chilean experience in regulation of roads public- private...
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2008/SOM3/EC/SEM/013 Agenda Item: 9
Chilean Experience in Regulation of Roads Public-Private Partnerships (PPP)
Submitted by: Chile
Seminar on Best Practices in Regulation and Promotion of Efficiency in Transport
Infrastructure Facilities Lima, Peru
15-16 August 2008
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Chilean Experience in Chilean Experience in Regulation of Roads PPPRegulation of Roads PPP
Patricio MansillaPatricio MansillaChemonicsChemonics InternationalInternationalLima Lima -- August 16, 2008August 16, 2008
AgendaAgenda
1.Chilean Institutional Framework1.Chilean Institutional Framework
2. Roads Regulatory Strategy in Chile2. Roads Regulatory Strategy in Chile
3. Key elements of the Chilean PPP Case3. Key elements of the Chilean PPP Case
3.1 Lessons learned 3.1 Lessons learned 3.1 Trends in the Road Regulation3.1 Trends in the Road Regulation
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1. Chilean Institutional Framework1. Chilean Institutional Framework
Chilean Institutional Structure
Ministry of Public Works
Finance Ministry
PPP Unit
Comptroller
Responsible for the complete PPP project Cycle
Health Ministry, Justice Ministry,
Civil Aviation Direction,Railroad CompanyLocal GovernmentsMandate Agreement fo
r PPP
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Chilean Institutional Structure
Chilean Institutional Structure
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Solicited and Unsolicited Proposals
ChileanChilean Project Project CycleCycle
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Total Concession Investment US$8.000 million
Chilean Infrastructure Investment
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PensionPension FundsFunds (Sept. 2007)(Sept. 2007)
2. Roads Regulatory Strategy in 2. Roads Regulatory Strategy in ChileChile
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PPP DesignPPP Design
RegulatorySystem
Business DesignInstitutional System and Procedures
Private SectorParticipation
EconomicStructure
PPP DesignPPP Design
Private Sector Participationin the Chilean Economy
Reform Health System
PrivatisationForeign InvestmentPromotion
Reform to thePension System
Reform to theEducation
Private Sector ParticipationPrivate Sector Participation
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RegulatorySystem
Project Finance Law
Complementary LawAmmendments
Concession Law No900Ministry of Public Works
Legal SystemLegal System
Time
Revenues
P
OVER
PROFITABILITY
MINIMUMMINIMUM
INCOMEINCOME
GUARANTEEGUARANTEE
CURRENTCURRENTREVENUESREVENUES
GOV. PAYMENTGOV. PAYMENTTOTO
CONCESSIONCONCESSION
Long Term MinimumIncome Guarantee
Long Term MinimumIncome Guarantee
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Time (years)
Revenues
P
CurrentRevenues
50% Gov.50% Conces
IMG
Revenue Sharing MechanismRevenue Sharing Mechanism
2.1. Panamerican Highway (Road 5)2.1. Panamerican Highway (Road 5)
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Panamerican Panamerican HigwhayHigwhay 19951995--19981998
Concepción
Valparaíso
San Antonio
Los Andes
SANTIAGO
Túnel El MelónLa Serena
Puerto Montt
Talca
Los Vilos
Chillán
Río Bueno
Collipulli
Road 5
Temuco
SANTIAGO
US$ 2,100 million1590 Kms.
Business DesignBusiness Design
Monopoly RegulationMonopoly Regulation
Business DesignBusiness Design
Financial RegulationFinancial
Regulation
∑= +
−++×+−=
N
1tt
ttVF
CAPM)(1M)&(O)SSQ(PCAPEXNPV
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Tariff SystemTariff System• Natural Monopoly. No alternative roads• Sequential and Competitive Bidding• Transport Modeling to determine tariffs• Second best tariffs to reduce deadweight loss• Efficient and equity criteria to implement the tariff
system and affordable for the users.
Business DesignGeographic
EquityGeographicGeographic
EquityEquityTariffs relatively similar along the Tariffs relatively similar along the highway according to the service levelhighway according to the service level
HorizontalEquity
HorizontalHorizontalEquityEquity
Users pay according to his categoryUsers pay according to his category
Vertical Equity
Vertical Vertical EquityEquity
Local Users or Frequent Users can Local Users or Frequent Users can receive a special payment treatmentreceive a special payment treatment
GenerationalEquity
GenerationalGenerationalEquityEquity
Users pay for a service level during a Users pay for a service level during a specific period of time. specific period of time.
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Panamerican HighwayPanamerican Highway
Panamerican HighwayPanamerican Highway
• Risk Sharing Mechanism• Feasibility Studies prepared by the Chilean
government and available for the bidders • Quality of Service: Guarantee by prizes and fines• International Pre qualification and sequential bidding• International Road Shows
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Cross Subsidy (Million US$/year) Cross Subsidy (Million US$/year)
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8,18
-7,02-8,18 -9,35
3,51
-2,34
5,857,02
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Tariff System (US$/100 Tariff System (US$/100 kmskms) )
Río Bueno - Pto Montt
Temuco - Río Bueno
Collipulli - Temuco
Chillán - Collipulli
Santiago - Talca
Talca - Chillán
La Serena – Los Vilos
Los Vilos - Santiago
US$
Complete Self Funded
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2.2.Urban Roads2.2.Urban Roads
Santiago in the NinetiesSantiago in the NinetiesPopulation: 5 millionPopulation: 5 million
10,3 Million of trips per day10,3 Million of trips per day
65%: Public Transportation65%: Public Transportation
35% : Private Transportation35% : Private Transportation
Economic DevelopmentEconomic Development
Rate Growth: 6% annuallyRate Growth: 6% annually
135 cars / 1000 persons135 cars / 1000 persons
Lack of Public InvestmentLack of Public Investment
Transport System with huge operation problemsTransport System with huge operation problems
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Santiago Infrastructure PlanSantiago Infrastructure Plan
• Public Transportation Modernization• Enlargement of the Metro System• Enlargement of Suburban Trains• PPP for the main urban roads• Economic regulation for the private transportation• Enhancement of the local transportation infrastructure• Traffic control system improvement
Urban Road System
1. Autopista Costanera Norte2. Sistema Norte – Sur3. Américo Vespucio Sur4. Américo Vespucio Norte
215 Km.5. Sistema de Telepeaje
Urban PPP Urban PPP RoadsRoads R-57
R-5 Sur
R-68
R-78
R-68
R-78
R-5 Sur
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• Three tariffs:Valley US$ 0,05/kmPeak US$ 0,06/km
Congestion US$0,12/km
• Tariff adjustment RPI + 3,5% annually.
• Concessionaire can do tariff management.
Santiago Infrastructure PlanSantiago Infrastructure Plan
2T2T
3T3T
1T1T
EastEast--West Urban SystemWest Urban System• Sequential Bidding Mechanism:
• Variable 1: “Payment for goods and rights (BD)"
Payment by the sponsor of the concessionaire before to create the concessionaire company.
• Variable 2: Investment Plan
• Variable 3: Payment from the Government
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Urban Road Concession: East-West Urban System
Results
•Investments: US$385 million•Length: 42 kilometers•Reduce gas emission•Reduce contamination •Reduce congestion•Reduce travel time from LasCondes to the Santiago Airport
•Implementation of the electronic toll road system “free flow” which let to the users go through the road without stop to pay tolls.•The number of accidents in the road is very low and it reach 8 in average per month.
Urban Roads Bidding ResultsUrban Roads Bidding Results
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3.3. Key Elements of the Chilean Key Elements of the Chilean PPP CasePPP Case
3.1. Lessons Learned3.1. Lessons Learned
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Lessons LearnedLessons Learned
• Lesson 1: Competition is an important first step for road regulation and prequalification is an important strategy to mitigate the adverse selection (concessionaire) problem.
• Lesson 2: Competition is not able to solve the incomplete contract problems. Every risk must be carefully studied. Technical studies to estimate the official investment cost of the PPP project.
• Lesson 3: Low balling and Winner's Curse
Lessons LearnedLessons Learned• Lesson 4: Regulation strategy must be included in early
stages of the project cycle. Economic variables to define the bidding winner.
• Lesson 5: Transport and financial Models, must be considered in the Regulatory studies to have a consistent PPP model.
• Lesson 6: Incomplete contracts must include in a easy way the potential conflict resolution issues like easy buy out or way out, negotiation mechanisms, new investments treatment.
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3.2. Trends in Road Regulation3.2. Trends in Road Regulation
Trends in Road RegulationTrends in Road Regulation• Trend 1: Vertical Integration of Regulation versus
Independent Regulator• Trend 2: Application of Least Present Value of Revenues• Trend 3: Unsolicited Proposals• Trend 4: Intermodal Competition (Minimum Revenue
Guarantee)• Trend 5: Total Integration of the Transport Model-
Financial Model and Regulatory Model (secuential or simultaneous)
