Rail PPP Critical Success Factors Focus: Greenfield Rail Projects

Transcription

1 2014 IPF Conference Milan, Italy Rail PPP Critical Success Factors Focus: Greenfield Rail Projects Peter James, MBA, CFA Head, Financial Practice T: George Kaulbeck, P.Eng., MBA Principal and Project Manager T: November 26, 2014

2 Outline 1. CPCS Introduction P3 Terms CSF Framework 2. International Case Study 3. CSF Recommendations

3 Our History

4 Global Management Consulting Firm CPCS is an international consulting firm providing advisory services to public and private sector clients in the infrastructure sector. Our services are critical to the development of rail sector throughout the World. We create value for our clients by providing management, technical, legal and financial and PPP advisory services under one roof. 4

5 Sectors of Expertise 5

6 Meet Our Team Consulting staff We are unique. With over 75 staff; business consultants, economists, financial analysts, planners, infrastructure engineering, operations experts, institutional specialists, social specialists and project managers. We are diverse. CPCS multicultural team can provide unique perspectives. Our team consists of 19 different nationalities. We are forward thinking. In a male dominant industry, CPCS fresh approach involves selecting top talent for our teams, women and men. Our team consists of 32% women. Support staff We are well-educated. Our team members hold MBA s, PhDs, MDs and specialized industry certifications/diploma s. We are global. Reaching wide with 22 worldwide offices and plans for more as we continue to expand. We are multi-lingual: Our languages include English, French, Portuguese, Bengali, Hindi, Japanese, Turkish, Spanish, Arabic, Urdu.

7 Our Clients Our clients have included every level of government in Canada, foreign government departments and agencies, industry associations, the private sector and all major international financial institutions, including the World Bank. Government International Financial Institutions Private Sector Industry Associations and Regional Authorities

8 Solutions provided by CPCS Economic Analysis Economic Impact Assessment Feasibility Studies/Project Appraisal Financial Analysis Financial & Operations Modeling Institutional Development & Reform Business Process Evaluation and Improvement Human Resources Planning Capacity Building and Training Legal/Regulatory/Policy Legal Due Diligence on PPP Projects Preparation of Transaction Documents Design of Regulatory Frameworks Design and Establishment of Regulatory and PPP Authorities Drafting of Enabling Legislation Transaction Advisory Services Investor Support and Planning PPP Capacity Building Due Diligence Strategic Options Analysis Deal Structuring and Marketing Management of Bid Process and Negotiations GIS Services Infrastructure, Network and Asset Mapping Route and Supply Chain Optimizations Multimodal Flow Movements Location-Allocation and Decisional Modeling Conceptual Modeling in 3D Engineering Operational Analysis / Modeling Conceptual Design

9 Keeping Railways on Track with P3s Construction Concession BOT Ownership Railway Infrastructure Use (access regime and operations) DBO BOOT DBfOT Etc. Maintenance

10 Keeping Railways on Track with P3s Concession: Generally provides the operator with long term access to the rail assets for all operation, investment and financing. The rail assets remain with the public sector and authority for the assets is transferred back to the public sector following the term of the conccesion period. Typically, the Operator is responsible for revenue collection Build Operate Transfer: Utilized for greenfield railways Ownership may be limited to a discrete asset of the railway Revenue collection may be the responsibility of the private or public sector Variations include:dbo, BOOT, DBFOT, etc

11 Critical Success Factors (CSFs) Supportive Legal/ Regulatory/ Institutional Environment PPP lifecycle Planning Political Alignment and Support Risk Management These CSFs are not mutually exclusive.

12 CSF: Legal/Regulatory/Institutional Legislation Transport Act PPP Act Railways Act Regulatory Health and Safety Competition Economic Enablement Rules of engagement Institutional Engineering Bodies PPP Center Ministry of Rail in this category, the legislative environment is the linchpin

13 CSF: Political Support Citizens Government or Project Champion Masterplan Political Support

14 CSF: Risk Management There are hundreds of risks which impact the execution of a PPP Project. We have broadly defined these into 2 categories: Extrinsic Risks Macroeconomic risks Force majeure risks Legal and Regulatory risks Appropriation risks Expropriation risks Intrinsic Risks Design risks Finance risks Construction and Procurement risks Operations and maintenance risks

15 CSF: PPP Lifecycle Planning For a P3, remember 6P: Proper Prior Planning Prevents Poor Performance Preparation Phase Project Procurement Phase Project Implementati on and Monitoring Rail PPP Project Success If the 3 other CSFs were not properly accounted for, rail PPP success will be headed for derailment.

16 International Rail PPP Study CPCS Proprietary database We highlight elements designed to support a successful rail PPP. Year of Contract Signature Total In development 1 Type of Service Total High speed passenger 6 Light Rail 9 Tram 3 Metro 3 Suburban Passenger Trains 1 Urban Rail 3 Grand Total 25 16

17 25 Rail PPPs Analyzed For Today 3 highlighted Bangkok s Skytrain (BTS) South Africa s Gautrain Mumbai s Metro (3 phases) 17

18 Bangkok Skytrain (BTS) Operator accepted full demand and revenue risk Traffic study forecast flawed Poor multi-modal links Asian Financial Crisis impacted Operator - unable to service debt (Baht devalued, Foreign debt) Dispute resolution mechanism Not part of a centralised plan Following restructuring, BTS the railway s operator recently went public in the largest Thai IPO on record. $2.13 billion USD (April, 2013)

19 South Africa s Gautrain DBfOMT FX Guarantee by Public Sector Integrated with Bus feeder lines Finance support by public sector Minimum Revenue guarantee with an revenue upside arrangement KPIs built into PPP Agreement Fare adjustment mechanisms

20 Mumbai Metro (Phase 1, 2 and 3) Mumbai Metro 1: BOOT Fare Setting mechanism is poorly defined, resulting in numerous legal disputes Viability Gap funding by public sector, with remaining by private sector Numerous delays relating to ROW land acquisition (Phase 1, 2, 3) Construction and Operations specifications are vague in the PPP Contracts In November, 2014 the Operator walked away from Phase 2.

21 International Rail PPP Study: Success Elements Typical Risk Allocations: BLT BOT Operating Concession Design & Construction Risks Mainly Private Sector Mainly Private sector Mainly Government Traffic & Revenue Risks Government Typically Shared Operations & Maintenance Risks Government Private Sector Private Sector Macroeconomic Risks Political Risks Mainly Government Government 21

22 Government Operations Private International Rail PPP Study: O&M Private sector typically maintains infrastructure and rolling stock Design & Construction Private Government BOT Operating Concession Private sector maintains rolling stock; infrastructure can be maintained by either Government or private sector BLT N/A Maintenance can be by either private sector infrastructure company or Government (or p.s.) operator

23 International Rail PPP Study: Financing Operations Private Government Private sector finances infrastructure and rolling stock; usually with participation of Government Design & Construction Private Government BOT Operating Concession Typically, Government finances infrastructure / though private sector may also finance systems and/or rolling stock BLT N/A Private sector finances infrastructure; usually with participation of Government; Rolling stock (& some systems) by Government or other private sector participant

24 International Rail PPP Study: Revenue All Risks with Government Risk-sharing with Government collecting revenues Risk-sharing with Private Sector collecting revenues All Risks with Private Sector Government collects fare & non-fare revenues/pays private sector for service or availability Service or availability payments tied to traffic levels or SLAs Minimum Traffic or Revenue Guarantees by Government* Private sector collects revenues* *Established to allow private sector to meet a pre-set DSCR or IRR. May include Concession fees Other variations include: Shadow fares, track access charges, Viability Gap Funding 24

25 CSF Recommendations Legal/Regulatory/Institutional: Rule of Law must be clear and predictable Framework must support aspects such as: safety standards, land acquisition and basis for private sector involvement Consider a dedicated PPP Unit to facilitate the PPP lifecycle Develop Institutional capacity for good governance

26 CSF Recommendations Political Support: Improve the VfM aspect: Overarching plan or strategy or intermodal framework Establish priorities Share the benefits: Include options such a refinance sharing mechanisms. This will ingratiate the project in the publics eye as the taxpayer shares in the successes Guard against the downside: Transparent procurement process, well designed PPP Contract Project Champion

27 CSF Recommendations Risk Management Process: Define Monitor Risk Management Measure Allocate.An extensive list of risks and CPCS recommendations for allocation is found in the Paper.

28 CSF Recommendations Define: Define the risks relating to rail design, finance, operations, legal/regulatory, etc. Measure: Determine likelihood of occurrence and potential impact on the project. Allocate: Determine whether the public or private sector is best able to manage and mitigate the risk. Monitor: The phase is important as the risk allocation, measurement and allocation must be monitored and adjusted if necessary.

29 CSF Recommendations PPP Lifecycle Planning Clear Project Sponsor Master Plan/Feas. Study Industry Review PPP Options Analysis VfM Analysis Conflict Resolution Formula Roles and Responsibilities Monitoring reports/timing Communication Strategy Preparation Phase Project Procurement Phase Project Implementati on and Monitoring Rail PPP Project Success Transparent, open and well communicated Procurement process Bidder feedback on Tender docs

30 Questions and Discussions Peter James, MBA, CFA Head, Financial Practice T: