- 1.(I C R C)ACCELERATED PPP PROCUREMENT OPTIONS FOR EMERGING
MARKETS DELIVERING HIGH QUALITY PPPs, VFM AND INFRASTRUCTURE
SERVICE AT SPEEDENGR. CHIDI IZUWAH ED, PPP RESOURCE CENTRE,
INFRASTRUCTURE CONCESSION REGULATORY COMMISSION Abuja , November
2012 Infrastructure Concession Regulatory Commission(I C R C)
2. Presentation Outline 1. Infrastructure & the Economy and
ICRC 2. PPP Procurement Lessons 3. PPP Procurement Time Challenge
4. PPP Procurement Acceleration Options 5. Invest in Nigeria Value
Proposition2Infrastructure Concession Regulatory Commission(I C R
C) 3. Infrastructure & the Economy If Nigeria was a three
legged stool I would say its stability and future depends on how
well and how fast we tackle the infrastructure problem the shaky
leg of the stool Dr. Ngozi Okonjo-Iweala HMF/CMEInfrastructure
Concession Regulatory Commission(I C R C) 4. Africa is BIG! and
full of OpportunitiesW EuropeUSA China Africa represents: 20% of
global land area 13% of global population 2 % of global economic
output North-South cross-Continental flight : 11 hours 5 time
zonesIndiaInfrastructure Concession Regulatory Commission(I C R C)
5. ......Nigeria centre of the worldInfrastructure Concession
Regulatory Commission(I C R C) 6. Projections (Top 20 League)
Goldman Sachs projections places Nigeria as; the 20th largest
economy by 2025 on the basis of GDP 21st on per Capita Income
(2025). 12th largest economy if Nigeria maintains its growth
trajectory to 2050, overtaking Korea, Italy and Canada on
GDP.Infrastructure Concession Regulatory Commission(I C R C) 7.
ICRC - Who are we The ICRC is the FGN s regulatory agency charged
with catalysing public and private efforts/resources for the
development and implementation of a world class PPP framework
towards the development of world class brownfield and greenfield
infrastructure for the benefit of Nigerians www.icrc.gov.ng
Infrastructure Concession Regulatory Commission(I C R C) 8.
Classical Major PPP Transaction Steps Decision to enter PPP Process
Priority ProjectsPPP Road Map and FrameworkAppoint TeamProcurement
Publication and AnnouncementsPPP Preparation Studies and Business
CaseSelect AdvisersPPP PrequalificationPrepare and Issue Bidding
DocumentsConduct Partner ProcurementImplementation, Service
Delivery and MonitoringNegotiation and Contract SigningBid
Evaluation and AwardInfrastructure Concession Regulatory
Commission(I C R C) 9. PPPLIFECYCLEinlinewithNa2onalPolicy Project
IdentificationPreliminariesProject Prioritization Project
SelectionDevelopment PhaseNEEDS ANALYSIS PPP OPTIONS APPRAISAL
VALUE FOR MONEY AFFORDABILITY SUSTAINABILITY PRELIM RISK MATRIX
VIABILITY/BANKABILITY VGF OBC OBC APPROVALProcurement
PhaseTRANSACTION ADVISER EoI AND RFP BIDDING BIDDERS CONFERENCE BID
EVALUATION VALUE FOR MONEY TEST PREFERRED BIDDER FULL BUSINESS CASE
FEC APPROVALImplementation PhaseTECHNICAL ADVISER MONITOR DESIGN
AND CONSTRUCTION COMMISSIONING TEST VERIFY OUTPUT REQUIREMENTS
CONTRACT MANAGEMENTPREPARING AND IMPLEMENTING EFFICIENT AND
EFFECTIVE PPP TRANSACTIONSInfrastructure Concession Regulatory
Commission(I C R C) 10. Typical Power Project Structure / Timeline
- IPP Offtaker Corporate Customer, Bulk TraderSponsor Vehicle
(Private Investors)Power Purchase AgreementShareholders agreement
(Equity)Project Company Institutional InvestorsOther Service
ProvidersCommercial Lenders Financing AgreementsShareholder loan
agreementEPC ContractEPC ContractorDevelopment / Finance (3
Years)DFIs/MFIsO&M ContractFuel Supply AgreementOperations
& Maintenance ContractorGeneration License,
PermitsNERC/ESIA/Other GovernmentFuel SupplierConstruction (1 5
Years)Operations (10 30 Years)Infrastructure Concession Regulatory
Commission(I C R C) 11. Project Development Cycle Timing The PPP
project development cycle is rigorous...time !!!Development Phase 9
monthsProcurement PhaseImplementation Phase12 months*3 5 years*
Needs AnalysisTransaction adviser* Technical AdviserPPP Options
appraisalEoI and RFPProject MonitoringValue for
MoneyBiddingCommissioning TestAffordabilityBidders ConferenceVerify
OutputSustainabilityBid EvaluationRequirementsPrelim Risk
MatrixValue for Money TestContract
managementViability/BankabilityPreferred BidderVGF assessmentFull
Business CaseOBC approvalFEC Approval* Indicative
timelines11Infrastructure Concession Regulatory Commission(I C R C)
12. PPP & TIME CHALLENGE The biggest challenge to procuring
infrastructure via PPP is time Procurement of infrastructure can be
an intensely political process Politicians are keen (to produce
infrastructure quickly; to preserve their decision making
prerogatives; to reward supporters) PPPs require: TIME to undertake
a proper feasibility study/business case TIME to secure approvals
TIME to conduct a fair, equitable, transperent and competitive
procurement process. Infrastructure Concession Regulatory
Commission(I C R C) 13. PPP Time to Deliver Case Study from Canada
and Nigeria Alberta s southeast(P3) and southwest Edmonton ring
roads are the most comparable pair. The Edmonton Ring Road was part
of a long-standing provincial and city commitment to create a
highway trade corridor linking Alberta to the United States and
Mexico. The P3 project was delivered two years earlier than the
conventionally procured project (P3 4yrs) Lekki Toll Road from
Inception to Financial Closure 5 to 6yrsInfrastructure Concession
Regulatory Commission(I C R C) 14. WHAT WE NEED! Typical
impact!FASTER PPP! S! through a rapid and simple process!
standardized across all PPP deals to ensure that" all deals get
done quickly and accurately!BETTER PPP! S! through PPP structures
that ensure optimal! allocation of deal roles, risks and"
responsibilities between public and private sector"MORE PPPs!
Execute a greater number of PPP transactions" to increase the
quantum of private investment!Reduce! time by!50%! Increase! value
by!40-! 50%! Increase! capacity by!90%!Infrastructure Concession
Regulatory Commission(I C R C) 15. Forumula 1 Approach to PPPs Fast
Safe Reliable Rules known Competent team members Timing is known to
all Records especially time is transperently kept and monitored
Commitment by all You need a Formula 1 type ecosystem to make it
fastInfrastructure Concession Regulatory Commission(I C R C) 16.
Infrastructure Leadership Quote from Other Lands
ContentsWetoldthemwewillgivethemroadstobringtheir
productson,schoolstosendtheirchildrento,
hospitalsandclinicstoimprovetheirhealth. Wecannotwasteour8me.
Wehavetoworkfasttoshowresultsforwearejudged
byourperformance,notwhatwepromiseTun Abdul Razak Hussein Prime
Minister of Malaysia 1970 - 1976 Infrastructure Concession
Regulatory Commission16 (I C R C) 17. PPP Acceleration Have Robust
and Well communicated legal and regulatory framework, PPP Manual
etc (Minimize rework get permission to copy and adapt from others
use WBI, AfDBi, ADBi, UNESCAP leverage) Use PPPIRC of the World
Bank Agree PPP Pipeline at highest levels Extensive Capacity
building Have a PPP Centre of Excellence Pre Qualify and Enpanel
Consultants and TAs Standardization PPP Manual, OBC, RFQ, RFP,
Contracts, Financial Model Model Concession Agreements Leverage
learnings from others (Assignments for Staff) Have regular PPP fora
with all stakeholders Infrastructure Concession Regulatory
Commission(I C R C) 18. PPP Acceleration PPP Units in MDAs Have P5
Network Creative Use of High Quality Unsolicited Proposals from
Credible Sponsors Use the New Delhi Metro and Chinese Delivery
Approach Use balance sheet of government via appropriate
instruments to incentivize the private sector and kickstart
investments (VGF, IFF etc) Use creative approaches like Annuity or
availability PPPs Exploit Scale (Use program approach to create
scale)Infrastructure Concession Regulatory Commission(I C R C) 19.
Creative Approach - Annuity Concession Model for eg. Roads In order
to accelerate use of PPP to improve roads in Africa, it is proposed
that annuity payments concession model should be considered as a
viable option. Annuity Concessions are a variant of the Build
Operate Transfer (BOT) PPP model in which the private operator is
remunerated via a fixed, periodic payment ("annuity") from the
government rather than through toll proceeds. Under these PPP
contracts, the private operator is responsible both for
constructing the road, as well as for operating and maintaining it
for a fixed period of time. However, this option significantly
reduces revenue risk for the private sector and also incentivizes
the private sector to then propose innovative financing and
construction options19Infrastructure Concession Regulatory
Commission(I C R C) 20. Annuity Concession Model eg. Roads Shorter
Project Development Cycle Under annuity concession model the
project lifecycle could be significantly shortened as depicted
below: Development PhaseProcurement PhaseImplementation Phase6
monthsTBDFinancial and Transaction Advisor AppointedTechnical
AdviserFinancial Model CompletedProject MonitoringEOI and RFP
BiddingCommissioning TestBidders ConferenceVerify Output
RequirementsBid EvaluationContract managementValue for Money Test
Preferred Bidder Full Business Case Federal Executive Council
Approval20Infrastructure Concession Regulatory Commission(I C R C)
21. Formula 1 PPP Delivery Methodology Faster PPPs : Implement a
new standardized rapid process to accelerate! deals by
approximately 50%, enabling PPP to deliver their expected!
DISGUISED CLIENT EXAMPLE" impact early - by Mckinsey and Company!
Current timeline! 48 wks"2 wks"Evaluation!Cabinet! approval!12-14
months"2 wks"From! Negotiation of Concession Agreement!Cabinet!
approval!2 wks" Signing! of conces-! sion agree-! ment!~100!
weeks1!Issues identied! Incomplete evaluation of" proposal upfront"
Approvals made without" sufcient basis"To!Lengthy negotiation
process due to lack of" timely and effective decision making" Lack
of strong perspective of ideal outcome" due to poor upfront
analysis"Filter! pro-! posal!Eval-! uate!Direct negotiation! Prep.
RFP!Key areas of improvement! Establish decision gates" ( screening
)" Dene and syndicate" upfront project plan"SOURCE: McKinsey
analysis"Call tender!Evaluate bids! and negotiate!Evaluation to
include" (in parallel)" Market-backed" assessment" Leverage Term"
Sheet"Final-! ise!Reduce" time by! 50%! 40-50! weeks1!Standardize
approach" for similar PPPs:" Front-load analyses and" decisions on
Key Terms" Batch approvals" Guided comprehensive" RFP process"Focus
on legal " negotiations" Streamline governance"Accelerated!
completion of PPPs! deals! McKinsey & Company"|
9"Infrastructure Concession Regulatory Commission(I C R C) 22. The
Indian PPP Story 1. India was in desperate need to upgrade its
infrastructure in order to accommodate its economic growth
potential 2. Government decided to aggressively apply PPP to
complement conventional project delivery 3. Leading to an
increasing number of PPP projects in past decade 4. Making India
one of the leading PPP markets today 5. Front mover focus on the
roads sector 6. Supported by a well established, coherent and
cohesive enabling environment and process standardization 7.
Including a set of relevant financial instruments 8. Leading to
significantly improved infrastructure22Infrastructure Concession
Regulatory Commission(I C R C) 23. PPP Ambition Government decided
to aggressively apply PPP to complement conventional project
deliveryUSD 1,000 billion 30%40%USD 514 billion 30% USD 222
billion70%20% 20%2002 - 20072007 - 2012 Public2012 -
2017PPPSources: 10th, 11th and 12th Five Year Plan23Infrastructure
Concession Regulatory Commission(I C R C) 24. PPP Status Making
India one of the leading PPP markets today and value in USD
billionIn terms of number of projects UK 20089351 India
2009450Mainland Europe 2001 -200850215Korea 2007126Canada
201050145Australia 2005100South Africa 2009 1Including10055
3219projects in tenderSources: University of Sydney, IFSL, The
Conference Board of Canada, National Treasury South Africa,
Ministry of Strategy and Finance in Korea, PPP India database,
adapted by VandenBroek Consulting Infrastructure24Concession
Regulatory Commission24 (I C R C) 25. PPP Framework Supported by a
well established, standardized, coherent and cohesive enabling
environment (The PPP Ecosystem) PPP Program To date some 450
projects delivered through PPP and governments intends to use PPP
for up to 40% of its upcoming infrastructure investmentsPolicy
Pillar Periodic Five Year Plan clearly indicate PPP targets per
sector Guidance is provided by Guidelines and Model Concession
Agreements Various state level PPP Laws (Infrastructure Acts) or
PPP policy statementsInstitutional Pillar Department for Economic
Affairs coordinates and support PPP Most States established PPP
Cells PPP Approval Committee Panel of Transaction advisors for
expert support Nationwide Training program developedFinancial
Pillar India Infrastructure Development Fund Viability Gap Fund
Fiscal incentives India Infrastructure Finance Company Ltd Several
state specific funds to facilitate PPPLocal conditions: Significant
need for infrastructure in a rapidly growing economy hampered by
fiscal constraints25Infrastructure Concession Regulatory
Commission(I C R C) 26. PPP Institutional Framework PPPs can only
be effective if built on a solid, clear and transparent PPP
policies, laws and institutions4th PPP Transactions 3rd PPP
Institutions 2nd PPP Laws 1st PPP PoliciesInfrastructure Concession
Regulatory Commission(I C R C) 27. Quick Roll Out PPP Case Studies
on Medical, Agriculture, Market and Road PPPs from Lagos, India, UK
etcInfrastructure Concession Regulatory Commission(I C R C) 28.
POWER PPP - AKUTE/ADIYAN WATER WORKS 12.15MW IPP
12.15MWprovidedby4x3MWGE Jenbachergasengines
13kmnaturalgaspipelineconnectedto exis2ngnaturalgasinfrastructure
$25.5milliontotalinstalledcost 12monthconstruc2onperiodand
commencedopera2onsinJanuary2010 10yearPPAwithLWC FacilityAgreement
BenetstoLWC Constant,reliable,aordablepowerfor LWC(40%savings)
Improvementinwaterdelivery(85%vs 32%)
Servicelevelcoverageincreasedby95% 28Infrastructure Concession
Regulatory Commission28(I C R C) 29. Medical/Hospital PPP Framework
Private Operator$ Ministry of HealthPPPAgreementDetailed designs
Capital financing Construction Medical supplies & equipment
Clinical services Maintenance Non-clinical servicesNew Hospital$
Sector Policies and Strategy Service Package Reimbursement for all
clinical and non-clinical services Performance monitoring Joint
Services Committee Staffing and TrainingMEDICAL MOBILE UNITS
(MMU)Infrastructure Concession Regulatory Commission(I C R C) 30.
AGRIC EQUIPMENT MODEL PPP GUJARAT INDIA ESTABLISHMENT OF
AGRICULTURAL TRACTOR AND Contents RESOURCE CENTRES IMPLEMENTS q
Objective Facilitate Farm Mechanization andProductivity q Public
Partner Government of Gujarat India q Private Partner John Deere
Tractors India/USA q Role of Private Partner Establish centers with
500 tractors and 13 different implements per centre. Provide
Trained Operators and Mechanics Provide Extension Support Services
Train 1000 locals as tractor operators and 500 as mechanics. q Role
of Government Provide land and revenue guarantees on minimum
guarantees (Note if utilization exceeds minimum by agreed
percentage excess revenue is 50/50 with government). q Role of
Farmers Use tractors and pay only for operating and maintenance
costs. Provide via cooperatives provide individuals to be trained
as tractor operators and mechanics.Infrastructure Concession
Regulatory Commission30 (I C R C) 31. State Road PPP Ahmadabad
Mehsana Toll Road Company Limited Contents (AMTRL); Gujarat India q
qPrivate Partner AMTRL and Public Partner PWD GoG Scope BoT
Ahmadabad to Mehsana Widening & Strengthening of Existing 51.6
km long road from two lanes to four lanes divided carriageway and
construction of continuous service roads on either side. Widening
& Strengthening of Existing 11.5 km long two lanes Kadi - Kalol
Spur road. Bypass of 2.3 km long at Sertha village on left side of
the existing road. 2 Nos. Main Toll Plazas one Ahmadabad side and
other Mehsana side at Km 20+000 and Km 65+500 respectively and two
intermediate toll plazas at Chhatral and Nandasan respectively. 2
Nos. Road over Bridges (RoB) & 2 Nos. Minor Bridges, 1 No. Road
under Bridge (RuB) and 5 Nos. Underpasses of minimum size of 5 m x
3 m and 5 Nos. Cattle Crossings of minimum size 3 m x 2.1 m.
Provision of retro-reflective signboards to improve road safety
with very good riding quality to enhance user comfort. Toll Rates
are based on road user benefits including savings in Vehicle
Operating Costs, Fuel and Time. Round-the-clock Highway Patrolling
24 hours Ambulance services Extensive tree plantation and
transplantation of 1500 nos. trees. Provision of roadside
arboriculture and landscaping. Completed 8 months ahead of schedule
and under budgetInfrastructure Concession Regulatory Commission31
(I C R C) 32. PPP for Truck Stop Facility UK MalaysiaCurrently in
Africa trucks stop at will on the Highways near cities, denying
throughput of essential traffic the economic arteries of many
nations; potential PPP project could develop income streams from
service provision Infrastructure Concession Regulatory Commission(I
C R C) 33. Nigerian PPPs First Mover Projects Pipeline- - - -
-Power (Hydro Gencos) Transport (Roads) Trasport (Rail and Ports)
Urban Infrastructure (FCT) Social (Hospital)Infrastructure
Concession Regulatory Commission(I C R C) 34. Thoughts Points for
All Invest in Nigeria q Consistent Democratic Government for 13
Years q Fighting corruption in Public and private sectors q Policy
consistency and long term planning framework q Reform in critical
sectors: Energy, Financial, Civil Service q Growth in the Non-oil
Sector: Telecom, Agriculture, Services q Ratings Upgrade
34Infrastructure Concession Regulatory Commission(I C R C) 35.
Private TO NIGERIA.TRANSFORMED BY PPPs This WELCOME Sector
Strengths is the year ......2020.....!!!!923,764,000 Square Metres
of OppurtunitiesInfrastructure Concession Regulatory Commission(I C
R C) 36. ICRC Passion That Will Make A Difference - THANK
YOUPoverty anywhere is a threat to security everywhereCONTACT
DETAILS: Engr. Chidi Izuwah Snr Executive Director, PPP Res.
Centre, Infrastructure Concession Regulatory Commission Email:
[email protected] Website: www.icrc.gov.ng Infrastructure
Concession Regulatory Commission(I C R C)