African Ports and Maritime Conference – IFC Port Presentation

•Méhita F. Sylla

•IFC Infrastructure Advisory Services

•November 28-30, 2011

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Overview of IFC’s Advisory Services

IFC Approach to PPP Transactions

Private Sector Participation in the Port Sector

Agenda

IFC Experience in Port Transactions

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•IBRD

•International Bank for Reconstruction and Development

•IDA

•International Development

•Association

•IFC

•International Finance Corporation

•MIGA

•Multilateral Investment and Guarantee Agency

•To promote institutional, legal and regulatory reform

•Governments of poorest countries with per capita income of less than $1,025

•- Technical assistance

•- Interest Free Loans

•- Policy Advice

•To promote private sector development

•Private companies and Governments in 179 member countries

•- Equity / Quasi-Equity

•- Long-term Loans

•- Risk Management

•- Advisory Services

•To reduce political investment risk

•Foreign investors in member countries

•- Political Risk Insurance

•Est. 1945 •Est. 1960 •Est. 1956 •Est. 1988

•Role:

•Clients:

•Products:

•To promote institutional, legal and regulatory reform

•Governments of member countries with per capita income between $1,025 and $6,055.

•- Technical assistance

•- Loans

•- Policy Advice

IFC is a Member of the World Bank Group

•Shared Mission: To Promote Economic Development and Reduce Poverty

IFC’s Role

IFC also provides advice to governments and businesses

Environment & Social Sustainability

Access to Finance

Business Environment

Public-Private Partnerships

Enterprise Assistance

World’s largest multilateral provider of financing for private enterprises$38+ billion in investment commitments

Advisory services to governments and businesses

Advisory Services and Financing

IFC’s Infrastructure Advisory Services

• Public-Private Partnerships (PPPs) IFC helps governments to increase the

quality and availability of public services and infrastructure using the PPP model

IFC has global experience in PPPs for transport (roads, airports, rail, ports, etc.), water and sanitation, health and education, power, mining, and many other areas

• Governments rely on IFC to structure PPPs that cost-effectively meet public needs with well-qualified private partners.

• Private partners trust IFC to construct a balanced and bankable project

Benin Port

Cameroon: power

Kenya Airways

Kenya Safaricom

Kenya Telecoms

Kenya Uganda Railways

Lesotho Hospital

Madagascar Tamatave Port

Mauritania Telecoms

Mozambique Moatize

South African National Parks

Sierra Leone Hotel

Uganda Telecom

Successful Mandates in Africa

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Overview of IFC’s Advisory Services

Private Sector Participation in the Port Sector

Agenda

IFC Approach to PPP Transactions

IFC Experience in Port Transactions

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Private Sector Participation Overview

• Key factors defining type of private participation include:

• Port Ownership

• Role of Port Authorities

• Relationship between the public and private sectors and their respective roles

• Most port “privatizations” have tended towards transferring selected port services and/or assets to private or mixed economy companies by means of restrictive leasing, licensing or concessionary contracts.

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Role of Port Authority after PSP – retains abilities to control property rights, planning

& efficiency• A modern Port Authority, acting in close cooperation with private

sector companies, typically concentrates its efforts on the efficient performance of a number of fundamental functions, including:

• Landlord and performance monitoring function

• Policy-making, planning and development function

• Traffic control, regulatory and surveillance function

• Marketing, public relations and promotion function

• Governments (and port authorities) also retain the responsibility for formulating a policy and/or regulatory reform agenda to serve as an effective basis for private sector involvement, which have often included difficult and transforming legislative, institutional and procedural changes.

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Governments benefit from Private Sector Participation

• Potential for new revenue streams for governments

• Access to private sector financing freeing Government budgets for social sectors

• Introduction of Experienced Management and International Trade Benefits

• Higher Efficiency through the involvement of the private sector

• Platform for Government Trade Strategies: Establishing a supportive environment and platform for an export-focused economy, and lowering the artificial costs of imported raw materials.

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Overview of IFC’s Advisory Services

Private Sector Participation in the Port Sector

Agenda

IFC Approach to PPP Transactions

IFC Experience in Port Transactions

11

Full package of advisory services

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Define ProjectScope

Project Coordination

Tech, Environmental,Legal, Financial & Regulatory Review

Financial Analysis

Develop StrategicOptions

Develop Structuring

Plan

Market Opportunity

Implementation & Closure of Strat. Inv.

Development of Privatisation Strategy

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OurApproach

Phase I: Preparation Phase II: Implementation

Step 1

Scope

Mandate Design

Mandate TORs

Work Plan Trust Funds Consultants Kick-off

Step 3

Framework

Enabling Reforms

Legal (new laws) Regulatory (agency) Fiscal reforms Triage Retrenchment Inst. Reinforcement Communication Financing

Step 4

Transaction

Transaction

Pre-qualification Info Memo Data Room Due diligence Draft Contracts Negotiations Call for tender Award Closing

Step 2

Options

Diagnostic

Legal due diligence Technical diagnosis Market conditions Demand projections Capital investment Regulatory framework Potential investors Strategic options

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Overview of IFC’s Advisory Services

IFC Approach to PPP Transactions

Private Sector Participation in the Port Sector

Agenda

IFC Experience in Port Transactions

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Case Study # 1

Concession of a Container Terminal

Port of toamasina, Madagascar

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Toamasina – Map and Location

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Transaction Structure (Cont’d)

• Expected returns to Madagascar over the 20 years of the concession: efficiency gains, international best practices, investments

• Estimated financial returns to Madagascar: US$ 300 million in investments and concession fees.

• Tariff reduction: 20% (handling) and 10% for reception & delivery

• Obligation to keep 350 employees for 5 years

• Operator’s Obligations backed up by Performance Bond over the lifetime of the concession

• June 2005: ICTSI Wins Madagascar Port Bidding

• October 2005: Contract signing ceremony

• Upfront payment (including asset acquisition): €10 million

• US$36 million invested in container handling equipment

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Toamasina – After Concession

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Case Study #2

Concession of a Container Terminal

Port of Cotonou, Benin

Port of Cotonou - Benin

• Benin located to west of Nigeria.

• Small seacoast but road links to landlocked Mali, Niger, Burkina Faso

• Current throughput of 300,000 teu /6.05 million tons.

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Port of Cotonou – PPP Timetable

• Nov 4, 2008 - IFC signed mandate with Government of Benin

US$169 million grant by US Millennium Challenge Corp for port infrastructure required private operator for container terminal

MCC grant included 550 meter wharf for 540,000 teu container terminal

• Nov 2008 - May 2009 - Market & technical studies, concession design

• May- June-July 2009 – Prequalification- Bid Preparation. Bid criteria published: Highest NPV for upfront payment and guaranteed annual throughput charges.

• August 2009 - Groupement Bollere awarded 25-year concession.

• September 2009 - Concession contract signed. Terms included:

Upfront payment of US$33 million, $29/teu throughput charge

Investments first 5 years: US$42 million civil works/US$70 million equipment

Minimum volume guarantees (400,304 Year 1 to 723,056 Year 8)

Minimal tariff regulation. Flexible labor policies.

Government obligation to deepen and dredge channel

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IFC Infrastructure Advisory Services – Port Projects

Completed mandates

• 2009- Cotonou Port

• 2008 – Durres Port - Albania

• 2006- Toasmasina Port - Madagascar

• 2001 – Suape Port - Brazil

On Going Mandates and

• 2011- Nouakchott Port- Mauritania

• 2010- Vinzhijam Port, kerala – India

• 2008- Port Louis- Ile Maurice

• Potential mandates

• Bulk Terminal- India

• Bar Port- Montenegro

• Central America - 2 Ports

• Caribbean

•Afrique Sub-Saharienne14 Fricker RoadIllovo 2196JohannesburgSouth AfricaTel: (27-11) 731-3000Fax: (27-11) 325-0582

•Siège2121 Pennsylvania Avenue, N.W.Washington, D.C. 20433 USATel: (202) 473-3800Fax: (202) 974-4384

•Emmanuel NyirinkindiManager Sub-Saharan Africa,Telephone: (27) 11 731 3068E-mail: ENyirinkindi@ifc.org

•Méhita Sylla FannySenior Investment Officer Telephone: (27) 11 731 3180E-mail: msylla@ifc.org

•Ramatou MagagiSenior Investment Officer Telephone: +1 202 473 3954E-mail: rmagagi@ifc.org

THANK YOU!!!

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