ppp in israel 2009
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Ministry of Finance The Division of PPP Projects
Public Private Partnership DivisionPublic Private Partnership Division
Inbal Insurance Company LtdInbal Insurance Company Ltd..
September 2011September 2011
PPP projects in IsraelPPP projects in Israel
Ministry of FinanceMinistry of Finance2 The Division of PPP Projects
VisionVision
Investments in infrastructure would enable to sustain Israel’s economy growth
Private sector’s involvement would improve level of government’s supplied services
Optimizing risk allocation between the public and the private sectors would contribute to public wealth
Ministry of FinanceMinistry of Finance3 The Division of PPP Projects
Industries under FocusIndustries under Focus
Railroads/Mass Transit Systems
Roads
Water desalination and sewage treatment
Construction
Energy (IPP; LNG; Solar)
The government has decided to focus primarily on
the following industries:
Ministry of FinanceMinistry of Finance4 The Division of PPP Projects
PPPPPP
PPP/PFI –PPP/PFI – Major issuesMajor issues
PPP/PFI In IsraelPPP/PFI In Israel
Ministry of FinanceMinistry of Finance5 The Division of PPP Projects
Governmental body
Authorities Involved Along the ProcessAuthorities Involved Along the ProcessAuthorities Involved Along the ProcessAuthorities Involved Along the Process
Inter-Ministerial Inter-Ministerial Tender CommitteeTender Committee
The Tender
Steering Committee
Designated Company
Concession Agreement Management
Ministry of FinanceRelevant Government Ministries
Inbal – The Division of PPPExternal Consultants
WDA, JPTA, CTA
Cross Israel Highway,
Tel Aviv Mass Transit
Ministry of FinanceMinistry of Finance6 The Division of PPP Projects
Contractual Framework(Limited or Non-Recourse Structure)Contractual Framework
(Limited or Non-Recourse Structure)
Government
Project vehicle (SPC(
Operating Agr.(O&M (
Construction Agr.(EPC)
Lender(s)Financial Facility
Sponsor(s)Equity
Ministry of FinanceMinistry of Finance7 The Division of PPP Projects
Project Feasibility Study Project Feasibility Study
Project is economically
feasible
Project meets PPP/PFI criteria
Phase 1 - economic
feasibility study:Cost/benefit
analysis
Phase 2 - prior to and
during tender process
Phase 3 -
decision & implementation
No
No
Yes
Yes
Project will not be implemented
Public sector implementation
using alternative method
החלטת ממשלה
Analyzing the bids compared
to the PSC
Yes
Signing a concession agreement
&Controlling its
execution
Business environment fits
PPP/PFI
No
Yes
Ministry of FinanceMinistry of Finance9 The Division of PPP Projects
Typical Risk Allocation Optimal Risk Allocation – each sector is responsible for the risks he can better
mitigate
Typical Risk Allocation Optimal Risk Allocation – each sector is responsible for the risks he can better
mitigate
Risk Public Private SharedTechnology
Land acquisition & Expropriation
Detailed design
Cost overruns
Completion delay
Archaeological findings
(mainly Public)
O&M costs
Collection risk
Force Majeure
Discriminatory change in laws and legislation
Political risk
Market/Demand risk
Ministry of FinanceMinistry of Finance10 The Division of PPP Projects
Typical PPP/PFI project Time FrameTypical PPP/PFI project Time FrameExcluding legislative related delays
Project stageProject stage Time Frame (Months)me Frame (Months)
• Appointing Tender Committee/Consultants 1• PQ Documents 3-4• Bidding the PQ 3• List/Short List after PQ 1• Tender documents 2• Bidding of Tender 4-6 • Tender process 1-2 • Best & Final 1-2• Sub Total 16-20
• Financial close 8-12
• Total 24-32
Ministry of FinanceMinistry of Finance11 The Division of PPP Projects
Improvements in the Tender RulesImprovements in the Tender RulesChanges and improvements in the Tender Rules in order Changes and improvements in the Tender Rules in order
to facilitate the implementation of the projects: to facilitate the implementation of the projects:
Unified accounting principles (based on IASB). Easing of tax treatment Interest rate changes protection Various indexation and protection options in accordance,
to risks at the different project stages
Steps to encourage institutional investors to participate in the Steps to encourage institutional investors to participate in the PPP financingPPP financing :
Indicative Rating to the projects (by Israeli rating co.) Refinance option after Construction phase
Ministry of FinanceMinistry of Finance12 The Division of PPP Projects
Encouraging foreign ParticipationEncouraging foreign ParticipationWhy foreign participation is needed?Why foreign participation is needed?
• Single borrower limitation (15%)Single borrower limitation (15%)
• Low competition (2 major banks) Low competition (2 major banks)
– Equity: NIS 54B for the big 5; NIS 37B for the big 2.Equity: NIS 54B for the big 5; NIS 37B for the big 2.
– ROE: 13.1% - 22% (9/2006 - big 5)ROE: 13.1% - 22% (9/2006 - big 5)
• 7-8 major groups participating in all government projects7-8 major groups participating in all government projects
Improvements in order to facilitate the participation of foreign Improvements in order to facilitate the participation of foreign bidders and foreign Lenders: bidders and foreign Lenders:
Foreign interest rate changes protection.
Foreign currency changes protection.
Various indexation and protection options in accordance, to risks at the different project stages
Payments to Concessionaire in foreign currency
Ministry of FinanceMinistry of Finance13 The Division of PPP Projects
Foreign Entities participationForeign Entities participation
• Technical Know-How
Bring professional expertise and experience.Bring advanced technologies. Bring more efficiency in the planning and
execution of projects. Improving the capability of Israeli entities.
• Investment
Partnership between Israeli and foreign entrepreneurs.
Enlargement of foreign investments.
Ministry of FinanceMinistry of Finance14 The Division of PPP Projects
Foreign Entities InvolvementForeign Entities Involvement
• Financing
Israel’s sovereign rating ( A – A+ ) attractive for international finance entities.
Improvements in Tender Rules encourages foreign participation : financing in USD / Euro with interest rate protection, various indexation protection at the different project stages.
Help to enlarge number of financing entities (single borrower limits for Israeli banks).
Stimulate competition – reduce financing costsOffer new financing tools and solutions
Ministry of FinanceMinistry of Finance15 The Division of PPP Projects
PPPPPP
PPP/PFI – Major issuesPPP/PFI – Major issues
PPP/PFI In IsraelPPP/PFI In Israel
Ministry of FinanceMinistry of Finance16 The Division of PPP Projects
Volume of Operation by SectorsConstruction costs
Volume of Operation by SectorsConstruction costs
Transport: $ 6.3 billion
Water: $ 2.0 billion
Construction: $ 0.3 billion
Energy : $ 1.4 billion
Total $ 10 billion
63%
20%
3%
14%
Transport Energy
Water Construction
Ministry of FinanceMinistry of Finance17 The Division of PPP Projects
Railways
Cross Israel Highway (H-6)
Carmel Tunnels
Roads No 431 + 531
Fast lane
Desalination facilities
Prison, Police National Academy
Solar Plants, LNG
Main PPP Projects Main PPP Projects in Israelin Israel
LRTs
Army Training Basis City
Ministry of FinanceMinistry of Finance18 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP Projects
Transportation Projects Status Foreign Entities Involvement
Cross-Israel Highway - Central Section
In operation Both in the operation and in the financng of the project.
Highway 431 In operation Financing of construction phase: HSBC (together with 3 Israeli banks)
Cross-Israel Highway – Section 18
Construction – work began in June 2007 and is expected to be completed by September 2009.
Both In the operation part and in finance part
Ministry of FinanceMinistry of Finance19 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP ProjectsTransportation Projects Status Foreign Entities
Involvement
Tel Aviv and Jerusalem Fast Lanes
Construction – Construction work began in August 2007 and is expected to be completed by the first quarter of 2010.
“Siemens” is a subcontractor responsible for the unique toll system
Jerusalem LRT Construction – Construction work began in August 2006 and is expected to be completed by the third quarter of 2010.
A French company (“ALSTOM”) holds 20% share in consortium
Tel Aviv LRT Financial Closing – expected to be completed in April 2009.
“Siemens” is part of the concessionaire. Financing of construction phase: RBS, Bayerische LB, KFW
Ministry of FinanceMinistry of Finance20 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP Projects
Transportation Projects Status Foreign Entities
Involvement
Carmel Tunnels Construction –work began in November 2006 and is expected to be completed by the end of 2010.
A Chinese company (“CCECC”) is involved in the tunneling works
Highway 531 Financial Close –to be completed in July 2009.
Ministry of FinanceMinistry of Finance21 The Division of PPP Projects
Cross Israel
Highway
531
Tel Aviv
Ayalon
HW-20
Geographic location:
The ring roads The ring roads around the Tel Aviv around the Tel Aviv metropolitan area :metropolitan area :
NorthNorth - 531 - 531EastEast - Cross Israel - Cross Israel
(Hw 6)(Hw 6)SouthSouth - 431 - 431WestWest - - Ayalon Ayalon
(Hw 20)(Hw 20)431
Ministry of FinanceMinistry of Finance22 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP ProjectsDesalination Projects Status Foreign Entities
Involvement
Ashkelon (100 m3/year) In operation A French company (Veolia Water ) is part of the consortium(50%)
Palmachim (30 m3/year) In operation
Hadera (100 m3/year) Construction - construction of the facility will be completed by the end of 2009.
Financing of the project : Calyon Bank , EIB, Espirito Santo Bank, Dexia Bank, KFW.
Sorek (150 m3/year) RFP released in January 2009. Proposals to be submitted in June 2009
Foreign companies are part of bidding groups
Ministry of FinanceMinistry of Finance23 The Division of PPP Projects
036
100 130 145 160280 305
405505
Development of sea water desalination plants in Israel along the national system
(100)
(30)
(100)
(100)
Tendering stage
Full production Since 12/05
Construction phase. Production at 12/09
(150) SorekFull production
Since 9/07
Tendering stage
Hadera
Palmachim
Ashdod
Ashkelon
Ministry of FinanceMinistry of Finance24 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP Projects
Energy Status Foreign Entities Involvement
Solar Power Plants in the Negev Desert
RFP for 2 Thermal power plants released in March 2009PQ for Photovoltaic plant expected to be released in April 2009.
Foreign companies are part of bidding groups.
LNG PQ to be released pending Government approval.
Ministry of FinanceMinistry of Finance25 The Division of PPP Projects
Status of PPP ProjectsStatus of PPP Projects
ConstructionProjects
Status Foreign Entities
Involvement
Beer Sheva Prison Construction - construction of the facility will be completed by June 2009.
The operational company is going to be foreign
Courts, Government Center Parking Lot, Knesset expansion
In operation
Training Center for The Israeli Police PQ –bids were submitted in June 2008.
RFP expected to be released in Q3/09
Foreign participant part of bidding group.
Ashdod Hospital PQ – bids were submitted in December 08.
RFP expected to be released in Q2/09
Ministry of FinanceMinistry of Finance26 The Division of PPP Projects
Expected additional ProjectsExpected additional Projects
Additional Roads & LRT lines (Tel-Aviv) including T/K &
Build/Design projects
Additional Desalination Facilities
Hospitals (Including hotels, parking areas, shopping malls)
International Airport in Megido
Education (school PFI)
An international airport and the Peace CorridorPeace Corridor projects
(Coordination with Jordan)
Additional renewable energy projects
Protection of the Environment ( a committee has been appointed
to make a preliminary study of potential projects )
Ministry of FinanceMinistry of Finance27 The Division of PPP Projects
Thank you for your attention
Ministry of FinanceMinistry of Finance28 The Division of PPP Projects
ContactsContacts
Mr. Abraham TenneHead of Desalination Division and chairman of the WDATel : 972-3-6369688/676Mobile : 972-50-6221342E-mail :[email protected]