Contact PPP Central UnitTel.: 202 2342 1283 202 2342 1284Fax: 202 2342 1303 202 2342 1203Email: [email protected]: www.pppcentralunit.mof.gov.eg
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TABLE OF CONTENTS Chapter I:
An Introduction to Public Private Partnerships Program In Egypt ........ 6
Introduction ............................................................................. 6
Definition of PPP ....................................................................... 6
Types of Public-Private Partnership (PPPs) for Infrastructure ........... 8
1. Corporatization “Ring Fencing” ............................................ 9
2. Service Contracting ........................................................... 10
3. Management Contracting ................................................... 11
4. Build-Operate-Transfer (BOT) / Build-Own-Operate (BOO) ...... 12
5. Concessions ..................................................................... 13
6. Private Finance Initiative Design-Finance-Build-Maintain-Transfer (DFBMT) ................................................ 14
PPP Success Drivers .................................................................. 15
Elements of Legal & Institutional Frameworks For PPPs .................. 15
PPPs In Egypt .......................................................................... 16
Benefits ............................................................................... 16
Drivers ................................................................................ 17
Policy Frame Work ................................................................ 18
Implementation Strategy ....................................................... 18
PPP Central Unit (PPPCU) ........................................................... 19
PPPCU Mission ...................................................................... 19
PPPCU Role .......................................................................... 20
PPPCU Structure & Organizational Chart .................................... 24
Achievements To-Date ........................................................... 26
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TABLE OF CONTENTS PPPs & The Current Economic Crisis ............................................ 27
The Way Forward ...................................................................... 28
PPP Project Preparation Fund (PPF) ......................................... 28
Developing Infrastructure Finance Facility Co. (IFFC) ................. 30
Creation of Infrastructure Viability Gap Fund (IVGF) .................. 31
Chapter II:
PPP Project Life Cycle ................................................................... 32
The overall PPP Project Life Cycle ................................................ 32
Phase 1: Project Initiation & Screening .................................... 32
Phase 2: Business Case ......................................................... 33
Phase 3: Conducting PPP Affordability & Risk Assessment ........... 34
Phase 4: Tendering & Procurement .......................................... 35
Phase 5: Bidders Selection ..................................................... 36
Phase 6: Contract Signature & Financial Closure ........................ 37
Phase 7: Post Award PPP Performance Monitoring &
Contract Compliance ................................................ 37
Chapter III:
Update on The Current PPP Projects ............................................... 38
PPP Schools Project ................................................................... 38
Summary of The Establishment Of 287 Public Schools ................ 38
Next Steps For The Sector Pilot Project .................................... 40
PPP Health Projects ................................................................... 41
Summary of Alexandria University Hospitals Project .................. 41
Next Steps For The Sector Pilot Project .................................... 43
Future Projects in Pipeline ...................................................... 44
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TABLE OF CONTENTS PPP Utilities Projects ................................................................. 45
Summary of New Cairo Wastewater Treatment Plant ................. 45
Next Steps For The Sector Pilot Project .................................... 47
Future Projects in Pipeline ...................................................... 48
PPP Transport Projects ............................................................... 49
Highway Projects .................................................................. 49
Summary of Shubra / Banha Highway Project .......................... 49
Summary of Rod El Farag Access Project .................................. 50
Chapter IV:
Draft Law For Regulation of Public Private Partnership “PPP” .............. 52
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Chapter I An Introduction to Public Private Partnerships Program In Egypt
Introduction1
In 2006 the Government of Egypt adopted a new long-term policy of pursuing partnerships with the private sector to expand and increase the country’s infrastructure investments.
In line with the economic reform agenda and strategy to increase private sector involvement in public social infrastructure services by leveraging private spending against public spending, the GoE has taken the initiative to introduce a Public Private Partnerships (PPP) policy and program through the establishment of the PPP Central Unit within the Ministry of Finance.
As the public face of PPP in Egypt, the PPP Central Unit acts as the PPP center for support and expertise, identifies pilot projects together with responsibleLine Ministries, sets national guidelines for implementation, standardizes PPP contracts, provides technical/advisory support to infrastructure Line Ministries and monitors the implementation of PPP projects.
Definition of PPPPPP is a long-term contractual relationship between the public sector and the private sector for the purpose of having the private sector deliver a project or service traditionally provided by the public sector. PPP projects do not minimize the public sector’s responsibility to improve public services, only the methodology for its provision and procurement is different.
The fundamental aspects of Egypt’s PPP policy framework are the use of performance-based contracts under which the Private Sector provides public services over contract duration and is paid by the Public Sector, end user or a hybrid of both. Output requirements are specified by Line Ministries
1 World Bank PPP Diagnost c Report for Egypt – August 2008.
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while specific inputs are generally the responsibility of the private sectorpartner. Under the PPP contract, the Government retains strategic control on the service, secures new infrastructure which generally reverts back to the public sector at the end of contract life, and allocates project and performance risks to the party(ies) best able to manage or mitigate these risks.
PPPs have multiple contractual components enabling the private sector to participate in project implementation through its participation in one or more aspects of the project’s development and implementation, including such project phases as project design, finance, build, operate, manage,and/or maintain.
Hence, Public-Private Partnerships (PPPs) are a form of legally enforceable contracts between the public and private sectors, which requires new investments by the private contractor (funds, technology, expertise/time, reputation, etc.) and which transfers key risks to the private sector (design, finance, construction, operation, etc.), in which payments aremade in exchange for performance, for the purpose of delivering a service traditionally provided by the public sector.
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Types of Public-Private Partnership (PPPs) for Infrastructure
Table 1.1: Range of PPP Structuring Options
PPP Contract Instrument
Average Contract
Term
Pro-vides the
Service or the Mngmt
Pro-vides the
Work-ing
Capital
Receive the Net Income or Cov-ers Net
Loss
Pro-vides Long
– Term Finance
Legally Owns
the As-sets
Provides Sectoral Planning & Regu-
lates Services
Corporatiza-tion & Pri-vate Market Finance
In per-petuity
Public Sector
Pub./Priv
Sectors
Public Sector
Pub./Priv.
Sectors
Public Sector
Public Sector
Service Con-tract
2-3 years
Private Sector
Public Sector
Public Sector
Public Sector
Public Sector
Public Sector
Management Contract
2-5 years
Private Sector
Public Sector
Public Sector
Public Sector
Public Sector
Public Sector
B.O.T.20-30+
yrsPrivate Sector
Private Sector
Private Sector
Private Sector
Public Sector
Public Sector
B.O.O.20-30+
yrsPrivate Sector
Private Sector
Private Sector
Private Sector
Private Sector
Public Sector
Concession20-30+
yrsPrivate Sector
Private Sector
Private Sector
Private Sector
Public Sector
Public Sector
Private Fi-nance Initia-tive (PFI)
10-30 yrs
Private Sector
Private Sector
Private Sector
Private Sector
Private Sector
Public Sector
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1. Corporatization “Ring Fencing”
Dept. of Public
Services
EGP
Banks
Loans
Users
Users
UtilityServices
Rates &Fees
ServicesRates
Budget
Cabinet
Dept. of Public
Services
Public Services Corp.
Board
Cabinet
Treasury
� The assets & liabilities of a Government are “carved-out” into a new public corp.
� Government is still the sole shareholder and names the Board of Directors.
� Employees are transferred from civil servants to public corporate employees.
� Revenues are first kept within the public corp. rather than to Treasury’sGen. fund
� Accrual-based corporate accounting standards allows for more accurate financial performance measurement & cost-recovery analysis(Benchmarking).
� Commercial banks may lend based upon the public corp.’s own assets and revenues.
� Key to success is the Corporate Governance Capacity of the public Board of Directors.
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2. Service Contracting
ServiceContractorService
1Service
2Service
3
Public Services Corp. Public Services Corp.
Service1
Service2
Service
Fees
� A specific service of a Public Corporation is “unbundled” from the sector(i.e. billing & collections, fleet maintenance, equipment maintenance,ICT services, leak repair, road maintenance, etc…).
� A prior full cost analysis of this service must be performed to benchmark current performance levels (full costs per unit) & compare with competitive outside bids. Ensure affordability and better “Value for Money”.
� Private (and even Public) firms competitively bid to provide this service.
� Capital investment requirements are low or nothing, asset lives of 3-5 years.
� Service contractors are paid to be “available” & per unit of work performed.
� Improved operating efficiency (quality & cost) is the principle objective.
� Labor participation in the process is critically important.
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3. Management Contracting
ManagementContractor
Board
Employees
MANAGMENT
Board
Employees
MANAGMENTMngmt Fees
Management
Public Services Corp.
� Public Corp. identifies several specific priority operating problems.
� Private firms competitively bid for the right to provide the generalmanagement service in exchange for a “Management Fee”.
� The Management Contract identifies specific operating targets operatinglevels that the Contractor must meet (w/ incentives & penalties).
� Contractor needs the authority to make all operating decisions (hiring & firing, etc.) Governments Board still owns Corp. & make long-termdecisions.
� New investments needed by private contractors are very low (or nothing).
� Contracts terms usually 2 – 5 years.
� Key goals are often to design & install new Management Information Systems, Activity Based Costing (ABC), reduce losses; improve collections & efficiency, etc.
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4. Build-Operate-Transfer (BOT) / Build-Own-Operate (BOO)
Single-PurposeProject Company (SPV)
Electric Utility Entity(Off-Taker)
PerformanceGuarantee?
LoanAgreement
Bulk SupplyOff-Taker
AgreementSupplyAgreement
Incorporation
ConsumerAccounts
CommercialLenders
Private Owners
(Sponsors)
Government(Min. of Finance)
Suppliers Consumers
� Ministry of Finance guarantees payment on behalf of the competent authority.
� At the end of the contract term there is an option to transfer the ownership to the state
� The private sector company enters into contract with the state in order to supply a product whereby the state has the exclusive right of purchase, thereof.
� The private sector construct, finance and operate the utility
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5. Concessions
EGP
Lenders Government
Single-PurposeProject Company (SPV)
Investor1
Investor2
Investor3
ConcessionContract /License
Repayment PublicServices
Tariffs/Rates
End Users
Loans
Equity Equity Equity
� A consortium of private firms capitalizes a new project Company (“SpecialPurpose Vehicle”) to expand, improve and operate a public services distribution network.
� Theproject companyborrowssignificant long-termfunds fromcommerciallenders. The lenders look almost completely to the projected future revenue stream generated by the project (and the Project Company’s limited assets) to repay all loans.
� The host country government does not provide a financial guarantee tolenders.
Table 1.2: Concession vs. B.O.T.Concession B.O.T.
Monopoly (one provider) Monopsony (one customer)
Based upon legally «ceding» an ex-clusive right to provide retail public services, usually enshrined in sector law
Existing (public) utility simply buys a key input (electricity, treated water, waste treatment, etc.) instead of providing it internally
Retail consumers now interface di-rectly with the private concessionaire
Retail consumers still interface with the existing (public) utility
Higher collection risks Lower collection risks
Usually involves taking over a poorly functioning utility network – higher risk of unknown condition of assets
Usually for a new green field project,with little or no risk of conditions of existing assets
Incentive for improved system-wide operating efficiency
Adds productive capacity, but does not improve system-wide operating efficiency
Regulatory body needed, to protect consumers & investors
Contract Compliance Office (CCO)within the Pub. off-taker
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6. Private Finance Initiative [Design- Finance-Build-Maintain-Transfer (DFBMT)]
Partnership Contract
Infrastructure delivering Services
Publicbody
Rents guarantee2
Creditcontract
(Potential)Claim transfers
Buildingcontract
Interfacecontract
Maintenancecontract
Insurance policy
International financial
institutions
Insurer
Maintenance company
Lenders/Market
Building company
Other investors
Lead Develop./Investor
Special Purpose Vehicle (SPV)
Equityand / or
subordinatefinancing
2 As far as possible.
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PPP Success Drivers � Standardization:
PPP Models & Documentation that can be easily replicated (Feasibility analysis, risk allocation, RFPs, PPP Contracts, etc..).
� Deal flow:
� Quantity: Sufficient scale to justify a PPP strategy.
� Quality: Determine which candidate is appropriate as PPPs, projects must be clear and bankable.
� Leverage:
create more opportunities to attract new finance using creditenhancements to reduce sovereign risk.
� Capacity Building:
PPP won’t work unless the public sector understands its Governance and oversight responsibilities from the beginning-to-end.
Elements of Legal & Institutionl Frameworks For PPPs: � Multi-Sector PPP Law.
� PPP Technical Unit(s).
� PPP Project Development & Preparation Facilities.
� PPP Manuals & Guidelines.
� Long Term Service Contracts & PPP Procurement Regulations (lowest bid is not often the best bid).
� Public Credit Enhancements.
� Financial Performance Guarantees (solvency of Public Agencies).
� Partial Risk Guarantees (PRGs) & Partial Credit Guarantees (PCGs).
� Public Sector Risk Management Unit.
� Systematic PPP Training & Capacity Building.
� PPP Contract Performance Monitoring Capacity.
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PPPs In Egypt:
Benefits:PPP in Egypt provides a new source of investment capital for required infrastructure projects, reduce the GoE sovereign borrowings and associated risks, drive the creation of local long-term funding markets, create a new private sector facility management market, expand the economy, stimulate job creation and increase the quality of public services to the Egyptian citizen.
PPPs introduce the disciplines and efficiencies of private sector managementand methods to the provision of public services. Experience from other countries indicates that by harnessing the complementary skills of public and private sectors, the public sector can realize significant advantagesin terms of cost, value and quality of the delivered services. Private participation aims at improving the quality of services provided to citizens, creating job opportunities, stimulating investment and consumption thus boosting growth, attracting FDI, and others. The State’s ability to provide public services at lower than their true cost is not impacted by PPP – this is a stand-alone issue that the State addresses on a sector or project-specificbasis; successful PPP transactions can be implemented whether services are provided at cost or below cost of service delivery through the use of explicit or implicit subsidy mechanisms where the Government would take on itself closing the Capital and Economic Viability Gaps.
Throughout a PPP project, the Government retains close control over the delivery of the specified level and standard of services. Where core socialservices are involved (such as teaching, medical care) the delivery of services to end-users (the public) will be retained by the public sector professionals.
PPPs in turn will open up opportunities for the domestic contracting and financing sectors, including smaller contractors who are expected to benefitconsiderably from the Program.
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Drivers3:Since 2004, key structural reform have been implemented by the government, these reforms are delivering results. To sustain Egypt’s growth prospects around 7-8% in future, Egypt needs more investment to infrastructure. It is estimated that Egypt should allocate between 5.5 to 7% of its yearly GDP to cover its infrastructure needs (new investment and maintenance) representing yearly amount of US$ 13 billion. The key challenge is therefore to bridge this financial gap by accelerating the mobilization of private capital.
International experience shows that 10-30 % of infrastructure capital needs could come from the private sector through PPPs if an appropriate and regulatory framework is established as well as other catalytic measures.
It is estimated that Egypt can realistically target the mobilization of 10-15% of its infrastructure needs through PPPs.
3 WB Report, Opt ons to develop PPP Market Supply Side Institutions, July 08.
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Policy Frame Work: Egypt is providing the right environment for implementation as follows:
� Adoption and localisation of international successful PPP models (UK, South Africa, India….etc).
� Provision of supportive legislative environment through:
� New Legal framework for PPP Projects (Draft finalized in submissionto Cabinet and Parliament phase).
� Standard PPP Contracts, Procurement documentation and procedures.
� Creation of regulatory bodies for post contract implementation.
Implementation Strategy: � Placing clearly PPP Initiatives within reform macro fiscal agenda.
� Establishing a PPP Central Unit at MoF as well as Satellite Units in Line Ministries.
� Ongoing International Advisory Mentoring.
� Identifying PPP’able projects as part of Line Ministries’5 years Strategic Plan.
� Providing legislative framework – PPP Law.
� Developed Tool-Kit for implementation of projects.
� Finalization budgetary and accounting practices to capture PPP transactions.
� Setting “Best Practice” precedence through pilot projects.
� Arranging for Credit Enhancement mechanisms.
� Stimulating domestic banking sector to offer longer tenors and competitive pricing.
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PPP Central Unit (PPPCU)
PPPCU Mission
� Generally promote the national PPP initiative to key stakeholders (within Govt., to private sectors, to public consumers, etc.),
� Identify & facilitate solutions to formal legal and institutional obstacles to the overall PPP project cycle,
� Develop PPP best practices, models, and standards for Egypt,
� Validate and develop PPP project proposals,
� Shepherd pilot procurements of PPPs,
� Build capacity in the Public sector to identify, analyze, prepare, tender, contract, and monitor successful PPP transactions,
� Alert and stimulate private contractors and lenders to enter the new PPP market,
� Assist public infrastructure authorities in the selection of experienced & quality PPP transaction advisors,
� Work together with the public infrastructure authorities and the advisors to ensure quality & consistency in procedures,
� Ensure that set PPP principles, rules, and Standard Operating Procedures (SOPs) are followed,
� Assist awarding authorities in the transparent & competitive selection of private sector partners, and
� Report to the Ministerial PPP Committee on the progress of the PPP Project
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PPPCU Role
External Financial Advisor
External Legal
Advisor
ExternalTechnicalAdvisor
PPPCentral Unit
LineMinistries
Service Providers Lenders
From Project Screening Tendering & Procurement, Bid Selection to Post-
Award Monitoring
The Unit’s primary functions are outlined below:
� Serve as the public face of PPP initiative in Egypt
� Establish a national PPP policy framework for implementation
� Set PPP guidelines and methodologies appropriate to Egypt
� Assist line ministries to identify potential PPP projects as part of line ministries’ five-year strategic plans
� Draft and issue standard project documents, contracts and PPP laws
� Provide technical and advisory support to line ministries on project development and transaction implementation
� Monitor project implementation post contract closure
� Coordinate PPP Program activities among line ministries, private sector partners and services providers, and the capital funding market
� Identify and resolve issues that may impede successful development of Egypt’s PPP program
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� Act as the center of PPP expertise, support and intelligence gatherer and disseminator
� Serve as a Capacity Building Center for PPP knowledge and expertise throughout Egypt
Overall, the PPP Central Unit is responsible for the development of a PPP Program in Egypt that serves the needs of the public sector and the Egyptian citizens. To do this, it must work closely with Line Ministries and their agencies and departments responsible to develop and implement the individual PPP projects for the requisite public infrastructure within their portfolios.
An essential task of the PPP Central Unit is to ensure that PPP project proposals are supported by sound analysis as to needs and value, receive the necessary budget approvals and that partner selection takes place as a result of a transparent and fair competition.
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Reject Project / ConventionalProcurement
Modifications /Updated Details
If Approved, included in Line Ministry’s 5 Year Strategic Plan
Does Project meet PPPScreening Criteria
Screening by PPP Central Unit
Line Ministry submits Project Proposal to PPP Central Unit
Project included in List of Proposed Projects
Submission of PPP Application to PPP Ministerial Committee
During the Screening and Approval Project Cycle described in chapter II, the PPP Central Unit provides technical assistance to select and propose sound, bankable projects that meet the needs of the public sector, end-users and will be suitably attractive to private sector partners. While the Central Unit will be responsible to recommend such projects for further development and funding, it is the line ministries’ responsibility to conduct sufficient research, due diligence and preliminary analysis to make a strongcase for project development through PPP.
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Project Approved by PPPMinisterial Committee
Ongoing Monitoring of Project
Appoint External Financial, Legal & Technical AdvisorPrepare Contract Award Requirements
Tendering Cycle
TenderPPP Project
Submissionof Proposals
Evaluation ofBid Proposals
Sign PPPContract
ImplementProject
During the Tendering and Monitoring Project Cycle, the PPP Central Unit assists awarding authorities in the transparent and competitive selection of service providers, reports to the Ministerial PPP Committee on the progress of PPP Projects and ensures public sector contributions to a PPP project are carefully optimized, controlled and monitored throughout the life of the project.
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PPPCU Structure & Organizational Chart
As a specialized entity within the MOF & with the previous mandate in place, the structure of the PPP Central Unit ensures ability to engage on policy development, work with Line Ministries and attract, retain experienced commercial staff
The PPP Central Unit required organizational setting to ensure its efficacy,ability to drive best practice and to ensure that Line Ministries are coordinated to achieve an orderly flow of projects in the PPP programme will be bettersupported. Moreover, setting direction to oversee that Line Ministries activities and individual projects compliance.
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Ad
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to t
he
Min
iste
r
Un
it D
ire
cto
r
Se
cto
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ffic
er
(He
alt
h)
We
bsite
& D
ata
ba
se
Co
ord
ina
tor
Do
no
rs P
ress
Tra
inin
g &
Ca
pa
city B
uild
ing
C
oo
rdin
ato
r
Pro
cu
rem
en
t Te
nd
erin
g
Pro
ce
ss M
ng
r
Co
ntr
act
Co
mp
lian
ce
Mn
gr
Bu
sin
ess P
lan
nin
g
& r
ep
ort
ing
Co
ord
ina
tor
As
sis
tan
t D
ep
uty
Fin
an
cia
l M
an
ag
em
en
t
& B
ud
ge
ts C
oo
rdin
ato
r
Se
cto
rs H
ea
ds
E
xte
rna
l A
ffa
irs
Mn
gr.
A
cc
ou
nti
ng
&
Re
po
rtin
g M
ng
r.
Te
nd
er.
& C
on
tra
ct
Co
mp
lia
nc
e M
ng
r. L
eg
al A
ffa
irs
Mn
gr.
F
ina
nc
e &
In
ve
stm
en
t
Mn
gr.
Co
ord
ina
tor
Co
ord
ina
tor
Co
ord
ina
tor
Se
cto
r O
ffic
er
(Ed
uc
ati
on
)
Se
cto
r O
ffic
er
(Uti
liti
es
)P
PP
n
ve
sto
rs C
om
pla
int
Re
ce
ipt
Ce
ntr
e
Co
ord
ina
tor
Se
cto
r O
ffic
er
Tra
ns
po
rt
OR
GA
NIZ
ATIO
NA
L C
HA
RT
PP
P C
en
tral
Un
it
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Achievements To-Date
� A new PPP Law has been drafted to strengthen and clarify the legislative framework of PPPs and to establish the institutional guidance for implementation required and will be presented to the Parliament to be approved (more illustrated in Chapter 4)
� A satellite PPP unit has been established in the Ministry of Transport and resources devoted to PPP projects in other Ministries and related Public Authorities.
� Significant training and capacity building activities undertaken forgovernment officers, and campaigns to increase the private sector’sawareness of PPPs and Government’s intentions.
� The public profile of PPPs in Egypt has been raised significantly, to theextent that Egypt is perceived as one of the leaders in the PPP field inthe Middle East North Africa (MENA) region
� PPP Central Unit won “PPP 2008 Award” among the Euro-Mediterranean Countries at “The Second International Conference for Public-Private Partnership” that was held in Paris, France on October 29-30, 2008
� A PPP Implementation Guide was issued, distributed to concerned parties to provide clear and practical procedures for key stakeholder institutions in Egypt, especially infrastructure Line Ministries and their PPP Satellite Units, responsible agencies and departments to follow when preparing and developing PPPs in addition to standardized procedures and documentation
� Bilingual Website: www.pppcentralunit.mof.gov.eg
� 1 Tender closed and awarded, New Cairo Wastewater Treatment Plant Project
� Pilot Projects underway:
� 3 Tenders opened – closure Q2/2009
� 4 Tenders under preparation
� 10 projects in pipeline across sector
� Pilot projects were launched in the education, University hospitals, and utilities sectors.
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PPPs & The Current Economic Crisis
� Financing for new PPPs will be affected primarily on the debt side.
� Private developers will be more selective, demanding higher quality, more “bankable” PPPs, with clearer forms of public support and risk-sharing.
� Infrastructure, as an asset class will be preferred by many investors, compared to other investments.
� Donors & MLO’s should be prepared to play an increased (counter-cyclical) role in providing & facilitating financing for PPPs.
� Future PPPs in emerging markets will likely see an increase both in small-scale contracts (using local contractors) and in “PFI-type” investment.
� Long-term fundamentals still remain: demand for infra in emerging markets is large and growing and the financial & implementation capacityof Governments is inadequate.
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The Way Forward4
Creation of Market Supply Side Institutions for:
PPP Project Preparation Fund (PPF)
Project Development StudiesDemand AssessmentEnvironment AssessmentSocial AssessmentCosts EstimatesRisks AnalysisFinancial Structuring
Development of Contractual documentsStructure & Preparationof Bidding DocumentsBidding
Infrastructure Project Preparation Facility (IPPF)
Infrastructure Project Preparation Facility (IPPF)
The preparation and procurement of PPP projects is more complex and costly than publicly procured infrastructure projects. The cost of procuring PPP projects are significant and often pose a burden on the budget of LineMinistries. Therefore; PPF primary objective is to fund transaction advisory cost of PPP projects
Preparation of a sound pipeline of viable PPP projects is critical in Egypt. Whilst the GoE may under-spend on the identification, preparation andprocurement of publicly procured infrastructure projects, cutting corners on the preparation of PPP Projects will be more costly. The cost of poor due diligence or preparation of PPP Projects will be reflected in the bidssubmitted by the private sector and will lead to costly PPP contracts for the government
4 WB Report, Options to develop PPP Market Supply Side Institutions, July 08
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Objectives of PPF: � More and better PPP projects are developed by Public Authorities
� GoE makes informed decisions based on good quality feasibility studies
� The GoE develops well structured PPPs that can be delivered and financedby the private sector
� To ensure that all PPF funded projects adhere to good practice as will be set out in various Central PPP Unit Guidance
� Support project management and technical capacity of the Public Authorities to undertake PPPs
� Ensure that PPF is sustained by recovering partial disbursements from PPP projects where appropriate
� Further develop the Egyptian PPP advisory services market
� Provide a vehicle to the multilateral and donor organization to contribute their funds and leverage their sector objectives
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Developing Infrastructure Finance Facility Co. (IFFC)
Infrastructure Finance Facility Company (IFFC)
Access to LT EGP Debt & Guarantees
Infrastructure Finance Facility Company
Creation of Infrastructure Financing Fund Company (IFFC) to develop a local currency financial facility to enable project developers to hedge againstexchange rate and convertibility risks.
Although the Egyptian banking market is highly liquid, it is nevertheless difficult for domestically financed projects to obtain long term debt due tothe following factors:
� Banks lack capacity to appraise infrastructure PPP projects
� Government does not issue on a regular basis long term government bonds that would enable bank to properly price long term risks
Accordingly; the creation of the IFFC to play a catalytic role in developing long terms finance products for privately sponsoredinfrastructure projects.
IFF will be established as a non banking institution with minority equity participation from the GoE and will be commercially oriented financial institution operating under the capital market regulations.IFFC will raise funds from the domestic and ultimately from the international capital markets and will benefit from the GoE umbrellaguarantees
Shareholders for the IFFC will include main domestic banks, national pension corporations and relevant international institutional investors.
The governance structure of IFFC needs to be further developed through specific technical assistance in future.
For both Project Preparation Facility (PPF) and Infrastructure Finance Facility Company (IFFC); World Bank is providing Technical Assistance.
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Creation of Infrastructure Viability Gap Fund (IVGF)
Infrastructure Viability Gap FundMaking Infrastructure PPPs
Commercially Viable
Infrastructure Viability Gap Fund
The GoE will need to consider the establishment of a dedicated fund which will provide capital subsidy to make PPPs commercially viable for PPPs which are economically justified but not commercially remunerative which is auseful instrument to make PPP projects affordable.
It is suggested by the World Bank that IVGF to be established in order to provide financial support in the form of grants; one time or deferredto economically viable infrastructure projects with a view to make them commercially viable if undertaken as PPP.
IVGF operations will be designed based on the following principals:
� Reliance on competitive bidding based on minimal subsidy request
� Use of model contracts developed by the PPPCU
� Capping of the percentage of costs to be covered by subsidy
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Chapter II PPP Project Life Cycle
The overall PPP Project Life Cycle
Phase I:ProjectInitiation
& Screening
Phase II:Business
Case
Phase III:Risk
Assessment,VFM
Analysis &PSC
Phase IV:Tendering
&Procurement
Phase V:Bid
Selection
Phase VI:Contract
Signing& FinancialClosure
Phase VII:Post-Award
Perform.Monitoring
Phase 1: Project Initiation & Screening
Procedure 1 Selection of projects to screen as PPP candidates
Procedure 2 Completion of the Project PPP Screening Checklist & Concept Note
Procedure 3 Review & Confirmation of PPP Project Documenta-tion by the PPP Central Unit
Procedure 4 Decision by the PPP Ministerial Committee on whether the Project should proceed to Phase 2
The above four steps relates to selecting projects that would be undertaken as PPPs. It is the Line Ministries that take the lead in Phase 1 of screening and selecting all of the projects within their sector.
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Phase 2: Business Case
1) Developing the plan to complete the Business Case.
2) Retaining needed outside PPP Advisors to prepare the Business Case.
3) Refining the project Scope: specifying the PPPs Output level of service.
4) Identifying & evaluating Project investment options.
5) Developing & implementing the stakeholder plan.
6) Completing the project Affordabil-ity analysis.
7) Conducting the project Demand analysis
8) Conducting the Technical Feasibil-ity analysis
9) Conducting the financial Feasibility Analysis
10) Conducting the Economic Feasibil-ity Analysis
11) Conducting the Institutional & Legal Feasibility Analysis
12) Conducting the Environmental impact analysis
13) Conducting the Project Risk Identification and Assessment
14) Conducting the Project Risk analysis
15) Proposing the Risk Allocation Structure
16) Testing the market: Assessing private sector Interest in the project
17) The PPP Central Unit Reviewing the Business Case
Phase II provides an analysis of a project’s feasibility as a PPP; as well as develops a proposed transaction structure and approach to risk allocation by Line Ministries and their Satellite Units
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Phase 3: Conducting PPP Affordability & Risk Assessment
Completing the PPP VFM Model by the Line Ministry PPP Satellite Unit.
Reviewing the Line Ministry's Analysis by the PPP Central Unit.
Reviewing the project & PPP Central Unit recommendation by the PPP Ministerial Committee.
Reviewing
Reviewing
Comple
ting
This phase is addressing the Public Sector Comparison (PSC) valuation as well as the Value for Money (VFM) assessment of a PPP project used to compare PPP option to normal public procurement. The PSC is a key component during the bidding process as it enables Line Ministries to compare and validate financial alternatives to confirm that the PPP projectwill yield better Value for Money than comparable public procurement.
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National Program for Public Private Partnership
Phase 4: Tendering & Procurement
1) Develop the Implementation Plan and Schedule for tendering & Procurement of the Project.
2) Issuing the Expres-sion of Interest “EOI”.
3) Issuance of Information Memorandum.
4) Finalization of the Pre-Qualification Document.
5) Forming the Pre-Qualification Committee.
6) Receiving the Evaluation qualifica-tions From interested Bidders.
7) Preparation of the Draft Bidding Documents.
8) Sending data room to Qualified Bidders.
9) Forming the Bid Opening Committee and Bid Evaluation Committee.
10) Deciding if “Competitive Dialogue” Technique will be Allowed.
11) Issuance of Tender Documents.
12) Receiving Q&A from Qualified Bidders & Conduct-ing Q&A Confer-ence.
13)Finalizing the Tender Documents.
14) Receiving final Proposal from Qualified Bidders.
The Line Ministries in cooperation with the PPP Central Unit will be implementing project tendering and procurement. PPP Central Unit will review procedures and document produced and provide approvals where required, in many cases the PPP Central Unit will provide Line Ministries with model documents to use in preparing Qualification and TenderingDocuments; accordingly roles, responsibilities are different from one step to another.
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Phase 5: Bidders Selection
Procedure 1 Opening Technical Bids
Procedure 2 Evaluating Technical Bids
Procedure 3 Conducting the Competitive Dialogue
Procedure 4 Announcement of the Technical Proposal Evaluation Results
Procedure 5 Opening Financial Bids
Procedure 6 Evaluating Financial Bids and completing the Financial Model’s Comparative
Procedure 7 Reviewing the Line Ministry’s Financial Model by the PPP Central Unit
Procedure 8 Selection and Announcement of the Winning Bidder
Phase 5 presents the procedures to advance from the receipt of finalproposals through the official decision on the winning bidder and formalnotification and announcement.
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Phase 6: Contract Signature & Financial Clo-sure
� Finalization of Contract negotiations.
� Implementation of Conditions Precedent “CP” & Ensuring that all obligations are fulfilled from both Government and Private Sector’s.
� Ensuring that signed contracts reach financial closure.
Finalizing
Ensuring Implementing
This Phase explains the process in which the Line Ministry will sign the finalcontract with the preferred bidder enabling it to finalize all the financialclosure agreements with lenders and co-financiers.
Phase 7: Post Award PPP Performance Moni-toring & Contract Compliance
Procedure 1 Preparation of PPP Contract Monitoring Plan and Establish-ment of Performance Control Committees.
Procedure 2 Monitoring performance during construction and operation.
Procedure 3 Managing requests to revise or renegotiate contract &managing dispute resolution.
Procedure 4 Managing PPPs at the End of the Contract and Asset transfers.
This phase describes the procedures required by the Line Ministry to monitor the performance of the private sector during the project construction and operation.
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Chapter III Update on The Current PPP Projects
PPP Schools Project
Summary of The Establishment of 287 Public Schools
The New Schools PPP Project is one of the key PPP pilot projects whereby the General Authority of the Educational Buildings (GAEB) with the technical assistance of the PPP Central Unit has invited the private sector participation, through a competitive bidding process to enter into PPPs for the design, construction, equipping, furnishing, maintenance, financing and provisionof non-educational services (including maintenance, cleaning, pest control, security, help desk facilities, and other services) for 345 new public Schools in 18 governorates for a period of 15 years divided into 7 geographical groups. This Project is the first stage of a program that is expected toinclude about 2,210 new public schools over the next 5 years.
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The current Project is tendered under law 89 (1998), the Law on Organizing Tenders and Bids for public procurement. Each of the 7 geographical groups was tendered separately under one tender in which the private sector will be allowed to bid for one or more group, as it may see fit. Projects followingthis pilot project will be tendered under the new PPP Law currently awaiting approval from the Egyptian Parliament.
The PPP Central Unit has appointed a number of different advisors to assist and facilitate the signature of the Contract. The International Finance Corporation (IFC) was contracted as the Transaction Lead Advisors while White & Case as the Legal Advisor for the Schooling Project.
The pre-qualification Committee has carried out a detailed evaluation of thePre-qualified Applications and short listed 6 qualified bidders out of whichthe following are expected to bid for the project:
Table 3.1: Qualified Bidders
Company Name
Samcrete Egypt Engineers & Contractors
IT Venture – Nile Capital
Abu-Dhabi Investment Company - UPS
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Next Steps For The Sector Pilot Project
Invitation to Bid was issued in July 2007 and restructured in July 2008 – Number of schools went down to 290 schools and bidding documents revised. The final amended Tender Documents including Contract and Annexes willbe issued during Q2/2009 and Notification of Award will be announcedduring Q3/2009. The construction phase shall begin during Q4/2009 and one third of the schools shall be operational by Q4/2010.
Under the project the private sector Service Provider will receive quarterly availability payments throughout the duration of the PPP contract 15 years including 3 years for construction following completion of construction and acceptance of the schools which is estimated to be 3 years. The availability payment is expected to cover amortization of capital costs, maintenance and other non-educational services, provided by the Service Provider under the PPP Contract.
At the end of the 15 year period of the Contract, the Service Provider shall hand over the schools to GAEB in a good operational rehabilitated condition as stipulated in the contract against no financial payments.
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PPP Health Projects
Summary of Alexandria University Hospitals Project
The new University Hospitals PPP Project is one of the key PPP Pilot projects whereby the Ministry of Higher Education, represented by Alexandria University, with the technical assistance of PPP Central Unit has invited the private sector participation through a competitive bidding process to enter into PPPs for the design, construction, financing, equipping, furnishing,maintaining and provision of non-clinical services for one tender in 2 different lots whereby each of the qualified Bidders is entitled to submit itsbid for one or both lots as follows:
� Lot 1: The new 200 bed, Smouha Maternity University Hospital and a Blood Bank located at the Smouha Maternity Hospital
� Lot 2: The new 230 bed, New Mowassat University Hospital with Centers of Excellence (COE) for the provision of highly specialized services in Neurology and Urology/Nephrology (including kidney transplants).
The current Project is tendered under law 89 (1998), the Law on Organizing Tenders and Bids for Public Procurement. Projects following this pilot project will be tendered under the new PPP Law currently awaiting approval from the Egyptian Parliament.
The PPP Central Unit has appointed a number of different advisors to assist and facilitate the signature of the Contract. The International Finance Corporation (IFC) was contracted as the Transaction Lead Adviser while Solve Consulting & HBS Consulting as Technical Advisors, and Trowers & Hamlins as Legal Advisors.
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Ministry of Finance
The pre-qualification Committee has carried out a detailed evaluation of thePre-qualified Applications and determined 8 qualified bidders as follows:
Table 3.2: Qualified Bidders
Company/Consortium Name Country
Orascom Construction Industries Egypt
Samcrete Egypt
Carillion PLC United Kingdom
Phillips Egypt
Saudi German Hospitals Group (SGHG) KSA
Babcock and Brown ConsortiumAbu Dhabi Investment Company (ADIC)Hassan Allam Sons
U.KUAE
Egypt
IT Ventures ConsortiumInterhealth CanadaIndustrial Construction and Engineering Co. SIACMiddle East North Africa Infrastructure Fund (MENA IF)
EgyptCanadaEgyptUAE
Gemmo Egypt LLC ConsortiumDorra Group – CRCDiamond Sharm Touristic CompanyEngineering Co for Real Estate
ItalyEgyptEgyptEgypt
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Next Steps For The Sector Pilot Project
Invitation to Bid will be issued by the end of Q1/2009. Individual meetings with Qualified Bidders; responding to their inquiries and/or clarificationon the Tender Documents are expected to be during Q2/2009. QualifiedBidders are expected to submit their Technical and Financial Bids by Q3/2009. Awarding and signature of PPP Contract by end of Q4/2009, and Commencement of services at the hospitals should be in Q2/2012.
Under the projects, the private sector Service Provider will receive quarterly availability payments throughout the duration of the PPP Contract (20 years including 2 years for construction) following completion of construction and acceptance of the Hospitals which is estimated to be 2 years. The availability payment is expected to cover amortization of capital costs, maintenance and other non-clinical services provided by the Service Provider under the PPP Contract.
At the end of the 20 year period of the Contract, the Service Provider shall hand over the Hospitals to Alexandria University in a good operational rehabilitated condition as per stipulation in the Contract against no financialpayments.
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Future Projects in Pipeline
Table 3.3: Pipeline Projects
# Project
Ministry & Ten-dering
Authority
Descrip-tion
Role of the Pri-
vate Sec-tor and Project
Life Span
Project Status
Require-ments
Com-ments
1
El Abassia Hospital (Ministry of Health Pilot Project)
Ministry of Health
Demoli-tion and Re-con-struction of an approxi-mately 150 Bed General Hospital
Finance, Design, Re-Con-struct, Operate, Equip and Pro-vide Non-clinical Services.
20 Years
Both Projects will be tendered in 1 bid divided in 2 lots
Prepara-tion of Concept Paper
Land Own-ership status under study
Submis-sion of Concept Paper & Con-tracting Transac-tion Advi-sors
Comple-tion of Land Own-ership Status
The Project will be tendered under Law 89
Abassia Oncology Center (Ministry of Health Pilot Project)
Construc-tion of an approxi-mately 150 Bed Oncology Center
2
Boulak General Hospital
Ministry of Health
Construc-tion of an approxi-mately 150 Bed General Hospital
Finance, Design, Re-Con-struct, Operate, Equip and Pro-vide Non-clinical Services.
20 Years
Prepara-tion of Concept Paper
Land Owner-ship sta-tus under study
Submis-sion of Concept Paper & Con-tracting Transac-tion Advi-sors
Comple-tion of Land Own-ership Status
The Project will be tendered under Law 89
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PPP Utilities Projects
Summary of New Cairo WastewaterTreatment Plant
The New Cairo Wastewater Treatment Plant PPP Project is one of the key PPP pilot projects whereby the Ministry of Housing, Utilities and Urban Development (MHUUD) through New Urban Communities Authority (NUCA) with the technical assistance of the PPP Central Unit has invited private sector participation, through a competitive bidding process to enter into PPPs for the design, construction, financing, operation and management of anew Wastewater Treatment Plant with a total capacity of 250,000m³/day to treat wastewater within New Cairo City, Madinaty and El Mostakbal with the objective of implementing a model of PPP transaction in the urban services area which can then be replicated in other projects of the wastewater sector.
The current Project is tendered under law 89 (1998), the Law on Organizing Tenders and Bids for Public Procurement. Partnership projects following this pilot project will be tendered under the new PPP Law currently awaiting approval from the Egyptian Parliament.
The PPP Central Unit has appointed a number of different advisors to assist and facilitate the signature of the Contract. The International Finance Corporation (IFC) was contracted as the Transaction Lead Adviser while Parsons BrinckerHoff as Technical Consultants and Gide Loyrette Nouel as Legal Advisors.
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The pre-qualification Committee has carried out a detailed evaluation ofthe Pre-qualified Applications and the following 5 qualified bidders hassubmitted their Bids:
Table 3.4: Five Bidders:
Company/Consortium Name Country
Orascom construction industries Aqualia Aqualia Infrastructions
EgyptSpainSpain
Mohamed Abdulmohsin Al Kharafi & Sons Company (MAK)
Kuwait
Samcrete Befesa CTA Emasesa BDDC
EgyptSpainSpain
Bahrain
AAW UtilitiesVeolia Water AMI INTECH (International Environmental Technolo-gies)
EgyptFranceEgypt
Metito Berlin WasserECG Hassan Allam sonsMetito Projects
Germany – U.A.EEgypt EgyptUAE
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Next Steps For The Sector Pilot Project
Tender Document as well as Invitation to Bid was issued in December 2008. The 5 Qualified Bidders submitted their Bids by end of April 2009. ContractSignature is expected by end of Q2/2009. Construction commissioning is scheduled Q1/2010 and Plant Operation by Q1/2012.
Under the Contract, the Service Provider will receive from NUCA sewage treatment charge / treated m³ of Wastewater following completion of construction and acceptance of the Wastewater Treatment Plant construction period which is estimated to be 2 years and operation period of 18 years.
At the end of the 20 years of the Contract, the Service Provider hand over the Wastewater Treatment Plant to NUCA in good operational condition as stipulated in the Contract against no payments.
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Future Projects in Pipeline
Table 3.5: Pipeline Projects
# ProjectMinistry & Tendering Authority
Descrip-tion
Role of the Pri-
vate Sec-tor and Project
Life Span
Project Status
Expected Date of closure
Expected Date of Project Delivery
1
6th of October Wastewater Treatment Plant
Ministry of Housing, Utilities&UrbanDevel.
New Urban Communi-tiesAuthority (NUCA)
Upgrade in Wastewa-ter Treat-ment Plant capacity to 600,000 m³/day
Finance, Design, Construct, Operate & Maintain
20 Years
Concept Paper prepared
Procure-ment of Transac-tion & other Advisor
Q2/2010 Q2/2012
2
Abo Rawash Wastewater Treatment Plant
Ministry of Housing, Utilities&UrbanDevel.
ConstructionAuthorityFor PotableWater&Wastewater(CAPW)
Upgrade the level of treatment from prima-ry treatment to second-ary treat-ment for wastewater Treatment Plant in Giza Governor-ate, with the capacity of 1.2 million m3/day
Finance, Design, Construct, Operate & Maintain
20 Years
Concept Paper prepared
Procure-ment of Transac-tion & other Advisor
Q2/2010 Q2/2012
3
Helwan Wastewater Treatment Plant
Wastewater Treatment Plant with capacity of 500,000 m3/day
Finance, Design, Construct, Operate & Maintain
20 Years
Concept Paper Avail-able
TBD
4
Nahia Wastewater Treatment Plant
Wastewater Treatment Plant with capacity of 200,000 m3/day
Finance, Design, Construct, Operate & Maintain
20 Years
Concept Paper Avail-able
TBD
Potable Water Pipeline Projects awaiting approval on Issuance of PPP Law
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PPP Transport Projects
Highway Projects
Summary of Shubra / Banha Highway ProjectThe Shubra / Banha Highway Project is one of the key PPP Pilot projects whereby the GARBLT (The General Authority for roads, bridges and Land Transport) with the technical assistance of the PPP Central Unit will invite the private sector participation through a competitive bidding process to enter into PPPs for the construction, operation and maintenance of a new freeway linking Shubra city to Banha city. The Project consists of a dual three lane motorway parallel – and East located - to the existing road between the Cairo Northern ring road and Banha city, the motorway is around 38 km long. It would start on the Northern Ring Road and will connect both roads to Alexandria and to Al Mansura.
The project will be tendered under the Roads law No. 229 of 1996 which is an amendment of Law No. 84 of 1968, that allows granting concessions to local and foreign investors for purpose of building, managing, maintaining highways and free ways in return for collecting user charges.
Project timeline: � Under Due Diligence
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Summary of Rod El Farag Access Project
The Rod El Farag Access Project is one of the key PPP pilot projects whereby the MHUUD (The Ministry of Housing, Utilities and Urban development) with the Ministry of Transport and by the technical assistance of the PPP Central Unit will invite the private sector participation through a competitive bidding process to enter into PPPs for the construction, operation and maintenance of Rod el Farag Access. The project route connects main routes at the River Nile bank to the ring road around greater Cairo then, to Cairo – Alexandria highway.
The project will connect main routes as Abu Bakr Al Sedeek corridor and Seket al waily corridor in eastern Cairo to the Greater Cairo ring road starting at El khalafawy square and Ismailia lake in addition to crossing the River Nile at Al Warrak island till the ring road; achieving speed limit of 120 km/hour. The highway will be of 4.2 km length, and width 45 m consisting of 4 lanes each side.
Project timeline: � Under Due Diligence – Transaction and Technical Advisors under
procurement
National Program for Public Private Partnership
52
Chap
ter
IV,
Dra
ft law
for
regula
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artn
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PPP”
Chapter IV Draft Law For Regulation of Public Private Partnership “PPP”
In pursuit of social and economic development and maintenance of high level of growth through enhancing the level of public services and utilities, as well as to ensure an effective and enforceable execution of infrastructure projects, GoE encouraged private sector to increase its direct investments in undertaking public utility projects through embarking on a PPP program without undermining State obligations towards its’ citizens and the quality consideration of such services and public utilities.
After conducting studies on the international successful models of PPP applications that relied on lower costs, better maintenance for public utilities projects and longer life span for public assets and private sector participation to expedite progress in the performance of these services and utilities provided in the education, health, transport, water, wastewater treatment sectors as well as other infrastructure projects,
GoE realized the importance of provision of an appropriate legal framework to ensure a balanced mechanism of duties and obligations between various parties of a PPP Contract to ensure successful and feasible project implementation and to allocate the risks to the party most capable to take,
In order to overcome legal and procedural impediments and difficultiesfaced by the Government to implement a partnership with the private sector in public infrastructure projects, with the present legal framework using current legislations related to concessions or public procurement law, or even special public sector laws, and
To ensure the presence of a legal framework to govern the partnership with private sector and guarantee the investor selection in a transparent, fair and competitive manner as well as determining the scope of partnership
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Dra
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PPP”
National Program for Public Private Partnership
projects and the role of various Government Entities to choose, certify and follow up on the performance of PPP projects and facilitate the private sector role to finance such projects.
The GoE prepared a draft PPP law which includes three issuance articles in addition to thirty seven articles divided into four chapters constituting the PPP law itself.
The 1st issuance article of the law stipulates that PPP contracts must be applied under the auspices of PPP law and that public utilities law, concessions law and public procurement law are not applicable to PPP Contracts.
Such article stipulates that PPP contracts scope are limited to contracts executed by Ministries or Agencies with special balance sheets, services and economic Public Authorities in addition to General Public Entity’s scope are limited to contracts determined by virtue of a Prime Ministerial decree.
The 2nd issuance article of the law grants the Minister of Finance the right to issue the Executive Regulations of the PPP Law within three months of its date of issuance.
The first article of the PPP law determines the general rules, definitions andsignatory powers of PPP contracts. It also clarifies the difference between theoperation mechanism whereby the private sector is responsible to operate the project and sell the product or provide service to the administrative contractual entity and the concession mechanism whereby the private sector in addition to operating the project is responsible of selling the product and provide the service directly to end users.
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This same first article stipulates the definition of a private sector as anEgyptian or foreign judicial entity being company or consortium, the public funds participation in which does not reach 20% of its equity. It also determines that the execution of a PPP contract will only be made with an Egyptian Joint Stock Company whose only purpose of establishment is the execution of the PPP contract. Such company will be incorporated by the winning bidder either before or after the tender award.
The second article is of special importance as it determines exclusively the definition of the PPP contract which should fulfill the following criteria andterms:
� The minimum commitments of the private sector would be to financeand construct or rehabilitate a public utility project along with provision of maintenance and of necessary services provided by the project. As for the operation or concession, it will be considered as additional obligations.
� The duration of the contract shall vary from five years at least to thirtyyears at most from the date of signature.
� The entire value of the contract should not be less than one hundred million Egyptian pounds.
� The private sector should not be paid any financial returns under thecontract except after the issuance of an Acceptance Certificate certifyingthat the level of work, products or provision of services is accepted by the administrative authority.
Since the Egyptian legislator is keen to provide adequate flexibility desiredfor some of the projects of such nature whereby its related financial andeconomic feasibility studies resulted in insufficiency of the thirty years periodas a maximum period for the PPP contract, the same article grants the permission to exceed the thirty years period originally or renew the period of the contract upon its expiry for a period not to exceed half of the original period. Such two exceptions would require for the first case the approval ofthe PPP Ministerial Committee after submission to the Prime Minister and for the second case the approval of the Cabinet upon submitting a request to the Ministerial Committee based on the PPP Central Unit recommendation.
Based on the understanding of the risk and sensitivity of having the private sector sell the product or provide the service directly to the end user and to collect payments, this article stipulates additional conditions to grant concessions to the private sector.
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In order to ensure implementations of the basics of international practices in the field of preliminary screening of projects to be executed under the PPPumbrella and its requirements of conducting legal, financial and technicalstudies in addition to economic, social and environmental feasibility studies article 3 stipulates the following as conditions and prerequisite for PPP implementation:
1. Conducting all types of studies from specialized consultants under the supervision of the PPP Central Unit
2. Concentration on highlighting the results of the feasibility, quality of end product or service and status of utility upon transfer back to state
3. Obtain approval from the Ministerial Committee of PPP Affairs on structure of the partnership.
To strengthen the regulatory role of the state during the two phases of execution and operation of the projects, article 4 confirms the dutyimposed on the contractual administrative entity and other related entities to supervise and regulate through appointment of representatives during the executing phase of the project and through the creation of Project Performance Monitoring Committee during the operation phase of the project by the private sector, whereby such committee is obliged to ensure the adequacy of the product or service provided to the required level and to submit a periodical report of its work to the competent authority.
Where as the nature of the PPP contracts is classified as long term contracts, articles 6 and 7 confirm the flexibility of changes taking place during thecontractual period. It regulate the right of the administrative entity to amend the conditions of construction, furnishing, rehabilitation and any other related work or services stipulated under the contract. Such articles also define the right of the administrative entity to amend the basics ofoperation and concession including the payments against the product or service availability. Subsequently it regulate the mechanism of economic equilibrium of the project incase of changes in law or regulations and events of compensation to either parties.
Realizing the fact that the continuation of operation of public utilities and services of projects, contemplated under the PPP contract represents the most important target to be reached articles 8 and 9 regulate the consequences of default of the private sector on its obligations under the PPP agreement and stipulate the rights of the lenders to step in order to remedy such default and to operate the project, also it stipulate the right of the administrative entity to step in to operate the project either directly
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or through another party chosen for such purposes. In all cases the private sector remains responsible of the project’s assets, rights and maintenance as well as compensation due to any event of default of its obligations.
Article 9 regulates the transfer of project assets and rights at the end of the term of the contract in good and valid for use status without any financialconsideration. Since the project is related to public utility. Article 10 imposed a ban on the seizure and execution over the project’s assets. The article also banned the private sector from affecting any real rights over its assets and funds excluding from such ban the accessory real rights of the lenders provided that the prior written approval of the contractual administrative entity is obtained.
As for articles 11 and 12, it regulates the right of the private sector to enter into sub contractual agreements and the role of administrative entity to object and receive work progress periodical reports.
With regard to regulations of the Government role on a Ministerial and Executive level concerning the choice, certification, and follow up on PPPprojects performance, chapter two of the law which includes articles from 13 till 16 regulates the formation and jurisdictions of the Ministerial Committee composed under the Presidency of the Minister of Finance. Such committee decides on the national policy, issuance of instructions and general criteria for PPP, ratifies standard contracts and studies, recommends requiredmechanisms to support the financing market and follows up on proceduresof financial provisions for these projects as well as follows up on projects’performance and participates dispute resolutions.
Article 14 regulates establishment, composition and work structure of the PPP Central Unit which is considered the financial, technical and legal experthouse of the Ministerial Committee. PPP Central Unit is responsible for the follow up on PPP projects before, during, after tendering, award procedures and contract complete execution.
Articles 15 and 16 stipulate the relationship between PPP Central Unit and the administrative entities wishing to enter into a PPP contract to ensure strategic and central organization of a unified national policy for PPP projects.
Chapter three of this law regulates in detail the tendering procedures of PPP projects starting from issuance of invitation for Expression of Interest, Information Memorandum which regulated under article 18, including procedures for choice of qualified bidders, composition of a competent
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committee.for.qualifications.and.claim.procedures,.procedures.to.regulate.meetings. and. preparatory. conferences. with. qualified. bidders. as. well. as.other regulations to insure fair rights to all competitors, their rights in confidentiality. of. technical,. economic. and. financial. forecasts. and. ending.with the issuance of tender documents and its contents.
Article 22 regulates one of the new phases recommended by the PPP international implementation models which is the competitive dialogue that permits separate one to one meetings with bidders to discuss their non binding.preliminary.technical.and.financial.bids.before.submitting.their.final.ones. Regarding procedures of evaluation and award, articles 24 through 32 regulate the procedures and provisions for evaluation and award committees’ composition, basis for bids submission and rules of determination of estimated monetary value for the projects. The latter was discussed in details in article 24 which regulates the mechanism for calculation of the estimated monetary value of the project to ensure that the risks borne by the private sector are computed within. Article 30 regulates the negotiations procedures with the winning Bidder.
Finally chapter four articles from 33 till 37 regulate the fundamental provisions and heads of terms required to be contemplated under the PPP contract especially procedures related to settlement of disputes through arbitration.and.agreements.with.financing.institutions......................