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DEVELOPMENT BANK OF TURKEY
Market and Regulatory Risk Issues
and
Challenges in PPP
M. SERDAR KABUKÇUOĞLU
April 2011
Kyrenia/TRNC
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PPP in the World - 1999
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PPP in the World - 2010
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Private
Public
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Necessity for construction
Fulfilment of public duties
Solving infrastructure problems
Restricted budgets
Minimizing costs
Pressure to increase efficiency
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•
•
•
Management efficiency
Newer technologies
Workplace efficiency
Personnel development
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3
•
•
•
•
•
•
•
•
•
Risks/opportunities
Management
Better value of many
Budgetary benefit
Efficiency
Additionality
Keeping environment
Public
Private
1
Contract
Management
• Transfer of control
• Right to use
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Profit
Positive net cash flows
Stable economic environment
Stable political situations
• Services are provided
• Building, extending or
renovating a facility on
behalf of Public
Asset
Management
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Public
Private
A public service
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Project
Management
•
•
•
•
•
To a certain group
In a certain place
With a certain proposed budged
For a certain time
By constructing and/or operating
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Regulatory
• Ministry of Finance
• State Planning Organization
• Treasury
Regulations
Operational
• Ministries
• Municipalities
Public
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Stake-holder Analysis
Tender & Procurement
Management
Investers
• Funds
• Companies
• Individual investors
Private
SPV/Project Company
Sponsors
• Funds
• Banks
• IFIs
SPV
Special Purpose Vehicle
Project Company
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Financial
Management
Investors
Financial Institutions
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Risk Sharing
100%
100%
Public
Private
0%
Public Assets
0%
PPP
Privatization
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Main Risks for PPPs
Project
Risks
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•
•
•
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Complation risks
Environmental risks
Operating risks
Revenue risks
Input supply risks
Political
Risks
Macro Economic
Risks
• Inflation
• Interest rate risks
• Exchange rate risks
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•
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Currency convertibility
Expropriation
War and Civil Disturbance
Change of law
Quasi-political risks
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Project Risks
1. Does the project make overall sense?
2. Can the project be completed on time and on budged?
3. May the project face any environmental problems during the
implementation, especially construction?
4. Is the project company capable of operating the project on the
proposed cost levels and accessing the finance?
5. How realistic is the operating revenues proposed in the project?
6. Can any raw materials or other inputs be obtained at the
projected costs and projected time?
7. Does project contract fit the projected operations and results?
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Macro-Economic Risks
1. Inflation
2. Exchange rate
3. Appropriate funding conditions
• Maturity
• Interest rate
• Grace period
• Guarantees
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Political Risks
1. Changes in regulations
2. Political interference
• Cancellation of license
• Expropriation
• Discriminatory taxes, import
restrictions
• Transfer of earnings
3. War and civil disturbance
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Solutions?
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2
3
PPP is a project (tailored and uniqe)
Government is owner of the project, so it is responsible for formulation
and designing of the project and it is leader, auditor of the project
«Good Governance»
Projects should be
• Well defined
• Viable
• Bankable
• Clear specifications of outputs
PPP does not make a bad project good
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Solutions?
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These are should be taken in the projects
• Legitimacy
• Additionality
• Value of many
• Sustainability
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Contracts should take care
• Transparency
• Competitive dialogue
• Risk sharing
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Risk evaluation
• Risk assesment
• Due dilligence
• Risk mitigation plan
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Solutions?
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Stakeholders Support
• Public sector employees
• Labor unions
• End users
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Effective procurement process
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Govermental incentives/supports
• Tariff subsidies
• Financial instruments
• Tax and custom
• Guarantees
• Loan guarantees
• Sovereign guarantees
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A PPP Task Force?
• A common policy for PPP
• A framework regulation
• Realistic targets
• Building a market interests
• Pricing
• Tendering
• Project filtering
• Project design
• Monitoring
• Keeping social targets of the project
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Thank you
for
your attention
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1.
Ahmet Keşli, «International Standarts of PPP Law and Experiences of Turkey», PPP Platform of Turkey, ADFIMI
Development Forum, 5-6 October 2010, İstanbul
2. Darren Grimsey and Mervyn K. Lewis, “Public Private Partnerships The Worldwide Revolution in infrastructure
provisions and Project Finance”,Edwar Elgar Publishing Ltd., 2007
3. “Europe 2020, A strategy for smart, sustainable and inclusive growth”, Communication From the Commission,
Brussels 3.3.2010, COM(2010)2020
4. E.R. Yescombe, “Principle of Project Finance”, Yescombe Ltd. London-UK,Academic Press,2002.
5. Falko Josef Seliner, “PPP Life Cycle”, Taiex Workshop on PPP, Ankara, 17 March 2010
6. “Fundamentals and Issues of PPP”, the National Council for Public Private Partnership, www.ncppp.org
7. Haluk Doğançay, “A New Project Financing Model for Turkey: Public Private partnership (PPP)”, EFCA Task Force
for Project Finance, 9 December 2004
8. “Never Mind the Balance Sheet”, CEE Bankwatch Network, November 2008
9. Prof. Maurizio Mensi, «Public Private Partnership, The Legal Framework», Academy of Economy and Finance, 1617 March 2010, Ankara
10. Onur Kordel, “Turkey: A Comparative Overview of Public Private Partnerships; With Those in Turkey”, Bener Law
Office, 29 July 2008
11. Prof. Dr. Ralf von Ameln, “Public Private Partnership and Competitive Dialogue” Stephan Harris, “Public Private
Partnerships: Delivering Better Infrastructure Services”
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