Presentation is loading. Please wait.

Presentation is loading. Please wait.

PPP International Best Practice and Regional Application Tegucigalpa, Honduras April 23 - 25, 2008 Sponsored by the Spanish Trust Fund.

Similar presentations


Presentation on theme: "PPP International Best Practice and Regional Application Tegucigalpa, Honduras April 23 - 25, 2008 Sponsored by the Spanish Trust Fund."— Presentation transcript:

1 PPP International Best Practice and Regional Application Tegucigalpa, Honduras April , 2008 Sponsored by the Spanish Trust Fund

2 Materials prepared by: C. Bert Kruk - Lead Port Specialist - The World Bank Sabino Escobedo - TAG Financial Advisors Session 5.3 Case Studies by Sector PORT SECTOR Sabino Escobedo - TAG Financial Advisors

3 Private Sector View Session 5.3 PPP Approach PPP Approach Day 1: Session 1.1 Overview of PPP Day 1:Session 1.2 Challenges: Latin America Day 1:Session 1.3 Considering Private Participation Day 1:Session 2.1 Planning the Process Day 1:Session 2.3 Involving Stakeholders Day 1:Session 3 Case Study: Transmission Day 2:Session 5 Case Studies: (1)Highways (2)Water & Sanitation (3) Ports Day 2 :Session 4.1 Standards, Tariffs, Subsidy, Financials Day 2 :Session 4.2 Selecting an Operator Day 1:Session 2.2 Regulation & Institutions Upstream Policy Readiness of Government Capacity Building For PPP Day 2 – Session 6 Readiness of Government Day 1- Session 5 Case Study: Ports Day 1- Session 5 Case Study: Ports

4 Contents Sector background Recent Industry and Sector Trends Case Studies: EUROPE - Port of Rotterdam, Holland LATIN AMERICA - Port of Valparaiso, Chile MIDDLE EAST - Port of Sohar, Oman AFRICA - Port of Doraleh, Djibouti Conclusions

5 Ports in developing countries represent a key asset for economic development They 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 markets Through their nodal role of facilitating intermodal transport ports have a significant role in contributing toward achievement of the Millennium Development Goals Sector Background

6 Industry and Sector Trends

7 Development of World Maritime Transport Source: UNCTAD Review of Maritime Transport 2007

8 World port container traffic (mio TEU) Source: Containerisation International and other publications

9 Regional share: World port container traffic (mio TEU)

10 World Top 10 container ports 2003 – 2007 Source: Yearbook Containerisation International

11 Governments, in particular since the 1990s, started to invite the private sector both for capital and operational experience To date, developing economy countries entered into 230 projects totalling more than US$ 24.7 billion of investment in 15 years In Africa some 70% of the (container) port operations are still run by the public sector LAC is second, but the process is gaining momentum Private sector involvement

12 The WB Port Reform Toolkit (Second Edition 2006) provides extensive details since not one solution fits all The Landlord Port Management Model is the World Banks preferred option Private sector involvement will grow but Governments will continue to be the landlord, regulator and provider of basic infrastructure Governments grant a concession (Lease or BOT) for years Investment costs of new facilities may run into billions of US$ Private sector involvement (2)

13 Private investors are flocking to the ports industry and so far have been proved right (ING source) Cargo volume increases are outpacing terminal capacity Typically investors were paying multiples times above the port group's earnings level Growing involvement of private investors in port projects (Source: Lloyds List November 2006)

14 Private participation in seaports: developing countries (Source: World Bank and PPIAF, PPI Project database)

15 Cities may benefit from ports: employment, tax income, economic development, but Ports may also has a negative influence on cities such traffic congestion, air, noise and light pollution and security issues Port zoning plans may lead to improved co- existence Increasing trend to move ports to Greenfield sites and redevelop the port in real estate (housing, recreation, business), marina, cruise terminal, and / or fishery facilities City - Port relationship

16 City – Port (Valparaiso, Chile)

17 Public versus private: Port Handling Costs Source: Economic Commission of Latin America and Caribbean

18 Increased participation: Private Sector in Ports Investment Management Operations Maintenance Port services

19 port functions port management model reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization service port tool port landlord port port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract PORTS REFORM

20 Port Management Models TypeInfra- structure Super- structure Stevedoring labor Other functions Public Service Port Public Mainly public Tool PortPublic PrivateMainly public Landlord PortPublicPrivate Mainly private Private Service Port Private Mainly private

21 Example: Landlord port model The Public Port Management: Owns, develops and maintains the infrastructure which is concessioned to private companies Is responsible for Regulation at Port Bylaws level Is responsible for nautical safety and environmental issues Other functions: either private (majority) or public Private (stevedoring) companies: own, operate and maintain their own equipment and employ their own labor

22 Example: Landlord port model (2) Stevedoring Warehousing and distribution Industry Pilotage Towage Bunkering Mooring and unmooring Examples of private companies:

23 port functions port management model reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization service port tool port landlord port port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract

24 Reasons for change General reasons Administrative/managerial reasons Financial reasons Employment reasons

25 Reasons for change: General Wish to: Increase port efficiency, service attitude and competitiveness Decrease costs Improve market/port user responsiveness Obtain access to new technologies Increase competitive position

26 Reasons for change: Administrative/managerial Wish to: Decrease political influence Reduce bureaucracy in port administration Obtain more efficient organisation Utilise foreign managerial experience Improve management skills

27 Reasons for change: Financial Wish to: Raise capital Reduce public expenditures Reduce commercial risks (investments) Improved utilisation of existing capacity - less need to invest in new infra- and superstructure Broaden ownership of port assets

28 Reasons for change: Employment Wish to: Reduce public labour force (administrative, operational and technical) Reduce/eliminate restrictive labour practices (Unions) Increase private sector employment Introduce hire and fire by performance

29 port functions port management model reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization service port tool port landlord port port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract

30 port functions port management model reasons for change port reform modalities - improvement of the port administration - liberalization - commercialization - corporatization - privatization service port tool port landlord port port reform tools - contracting out - management contract - concession lease bot schemes - full privatisation - regulation contract issues - concession documents and contracts - issues to be addressed in a concession agreement - critical items of concessions - table of contents of a concession contract

31 Port Reform Tools Contracting out Management contract Lease Concession BOT schemes Full privatization

32 Benefits of Port Reform Tools Better and more efficient port management (especially port operations) performed by the private operator Avoidance of the drawbacks associated with monopolies through the inclusion of detailed concession conditions The application of private capital to socially and economically desirable projects, freeing up government funds for other priority projects

33 Benefits of Port Reform Tools (2) The possible creation of new revenue streams for the Government The transfer or sharing of risks (depending on the Tool selected) for construction, finance, and operation of the facility to the private sector The attraction and use of foreign investment, expertise and technology

34 Leasing Lease systems most used: Flat rate lease Shared revenue lease

35 Leasing - Flat rate lease Characteristics Specified sum of money (usually for infrastructure) is to be paid for a specified period of time Lease is a fair return of the value of the property Inflation adjustment of the lease is optional (but recommended!)

36 Leasing - Shared revenue lease Characteristics Lease is computed on the basis of a minimum lease plus a compensation (often referred to as Royalty) per move (preferably) on a decreasing scale A model may be a combination of a fixed and variable Royalty (based on performance) The lessee guarantees a minimum annual compensation Inflation adjustment

37 Leasing (contd) Possible suitable lease partners Shipping lines Stevedoring companies Importers and exporters Inland transport companies Private investment companies (combined with an operating company or management agreement)

38 CASE STUDIES 1.The 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

39 CASE STUDY: A Flat Rate Lease System (Contract) 1) The Port of Rotterdam

40 Municipality of Rotterdam owns land and water except for the river Rhine Municipality (through the Port Management) leases the infrastructure and provides: Site ready for building Access to site Quay wall Contract depth at quay Flat Rate Lease system Rotterdam

41 Private companies provide Surfacing of site Superstructure (office buildings, workshops, warehouses/sheds, gate, fencing Rail, electricity, water, gas, etc.

42 Principal clients Stevedoring companies Warehousing companies Transport companies Industrial companies Repair/maintenance/service companies Government agencies (Customs ) Flat Rate Lease system Rotterdam

43 Lessee pays for use of land area occupied When site has water front lessee also pays for right of berth(ing) according to quay length and water depth Flat Rate Lease system Rotterdam

44 Contracts/review of lease Formerly Usually 25 years with every 5 years negotiations on lease price Present Usually 25 years with every year inflation correction Flat Rate Lease system Rotterdam

45 Contracts/review of lease (contd) After 25 years option for another 25 years Municipality may terminate contract after 50 years Lessee may terminate after 25 years or renew after 50 years Flat Rate Lease system Rotterdam

46 Environment At start of contract soil pollution report At end of contract soil pollution report Pollution removed at expense of lessee Flat Rate Lease system Rotterdam

47 Special items At termination of contract site free of superstructure Buy-out of contract through negotiations Buy-out of superstructure through negotiations Flat Rate Lease system Rotterdam

48 Subjects in lease contract Official names of parties concerned Size, location and status of site Condition of soil at start of contract Pipeline/cable lanes Duration of contract Lease price Flat Rate Lease system Rotterdam

49 Subjects in lease contract (contd) Possibilities of lease reduction Negligence in payments Quay dues Use of site Construction and maintenance Railway tracks Flat Rate Lease system Rotterdam

50 Subjects in lease contract (contd) Taxes Sub-rental and re-rental Termination through negligence Bankruptcy/temporary suspension of payment/liquidation Clearing of site at termination of lease period Flat Rate Lease system Rotterdam

51 Subjects in lease contract (contd) Re-use of site with superstructure Costs and damages Legal rights to third parties Right of termination of contract Flat Rate Lease system Rotterdam

52 Concession Contract: Key Items Definitions Appointment of the Operator Duration of the Agreement General rights and obligations of the Operator General rights and obligations of the Port Authority Transfer of rights, obligations and assets Performance parameters (Transfer of) Employees Force Majeure (compensation) Lease of facilities Activities performed by the Authority Access to the site Miscellaneous conditions Functional and technical design Design and construction flaws Building conditions Inflation correction Liability for loss or damage of goods Maintenance (infra- and superstructure)

53 CASE STUDY: Port Sector Reform in Chile The Port of Valparaiso Concession 2) The Port of Valparaiso, Chile

54 City – Port of Valparaiso, Chile

55 The 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 Concessions The first 4 major Concession - integrated terminals - are run exclusively by private companies, which started operations in January 2000

56 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. The Port of Valparaiso, Chile

57 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. The Port of Valparaiso, Chile

58 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; and To transfer a reduction of freight charges to final clients. The Port of Valparaiso, Chile

59 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; and The GoV sought to attract international interest to the ports bidding process. The Port of Valparaiso, Chile

60 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 The Port of Valparaiso, Chile

61 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) The Port of Valparaiso, Chile

62 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). The Port of Valparaiso, Chile

63 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 Chiles Treasury; Other reforms are needed to complete the modernization of the ports: Tariffs for navigation aid systems are too high Pilotage is monopolistic (reserved to former Navy officers) and charges are too high. The Port of Valparaiso, Chile

64 1. Areas for future port developments 2. Espigón: Development of the terminal 2 to double the capacity of the port 3. 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) The Port of Valparaiso, Chile

65 4. Logistics Support Extension Zone (ZEAL - Zona de Extensión de Apoyo Logístico) The Port of Valparaiso, Chile

66

67

68 Puerto Barón is conceived as a mega urban development project for the citys 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 Valparaisos urban and commercial center. The Port of Valparaiso, Chile

69 For the construction of the Puerto Bar ó n projects 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. The Port of Valparaiso, Chile

70 Project Brief details by: C. Bert Kruk March 11, 2004 Updated March 2008 CASE STUDY: 3) Sohar Industrial Port, Sultanate of Oman

71 Sohar Industrial Port Company (SIPC): SIPC is a 50/50 Joint Venture between the Government of the Sultanate of Oman and the Port of Rotterdam SIPC will manage Sohar along the principles of a Landlord Port Cargo handing, industries and services will be executed by and invested in by the private sector (concessions and licences)

72 Sohar: Location Sohar

73 Project Concept Reasons for the Government of Oman (GSO) to initiate the development of a new port in Northern Oman Diversification in non-oil sectors Import / export needs of an expanding domestic market Creation of employment

74 Sohar as petrochemical cluster: Advantages Location outside the Gulf Availability of local natural gas In the future the Delphin pipeline (Qatar) Infrastructure Management expertise Competitive rates

75 Sohar Industrial Port Masterplan Site selection study (JICA) Masterplan design by Brown and Root (early 2000) Location in northern Oman Industrial Port Area: 2,000 hectares Potential Industrial Development Zone: 8,000 hectares

76 Technical details (Investments of the Oman Government) 300 km long gas pipeline from local field to deliver 21.5 mio m3 of gas/day 6 km of breakwaters 18 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 cargo 550 m quaywall for dry bulk cargo

77 Technical details (2) 3 jetties for liquid bulk cargoes Common utilities, cooling water in- and outlet and service (pipelines, roads and utilities) corridors Seawater intake and outfall station of 334,000 m3/hour Wastewater treatment plant of 100 m3/hour 500 MW power station with 50 million gallons of desalinated water

78 Aerial view of Sohar - May 2001

79 Sohar 2007

80 Planned industries in Sohar Refinery Input via pipeline from Muscat Refinery Output: 5.4 mio tons liquid bulk/year (2006) Methanol plant Input: Natural Gas (by pipeline) Output: 1.6 mio tons liquid bulk/year (2006)

81 Planned industries in Sohar 2 Polypropylene plant Input from refinery products Output: 0.3 mio tons containerised cargo/year (2006) Urea plant Input: Natural Gas (by pipeline) Output: 1.1 mio tons dry bulk/year (2006)

82 Planned industries in Sohar 3 Aluminium smelter Input: Import of alumina Output: 0.5 mio ton multipurpose/container cargo/year (2007) Polyethylene plant Output 0.5 mio tons per annum (2007)

83 1999: visit Omani Government Officials to Rotterdam (RMPM) 2000: Negotiations between GSO and RMPM about in- house consultancy 2001: Acceptance of Partnership March 2002: Signing of MOU Management principles and project history

84 Management 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 RMPM SIPC will manage Sohar along the principles of a Landlord Port Cargo handing, industries and services will be executed by and invested in by the private sector (concessions and licences)

85 Strategic issues Financially attractive project Long term trend: Petrochemical industry moves (partly) to the Middle East Sohar project can be used as Active Business Intelligence Source Sohar project offer unique chance for younger RMPM managers to gain experience in the field (HRM)

86 Milestones July 2002: Signing of Shareholders, Concession and Usufruct Agreements between the Sultanate of Oman and the Port of Rotterdam, based on 50/50 joint venture August 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

87 Milestones (2) December 2005: The largest investor, Sohar Aluminium, announces a $ 2.4 billion investment in Sohar June 2006: Arrival of the first liquid bulk tanker September 2006: Refinery in commissioning stage December 2006: Oman International Container Terminal receives the first container vessel December 2006: The Port of Sohar receives the Dubai International Maritime Award for Outstanding Success in Port and Terminal Operations.

88 Status 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 Company Negotiations with all clients on Port Rules and Regulations PRR (Port Bylaws) Negotiations with all clients on Construction Rules and Regulations (CRR)

89 Status of the project in 2004 (2) Hiring of local staff Organization in place but still too much dependency on Dutch expertise New potential clients

90 Status 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 Oiltanking Private sector investments are in the range of US$ 12 billion Marine services (towage) are provided by private company International Maritime College Future employment 8,000 direct and 30,000 indirect

91 CASE STUDY: A Concession Contract 4) The Port of Doraleh, Djibouti

92 The 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 Doraleh Project investment: USD$ 427 million

93 The 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;

94 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. The Port of Doraleh, Djibouti (cont.)

95 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: Concessionaires USD$5 million equity investment Lenders 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 The Port of Doraleh, Djibouti (cont.)

96 MIGA provided financial guarantees to the transaction to cover a 10-year period against the risk of: Transfer restriction War and civil disturbance Expropriation, and Breach of Contract MIGAs 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! The Port of Doraleh, Djibouti (cont.)

97 Conclusions Obviously in many ports there is a requirement for a certain level of autonomy The level of autonomy is a critical success factor for port re-organisation Institutional reform is an exceedingly complex issue There is much confusion about the successes of specific experiences with changes Limited solid evidence about the effectiveness of the various strategies Existing situations will not automatically improve when applying any of processes mentioned Port Reform is a very complicated process and requires expert assistance

98 Recommendations PPP Arrangements do work and are successful Private operator involvement will continue in the sector Establish clear roles, responsibilities and realistic goals Preferred roles of public sector Public sector continues to own the land and infrastructure Masterplanner Regulator Finance, supply, maintain and own common user infrastructure

99 Materials prepared by: C. Bert Kruk - Lead Port Specialist - The World Bank Sabino Escobedo - TAG Financial Advisors THANK YOU!

100 Contacts For comments or further details contact: Junglim Richard Sabino Escobedo David Stiggers

101 Materials prepared by: C. Bert Kruk - Lead Port Specialist - The World Bank Sabino Escobedo - TAG Financial Advisors Session 5.3 Case Studies by Sector PORT SECTOR Sabino Escobedo - TAG Financial Advisors


Download ppt "PPP International Best Practice and Regional Application Tegucigalpa, Honduras April 23 - 25, 2008 Sponsored by the Spanish Trust Fund."

Similar presentations


Ads by Google