public private partnership for infrastructural development in the niger delta
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AYULI JEMIDE
NIGER DELTA DEVELOPMENT COMMISSION & NIGERIAN BAR ASSOCIATION
CONFERENCE ON LAW, PEACE & DEVELOPMENT
IN THE NIGER DELTA
6th May 2008, Presidential Hotel, Port Harcourt
Public Private PartnershipFor Infrastructural Development
In The NIGER DELTA
AYULI JEMIDE
OUTLINE
1. KEY ELEMENTS OF PPP’S
2. CORE PPP PRINCIPLES & THE NIGER DELTA
3. RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S
4. TALKING POINT ON PPP/INFRASTRUCTURE PROJECTS IN THE NIGER DELTA
5. SOME USEFUL CASE STUDIES
6. IMPERATIVES FOR PPP’S IN NIGER DELTA
AYULI JEMIDE
Key Elements of Public-Private Partnership
• A contractual partnership between a government (public) entity and a private company (or a non-profit private body) that provides a public service to citizens.
• A good PPP should improve a service provided by Government at a reasonable cost to the end user.
• Typically, the Public Sector is buying a service, and the private sector is investing for Profit.
• Flexible contracting: Lease, Manage, Build Operate & Transfer, Joint Ventures, Service Contracts. Anything goes!
AYULI JEMIDE
HOW WILL CORE PPP PRINCIPLES PLAY OUT
WITH NIGER DELTA PROJECTS?
AYULI JEMIDE
PPP’S are ONLY for VIABLE projects
RULE RULE
NO. 1NO. 1
• Feasibility: a) Is it possible? b) What will it cost?
• Viability: a) Will cash flow maintain service levels?
b) Will there be a profit or ROI? Can we identify viable project types in the
Niger Delta?
AYULI JEMIDE
Allocate RISKS to the party best able to handle them
Usual Parties: Govt, Investor, Financier -
Insurance.
Usual Risks: Political, Financial, Operations, etc, and now Security
Which party can best handle the peculiar risks
in the Niger Delta? How?
RULE RULE
NO. 2NO. 2
AYULI JEMIDE
PPP must address STAKEHOLDER concerns
NEEDS ANALYSIS: Do they need it? Is the need more pressing then other neglected areas?
AFFORDABILITY TEST: Can the public afford the User Charges? Will it be robbing Peter to pay Paul?
Which proposed PPP’s in the Niger Delta will ably address these issues?
RULE RULE
NO. 3NO. 3
AYULI JEMIDE
RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND
PPP’S
AYULI JEMIDE
WHO CAN CONTRACT IN PPP’S?
1) Those empowered by the Infrastructure Concession Regulatory Commission Act 2005
Section 1 “Any Federal Govt Ministry, Agency, Corporation, or
body involved in the financing, construction, operation or maintenance of infrastructure, by whatever name called, may enter into a contract with or grant concession to any duly prequalified project proponent in the private sector for the financing, construction, operation or maintenance of any infrastructure……in accordance with the provisions of this Act.
Question Question
NO. 1NO. 1
AYULI JEMIDE
WHO CAN CONTRACT IN PPP’S?
2) Government Agencies empowered by Law
Examples:- Federal Emergency Road Maintenance Act
Section 8- Niger Delta Development Commission Act –
Section 7 1 (b), 8 (e) ?
Question Question
NO. 1NO. 1
AYULI JEMIDE
WHO CAN CONTRACT IN PPP’S?
Question Question
NO. 1NO. 1
STATE GOVERNMENTS:
Section 5 (2) ( a) (b) of 1999 Constitution:
Vests Executive Powers in Governor: “shall to execute and maintain all Laws made by the House of Assembly and with respect to which the House of Assembly has for the time being power to make laws”. – Everything on the concurrent or residual legislative list?
An enabling Law for PPP enacted by each State is advisable for clarity and investor confidence.
AYULI JEMIDE
WHO CAN CONTRACT IN PPP’S?
Question Question
NO. 1NO. 1
LOCAL GOVERNMENTS:
4th Schedule to 1999 Constitution lists functions of LG’S to include:
Maintenance of roads, and in conjunction with the State: primary, vocational, and adult education etc
Also Local Govt Laws have similar Executive-power provisions for the LGA Chairman as that of the Governor contained in the Constitution
Are these sufficient for a serious investor?
AYULI JEMIDE
WHO CAN LEGISLATIVE?
Exclusive
Federal Roads
Maritime
Aviation
Mines & Minerals
Railways
Nuclear Energy
Concurrent
Electric Power
Industrial, Commercial & Agric Dev.
Education
Residual
Urban planning
Transportation
State Roads
Water
Housing
Health
Question Question
NO. 2NO. 2
AYULI JEMIDE
WHO OWNS THE ASSETS?
QuestionQuestion
NO. 3NO. 3
STATE
GOVERNMENT
16%FEDERAL GOVERNMENT
17%
LOCAL GOVERNMENT
67%
ROADS FOR EXAMPLE:
AYULI JEMIDE
TALKING POINTS ON INFRASTRUCTURE AND
PPP’S IN NIGER DELTA
AYULI JEMIDE
PIONEER’S BURDEN
Are there successful PPP projects in the Niger Delta?
- Educate and Inform - Process to encourage credible investors - Legislation - PPP Unit with qualified project officers - Identify, remove, hindrances and obstacles
PointPoint
NO. 1NO. 1
AYULI JEMIDE
BANKABILITY
THIS WOULD BE AN ISSUE:
1. Project Finance: Cash flow Lending2. Infrastructure is not a briefcase project3. Risk Analysis is high: Project risk, Operational
risk, Economic risk, Endangered Asset.
PointPoint
NO. 2NO. 2
AYULI JEMIDE
Can we cross the Bankability hurdle?
Some Options:
- More Govt funding to reduce private sector risk- 100% Govt funding with Private Sector as Operators- State or Federal Government Bonds- Sovereign Guarantees & Indemnities- Spread funding into bite size portions- Structure collateral rewards i.e shadow tolls, guaranteed
income plus @ a minimum IRR (rate of return).
PointPoint
NO. 2NO. 2
AYULI JEMIDE
RISKS !!!
ALLOCATION OF RISKS WILL BE KEY TO PPP’S IN THE NIGER DELTA
• Can we allocate risk to Communities? • How we allocate risk to a non-stakeholder?
• High risk demands higher premiums and makes the user charges higher.
PointPoint
NO. 3NO. 3
AYULI JEMIDE
WHO TAKES RESPONSIBILITY?
WOULD FEDERAL, STATE, AND LOCAL
GOVTS TAKE RESPONSIBILITY FOR CERTAIN FORCE MAJEURE EVENTS?
E.G. BAIL OUT CLAUSES THAT GIVE INVESTOR A GUARANTEE THAT THEY WILL NEVER LOSE THEIR MONEY
PointPoint
NO. 4NO. 4
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SOME USEFUL CASE STUDIES
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LEKKI ROAD CONCESSION
• State Govt passed the Lagos State Highway, Roads & Bridges Law to support this transaction.
• State Government gave adequate Guarantees: Cash Bond, Access to Site, etc
• Signed Non-Compete Clauses• Threw in other projects as sweeteners• Set up a Unit to monitor PPP’s• Stamp Duties Exemption from FGN• NAICOM Exemption for Offshore Reinsurance
AYULI JEMIDE
TAJIKISTAN POWER PROJECT
•ABOUT TAJIKISTAN:• Mountain region of Former Soviet Union• Civil war just ended• Per Capita Income was $160 a year • 80% of population lived below poverty line• People used wood for heating: the forests went sparse
and respiratory disorders were common• 43 % of homes had no electricity• Homes with electricity were used to paying < 1/10th of
current production costNOT AN INVESTORS HAVEN FOR A POWER PROJECT
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DEAL STRUCTURE
WORLD BANK IDA
$1OM @
0.75%
Tajikistan
GOVT
On-lending@ 6%As Part Finance
PAMIR ENERGY
AKFED -70%
($8m Equity)
IFC – 30%
($3.5m Equity)
($4.5m Debt)
Tajikistan
GOVT
5.2% Margin
$5mGrant from Swiss Govt
+POOL
OF
FUNDS
AYULI JEMIDE
LESSONS
• 25 year Concession on Electric Utility Assets – It’s an interesting PPP!
• Must not be a big project - 30,000 customers initially.
• Employment is a major spin off - 595 employees.
• Conflict ridden areas should seek funds from right places
AYULI JEMIDE
MORE LESSONS
• Government used its pool of funds to subsidize a “lifeline” Tariff – An ingenious Social Protection Scheme.
• Donor and Funding Agencies are key factors in high risk PPP projects
• Think outside the box – This pioneered a new mode of collaboration
• Cheaper funding arranged by Govt. gave a fair return on investment
AYULI JEMIDE
AFGHANISTAN HEALTH PROJECT
BACKGROUND INFORMATION
In 2002 Afghanistan had one of the worse basic health indicators in the world:
- 25% of children died before their 5th birthday
- 165 of every 1000 children died at birth
- 1600 maternal deaths in every 100,000
- Over 60% of population had no access to any basic health service
AYULI JEMIDE
HOW WAS PROJECT STRUCTURED?DONORS LOCAL
GOVTNGO’S STATE
GOVT• MONEY • PROVIDE LAND
• LABOUR FOR BUILDING HEALTH CENTERS
• TRAIN COMMUNITY BASED PERSONNEL
•SET UP HEALTH COMMITTEES
• OPERATE THE HEALTH CENTRES VIA CONTRACT AFTER COMPETITIVE BIDS WITH SET OPERATIONAL CRITERIA AND LEVELS: EQUIPMENT, STAFF, PRICING ETC
• OWNS THE HEALTH CENTRES
• REGULATES THE STANDARDS AT HEALTH CENTRES
AYULI JEMIDE
WAS IT SUCCESSFUL?
2002 2005Under 40% had access to basic health
Few Community based health Personnel
Haphazard approach to health care
Limited local participation in health care delivery (Mostly NGO’s)
77% had access 3 years later
27 Health Centers manned by Trained indigenes
Standardized classification of health facilities in all the communities
Ongoing Capacity Building should see more health centers run by locals when Concessions are over.
AYULI JEMIDE
IMPERATIVES FOR PPP PROJECTS IN THE NIGER
DELTA
AYULI JEMIDE
1. Use Low Hanging Fruit
Pioneer with projects that:
a) Require minimal Govt. involvement
b) Are quick to achieve
c) Generate employment and capacity building
d) Are service oriented
For example: Health care schemes or Education.
AYULI JEMIDE
2. Start With Parties Who Have Vested Interest
• It is easier to work with the oil companies who already have a vested interest and sunken costs than to find “green” investors.
• OPCO’S, Govt and NDDC should start a PPP task force immediately to fashion a roadmap
AYULI JEMIDE
3. Start With Service-Oriented PPP’s
• PPP’S that affect standard of living should be uppermost.
• Studies from Post Conflict countries say this is the fastest route to host community buy-in. Service oriented PPP’s are seen for their value NOT as contracts to the oppressors.
• E.G – Education, Health, Capacity Building.
AYULI JEMIDE
4. Network with International Agencies
• MDA’S (Multilateral donor and credit agencies are key) World Bank IDA, MIGA etc
• TO:• Give risk guarantees• Grants and soft loans• Training and capacity building
AYULI JEMIDE
CONCLUSION
• IT IS NOT IT IS NOT ROCKET ROCKET SCIENCE !!SCIENCE !!
AYULI JEMIDE
• THANK YOU FOR LISTENING
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