PPP - ADB's role in structuring, financing and procurement Asean Connectivity Forum 8 November, 2016
Contents I. Asian Development Bank products & procurement II. III. Challenges to PPP in Asia and the Pacific ADB s PPP operations
Asian Development Bank products & procurement Sovereign loans ADB Procurement guidelines apply (new procurement framework to be approved in 2017) Non-Sovereign loans Following competitive/market practices Technical assistance ADB is the contracting party Transaction advisory
Asian Development Bank products & procurement Key figures 2015 Sovereign Loans USD 13,304 mill Grants USD 365 mill Nonsovereign Loans USD 2,150 mill Equity Investments USD 134 mill Guarantees USD 341 mill Technical Assistance USD 141 mill
Asian Development Bank products & procurement During 2016 2018, ADB expects to commit 44% of its total investment in the region to infrastructure development, with a focus on large projects and programs in the transport, energy, and urban sectors. Finding information Country Partnership strategy/country Operations Business Plan (https://www.adb.org/countries/documents/ma in) Business opportunites (https://www.adb.org/site/businessopportunities/main)
Challenges to PPP in Asia and the Pacific Advocacy and capacity development Enabling environment Project development Project financing Inconsistent and insufficient political commitment Limited or lack of understanding about PPP contracts, risk allocation, government s role & responsibility Lack of government capacity for project identification / PPP conceptualization Underdeveloped regulatory frameworks & unclear implementation Limited coordination among central ministries / regional governments Delay in land acquisition and insufficient compensation / resettlement Delay of approval / permit processes Limited capacity for project and budget implementation Limited capacity for project selection and prioritization / bid management Limited fund availability for deal structuring, pre-feasibility study Poor quality of project viability assessment with wrong assumptions/forecasts Lack of long-term local currency liquidity, e.g., weak banking sector, lack of project bond market / institutional investors interest in asset class Lack of secondary or securitization market for project finance assets Recent regulations (Basel III) constrain banks to provide project finance Private finance for DMC risks requires credit enhancement / co-financing
ADB s PPP Operational Framework Pillar 1 Pillar 2 Pillar 3 Pillar 4 Advocacy and capacity development Enabling environment Project development Project financing Create awareness Invoke leadership Identify PPP potential in sector planning and the private sector development agenda Develop capacity of Government and ADB staff Enhance external knowledge management links Develop policy, legal, regulatory and institutional framework to facilitate, guide and manage the development of PPPs (country and sector specific) Align ADB project cycle to the PPP development process Assist in the development of pathfinder projects Provide support (including advisory support) throughout the process up to contract award/financial close which can come as expert support, toolkits, funding costs of transaction advisors, procurement support. Provide credit enhancement products e.g. equity, long term debt, refinancing subordinate debt, cofinancing, guarantees, etc. Establish credit guarantee facility Provide public sector financial support through schemes such as viability gap funding, etc.
How can ADB support PPPs? Donors Donor-funded facilities Sovereign Financing & Assistance (Loan, TA etc ) to Governments Transaction Advisory Services for Governments 7 On-lending program State-owned Bank/ Financial intermediary Transaction Advisory Services for Private Entities Non-Sovereign Financing For private entities - Project Debt / Equity / Guarantees Private Financiers & Investors ADB-invested Private Fund/Vehicle 4 5 6 3 DMC Government / Ministry of Finance / Line Ministry 2 Sovereign PPP project support Project Viability Gap Funding Project availability payment Funding of government debt/equity Public Sector Contracting Authority / Line Ministry PPP Project Company BOT / Concession National Project Preparation Facility Publicly-financed Infrastructure Private Sector O&M Service 1 Service/Mgmt Contract
Asia Pacific Project Preparation Facility (AP3F) $40 mil C$20 mil ($16 mil) A$10 mil ($7 mil)