Selecting the Right Projects / Sectors for PPP Implementation

Transcription

1 the Right s / Sectors for PPP Implementation Policy Dialogue on PPP for Infrastructure Development in South Asia Organized by UN ESCAP September 2015

2 PPP Macro Level Large number of commercial banks, Support from Multilaterals, Foreign Direct Investment (FDI), Involvement of Pension and Insurance funds, Specialized lending institutions Standardized RFQ/RFP with international benchmarks related to procurement Lesser fluctuation of Government, Awareness amongst political leaders, Policy and Vision Documents Transparent & Fair Procurement Process Stable Political Situation & Will Well developed Financial Market Platform for interaction between Authority, Private players and End users PPP Act/Law, Sector specific laws, Regulatory bodies Strong Legal/ Regulatory Framework ful PPP Stakeholders Participation & Interactions Strong & Matured Private Sector Robust Risk Allocation Framework Economic & Financial Viability Adequate Government Support Sector specific Standardized Concession Agreements Value for money analysis, Demand Supply gap, Willing of user to pay, Taxation incentives, Interest rates Viability Gap Funding and other fiscal support, Quick decision making & approval granting framework Large number of private firms with sufficient technical and financial capabilities, Enabling environment for Consortium Page 2 Right

3 of PPP Example of Australian PPP Market Source: Public Private Partnerships in Australia and Japan, Japan External Trade Organization (JETRO), August 2010 Page 3 Right

4 s for PPP Type Description Sectors Examples Revenue Based feasible from revenue from user charge only Roads / Highways Airport Power / Energy Tourism Revenue + Govt. Support Only with Govt. Support feasible with mix of revenue from user charges and Government support feasible with Government support (Revenue from user charge insignificant) Roads / Highways Urban (water supply & transport) Tourism Roads / Highways Urban (water supply & transport) Healthcare Education Page 4 Right

5 Right s for PPP Roads and Highways Poor preparation of projects Aggressive bidding Lengthy dispute resolution Delay in land and environmental clearances Need to shift focus Greenfield to Brownfield projects Operation Maintenance and Transfer (OMT) Concessions Increase in limit for Foreign Investor s equity Adoption of new PPP variants Modified Annuity (Grant + Annuity + Toll) Hybrid PPP (Interest free Loan + Toll) BOT Model (Construction financed by the Authority) Page 5 Right

6 Right s for PPP Airports Small airports not so lucrative Cost based tariff determination at big airports Slow monetization of land Need to shift focus Metro to non-metro airports Increase in Foreign Investor s equity limit Adoption of new PPP variants Small airports Management Contract on Fixed fee + Incentive model; Standalone city side development to be allowed Large airports Long term lease/operation Maintenance & Transfer Concession; Tariff determination through Hybrid Till Page 6 Right

7 Right s for PPP Urban Transport Low population base in many cities Scarcity of land in urban area Absence of Tariff/ User charge regulations Slow monetization of land PPP variants that can be adopted Rolling Stock Cost plus/ Gross cost or Net cost contract Service/ Management Contract on Fixed fee + Incentive model BOT for Bus stand, parking, etc. with real estate as sweetener Page 7 Right

8 Right s for PPP Power / Energy Credit risk (High investment cost) Delay in Power purchase agreement, Guarantees, etc. Poor recovery Delay in land and environmental clearances Need to shift focus Increase in limit for Foreign Investor s equity Increase efficiency in power distribution PPP variants that can be adopted Operation & Maintenance Contract on Fixed fee + Incentive model Distribution Franchisee Private sector to have revenue rights Page 8 Right

9 Right s for PPP Water Supply & Sanitation Capacity to absorb supply (Bulk Water) Social consideration in tariff / user charges Revenue collection risks Need to shift focus Infrastructure creation to infrastructure management Improve service delivery Individual components Water Treatment Plant, Bulk supply pipeline, etc. PPP variants that can be adopted Performance based Operation & Maintenance contracts Non-Revenue Water (NRW) reduction, Supply duration & pressure BOT (Annuity) Page 9 Right

10 Right s for PPP Healthcare Pricing / Economic regulation Availability of suitable manpower Meeting social obligations Scarcity of land in urban area Need to shift focus Infrastructure creation to infrastructure management Improve service delivery Bringing in universal health insurance policy and linking it with project Providing subsidized land PPP variants that can be adopted Performance based Management & Operations contracts with Buy back arrangement on capacities Page 10 Right

11 Right s for PPP Education Lack of standard metrics for performance review Availability of suitable manpower Meeting social obligations Pricing regulation Need to shift focus Infrastructure creation to infrastructure management Improve service delivery Provide subsidized land PPP variants that can be adopted Private management of government schools Voucher system Page 11 Right

12 Thank You Abhaya Agarwal Partner - Infrastructure and PPP Ernst & Young LLP 6th Floor, Hindustan Times House, 18-20, Kasturba Gandhi Marg, New Delhi, Delhi , India Phone: abhaya.agarwal@in.ey.com Page 12