public-private partnerships - world bankpubdocs.worldbank.org/pubdocs/publicdoc/2015/8/... ·...
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Public-Private Partnerships:
Risks & Rewards
S. Brian Samuel, PPP Coordinator, CDB
High-Level PPP Workshop, Caribbean Growth Forum
St. Lucia, 15th June 2015
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POSSIBILITIES
REWARDS
RISKS
LESSONS
OPPORTUNITIES
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POSSIBILITIES:
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PPPs can lead to value for money,
but it’s not guaranteed
Motivations: Challenges:
Lack of fiscal space
Private sector
efficiency and
innovation
Improving project and
service delivery
Fiscal implications are
often overlooked
Public and private
interests are not
automatically aligned
PPPs are complicated
and development /
transaction costs high
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PPPs can deliver the goods – if
done properly
In addition to likely
levels of public
procurement, the
infrastructure funding
gap is estimated at
around $10 billion over
the next decade –
innovative solutions are
needed to unlock
private sector
investment
PPPs usually result in
better value for money:
In the UK, the National
Audit Office found that
73% of traditional
projects ran over budget,
versus 22% for PPP
projects
70% of traditional
projects were late, versus
23% for PPPs
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REWARDS:
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Sangster International Airport1
Long but successful process:
1990s – Aging and overcrowded facility
GoJ fiscally unable to make necessary capital investment
1996-1998 – GoJ attempted sole-source PPP
Negotiations broke down
1998-2003 – Competitive PPP procurement
GoJ enters into 30-year concession with Vancouver Airport
Services Concession (now Vantage Airport Group)
1 Source: PPPs in the Caribbean: Building on Early Experience. CDB 2014
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Sangster International Airport
Results & Lessons Learnt:
Over US$200 million in private sector investments
Better results obtained through competitive bidding
Need for staff with PPP training and specialized
advisors
Agency coordination driven by political champion
Establish legal & regulatory framework prior to
transaction
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Bahamas Non-Revenue Water (NRW)2
Money down the drain – literally:
58% NRW in New
Providence, led to
widespread use of
desalination (93%)
Solution:
Performance based
PPP to reduce NRW
over 10 years
US$83 million capex,
financing from IDB2 Source: Consolidated Water
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Bahamas Non-Revenue Water2
Results:
From 2012 to 2014,
NRW reduced from
58% to 36%
1 billion gallons of
water saved in 2 years
US$6.5 million savings
to date
Less dependence on
desalinated water
Not politically sensitive
2 Source: Consolidated Water
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Highway 2000, Jamaica3
Innovative structure for land development:
US $600 million 50-year
concession
GoJ not providing
financing nor traffic
guarantees
Up to 1,200 acres adjacent
land available for
development by toll road
operator
Developer has time limits,
or land reverts to GoJ
Risk Sharing
GoJ Developer
Traffic X
Revenue X
Design &
Construction
X
Access to Land X
Utility Relocations X
Political Risk X
Development
Land
X
3 Source: NROCC Jamaica
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RISKS:
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Early Dominican Republic Toll Roads4
Skewed risk allocation:
Governments often assume a
portion of traffic risk to make
road projects bankable
DR govt. signed PPP road
contracts totaling US$1.0 billion
• Autopista del Nordeste: Traffic 30-
40% lower than forecast; Govt. pays
US$38M “shadow tolls” annually
• CODACSA: Govt agreed to
compensate for traffic, inflation and
FOREX risks; Arbitration awarded
US$ 42 million
4 Source: Caribbean PPP Road Map, World Bank 2014
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Project development:
Overcoming failure to launch
Urgent need for early stage
screening; to weed out concepts
that don’t make sense
Investment in preparation results
in lower risk at operational stage
Preparation & implementation
around $1 million per project; not
proportionate to deal size
Cost - plus lack of capacity - why
only 12 percent of the Caribbean
PPP project pipeline reaches the
tender stage
16
13
Caribbean PPP
Pipeline 20145
Concept
Feasibility
Tender8
5 Source: Caribbean PPP Road Map, World Bank 2014
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LESSONS:
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Sobering Lessons:
Post-closing
fiscal
surprises
Endless
delays
Failure to
close
Inappropriate risk allocation
Inadequate due diligence and preparation
Insufficient fiscal oversight
Flawed transaction processes
Gaps in due diligence and preparation
Lack of capacity
Insufficient project preparation
Lack of awareness of PPP potential
Lack of Regional support mechanisms
Risks Reasons
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Successful implementation of PPPs
requires a good enabling environment
State-of-the art PPP expertise and experience
on all stages in the PPP project life cycle
Robust PPP tools, regulations, policies, and
procedures
Funding for project preparation and PPP
structuring
Clear support from the highest levels of
government and political champions
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OPPORTUNITIES:
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There are many PPP Opportunities:
Conventional Energy
Renewable Energy / Energy Efficiency
Ports and Cruise Ship Terminals
Airports
Roads and Bridges
Education
Government Facilities
Health
Tourism
Water and Sanitation
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Thank you!
S. Brian Samuel
PPP Coordinator, CDB