Mr Kevin DIXON Managing Director Asia Pacific Mott MacDonald

Transcription

1 Attracting investors - Issues in preparing business cases Mr Kevin DIXON Managing Director Asia Pacific Mott MacDonald Kevin.Dixon@mottmac.com Mott MacDonald does not accept any liability for reliance on information presented herein

2 Contents Mott MacDonald s credentials in PPP Attracting Investors issues in preparing a business case Lessons learnt from our experiences

3 ? Public and private sector customers engage Mott MacDonald s wholly independent professional development management, commercial & technical consultancy services in over 120 countries to provide assurance in Project Delivery. Mott MacDonald is an employee owned business with annual turnover of US$1.5 billion earned by over staff worldwide. Mott MacDonald is established as the world s No 1 infrastructure advisory firm. Experienced in both buy and sell side, Mott MacDonald advises on optimising risks and opportunities of infrastructure investments.

4 World s No 1 infrastructure advisor 1st Place IJ Online ITA Global League Table Mott MacDonald understand the risks and opportunities of infrastructure investments, enabling us to deliver a competitive edge to our Client s transactions. Mott MacDonald s risk-based reporting style has become the industry benchmark for lending banks in project finance. We have brought this ethos to the mergers and acquisitions market and are enabling investors to make more informed investment decisions, reduce their risks and ultimately maximise their returns. Unique Experienced Proven Trusted Our unique combination of business consultants combined with sector specific experts deliver informed, pragmatic and timely benefits, helping our clients to further increase the return on their investments. Advisory portfolio is in excess of 30 billion. Supported the delivery and closure of over 300 deals. We have experts across the complete infrastructure spectrum. No.1 in Infrastructure Journal s Global Technical Advisor league table. Public Private Finance TA of the year in 2005, 2007, 2008 & We have significant repeat business from industry leading Clients. We work closely with our Clients to understand their investment strategy. We do not believe in one size fits all consultancy and our partnering style enables us to tailor our approach to suit each investment strategy. We could not have chosen better and we would not be where we are now without your input, guidance, professionalism, and commitment. The blend of business experience and technical expertise worked extremely well and has exceeded my expectations. The quality of the product reflects this. Mott MacDonald was the dominant Social Infrastructure Advisor in the first half of the year, capturing more than 40 per cent of the market share. Infrastructure Journal Your independent report must be the most thorough and comprehensive ITA report in history and has received praise from all who have read it. It greatly helped the shareholders, the authority and lenders understand the complexity of the deal and how it will work. Airtanker Mott MacDonald likes to create a lasting impression on people and has positioned itself as consultant of choice for both customers and employees. The Times 100 Macquarie owned business

5 World s No 1 infrastructure advisor Mott MacDonald was named as the Global Technical Advisor of the year. Judges commented that Mott MacDonald s competitors could not compete with our breadth of deal experience and wide range of activity across a number of sectors and geographies. Global Technical Advisor League Table FY2008

6 Water PPP Project Alpha and Wastewater PPP Project Omega Northern Ireland Water UK Preparation of a business case to examine PPP, which resulted in the recommendation of a 25 year concession DBFO model. We were involved from this stage through to the end of construction

7 Thai Tap Water Supply Thai Tap, West Bangkok Thailand, 320 MLD Water BOO Demand growth + government commitment to closing groundwater abstraction boreholes + sensible take or pay agreement We are currently supporting the expansion of this Project to 450 MLD

8 Jakarta Water Supply Jakarta Water Supply Indonesia We have worked with both the east & west concession companies in preparing capital investment plans for submission to the regulator, provided Lenders with due diligence and managed EPC contractors to make capital works improvements

9 PPP Objectives Long term commitment to the capital investment, operation & maintenance of water supply and sanitation infrastructure by all parties involved with costs & profits recovered from consumers with ability to pay

10 The Challenge Money markets continue to be nervous about long-term commitments to risky projects How to convince investors and lenders to finance your project?

11 Stakeholders Carbon Offtaker Government Regulator Customers Local Department/ Public Corp./ Private Co. Lenders/ Investors Project Company EPC Contractor Operator MM Designer Manufacturer

12 Threats to Project Company Financial Risks Fiscal Regime Currency devaluation Ability to bill consumer & collect cash High debt / Poor cash-flow Political, Legal & Regulatory Risks Institutional strength Policy or Rule changes Sub - sovereign Demand risks Market Risks Off-taker credit risk Price or Service Competition Project Company Project risks Political & regulatory risk Water Supply Risks Construction Risks New entry Performance Risks Dominant party behaviour Environmental risks Land acquisition risks Social risks NRW / Network Constraints Construction & Operation Risks

13 PPP - Structured Finance Model Carbon Offtaker Customer Lenders/ Investors Credit agreements; shareholder agreements Offtake agreements Government Local Department/ Public Corp./ Private Co. Construction agreements Project Company Water Purchase Agreement; Consents & Permits O&M agreements EPC Contractor Equipment supply agreements Operator Designer Manufacturer

14 PPP - Structured Finance Model Carbon Offtaker MM Compliance Customer Affordability Government Local Department/ Public Corp./ Private Co. Policy development; Support of Parliamentary Acts; Establishment of Service Level Agreements, Privatization Master Plans; Procurement Strategies; Demand Forecasting; Independent Review; Contract Preparation; Detailed Specification; Owner s Engineer; Independent Checking Engineer; Independent Technical Auditor; Independent Validation & Verification; Cost Control; Interface Management Lenders/ Investors MM Market Conditions; Lender s Engineer; Technical Due Diligence; Social & Env. Due Diligence; Asset Valuation Obtaining Permissions & Consents, Survey, Detailed Design Project Company EPC Contractor Designer MM Cost Control, Design & Construction Management Manufacturer Safety cases; Reliability, Availability, Maintenance & Safety Review Consortia Design; Risk Management; Social & Environmental Impact Assessment; Contract Preparation; Contract Audit, PDD Operator Asset Management Planning, Investment Planning, Cost Optimization, Monitoring, Auditing, Operational Maintenance Planning & Procurement

15 Lessons Learnt Experienced investors have learnt that successful projects will have: Long-term government commitment, no political interference and experienced advisors The project will have a simple contractual structure and minimal number of contracted interfaces A convincing business case and risk management strategy To attract investors in a competitive money market, the public sector needs to prepare a convincing business case for the Project, comprised of: Measurable physical and economic demand for the water services A robust payment mechanism for recovering costs and profits for the water services A technically feasible and affordable solution for providing the services And a clear and common sense Project risk management strategy

16 Thank you