A stock taking and future perspective PUBLIC PRIVATE PARTNERSHIPS FOR CREATING AND MANAGING INFRASTRUCTURE AT SUB NATIONAL LEVEL A stock taking and future perspective Maniram Singh Mahat Executive Director Town Development Fund

PUBLIC PRIVATE PARTNERSHIPS AGENDA Understanding PPP transactions Feasibility Study: Project Description Preconditions for Successful Tender under PPP Environmental and Social Analysis Financial and Economic Viability Check Contract Documents The way forward: Perspectives in Nepalese municipalities

PUBLIC PRIVATE PARTNERSHIPS What they are… “A cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards.” The Canadian Council for Public-Private Partnerships

Feasibility Study: Project Description Physical Description of the Facility Service Area Estimated Project Costs Project Implementation Schemes Project Financing Sources of Revenue Performance Standards/Specifications

Successful PPPs require Legal Instruments (PPP Policy, PPP Act, Guidelines, PPP focus SBD....) good transaction skills on the part of the public sector partner (including legal, financial, negotiation and industry specific skills) an experienced service provider from the private sector. Political Commitment

Preconditions for Successful Tender Available Site Local Support Adequate Consumer Base Absence of Competitive Complexes Favourable Market Conditions

Environmental and Social Analysis General Environmental and Social Screening IEE, EIA, EMP

We do need value for money. Financial Model Financial Analysis Economic Analysis Because We do need value for money.

Standard Viability Indicators Financial Internal Rate of Return (FIRR) Weighted Average Cost of Capital (WACC) Internal Rate of Return on Equity (IRR Equity) Net Present Value on Project (NPV) Net Present Value on Equity, after financing (NPV Equity) Payback Period, after tax

Financing Conditions Debt ....% of cost including capitalized interest Equity ....% of cost Repayment Period ....years, ....year grace period on principal. Interest is capitalized in the first year Interest Rate ...% per Annum

Economic Viability Indicators Economic Internal Rate of Return Economic Net Present Value on the project Benefit-Cost Benefit Proxies: Employment generation from the project Income generation from the project Increased land values around the project

CONTRACT DOCUMENTS Annex A: Concept Design and Technical Specifications prepared by the LGU Annex B: Proponent's Technical Proposal Annex C: Proponent's Financial Proposal Annex D: Project Construction and Implementation Schedule Annex E: Obligation of parties

Some Key Provisions General Provisions (effectivity, waiver, confidentiality Managing Force Majeure Event Default case of Proponent/s Dispute resolution Contract termination

The way forward: Perspectives in Nepalese municipalities What could be the ideal project list to start...? Urban Utilities: Water and Sanitation, Toll roads, Bus Terminals,

The way forward: Perspectives in Nepalese municipalities Social services infrastructure Basic urban services infrastructure Revenue generating urban infrastructure Drainage (Roads/Bridges/Culverts if part of drainage), Public Toilets, Slum Area Improvement (water, road, drainage, solid waste, and access roads to hamlets of the poor communities), SWM (Collection, Transportation and Disposal including equipment), Sanitation Programmes, Pre-primary Schools, Libraries/Reading Halls (book bank for poor children), Health Centres/Health Posts, Fire Station, Aged Rest-Houses/Orphanages, Water Pollution (including Sewerage, Waste Water Treatment Plants etc.), Social Housing, School buildings (hostels for girls and physically challenged), Green Zones/Parks/ Play Grounds, Municipal Hospitals, Aurvedic Hospitals, etc Roads and Bridges, Drinking Water, Preservation of Natural/Cultural/Archaeological/Heritage Sites, Slaughter House, Street Lightings, Municipal Buildings, Community Buildings and Rest Houses, Sports/Stadium, Recreational Area, Crematoriums, Museums, Protection of Natural resources ( Public Land Protection Works, River training for Soil Erosion Control, Preservation of Rivers/Streams/Ponds/Deep Water, Wells/Lakes/Stone Spouts) Controlling Air and noise pollution Plantation on Road sides etc.   Bus Parks and Parking lots (Trucks, taxi, motorbikes, Rickshaws/Horse Carts/etc.) Cottage/Medium/ Small Industries, Tourism development Projects, Market development project (Haat Bazar/Market Fair Centres/ Exhibition Centres) Communication Facilities, Generation/Distribution of Electricity (hydropower Projects) etc. Possible Finanicing: The TDF will revisit the above sectors on regular basis based on the government policy.

Capacity Gap at Municipal Level P3 Program Management in Nutshell and Capacity Development GENESIS FEASIBILITY PLAN & TEST PROCURE IMPLEMENT OPERATE Startup Monitoring Assessment Enhancement Contract Mods Contract Renegotiations Preliminary Project Definition Seed Funding Objectives Register Alternatives Index Prelim Schedule/ Budget Prelim Economic/ Financial Analysis Qualitative Analysis Fatal Flaw Analysis Process Map & Strategy Feasibility Report/ Project Approval Asset/System Evaluation Site Selection/ Analysis Environmental/ Permitting Analysis Final Project Definition Master Schedule/ Budget Political Climate Assessment Procurement Strategy Prelim Business Plan Public/Vendor Outreach & Stakeholder Consultation Business Plan Risk Assessment/ Allocation Delivery Methodology Commercial Terms /Contract Principles Deal Structuring Concept Design/ Performance Specs Procurement Documents Vendor Pre- Qualification Vendor Proposal Evaluation Contract Negotiations Design Compliance Construction Oversight Commissioning Administration Capacity Gap at Municipal Level

Issues Facing in Municipal PPPs Today PPP Project Pipeline: Biggest current constraint to PPPs in urban infrastructure is no inadequate legal frameworks, but the limited number of candidate PPP projects being identified and prepared. Govts. should focus on building the PPP project pipeline. Public Sector Risk-Sharing in PPPs: During past 1 year private urban infrastructure project developers (and lenders) are requiring more and clearer forms of public sector support, risk-sharing, and contingent liabilities than before. PPP Frameworks must be ready to manage these requests.