Public Private Partnership Investment and Construction Armando R. Araujo Cairo 2003

Concessionaire Constructs Plant Uses Plant Insurance Equipment Supplier Contractor Banks Investors Operator Maintenance Supplies Consumers Government

Concessionaire or Operator Constructs Plant Uses Plant Insurance Equipment Supplier Contractor Banks Investors Operator Maintenance Supplies Consumers Government Agency

Country Risks Political Risks (political situation / fiscal regime / expropriation / cancellation) Commercial Risks (economic situation / inflation / exchange rate) Legal Risks (proprietary legislation / environmental legislation / sustainability of laws / appeals / justice)

Project Risks Construction Risks –Design ==> output, efficiency –Cost of Construction (geology, quantities) –Completion Delays –No completion –Bad performance by Contractor

Project Risks (Cont) Operational Risks –Other investments not materializing –technical risks (performance) –demand risks (market for services) –supply risks (consumables input) –force majeure

Project Risks (Cont) Financial Risks –inflation –arrears or non-payment of services –exchange rate (devaluation and availability) Environmental Risks –licenses –penalties –new rules (public opposition)

Turn-Key Contracts Risks (division) Design (responsibility / transfer ownership of technology) Supervision of Works (partial receptions) Payment Schedule (this is one of the most difficult issues ==> not only economic issue but risk)

Pre-Qualification Base ==> Standard Document for Works Important Agents as Part of Applicant Balance Risks x Restricted Competition Experience of Sub-contractors Requirements for Concessionaire Company Project Information Memorandum Advance Criteria for Award

Bidding Document for Turn-Key Design Responsibility Supervision of Works Price Schedules –Avoid Up-front Loading –Divide Activities of Easy Measure Payment Schedules

Bidding Documents for Concession Two- stages x One-Stage Technical Evaluation Avoid Requiring Investment Plan Use Performance Indicators Concession Contract –Investments –Operation & Maintenance

Concession Contract Service to provide Concession Area Rights Concessionaire Obligations Concessionaire Regulation Applicable Regulators Power Penalties for non- compliance Tariff Regime Guarantees Duration Contract Termination; Renewal Dispute Resolution Applicable Law