1. PUBLIC PRIVATE PARTNERSHIPS Taking a Balanced Look…. Development Equity Associates Inc. Nov. 14, 2012 1

2. PUBLIC PRIVATE PARTNERSHIPS AGENDA  What are PPP transactions  Why and When to do them  How are they done  Some Examples Good and Bad.  The Key lessons to remember…  Future Outlook for PPPs. Development Equity Associates Inc. Nov. 14, 2012 2

3. PUBLIC PRIVATE PARTNERSHIPS What they are… Development Equity Associates Inc. Nov. 14, 2012 3 Agreement between Government and the Private Sector for the Provision of a Public Good or Service by the Latter. Generally but not always involving: – Long Term Contracts – User Charges and/or Payments flowing between the Parties – Shared Investments but Mainly Private – Risk Sharing by the Parties Must be a Partnership

4. PUBLIC PRIVATE PARTNERSHIPS What they are… Development Equity Associates Inc. Nov. 14, 2012 4 Source: European Commission

5. PUBLIC PRIVATE PARTNERSHIPS Why do them…. Development Equity Associates Inc. Nov. 14, 2012 5 Fiscal Head Room As a Way of Financing the Project Separate Policy & Regulation from Operations Make the Good or Service Available Pay for Performance and Output Introduce Competition – For and In the Market

6. PUBLIC PRIVATE PARTNERSHIPS When to do them…. Development Equity Associates Inc. Nov. 14, 2012 6 Source: Vikram Kutaree – World Bank

7. PUBLIC PRIVATE PARTNERSHIPS When to do them…. Development Equity Associates Inc. Nov. 14, 2012 7 Benefits Economic Growth and Employment Other Social Benefits Impact on the Poor Ease Of Implementation Political Support & Lack of Resistance Technical Feasibility Financial Viability Public Support 2 3

8. PUBLIC PRIVATE PARTNERSHIPS How to do them…. Development Equity Associates Inc. Nov. 14, 2012 8 Project Identification – If it ain’t broke don’t fix it ! Pre – Feasibility – More than back of the envelope – do this first !! – Go –NoGo here Public Relations Program – A must ! Feasibility Study – Only if needed for the RFP Agree Regulatory Framework RFP Design – Technical Pass Fail & Selection on Financial bids – Include Draft Contract – Include Surrogate regulations if needed with Phase out.

9. PUBLIC PRIVATE PARTNERSHIPS How to do them…. Development Equity Associates Inc. Nov. 14, 2012 9 Implementation Institutional Arrangements – Preferably before tendering! – Must have Transition Plan EOI & Tendering – ICB Best for Large Projects Selection, Negotiations and Contract Financial Closing Implement Regulatory Framework

10. PUBLIC PRIVATE PARTNERSHIPS Examples – The Good & Not So Good Development Equity Associates Inc. Nov. 14, 2012 10 The Good Roads – Chile Urban Public Transport - Jordan, Bahrain Water Supply – Bucharest Romania The Not So Good Roads – Mexico Solid Waste Collections -Bahrain Municipal Parks – Sophia Bulgaria Water Supply – Mumbai, India

11. PUBLIC PRIVATE PARTNERSHIPS Key lessons to remember… Development Equity Associates Inc. Nov. 14, 2012 11 Legal & Regulatory Framework Tariff Regimes Avoidance of “Fate Control” Competition a Must !! Balance in Private Incentives & Public Interest

12. PUBLIC PRIVATE PARTNERSHIPS Key lessons to remember… Development Equity Associates Inc. Nov. 14, 2012 12 What is the Sector Priority ? In Transaction Design Incentives and Penalties Length of Contract Risk Allocation In Regulatory Strategy Tariff Regime Competition Institutional Structure The Need to Set the Right Priorities

13. PUBLIC PRIVATE PARTNERSHIPS Key lessons to remember… Development Equity Associates Inc. Nov. 14, 2012 13 Budget Rationale vs. Present Value Test

14. PUBLIC PRIVATE PARTNERSHIPS Key lessons to remember… Development Equity Associates Inc. Nov. 14, 2012 14 Average Time to Renegotiation … 1.5 to 3.5 Years …Depending on Sector The Common Causes: Bidder’s Remorse Strategic Additions after Award Winner is Stronger Position Some Remedial Measures Adequate Escalation Clauses Right to Re-Bid ( e.g., O&M) Conditions & Penalties Renegotiation !!!

15. PUBLIC PRIVATE PARTNERSHIPS OUTLOOK Development Equity Associates Inc. Nov. 14, 2012 15 Greenfield and Energy PPPs will continue to Dominate South Asia likely to remain the main growth Area for PPPs. Worldwide PPPs are likely to pick up as Fiscal Headroom lags Demand Growth

16. PUBLIC PRIVATE PARTNERSHIPS Development Equity Associates Inc. Nov. 14, 2012 16 THANK YOU