops, warehouses/sheds, gate, fencing Rail, electricity, water, gas, etc. 32

33 Flat Rate Lease system Rotterdam Lessee pays for use of land area occupied When site has water front lessee also pays for right of berth(ing) according to quay length and water depth 33

34 Flat Rate Lease system Rotterdam Contracts/review of lease Formerly Usually 25 years with every 5 years negotiations on lease price Present Usually 25 years with every year inflation correction 34

35 Flat Rate Lease system Rotterdam Contracts/review of lease (cont d): After 25 years option for another 25 years Municipality may terminate contract after 50 years Lessee may terminate after 25 years or renew after 50 years 35

36 Flat Rate Lease system Rotterdam Environment At start of contract soil pollution report At end of contract soil pollution report Pollution removed at expense of lessee 36

37 Flat Rate Lease system Rotterdam Special items: At termination of contract site free of superstructure Buy-out of contract through negotiations Buy-out of superstructure through negotiations 37

38 CASE STUDY: 2) The Port of Valparaiso, Chile Port Sector Reform in Chile The Port of Valparaiso: Shared Revenue Lease (Concession) 38

39 City Port of Valparaiso, Chile 39

40 The Port of Valparaiso, Chile Port Sector Reform: Objective: Encourage investment in better port equipment in the hope that it will lead to more efficient service, in part by attracting larger, more modern ships. The old multi-operator system established in 1981 was replaced by Concessions The first 4 major Concessions - integrated terminals - are run exclusively by private companies, which started operations in January

41 The Port of Valparaiso, Chile Port Sector Reform (cont.) Before the Reform: EMPORCHI, the state port company, sole handler of cargo on land; Stevedores preformed cargo operations aboard ships; Division of cargo among stevedore companies limited their incentive to invest; Lack of investments and considerable growth of trade in the 1980s and 1990s led to a non-exclusive Concession granted through a tender to a JV of the 3 largest stevedore companies - Concession not profitable; This non-exclusive Concession led to an inefficient multi-operator system; Dissatisfied with the performance of this Concession, the Government of Chile decided to implement the present REFORM. 41

42 The Port of Valparaiso, Chile Port Sector Reform (cont.) During the Reform: Nearly 40 ports in Chile were already owned by the private sector when the Reform was introduced; The Government of Chile introduces the Mono-operator System; An exclusive Concession for each of the main container terminals makes the Concessionaire responsible for the operations, maintenance and all investments in equipment and infrastructure of the port; EMPORCHI, the state port company, still handled the container and general cargo traffic; The private ports handled almost all the dry and liquid bulk cargoes. 42

43 The Port of Valparaiso, Chile Port Sector Reform (cont.) The objective of the new Mono-operator Concession System is: To promote investment in modern transfer equipment and new berths; To bring the management of the terminals up to date; To reduce port costs to clients; To enhance service quality - reducing waiting and service times; To attract larger and more modern ships; and To transfer a reduction of freight charges to final clients. 43

44 The Port of Valparaiso, Chile Port Sector Reform (cont.) The Process: The GoC had to obtain approval by the legislature (one of the conditions: reach agreement with labor unions and stevedore companies); The GoC had to form 10 new state port companies (land lord ports) as successors to EMPORCHI with no service disruptions; The new state port companies had to remain as public corporations but had to operate according to the rules of private stock companies; and The GoC sought to attract international interest to the ports bidding process. 44

45 The Port of Valparaiso, Chile Port Sector Reform (cont.) The new state port companies: Own the port infrastructure; Run maritime and land access; Enforce the Concession Contract; Are not allowed by law to handle cargo or berthing; Share revenues with Concessionaires: - A minimum annual rental payment, and - Some revenue sharing on the upside. The first 4 Concession were awarded in 3 ports in August

46 The Port of Valparaiso, Chile Port Sector Reform (cont.) The Bidding: 1) The Bidders are asked to offer the lowest maximum tariff [ the authority set a floor to discourage: (a) overoptimistic bids and (b) to renegotiate charges after the Concession Contract is awarded]; 2) A Bidder offering the floor tariff should also offer an upfront tie-breaking payment; 3) Annual rental payments are determined in advance, to prevent implicit subsidies to Concessionaire: (Concession Contracts establish an increasing rent to the state port company as tonnage rises). 46

47 The Port of Valparaiso, Chile Port Sector Reform (cont.) Incentives to invest: Instead of stipulating how much the Concessionaire must invest, the Concessions encourage investment simply by imposing penalties for slow service; The Concessionaire will be compensated for the part of fixed assets not depreciated; The initial Concession period of 15 or 20 years may be extended to 30 years max. if some investments in infrastructure are operative some years before the initial concession period ends; Maximum charges on vessels and cargo transfer are fixed in the Concession contract - the Concessionaire is allowed to charge special tariffs provided they are for additional value added (ex. extra charge for prompt dispatch). 47

48 The Port of Valparaiso, Chile Port Sector Reform (cont.) Reform results: POSITIVE SIGNS in terms of LOWER TARIFFS and MORE EFFICIENT SERVICE; Keeping a high level of competitive tension among prospective Bidders brought lower tariffs to clients and reasonable returns to Chile s Treasury; Other reforms are needed to complete the modernization of the ports: Tariffs for navigation aid systems are too high Pilotage is monopolistic (reserved to former Navy officers) and charges are too high. 48

49 The Port of Valparaiso, Chile 49

50 The Port of Valparaiso, Chile 1. Areas for future port developments 2. Espigón: Development of the terminal 2 to double the capacity of the port 3. Area for the project for the opening and development of the waterfront, 'Puerto Barón 4. Logistics Support Extension Zone (ZEAL - Zona de Extensión de Apoyo Logístico) 50

51 The Port of Valparaiso, Chile 4. Logistics Support Extension Zone (ZEAL - Zona de Extensión de Apoyo Logístico) 51

52 The Port of Valparaiso, Chile 52

53 The Port of Valparaiso, Chile 53

54 The Port of Valparaiso, Chile Puerto Barón is conceived as a mega urban development project for the city s waterfront, which aim is to open a new space for integration between the city and the sea and constitute an attractive pole of economic and social development, through the construction of top quality tourism and commercial urban infrastructure. This project consolidates the vision of city-port integration, by earmarking more than 60% of its 20 hectares for the development of public use spaces, in a strategic zone near Valparaiso s urban and commercial center. 54

55 The Port of Valparaiso, Chile For the construction of the Puerto Barón project s first phase, which will begin in 2008, US$100 million will be invested and 1,500 temporary jobs created; Once Puerto Barón opens, 2,500 permanent jobs will be generated; Traffic congestions will be solved; In a second phase, the project includes the construction of a hotel, a convention center, a university, a medical center, a marine center, and a housing project of nearly 500 apartments, lofts for offices and restaurants, and commercial space with an ocean view. 55

56 IV. Recommendations PPP Projects in Ports do work and are successful Private operator involvement will continue in the sector Establish clear roles, responsibilities and realistic goals Preferred roles of public sector Public sector continues to own the land and infrastructure Masterplanner Regulator Finance, supply, maintain and own common user infrastructure 56

57 Contacts For comments or further details contact: Penny Williams Cledan Mandri Perrott Sabino Escobedo David Stiggers 57

58 PPPs in Infrastructure THANK YOU! Sabino Escobedo, TAG Financial Advisors 58