public private partnership unit finance department government of sindh may, 2011 public private...
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Public Private Partnership UnitFinance DepartmentGovernment of Sindh
May, 2011
Public Private Partnership UnitFinance DepartmentGovernment of Sindh
May, 2011
PPP PROJECTS IN SINDHPPP PROJECTS IN SINDH
Partnership For Development
Partnership For Development
PPP Unit comprises of Public and Private Sector specialists having professional expertise and relevant certification
PPP Unit
PPP Unit
DG
DirectorMarket
Development
DirectorFinance & Risk Management
DirectorCorporate Affairs
DirectorProject
Structuring
Assistant Director-I
Assistant Director- IV
Assistant Director- V
Assistant Director-II
Assistant Director-III
RMU
Vision
Objectives of PPP in Sindh Provision of infrastructure services Improve their reliability and quality
for accelerating economic growth Achieving the social objectives of the
government Mobilize private sector resources for
infrastructure projects; Incorporate principles of fairness,
competition and transparency in public-private partnership projects;
PPP Unit envisions that with out private sector participation, the public sector can not bring about efficiency in the Service Delivery System.
Provision of private finance is also very important and the vision is to covert abundant public sector resources into commercial assets generating constant flow of funds
Vision and Objectives
Administrative support Licenses and clearances , Utility
connections for power, gas and water, land or rights of way
Asset-based support leasing land and infrastructure facilities
Direct financial assistance Viability Gap Fund
Government guarantees Political risks ,delay of agreed user fee
adjustments,(MRG), Credit Enhancement, Force majeure
and Demand risk etc
These contractual obligations form part of RFP Well thought out plan VGF Board has to decide about the project financing issue on the pattern of TIFU *UK, *TIFIA USA and *IIFCL India. The Risks of project are well defined and well quantified
What do we offer to private sector?
KEENJHAR LAKE
Outbound Tourism Expenditure by Pakistanis
CAGR13.5%
► World Travel & Tourism Council (WTTC) research is done in co-operation with Oxford Economics
World► Travel & Tourism (T&T)
contributes 9.2% to GDP (US$5,751 bn) in 2010
► Real GDP growth for the T&T Economy is expected to be 4.4% per annum over the coming 10 years
Pakistan► T&T contributed 2.0% to
GDP (US$ 9.1b) in 2009► In 2007, Pakistanis have
spent amounts exceeding US$ 2b on international travel and tourism
Tourism Market AnalysisKey FactsSource: WTTC
Internationl Tourism Receipts as % of GDPSource: UNESCO
Statistical Report 2009
Karachi Economy
40% of Financial activity
53% of total collection of FBR
40% of large scale manufacturing
50% Bank Deposits
25% Federal Revenue
95% foreign trade passes through Karachi
Karachi
Percentage Household Income Distribution
Household Income Distribution► Population is currently
estimated around 16 – 18 million
► Average annual income growth: 5.8%
► Expected earnings top bracket of 14% is now expected to be PKR 47,000 per month
Key Facts
Commercial ► Most of the port related
activities through the two ports at Karachi and Bin Qasim
► Home to most of the consumer products and pharmaceutical companies.
► Financial Services hub of Pakistan
20%
40%
16%
7%3%
14% 5000 or below
5000 to 10000
10000 to 15000
15000 to 20000
20000 to 25000
25000 and above
20%
40%
16%
7%3%
14% 5000 or below
5000 to 10000
10000 to 15000
15000 to 20000
20000 to 25000
25000 and above
Earnings Top Bracket
FBR Yearbook 2006-07
The Lake► Largest freshwater lake in
Pakistan (24 Km long, 8 Km wide, 192 Km Periphery)
► Wetland of international importance (Ramsar Site)
► Wildlife Sanctuary and home to several species of local and migrating birds
► Major water reservoir► Perfect for short stay s away
from the busy routine of city► Proximity to Thatta City , with
its rich history and culture, enhances tourism potential
► An ideal location for eco-friendly tourism and nature
► Resort development can be a major economic stimulus
Historical places near Keenjhar Lake► Tourist sites in and around
Thatta having potential for development and organized tourism
► History of Thatta goes back several millennia to the Indus Valley civilization.
► Thatta Capital of Sindh and seat of power for 400 years for three Muslim dynasties
► Architecture continues to inspire modern buildings
► Close to 1000 year old lost city of Bhambhore
► Chawkandi tombs date back over 1000 years
► The tombs at Makli necropolis date back over 700 years
► Shah Jahan Mosque, built back in 1647, one of the largest mosques with 100 domes
Chawkandi Tombs
Bhambore
Shah Jahan Mosque
Makli
THE PROJECT
The Project Site► Located 10 Km from the
National Highway
► Direct connection with the Lake offering a 270 degree view with 8km shoreline
► Limited access provides better Security
► Maximized shoreline for waterfront development.
► Offers great flexibility for articulation of various Integrated Resort Facilities
► Large untouched land (with no existing man made structures/ facilities)
► A raised site with flat terrain suitable for infrastructure and other development
Project Site
N
EW
Project Site
The Visualization of the Project
FINANCIAL OVERVIEW
Resort Zone
Recreation Zone
ESTIMATED PROJECT COSTSDEVELOPMENT
OUTLAYS
► Land cost represents only 5% of the estimated project costs► 43% of the Resort Zone costs are estimated to be funded through sale
of farmhouse components► 60% of the project finance is expected to be raised from Commercial
Debt carrying interest @ 15% - 16% p.a.
Figures in PKR MillionsResort Zone
RecreationZone Total
Infrastructure & Land 1,795 424 2,219
Resort and Hospitality 2,916 - 2,916
Entertainment District - 2,586 2,586
Golf Course 940 - 940
Development Costs 5,651 3,010 8,661
IDC 1,021 307 1,328
Project Costs 6,672 3,317 9,989
Resort Zone
Recreation Zone
Quantitative Aspects► Resort Zoneo Equity IRR: 23%o NPV @16%: PKR 1.3billion
Qualitative Aspects► Flexibility in terms of
developing the project► Reduced upfront investment► Land price is payable on
deferred basis► Land is available for
mortgage► Extensive work already
undertaken► Feasibility shows bankable
financial ratios
INVESTMENT ANALYSISKEY RESULTS
DevelopmentPeriod
Operational Period
Payback: Year 9
DevelopmentPeriod
Operational Period
Payback: Year 9
TRANSACTION STRUCTURE
STRUCTURE
GoS
Private Party
Debt
Equity
Total Project Cost inclusive of
Land
CashEquity IRR: 23%Payback: 8.4 years(Yr 4 of operations)
Project Revenues
Commercial Lenders
20% Upfront Bid Amount to be paid on or prior to signing of concession agreement
Balance Bid Amount to be paid on or prior to COD at 8% p.a. Interest. Payment of Balance Bid Amount is a condition precedent to the
COD.
Project Revenues shall be governed by the Escrow Agreement whereby the proceeds
will be appropriated between the KPC account, Lenders account and Project
Development account
Under Escrow Agreement
The Concessionaire shall have a 95 years Lease on the Project Land with a right to mortgage subject to the provisions of the Concession Agreement
► Quoted Bid Amount (QBA) is the price at which financial bids are invited from potential developers
► QBA shall be:o Base land price; plus o premium on land
► Developer can either be an individual or a consortium
► Developer to incorporate a Project SPV which shall sign the Concession Agreement with the Government
► GoS to implement project through Keenjhar Project Company, a wholly owned project entity
CONTRACTUAL WEBOVERVIEW
Project SPVShareholde
rs Agreement
Sub-Lease/Sub-
Contract Agreement
Sub-Lease/Sub-
Contract Agreement
Concession Agreement
KPC
Private Party 1
Contractor/
Private Party 3
Contractor
Master Developer
Financing Agreement
Commercial Lenders
Escrow Agreement
Tourism Departmen
t (DoT)GOS
Sub-Lease/Sub-
Contract Agreement
Private Party 2
Contractor/
Allocate Project Land to the DoT
Transfer of Project Land under Master Lease arrangement from DoT to KPC
Hyderabad - Badin Road ProjectPublic sector partner
• Government of Sindh
Project advisors
• MM Pakistan (Pvt.) Ltd. (Technical and Lead Advisor)
• KPMG Taseer Hadi & Co. (Financial Advisor)
• Mandviwalla & Zafar (Legal Advisor
Procurement approach
GoS intends to award a Concession Agreement for the design, build, finance, operation and transfer of a 98.5 km road connecting Hyderabad to Badin through the towns of Tando Mohammad Khan, Matli and Talhar. It is currently envisaged that the contract term will be for a period of approximately 33 years. The Project (including the ownership of the Project related assets) shall be handed over to GoS at the end of the contract period.
Private partner’s role
The Service Provider will:
• Finance the Project
• Detailed designing of the Project based on conceptual designs provided by the Contracting Authority
• Construct the Project
• Satisfy all required tests on completion of construction of the Project
• Operate the Project during the PPP Contract and collect tolls
• Maintain and repair the Project during the PPP Contract period
• Hand over the Project to the Contracting Authority at the end of the PPP Contract period
Economic significance of project location
• 6 major junctions at Siri, Tando Mohammad Khan - Sajawal, Tando Mohammad Khan - Tando Allah Yar, Matli - Tando Ghulam Ali - Digri, Talhar and Badin Cantt
• Over 100 smaller link roads indicate mass-usage and importance of the Road
• Collects traffic from southern Sindh and connects to the N-5 National Highway towards the North
• Connects Hyderabad with many important industrial and commercial areas in the surroundings
• Tharparkar District, with vast Coal reserves, is situated on the Eastern side of the Project area
• Type of industries: Rice Mills, Sugar Mills & Oil Mills
Run-of-River Power GenerationRun-of-River Power Generation EOI for hiring Transaction Advisor floated on 3rd July, 2010 Scope of work
Identify the potential sites for ROR Power Generation in the province particularly at Sukkur Barrage;
Conduct Feasibility Study in respect of the top four promising sites identified in the survey;
Assist Government of Sindh in marketing the project to the relevant mix of investors, and administering the bidding process for the selected sites
RFP issued to the 7 pre-qualified consulting consortia Transaction advisor likely to start work by June 2011
20
Gorakh Hill Resort Project
►The development of Gorakh Hills fall under the Gorakh Hills Development Authority formed through an Act of Parliament in September 2008
►It was decided by the Government of Sindh in 2010 to develop Gorakh Hills under Public Private Partnership and mandated Transaction Advisors Ernst & Young in consortium with Meinhardt (Pakistan) Private Limited and Mohsin Tayebaly & Co to evaluate options for development of Gorakh Hills under PPP.
►The initial studies suggested a need for development of better access road and development of basic facilities for tourists visiting the hill top
►Detailed design of road that follows the existing route for most part that is reengineered to provide better road access has been completed
►A conceptual design for the tourist facility at the hill top has also been completed.
Gorakh Hill Development project (GHDP)
►Gorakh Hill is located 450 km North of Karachi, 300 Kms from Hyderabad, 93 Km in Northwest of Dadu and 46 Km from Sehwan Sharif
►Gorakh Hills development was initiated in 1998, with a plan to develop Gorakh Hills as a resort on lines of hill stations in northern Pakistan. A master plan was developed by M/s Naqvi & Siddiqui Associates in collaboration with M/s Shankland & Cox for the hills covering an area of about 1,908 Acres which included residential, recreational and hospitality components.
►PKR 198.269 million has been spent on various development works which include road from Wahi Pandi to Gorakh Hill summit, water pumping stations and supply line to the summit, electricity supply to the summit, construction of police check posts along the road to the summit, construction of bridges, culverts etc. shades and fencing at the summit and construction of contractors cottage and residential quarters for workers.
►The road from Wahi pandi to Gorakh Hill top has been prone to damage mainly due to seasonal torrents which flow through the numerous storm water drains that pass through the road and land slides at Khanwal Luk.
Gorakh Hills Background
Thank you