1. Odessa Maritime Days
24 May – Odessa

2. Transactions: Pre-Crisis
Ports: Facts & Trends
Transactions: Pre-Crisis
May 2013
Odessa Maritime Days

3. Ports: Facts & Trends
Crisis
Global economic crisis impacted the global trade flows
Trade flows start to decrease and number of containers go down
Sea freight rates have gone down dramatically
Companies are in financial distress and are forced to sell stakes in port assets
Operators have difficulties closing a financial loan
Less appetite for port concessions
Even African projects slow down: syndication
May 2013
Odessa Maritime Days

4. Project Bankability a viable project is not yet a bankable one
Economic & Financial Balance
Financial Viability
Bankability
IRR
NPV
Secu-rities
DSCR
Determined over a period of > 20 years
Includes future project phases
Determined over a period of < 20 years
Depending of project start-up phase
May 2013
Odessa Maritime Days

5. Project Bankability a viable project is not yet a bankable one
Debt service
Revenue protection (tariff and competition)
CAPEX/ OPEX aligned with revenues
Value Engineering and port planning aligned with business demands
Securities
Proper structuring
Proper risk engineering
Quantification (value) of impact of different structures and risk allocations: create value
Safeguarding in the mean time authorities interest to retain discretion over policy
New era of contract engineering
May 2013
Odessa Maritime Days

6. Value engineering A viable project may not yet be bankable
This project has a project IRR of 19% and a positive NPV.
However, the first year of positive Free Cash Flow is in year 6
The pay-back period is 10 years from initial investment.
Vale created after the expansion investments in year 15 are not of interest for the lenders!
So, how bankable is this project for project financing?
May 2013
Odessa Maritime Days

7. Basic Port Management models
Port Models
Basic Port Management models
Type
Nautical Access
Infrastructure
Superstructure
Labour
Nautical services
Antwerp
Public, by Regional Government (100% subsidy)
Public, partly PA partly Reg. Government
Mostly Private
Some public cranes at daily rent fee
Private via regulated dock labor pool
River towage: open thru 7-yr concession
Harbour towage: by PA
Bunkering: open
Rotterdam
Public by National Government (100% subsidy)
Port Authority*
Private
Private incl. subcontract.
Towage: open
Pilotage: private, closed
Felixstowe (HPH)
Harwich Haven Authority responsible dredging &
maintenance navigation channel
Pilotage: Harwich Haven Authority
Other: Private, Open
Article Uruguay & Buenos Aires
May 2013
Odessa Maritime Days

8. Financial Structure Business Case Model
Cash Flows PA/TO
Financial Structure Business Case Model
Port Authority
Operator
Surplus profit is transferred back to PA
Port dues
Concession
fees
Handling
fees
Storage fees
Commercial
loans
Soft loans
Terminal Operator
Assets
Port Authority
Assets
Equity
Subsidy
Commercial
loans
Concession
fees
Opex
Opex
May 2013
Odessa Maritime Days
© Accenture 2001

9. Financial Structure Business Case Model
Cash Flows PA/TO
Financial Structure Business Case Model
Minimal rate of return TO
Surplus profit
Minimal rate of return PA X%
Revenue
Handling fees Y%
Concession fees
Create market appetite
Secure revenues operator
Concession contract (bankability)
Competitive tendering for concession
Maximise value to Port
Align concession fees with surplus profit (time and amount)
Port dues
BC TO
BC PA
May 2013
Odessa Maritime Days
© Accenture 2001

10. Contract Award Criteria
Tender Process
Contract Award Criteria
Selection and awarding (give substance to objectives of Ministry/PA)
Value:
throughput guarantees
productivity
risk absorption
Money:
upfront fee
fixed fee
Royalty/ revenue share
May 2013
Odessa Maritime Days

11. Transaction Costs – Classical Approach
Tender Process
Transaction Costs – Classical Approach €
transaction costs
private
public
time
5 Candidates
1 Preferred Candidate
preparation
pre-qualification
proposal
negotiation
Draft Contract
Final Contract
High transaction costs at the tail of the tender procedure for both public and private sector
Time consuming negotiations as contract/critical topics are brought in the process (too) late
May 2013
Odessa Maritime Days

12. preparation + market consultation
Tender Process
Transaction Costs – Competitive Dialogue €
Potential to deal with sensitive topics
public
transaction costs
transaction costs
private
time
5-10 Candidates
3-6 Candidates
3-6 Candidates
preparation market consultation
pre-qualification
contract “dialogue”
proposal
Draft Contract
Proposal
Final Contract
BAFO
Significant transaction costs at the beginning of the tender procedure for both public and private sector
No time consuming negotiations as contract/critical topics are brought in the process early and under competition
May 2013
Odessa Maritime Days