Presentation on theme: "PPP International Best Practice and Regional Application"— Presentation transcript:
1PPP International Best Practice and Regional Application Tegucigalpa, HondurasApril , 2008Sponsored by the Spanish Trust Fund
2Sabino Escobedo - TAG Financial Advisors Session 5.3Case Studies by SectorPORT SECTORSabino Escobedo - TAG Financial AdvisorsMaterials prepared by:C. Bert Kruk - Lead Port Specialist - The World BankSabino Escobedo - TAG Financial Advisors
3Session 5.3 Case Study: Ports Readiness of Government Overview of PPP Day 2 – Session 6Readiness of GovernmentDay 1: Session 1.1Overview of PPPUpstreamPolicyPrivate Sector ViewDay 1:Session 1.2Challenges: Latin AmericaReadinessofGovernmentCapacityBuildingFor PPPDay 1- Session 5Case Study:PortsDay 1:Session 1.3ConsideringPrivateParticipationDay 2:Session 5Case Studies:(1)Highways(2)Water & Sanitation(3) PortsPPPApproachElements of the Public Private Partnership Approach (PPP): Over the next two days we will look at the overall approach for establishing Public Private Partnerships relating to international and regional experience:We will establish an overview of the approach taken in developing a PPP arrangement, discuss the key issues related tp providing services, the definition of basic principles and look at tools and options for planning and design of reforms needed to establish a successful PPP ArrangementDAY 12 Considering private participation:A review of the key issues that governments can resolve in order to introduce private participation, including resolution of policy problems, effects of privatization, making privatization work, the various private participation models, and how the Toolkit approach works.3 Planning the process of introducing private participation:A four step process for developing policy, designing details of the arrangement, selecting the operator and managing the arrangements are reviewed. Key elements of the overall design such as stakeholder consultation, government institutions to manage the arrangement and key analytic and advisory work to support the arrangement are discussed.4 Involving Stakeholders in the design of the arrangement:Discussion on ways of identifying and involving stakeholders in the design of the arrangements and of distributing the benefits and costs of private participation so as to increase support and long term sustainability.Day 25 Setting upstream policy:This considers some of the key reform choices for the sector upstream of the design of the private participation arrangement, such as the allocation of responsibilities among different tiers of government, definition of the market structure for the sector (including appropriate scale and scope) and establishing policies and rules governing competition.6 Setting service standards, tariffs, subsidies, and financial arrangements:A section reviewing the key issues related to setting targets relating to coverage and quality; the implications of those targets for the cost of service; options for supplementing tariff revenue with subsidies; and some implications for design of the arrangement and its financing.7 Allocating responsibilities and risks:Provides advice on the identification, assessment and allocation of risks and responsibilities among customers, the operator, and the government and how to design tariff-adjustment and other rules to achieve the desired allocation.8 Institutional Frameworks - Developing institutions to manage the relationship:The choice and design of institutions—including courts, arbitration panels, independent experts, and regulatory agencies—that will interpret and apply the rules over the life of the arrangements.PPP’s in the Transport Sector – with some Case StudiesDay 3Selecting the Operator: This is in two parts as we have a lot of interesting material to coverA review of the key issues to be addressed and steps involved in selecting an operator governments can use to select the operator. This includes detailed discussion on selection methods, selection criteria, managing the bidding process and some key bidding issues.Unsolicited Bids:Some of the key issues in resolving how to address unsolicited bids – how to maximize advantages, whilst ensuring transparency and fairnessDay 1:Session 2.1Planning the ProcessDay 1:Session 3Case Study:TransmissionDay 2 :Session 4.2Selecting an OperatorDay 2 :Session 4.1Standards, Tariffs, Subsidy, FinancialsDay 1:Session 2.3Involving StakeholdersDay 1:Session 2.2Regulation& Institutions
4Contents Sector background Recent Industry and Sector Trends Case Studies:EUROPE - Port of Rotterdam, HollandLATIN AMERICA - Port of Valparaiso, ChileMIDDLE EAST - Port of Sohar, OmanAFRICA - Port of Doraleh, DjiboutiConclusions
5Sector BackgroundPorts in developing countries represent a key asset for economic developmentThey need to operate efficiently and be properly structured in order to support an increase in trade and GDP by linking countries, both coastal and landlocked, productive hinterlands and consumers to global marketsThrough their nodal role of facilitating intermodal transport ports have a significant role in contributing toward achievement of the Millennium Development Goals
7Development of World Maritime Transport Source: UNCTAD Review of Maritime Transport 2007
8World port container traffic (mio TEU) Source: Containerisation International and other publications
9Regional share: World port container traffic (mio TEU)
10World Top 10 container ports 2003 – 2007 Source: Yearbook Containerisation International
11Private sector involvement Governments, in particular since the 1990’s, started to invite the private sector both for capital and operational experienceTo date, developing economy countries entered into 230 projects totalling more than US$ 24.7 billion of investment in 15 yearsIn Africa some 70% of the (container) port operations are still run by the public sectorLAC is second, but the process is gaining momentum
12Private sector involvement (2) The WB Port Reform Toolkit (Second Edition 2006) provides extensive details since not one solution fits allThe Landlord Port Management Model is the World Bank’s preferred optionPrivate sector involvement will grow but Governments will continue to be the landlord, regulator and provider of basic infrastructureGovernments grant a concession (Lease or BOT) for yearsInvestment costs of new facilities may run into billions of US$
13Growing involvement of private investors in port projects Private investors are flocking to the ports industry and so far have been proved right (ING source)Cargo volume increases are outpacing terminal capacityTypically investors were paying multiples times above the port group's earnings level(Source: Lloyds’ List November 2006)
14Private participation in seaports: developing countries 1990-2005 (Source: World Bank and PPIAF, PPI Project database)
15City - Port relationship Cities may benefit from ports: employment, tax income, economic development, butPorts may also has a negative influence on cities such traffic congestion, air, noise and light pollution and security issuesPort zoning plans may lead to improved co-existenceIncreasing trend to move ports to Greenfield sites and redevelop the port in real estate (housing, recreation, business), marina, cruise terminal, and / or fishery facilities
17Public versus private: Port Handling Costs Source: Economic Commission of Latin America and Caribbean
18Increased participation: Private Sector in Ports InvestmentManagementOperationsMaintenancePort services
19PORTS REFORM - regulation port functions service port port management tool portlandlord portport managementmodelreasons for changeport reform modalities- improvement of the port administration- liberalization- commercialization- corporatization- privatizationport reform tools- contracting out- management contractconcessionleasebot schemes- full privatisation- regulationcontract issues- concession documents and contracts- issues to be addressed in a concession agreement- critical items of concessions- table of contents of a concession contract
20Port Management Models TypeInfra-structureSuper-Stevedoring laborOther functionsPublic Service PortPublicMainly publicTool PortPrivateLandlord PortMainly privatePrivate Service Port
21Example: Landlord port model The Public Port Management:Owns, develops and maintains the infrastructure which is concessioned to private companiesIs responsible for Regulation at Port Bylaws levelIs responsible for nautical safety and environmental issuesOther functions: either private (majority) or publicPrivate (stevedoring) companies: own, operate and maintain their own equipment and employ their own labor
22Example: Landlord port model (2) Examples of private companies:StevedoringWarehousing and distributionIndustryPilotageTowageBunkeringMooring and unmooring
23port functionsservice porttool portlandlord portport managementmodelreasons for changeport reform modalities- improvement of the port administration- liberalization- commercialization- corporatization- privatizationport reform tools- contracting out- management contractconcessionleasebot schemesfull privatisationregulationcontract issues- concession documents and contracts- issues to be addressed in a concession agreement- critical items of concessions- table of contents of a concession contract
24Reasons for change General reasons Administrative/managerial reasons Financial reasonsEmployment reasons
25Reasons for change: General Wish to:Increase port efficiency, service attitude and competitivenessDecrease costsImprove market/port user responsivenessObtain access to new technologiesIncrease competitive position
26Reasons for change: Administrative/managerial Wish to:Decrease political influenceReduce bureaucracy in port administrationObtain more efficient organisationUtilise foreign managerial experienceImprove management skills
27Reasons for change: Financial Wish to:Raise capitalReduce public expendituresReduce commercial risks (investments)Improved utilisation of existing capacity - less need to invest in new infra- and superstructureBroaden ownership of port assets
28Reasons for change: Employment Wish to:Reduce public labour force (administrative, operational and technical)Reduce/eliminate restrictive labour practices (Unions)Increase private sector employmentIntroduce ‘hire and fire’ by performance
29port functionsservice porttool portlandlord portport managementmodelreasons for changeport reform modalities- improvement of the port administration- liberalization- commercialization- corporatization- privatizationport reform tools- contracting out- management contractconcessionleasebot schemesfull privatisationregulationcontract issues- concession documents and contracts- issues to be addressed in a concession agreement- critical items of concessions- table of contents of a concession contract
30port functionsservice porttool portlandlord portport managementmodelreasons for changeport reform modalities- improvement of the port administration- liberalization- commercialization- corporatization- privatizationport reform tools- contracting out- management contractconcessionleasebot schemesfull privatisationregulationcontract issues- concession documents and contracts- issues to be addressed in a concession agreement- critical items of concessions- table of contents of a concession contract
32Benefits of Port Reform Tools Better and more efficient port management (especially port operations) performed by the private operatorAvoidance of the drawbacks associated with monopolies through the inclusion of detailed concession conditionsThe application of private capital to socially and economically desirable projects, freeing up government funds for other priority projects
33Benefits of Port Reform Tools (2) The possible creation of new revenue streams for the GovernmentThe transfer or sharing of risks (depending on the Tool selected) for construction, finance, and operation of the facility to the private sectorThe attraction and use of foreign investment, expertise and technology
34LeasingLease systems most used:Flat rate leaseShared revenue lease
35Leasing - Flat rate lease CharacteristicsSpecified sum of money (usually for infrastructure) is to be paid for a specified period of timeLease is a fair return of the value of the propertyInflation adjustment of the lease is optional (but recommended!)
36Leasing - Shared revenue lease CharacteristicsLease is computed on the basis of a minimum lease plus a compensation (often referred to as ‘Royalty’) per move (preferably) on a decreasing scaleA model may be a combination of a fixed and variable Royalty (based on performance)The lessee guarantees a minimum annual compensationInflation adjustment
37Leasing (cont’d) Possible suitable lease partners Shipping lines Stevedoring companiesImporters and exportersInland transport companiesPrivate investment companies (combined with an operating company or management agreement)
38CASE STUDIESThe Port of Rotterdam Flat Rate Lease System (Contract) The Port of Valparaiso, Chile Concession Sohar Industrial Port, Oman Joint Venture, Concession and Licenses The Port of Doraleh, Djibouti Concession
39CASE STUDY: 1) The Port of Rotterdam A Flat Rate Lease System (Contract)
40Flat Rate Lease system Rotterdam Municipality of Rotterdam owns land and water except for the river RhineMunicipality (through the Port Management) leases the infrastructure and provides:Site ready for buildingAccess to siteQuay wallContract depth at quay
41Flat Rate Lease system Rotterdam Private companies provideSurfacing of siteSuperstructure (office buildings, workshops, warehouses/sheds, gate, fencingRail, electricity, water, gas, etc.
42Flat Rate Lease system Rotterdam Principal clientsStevedoring companiesWarehousing companiesTransport companiesIndustrial companiesRepair/maintenance/service companiesGovernment agencies (Customs)
43Flat Rate Lease system Rotterdam Lessee pays for use of land area occupiedWhen site has water front lessee also pays for right of berth(ing) according to quay length and water depth
44Flat Rate Lease system Rotterdam Contracts/review of leaseFormerlyUsually 25 years with every 5 years negotiations on lease pricePresentUsually 25 years with every year inflation correction
45Flat Rate Lease system Rotterdam Contracts/review of lease (cont’d)After 25 years option for another 25 yearsMunicipality may terminate contract after 50 yearsLessee may terminate after 25 years or renew after 50 years
46Flat Rate Lease system Rotterdam EnvironmentAt start of contract soil pollution reportAt end of contract soil pollution reportPollution removed at expense of lessee
47Flat Rate Lease system Rotterdam Special itemsAt termination of contract site free of superstructureBuy-out of contract through negotiationsBuy-out of superstructure through negotiations
48Flat Rate Lease system Rotterdam Subjects in lease contractOfficial names of parties concernedSize, location and status of siteCondition of soil at start of contractPipeline/cable lanesDuration of contractLease price
49Flat Rate Lease system Rotterdam Subjects in lease contract (cont’d)Possibilities of lease reductionNegligence in paymentsQuay duesUse of siteConstruction and maintenanceRailway tracks
50Flat Rate Lease system Rotterdam Subjects in lease contract (cont’d)TaxesSub-rental and re-rentalTermination through negligenceBankruptcy/temporary suspension of payment/liquidationClearing of site at termination of lease period
51Flat Rate Lease system Rotterdam Subjects in lease contract (cont’d)Re-use of site with superstructureCosts and damagesLegal rights to third partiesRight of termination of contract
52Concession Contract: Key Items DefinitionsAppointment of the OperatorDuration of the AgreementGeneral rights and obligations of the OperatorGeneral rights and obligations of the Port AuthorityTransfer of rights, obligations and assetsPerformance parameters(Transfer of) EmployeesForce Majeure (compensation)Lease of facilitiesActivities performed by the AuthorityAccess to the siteMiscellaneous conditionsFunctional and technical designDesign and construction flawsBuilding conditionsInflation correctionLiability for loss or damage of goodsMaintenance (infra- and superstructure)
532) The Port of Valparaiso, Chile CASE STUDY:2) The Port of Valparaiso, ChilePort Sector Reform in ChileThe Port of Valparaiso Concession
55The Port of Valparaiso, Chile Port Sector Reform:Objective: Encourage investment in better port equipment in the hope that it will lead to more efficient service, in part by attracting larger, more modern ships.The old multi-operator system established in 1981 was replaced by ConcessionsThe first 4 major Concession - integrated terminals - are run exclusively by private companies, which started operations in January 2000
56The Port of Valparaiso, Chile Port Sector Reform (cont.)Before the Reform:EMPORCHI, the state port company, sole handler of cargo on land;Stevedores preformed cargo operations aboard ships;Division of cargo among stevedore companies limited their incentive to invest;Lack of investments and considerable growth of trade in the 1980s and 1990s led to a non-exclusive Concession granted through a tender to a JV of the 3 largest stevedore companies - Concession not profitable;This non-exclusive Concession led to an inefficient multi-operator system;Dissatisfied with the performance of this Concession, the Government of Chile decided to implement the present REFORM.
57The Port of Valparaiso, Chile Port Sector Reform (cont.)During the Reform:Nearly 40 ports in Chile were already owned by the private sector when the Reform was introduced;The Government of Chile introduces the Mono-operator System;An exclusive Concession for each of the main container terminals makes the Concessionaire responsible for the operations, maintenance and all investments in equipment and infrastructure of the port;EMPORCHI, the state port company, still handled the container and general cargo traffic;The private ports handled almost all the dry and liquid bulk cargoes.
58The Port of Valparaiso, Chile Port Sector Reform (cont.)The objective of the new Mono-operator Concession System is:To promote investment in modern transfer equipment and new berths;To bring the management of the terminals up to date;To reduce port costs to clients;To enhance service quality - reducing waiting and service times;To attract larger and more modern ships; andTo transfer a reduction of freight charges to final clients.
59The Port of Valparaiso, Chile Port Sector Reform (cont.)The Process:The GoC had to obtain approval by the legislature(one of the conditions: reach agreement with labor unions and stevedore companies);The GoC had to form 10 new state port companies (land lord ports) as successors to EMPORCHI with no service disruptions;The new state port companies had to remain as public corporations but had to operate according to the rules of private stock companies; andThe GoV sought to attract international interest to the ports bidding process.
60The Port of Valparaiso, Chile Port Sector Reform (cont.)The new state port companies:Own the port infrastructure;Run maritime and land access;Enforce the Concession Contract;Are not allowed by law to handle cargo or berthing;Share revenues with Concessionaires:- A minimum annual rental payment, and- Some revenue sharing on the upside.The first 4 Concession were awarded in 3 ports in August 1999.
61The Port of Valparaiso, Chile Port Sector Reform (cont.)The Bidding:1) The Bidders are asked to offer the lowest maximum tariff( the authority set a floor to discourage: (a) overoptimistic bids and(b) to renegotiate charges after the Concession Contract is awarded);2) A Bidder offering the floor tariff should also offer an upfront tie-breaking payment;3) Annual rental payments are determined in advance, to prevent implicit subsidies to Concessionaires(Concession Contracts establish an increasing rent to the state port company as tonnage rises)
62The Port of Valparaiso, Chile Port Sector Reform (cont.)Incentives to invest:Instead of stipulating how much the Concessionaire must invest, the Concessions encourage investment simply by imposing penalties for slow service;The Concessionaire will be compensated for the part of fixed assets not depreciated;The initial Concession period of 15 or 20 years may be extended to 30 years max. if some investments in infrastructure are operative some years before the initial concession period ends;Maximum charges on vessels and cargo transfer are fixed in the Concession contract - the Concessionaire is allowed to charge special tariffs provided they are for additional value added (ex. extra charge for prompt dispatch).
63The Port of Valparaiso, Chile Port Sector Reform (cont.)Reform results:POSITIVE SIGNS in terms of LOWER TARIFFS and MORE EFFICIENT SERVICE;Keeping a high level of competitive tension among prospective Bidders brought lower tariffs to clients and reasonable returns to Chile’s Treasury;Other reforms are needed to complete the modernization of the ports:Tariffs for navigation aid systems are too highPilotage is monopolistic (reserved to former Navy officers) and charges are too high.
64The Port of Valparaiso, Chile 1. Areas for future port developments2. Espigón: Development of the terminal 2 to double the capacity of the port3. Area for the project for the opening and development of the waterfront, 'Puerto Barón’4. Logistics Support Extension Zone (ZEAL - Zona de Extensión de Apoyo Logístico)
65The Port of Valparaiso, Chile 4. Logistics Support Extension Zone(ZEAL - Zona de Extensión de Apoyo Logístico)
68The Port of Valparaiso, Chile Puerto Barón is conceived as a mega urban development project for the city’s waterfront, which aim is to open a new space for integration between the city and the sea and constitute an attractive pole of economic and social development, through the construction of top quality tourism and commercial urban infrastructure.This project consolidates the vision of city-port integration, by earmarking more than 60% of its 20 hectares for the development of public use spaces, in a strategic zone near Valparaiso’s urban and commercial center.
69The Port of Valparaiso, Chile For the construction of the Puerto Barón project’s first phase, which will begin in 2008, US$100 million will be invested and 1,500 temporary jobs created;Once the initiative is inaugurated, it is expected that 2,500 permanent jobs will be generated;Traffic congestions will be solved;In a second phase, the project includes the construction of a hotel, a convention center, a university, a medical center, a marine center, and a housing project of nearly 500 apartments, with lofts for offices and restaurants and commerce with an ocean view.
703) Sohar Industrial Port, Sultanate of Oman CASE STUDY:3) Sohar Industrial Port, Sultanate of OmanProject Brief details by:C. Bert KrukMarch 11, 2004Updated March 2008
71Sohar Industrial Port Company (SIPC): SIPC is a 50/50 Joint Venture between the Government of the Sultanate of Oman and the Port of RotterdamSIPC will manage Sohar along the principles of a Landlord PortCargo handing, industries and services will be executed by and invested in by the private sector (concessions and licences)
73Project ConceptReasons for the Government of Oman (GSO) to initiate the development of a new port in Northern OmanDiversification in non-oil sectorsImport / export needs of an expanding domestic marketCreation of employment
74Sohar as petrochemical cluster: Advantages Location outside the GulfAvailability of local natural gasIn the future the Delphin pipeline (Qatar)InfrastructureManagement expertiseCompetitive rates
75Sohar Industrial Port Masterplan Site selection study (JICA)Masterplan design by Brown and Root (early 2000)Location in northern OmanIndustrial Port Area: 2,000 hectaresPotential Industrial Development Zone: 8,000 hectares
76Technical details (Investments of the Oman Government) 300 km long gas pipeline from local field to deliver 21.5 mio m3 of gas/day6 km of breakwaters18 million m3 dredging for the southern part of the port basin (- 16 m) and the entrance channel (- 16.5m)1,250 m of quaywall for containers and multipurpose cargo550 m quaywall for dry bulk cargo
77Technical details (2) 3 jetties for liquid bulk cargoes Common utilities, cooling water in- and outlet and service (pipelines, roads and utilities) corridorsSeawater intake and outfall station of 334,000 m3/hourWastewater treatment plant of 100 m3/hour500 MW power station with 50 million gallons of desalinated water
80Planned industries in Sohar RefineryInput via pipeline from Muscat RefineryOutput: 5.4 mio tons liquid bulk/year (2006)Methanol plantInput: Natural Gas (by pipeline)Output: 1.6 mio tons liquid bulk/year (2006)
81Planned industries in Sohar 2 Polypropylene plantInput from refinery productsOutput: 0.3 mio tons containerised cargo/year (2006)Urea plantInput: Natural Gas (by pipeline)Output: 1.1 mio tons dry bulk/year (2006)
82Planned industries in Sohar 3 Aluminium smelterInput: Import of aluminaOutput: 0.5 mio ton multipurpose/container cargo/year (2007)Polyethylene plantOutput 0.5 mio tons per annum (2007)
83Management principles and project history 1999: visit Omani Government Officials to Rotterdam (RMPM)2000: Negotiations between GSO and RMPM about in-house consultancy2001: Acceptance of PartnershipMarch 2002: Signing of MOU
84Management principles and project history (2) July 2002: Signing of Shareholders and Concession contracts (SIPC: Sohar Industrial Port Company)SIPC is a 50/50 Joint Venture between the GSO and RMPMSIPC will manage Sohar along the principles of a Landlord PortCargo handing, industries and services will be executed by and invested in by the private sector (concessions and licences)
85Strategic issues Financially attractive project Long term trend: Petrochemical industry moves (partly) to the Middle EastSohar project can be used as Active Business Intelligence SourceSohar project offer unique chance for younger RMPM managers to gain experience in the field (HRM)
86MilestonesJuly 2002: Signing of Shareholders, Concession and Usufruct Agreements between the Sultanate of Oman and the Port of Rotterdam, based on 50/50 joint ventureAugust 2002: Establishment of Sohar Industrial Port Company – SIPC (SAOC), with a 25 year concession over SIP by Royal Decree (RD 80/2002) to develop and manage a 2,000 hectares industrial area with a word class deep sea port.April 2004: Arrival of the first commercial vessel carrying project cargo
87Milestones (2)December 2005: The largest investor, Sohar Aluminium, announces a $ 2.4 billion investment in SoharJune 2006: Arrival of the first liquid bulk tankerSeptember 2006: Refinery in commissioning stageDecember 2006: Oman International Container Terminal receives the first container vesselDecember 2006: The Port of Sohar receives the Dubai International Maritime Award for Outstanding Success in Port and Terminal Operations.
88Status of the project in 2004 Negotiations with individual clients on lease contracts (so-called Sub-Usufruct Agreements in principle as Flat Lease Rates)Sub-Usufruct agreements signed with Refinery and Stevedoring CompanyNegotiations with all clients on Port Rules and Regulations PRR (Port Bylaws)Negotiations with all clients on Construction Rules and Regulations (CRR)
89Status of the project in 2004 (2) Hiring of local staffOrganization in place but still too much dependency on Dutch expertiseNew potential clients
90Status of the project in 2008 Many internationally established companies have settled in Sohar such as: Air Liquide, Alcan, Hutchison Port Holdings, Larsen & Toubro, LG, Odfjell and OiltankingPrivate sector investments are in the range of US$ 12 billionMarine services (towage) are provided by private companyInternational Maritime CollegeFuture employment 8,000 direct and 30,000 indirect
914) The Port of Doraleh, Djibouti CASE STUDY:4) The Port of Doraleh, DjiboutiA Concession Contract
92The Port of Doraleh, Djibouti A 30-year Concession for the development, financing, design, construction, management, operation, and maintenance of a new container terminal in the port of DoralehProject investment: USD$ 427 million
93The Port of Doraleh, Djibouti (cont.) The port will include a 2,000 meters quay and will be developed in 2 phases;During the construction phase, the port will employ approx. 500 local workers; on completion, the port will employ approx. 670 full-time employees;In addition to direct employment at the port, the project will require other services such as engineering, warehousing, spare parts, information technology and services, catering and cleaning, which will contribute to the local economy;The project will also lead to transfer of management expertise and technology;
94The Port of Doraleh, Djibouti (cont.) The port is strategically located in East Africa along one of the fastest growing East-West international shipping routes;About 85% of imports into Djibouti are destined for the land-locked nation of Ethiopia;The project will increase port traffic and open up new opportunities for investment and growth in the country;The port will attract other African countries to use the port as a gateway too;The port will promote regional integration through trade development.
95The Port of Doraleh, Djibouti (cont.) Financing the Project with modern and innovative products:Financing provided through a Project Finance Facility;MIGA (World Bank Group) issued financial guarantees to the concessionaire and its lenders for their investments in the Doraleh Container Terminal;MIGA provided guarantees to cover:Concessionaire’s USD$5 million equity investmentLenders’ USD$422 million - funds provided by Dubai Islamic Bank, Standard Chartered Bank, WestLB AG, and other participating banks;MIGA issued its first guarantee for an Islamic project finance facility
96The Port of Doraleh, Djibouti (cont.) MIGA provided financial guarantees to the transaction to cover a 10-year period against the risk of:Transfer restrictionWar and civil disturbanceExpropriation, andBreach of ContractMIGA’s participation in the transaction is helping to mitigate perceived political risks for the banks and enabling the project sponsors to raise medium-term, cross-border project financing!
97ConclusionsObviously in many ports there is a requirement for a certain level of autonomyThe level of autonomy is a critical success factor for port re-organisationInstitutional reform is an exceedingly complex issueThere is much confusion about the successes of specific experiences with changesLimited solid evidence about the effectiveness of the various strategiesExisting situations will not automatically improve when applying any of processes mentionedPort Reform is a very complicated process and requires expert assistance
98Recommendations PPP Arrangements do work and are successful Private operator involvement will continue in the sectorEstablish clear roles, responsibilities and realistic goalsPreferred roles of public sectorPublic sector continues to own the land and infrastructureMasterplannerRegulatorFinance, supply, maintain and own common user infrastructure
99THANK YOU! Sabino Escobedo - TAG Financial Advisors Materials prepared by:C. Bert Kruk - Lead Port Specialist - The World BankSabino Escobedo - TAG Financial Advisors
100Contacts For comments or further details contact: Junglim HahmRichard CabelloSabino EscobedoDavid StiggersThere are some supplementary materials that will help you understand this further.The toolkit includes a spreadsheet based financial Policy Simulation model that will assist in balancing tariffs, subsidies and coverage targets as covered by Module 5 [ as well as integrating with some of the other key financial issues covered in other Modules]There are 16 case studies, and some of these have been referred to in this module.The full toolkit can be read or downloaded from the website, and questions or comments made to the task manager.
101Sabino Escobedo - TAG Financial Advisors Session 5.3Case Studies by SectorPORT SECTORSabino Escobedo - TAG Financial AdvisorsMaterials prepared by:C. Bert Kruk - Lead Port Specialist - The World BankSabino Escobedo - TAG Financial Advisors