Public-Private Partnerships IFC Advisory Creating opportunity where it s needed most
Agenda About IFC Key Challenges in Infrastructure Advantages of PPP Our Experience
Agenda About IFC Key Challenges in Infrastructure Advantages of PPP Our Experience Thimphu Parking PPP Project
About IFC and PPP Advisory
World Bank Group IFC is the private sector arm of the World Bank Group which comprises five agencies
International Finance Corporation Technical assistance and advice to governments and businesses World s largest multilateral provider of financing for private enterprises $30+ billion in outstanding investment commitments
Key Challenges in Infrastructure
Road Road transport ensures the mobility of people and the production and distribution of goods. 1.7 billion cars will be on the world s roads by 2035 1.24 million people die every year on the world s roads 31% of the world s population lacks access to an allweather road
Energy One in five people lack access to electricity and the computers, refrigerators and lighting that most of us take for granted. The energy gap is inequitable and it is unsustainable. Ban-Ki Moon, Secretary-General of the United Nations Depletion of fossil fuel reserves Rising energy costs
Food Security 50-80% the amount of income spent on food by the poor. 1/3 of food produced is lost or wasted 70% of additional food that needs to be made available by 2050.
Health Lack of infrastructure Shortage of trained staff Limited resources
PPPs offer various advantages
Key advantages of PPPs 1. Combine the different skills and resources of various partners in innovative ways.
Key advantages of PPPs 1. Combine the different skills and resources of various partners in innovative ways. 2. Allow for the sharing of risks and responsibilities.
Key advantages of PPPs 1. Combine the different skills and resources of various partners in innovative ways. 2. Allow for the sharing of risks and responsibilities. 3. Provide access to industry best practices, as well as the experience and expertise of the private sector.
Key advantages of PPPs 1. Combine the different skills and resources of various partners in innovative ways. 2. Allow for the sharing of risks and responsibilities. 3. Provide access to industry best practices, as well as the experience and expertise of the private sector. 4. Allow governments to focus on policy, planning and regulation.
Key advantages of PPPs 1. Combine the different skills and resources of various partners in innovative ways. 2. Allow for the sharing of risks and responsibilities. 3. Provide access to industry best practices, as well as the experience and expertise of the private sector. 4. Allow governments to focus on policy, planning and regulation. 5. Bring value for money as a result of the competitive bidding process.
Global Experience
The partner of choice in PPPs Global market knowledge Objectivity & transparency 350 projects since 1989 Neutral partner
IFC s record of success Agribusiness/Food Security Health Power/ Renewable energy Transport Water/Sanitation Ongoing/Successful
Impact of IFC s PPPs 35.5 million people with first-time or improved access to education, electricity, health, sanitation, water, and other basic services. $3,000,000,000 in private investment $2,000,000,000 in fiscal benefits Developmental impact of IFC projects closed FY05 to FY13
Success Stories
Upgraded diagnostic radiology facilities. 7-year concession to provide advanced radiology services across 4 government hospitals/ medical colleges. Awarded to Wipro GE Healthcare Ltd. And Medall Healthcare Private Ltd. 98,800 people with improved access to services $6 million in investment Andhra Pradesh Radiology (2010)
5 MW rooftop solar panels. 25-year concessions to build, own, and operate solar panels on residential and public buildings and connect to the grid. Awarded to Azure Power and SunEdison (two concessions, 2.5 MW each). 10,000 people with improved access to services $12 million in investment 7,154 metric tons of GHG emissions avoided Gujarat Solar (2012)
New modern, temperature-controlled 50,000 metric tons grain silos. 30-year concession to build, and operate grain storage facility. Awarded to LT Foods. 500,000 people with improved access to services $8 million in realized private investment $6 million in fiscal benefits 6,667 farmers reached Punjab Silos (2010)
Bhutan Experience: Thimphu Parking PPP
Need for Parking Linear City Increase in population Vehicle ownership growth 13.6% growth Increasing Congestion & Parking Demand In line with the Thimphu Structure Plan notified in 2004, RGoB proposed an Integrated Transportation Strategy to reduce congestion in Core City Area by providing off-street parking facilities to enable the removal of Norzim Lam
Team IFC and Thimphu Thromde / MoF entered into an agreement on December 2012. Thimphu Thromde created a multi-sector steering committee to provide speedy approval at various stages. IFC brought together strong international and local expertise to deliver the project Pre-feasibility Technical Consultant Technical Consultant Legal Consultant Bhutan Legal Consultant
Key Due Diligence Activities Site Planning and Traffic Flow
Site Planning and Traffic Flow Two (2) entry/ exit points planned for Site 1 for better traffic distribution Legend It is estimated that the V/C of roads surrounding Sites 1 and 2 will remain below 1 even if 100% capacity is added to traffic volume in peak time Site 1 Site 2 Two way One way
Key Due Diligence Activities Site Planning and Traffic Flow Demand supply Analysis User Surveys
7:00 7:30 8:00 8:30 9:00 9:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 15:00 15:30 16:00 16:30 17:00 17:30 18:00 18:30 19:00 19:30 20:00 20:30 21:00 21:30 Demand Supply Analysis 600 500 Intra-day Demand 400 300 200 100 0 2017 2036 2046 7000 6500 Future Demand 6000 5500 5000 4500 4000 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 Off-street On-street
User Opinion Nearly 50% of car users surveyed expressed that the increase in parking fees in July 2012 reduced the number of their car trips to the Core City Area (Source: UMTC surveys, March 2013) Observed decrease in parking demand by ~8% 97% of car users surveyed expressed a willingness to be allowed to park within the Core City Area Willingness to pay 88% of car users surveyed expressed a preference (i.e., Highly Likely) to pay the current parking fees 36% car users are willing to pay 25% more than the current tariff for improved services (including increased safety, etc.) On-street parking reduces road capacity Users feel parking facilities are unsafe and inadequate
Key Due Diligence Activities Site Planning and Traffic Flow Demand supply Analysis Technology Option Analysis
Technology Option Analysis Technology Car spaces per 1000 sq m* Accommodate Required capacity at sites? Suitability for multi-level car park in Thimphu 38 No Inefficient use of prime space in core city area Manual Ramp Based Surface offstreet Semi- Automated Fully- Automated 83 Yes 114 Yes 139 Yes Suitable for medium to large sites Allows for efficient utilization of space Common and tested parking method Minimum dependence on technology for operations Creation of local employment Suitable for small sites Allows for very efficient utilization of space Relatively new technology Requires spare parts that may not be easily available in Bhutan Suitable for small sites Allows for most efficient utilization of space Relatively new technology Requires spare parts that may not be easily available in Bhutan
Key Due Diligence Activities Site Planning and Traffic Flow Demand supply Analysis Technology Option Analysis Project Costing Financial Viability Analysis
Project Costing and Financial Viability KEY PARAMETERS Nu Mn $ Mn Site Preparation 10.50 0.18 Civil Construction for Parking including electrical 269.22 4.56 Installation costs 22.36 0.38 Pre-operative 49.72 0.84 Interest During Construction 27.73 0.47 Off-street Parking, including Sites 1 and 2 Surface Lots 78.35 1.33 Total Capital Cost (Including Off-street) 481.90 8.17 х Not Financially viable for private investor Concession Term 10 years 15 years 20 years 30 years Equity IRR (based on parking revenues) Total Parking Rent paid to Thromde (NPV, Nu million) 15.16% 21.18% 23.03% 24.13% 82 103 118 138 Profitable scenario for private investor Significant payments received by Thromde Upside to Thromde for monetization of greater parking revenues post concession term
Key Due Diligence Activities Site Planning and Traffic Flow Demand supply Analysis Technology Option Analysis Project Costing Financial Viability Analysis Legal Due Diligence
Transaction Structure Thimphu Thromde Commercial Lenders Parking Rent Performance Monitoring & Reporting Fee Independent Engineer (construction) Debt Disbursement Equity Injection Debt Repayment Capital withdrawal Concessionaire Escrow Account Subcontract payment Subcontractors Design, Construction, Technology, Operation Bidding Company / Consortium Parking Fee Parking User (cars,, trucks, etc ) Parking spaces within Concession Area On-Street Parking Spaces Off-Street MLCP/ Surface Lots
Bid Process Submission of Proposal Qualification FAIL Return Bid PASS Financial Bid Bid Award Six entities bought the bid documents Two bidders submitted the proposal to undertake the project Based on the evaluation the winning bidder was successfully awarded the contract
Results : Benefits to Thromde and RGoB No upfront investment (Nu 400 Million) Introduced Efficiencies Through better planning and organization, cost optimization, and risk management Fiscal Benefit Significant increase in parking rent Mitigated Risk Construction cost overrun Time Overrun
Continued Engagement : Post Transaction Support Condition Precedents of the Contract Procurement of Independent Engineer Project Performance Monitoring Capacity Building through workshops and site visits
Tashi Delek!