PPPs for Infrastructure Financing
in the MENA-Region
“Different PPP Designs in the MENA Region”:
Establishing an Effective Legal & Contractual Framework
Frequently Asked Questions on PPPs:
The EIC Response
Frank Kehlenbach
BIAC Representative / Director of European International Contractors
Istanbul, 08th November 2006
PPPs for Infrastructure Financing in the MENA Region
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About EIC - Experience
TOP TRANSPORTATION DEVELOPERS 2004
Company
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)
No. of Concession/P3 Projects
Under Contract*
Active Proposals
45
23
22
20
19
19
17
17
16
15
14
13
10
8
7
7
7
6
6
6
6
6
6
6
4
4
4
4
3
3
3
2
1
18
14
4
1
13
2
8
1
22
19
15
6
14
8
7
1
0
22
7
6
6
6
2
2
9
5
4
2
11
11
4
3
5
* road, bridge, tunnel, rail, port, airport concessions + public-private partnerships over $50m put under const./oper. since
European international contractors
take a leading role in
developing the world’s
TRANSPORT infrastructure,
such as toll roads, railroads, ports
and airports, but some
diversification into other
sectors.
European contractors have
developed over the past decades
expertise not only to build
infrastructure facilities, but also to
design, operate and finance
these structures in industrialised
as well as in emerging &
developing countries.
1985. Source PWF database
Istanbul, 08th November 2006
PPPs for Infrastructure Financing in the MENA Region
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About EIC - Goals
Bigger Market
Fair Market
International Financing Institutions
must reserve sufficient funding for
infrastructure investments in
developing countries
Balanced Contract Conditions
Effective Dispute Settlement
International Arbitration
Promotion of Public-Private
Partnerships
Ethical Market
Better Market
Corruption-free environment
Quality-Based
International Competition
Environmentally sound and
sustainable projects
(due to project life-cycle costing)
Istanbul, 08th November 2006
PPPs for Infrastructure Financing in the MENA Region
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PPP Developing Markets Overview
2
World Regions
Regions ranked by Investment
in US$ mil (1990-2005)
E ast A si a and P aci f i c
E ur ope and Cent r al A si a
Lat i n A mer i ca and t he Car i bbean
M i ddl e E ast and Nor t h A f r i ca
Sout h A si a
Sub-Sahar an A f r i ca
182 (19%)
Y ear
36 4 (%)
80, 0
224
60, 0
in billion US$
71 (7%)
(23%)
70, 0
41 (4%)
”Asian Crisis”
WORLD TOTAL: 970 billion US$
Investment in Infrastructure with Private
Participation in Developing Countries
(1990 - 2005) by Region
50, 0
40, 0
30, 0
416 (43%)
20, 0
10, 0
LAC
0, 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
EAP
ECA
AFR
SA
MENA
2005
Source: World Bank PPI Database
Istanbul, 08th November 2006
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PPP Developing Markets Overview
Total & Cancelled / Distress
Projects
Sectors ranked by Investment
in billion US$ (1990-2005)
306
(32%)
142
(15%)
500
19
450
50 (5%)
in billion US$
SECTORAL TOTAL: 970 billion US$
Infrastructure Sectors
400
350
34
300
250
453
200
472
(48%)
16
273
150
100
126
50
33
0
Telecom
Energy
Transport
Water & Sewage
17
Telecom
Energy
Transport
Water
Sector
Source: World Bank PPI Database
Istanbul, 08th November 2006
PPPs for Infrastructure Financing in the MENA Region
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PPP Developing Markets Overview
Focus: MENA Region (excluding Extractive Industries)
MENA TOTAL: 43.5 billion US$
Sectors ranked by Investment
in million US$ (1990-2005)
In the MENA Region, the
dominance of the telecom and
15,141
(36,5%)
the energy sectors is even more
2,072
(5%)
679
(1,5%)
23,312
(57%)
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),
Telecom
Energy
Transport
Water & Sewage
Source: World Bank PPI Database
Istanbul, 08th November 2006
seaports (1.300 million) and
railroads (182 million).
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PPP Developing Markets Overview
Lessons Learned on PPP Structuring
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”.
Istanbul, 08th November 2006
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EIC White Book on BOT/PPP
Basic Features
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
Istanbul, 08th November 2006
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EIC White Book on BOT/PPP
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21 Recommendations


1
2
GENERAL PRECONDITIONS

3
TENDER PROCESS
– Ensure true Government Support
–
Use Pre-qualification of bidders
– Create a PPP Task Force
–
– Enhance Country Legal Framework
(Accounting, Taxes, Procurement)
Ensure Transparency &
Confidentiality throughout process
–
Present clear award criteria
–
Reimburse Bidding Costs
–
Unsolicited Bids ??? (outside EU )
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
Istanbul, 08th November 2006
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4
–
RISK MITIGATION
Provide for optimal risk
identification & allocation
–
Invite financial risk mitigation
through IFIs, ECAs, etc.
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EIC on FAQs on PPP
Political Arguments on PPP
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
Istanbul, 08th November 2006
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Conclusion
Challenges for PPPs
Benefits of PPPs
Public sector skills
Project life-cycle approach
Legal and regulatory sectorspecific framework
Project completion on time +
on budget
Steady revenue flows
Project operation according to
pre-defined standards
Transaction costs, right blend of
public and private funds (Role of
Risk transfer to the private
IFIs /EU)
sector (e.g. interface risk)
Political & Economic risks
Additional private funds
Istanbul, 08th November 2006
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Conclusion
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.”
Istanbul, 08th November 2006
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EIC Contact

Address:
EIC Secretariat
Kurfuerstenstrasse 129,
D - 10785 Berlin, Germany

Phone:
++49 (0)30 /21286-244

Fax:
++49 (0)30 /21286-285

E-mail:
eicontractors@compuserve.com

Internet:
www.eicontractors.de
Istanbul, 08th November 2006
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