1.(I C R C)ACCELERATED PPP PROCUREMENT OPTIONS FOR EMERGING MARKETS DELIVERING HIGH QUALITY PPPs, VFM AND INFRASTRUCTURE SERVICE AT SPEEDENGR. CHIDI IZUWAH ED, PPP RESOURCE CENTRE, INFRASTRUCTURE CONCESSION REGULATORY COMMISSION Abuja , November 2012 Infrastructure Concession Regulatory Commission(I C R C)

2. Presentation Outline 1. Infrastructure & the Economy and ICRC 2. PPP Procurement Lessons 3. PPP Procurement Time Challenge 4. PPP Procurement Acceleration Options 5. Invest in Nigeria Value Proposition2Infrastructure Concession Regulatory Commission(I C R C) 3. Infrastructure & the Economy If Nigeria was a three legged stool I would say its stability and future depends on how well and how fast we tackle the infrastructure problem the shaky leg of the stool Dr. Ngozi Okonjo-Iweala HMF/CMEInfrastructure Concession Regulatory Commission(I C R C) 4. Africa is BIG! and full of OpportunitiesW EuropeUSA China Africa represents: 20% of global land area 13% of global population 2 % of global economic output North-South cross-Continental flight : 11 hours 5 time zonesIndiaInfrastructure Concession Regulatory Commission(I C R C) 5. ......Nigeria centre of the worldInfrastructure Concession Regulatory Commission(I C R C) 6. Projections (Top 20 League) Goldman Sachs projections places Nigeria as; the 20th largest economy by 2025 on the basis of GDP 21st on per Capita Income (2025). 12th largest economy if Nigeria maintains its growth trajectory to 2050, overtaking Korea, Italy and Canada on GDP.Infrastructure Concession Regulatory Commission(I C R C) 7. ICRC - Who are we The ICRC is the FGN s regulatory agency charged with catalysing public and private efforts/resources for the development and implementation of a world class PPP framework towards the development of world class brownfield and greenfield infrastructure for the benefit of Nigerians www.icrc.gov.ng Infrastructure Concession Regulatory Commission(I C R C) 8. Classical Major PPP Transaction Steps Decision to enter PPP Process Priority ProjectsPPP Road Map and FrameworkAppoint TeamProcurement Publication and AnnouncementsPPP Preparation Studies and Business CaseSelect AdvisersPPP PrequalificationPrepare and Issue Bidding DocumentsConduct Partner ProcurementImplementation, Service Delivery and MonitoringNegotiation and Contract SigningBid Evaluation and AwardInfrastructure Concession Regulatory Commission(I C R C) 9. PPPLIFECYCLEinlinewithNa2onalPolicy Project IdentificationPreliminariesProject Prioritization Project SelectionDevelopment PhaseNEEDS ANALYSIS PPP OPTIONS APPRAISAL VALUE FOR MONEY AFFORDABILITY SUSTAINABILITY PRELIM RISK MATRIX VIABILITY/BANKABILITY VGF OBC OBC APPROVALProcurement PhaseTRANSACTION ADVISER EoI AND RFP BIDDING BIDDERS CONFERENCE BID EVALUATION VALUE FOR MONEY TEST PREFERRED BIDDER FULL BUSINESS CASE FEC APPROVALImplementation PhaseTECHNICAL ADVISER MONITOR DESIGN AND CONSTRUCTION COMMISSIONING TEST VERIFY OUTPUT REQUIREMENTS CONTRACT MANAGEMENTPREPARING AND IMPLEMENTING EFFICIENT AND EFFECTIVE PPP TRANSACTIONSInfrastructure Concession Regulatory Commission(I C R C) 10. Typical Power Project Structure / Timeline - IPP Offtaker Corporate Customer, Bulk TraderSponsor Vehicle (Private Investors)Power Purchase AgreementShareholders agreement (Equity)Project Company Institutional InvestorsOther Service ProvidersCommercial Lenders Financing AgreementsShareholder loan agreementEPC ContractEPC ContractorDevelopment / Finance (3 Years)DFIs/MFIsO&M ContractFuel Supply AgreementOperations & Maintenance ContractorGeneration License, PermitsNERC/ESIA/Other GovernmentFuel SupplierConstruction (1 5 Years)Operations (10 30 Years)Infrastructure Concession Regulatory Commission(I C R C) 11. Project Development Cycle Timing The PPP project development cycle is rigorous...time !!!Development Phase 9 monthsProcurement PhaseImplementation Phase12 months*3 5 years* Needs AnalysisTransaction adviser* Technical AdviserPPP Options appraisalEoI and RFPProject MonitoringValue for MoneyBiddingCommissioning TestAffordabilityBidders ConferenceVerify OutputSustainabilityBid EvaluationRequirementsPrelim Risk MatrixValue for Money TestContract managementViability/BankabilityPreferred BidderVGF assessmentFull Business CaseOBC approvalFEC Approval* Indicative timelines11Infrastructure Concession Regulatory Commission(I C R C) 12. PPP & TIME CHALLENGE The biggest challenge to procuring infrastructure via PPP is time Procurement of infrastructure can be an intensely political process Politicians are keen (to produce infrastructure quickly; to preserve their decision making prerogatives; to reward supporters) PPPs require: TIME to undertake a proper feasibility study/business case TIME to secure approvals TIME to conduct a fair, equitable, transperent and competitive procurement process. Infrastructure Concession Regulatory Commission(I C R C) 13. PPP Time to Deliver Case Study from Canada and Nigeria Alberta s southeast(P3) and southwest Edmonton ring roads are the most comparable pair. The Edmonton Ring Road was part of a long-standing provincial and city commitment to create a highway trade corridor linking Alberta to the United States and Mexico. The P3 project was delivered two years earlier than the conventionally procured project (P3 4yrs) Lekki Toll Road from Inception to Financial Closure 5 to 6yrsInfrastructure Concession Regulatory Commission(I C R C) 14. WHAT WE NEED! Typical impact!FASTER PPP! S! through a rapid and simple process! standardized across all PPP deals to ensure that" all deals get done quickly and accurately!BETTER PPP! S! through PPP structures that ensure optimal! allocation of deal roles, risks and" responsibilities between public and private sector"MORE PPPs! Execute a greater number of PPP transactions" to increase the quantum of private investment!Reduce! time by!50%! Increase! value by!40-! 50%! Increase! capacity by!90%!Infrastructure Concession Regulatory Commission(I C R C) 15. Forumula 1 Approach to PPPs Fast Safe Reliable Rules known Competent team members Timing is known to all Records especially time is transperently kept and monitored Commitment by all You need a Formula 1 type ecosystem to make it fastInfrastructure Concession Regulatory Commission(I C R C) 16. Infrastructure Leadership Quote from Other Lands ContentsWetoldthemwewillgivethemroadstobringtheir productson,schoolstosendtheirchildrento, hospitalsandclinicstoimprovetheirhealth. Wecannotwasteour8me. Wehavetoworkfasttoshowresultsforwearejudged byourperformance,notwhatwepromiseTun Abdul Razak Hussein Prime Minister of Malaysia 1970 - 1976 Infrastructure Concession Regulatory Commission16 (I C R C) 17. PPP Acceleration Have Robust and Well communicated legal and regulatory framework, PPP Manual etc (Minimize rework get permission to copy and adapt from others use WBI, AfDBi, ADBi, UNESCAP leverage) Use PPPIRC of the World Bank Agree PPP Pipeline at highest levels Extensive Capacity building Have a PPP Centre of Excellence Pre Qualify and Enpanel Consultants and TAs Standardization PPP Manual, OBC, RFQ, RFP, Contracts, Financial Model Model Concession Agreements Leverage learnings from others (Assignments for Staff) Have regular PPP fora with all stakeholders Infrastructure Concession Regulatory Commission(I C R C) 18. PPP Acceleration PPP Units in MDAs Have P5 Network Creative Use of High Quality Unsolicited Proposals from Credible Sponsors Use the New Delhi Metro and Chinese Delivery Approach Use balance sheet of government via appropriate instruments to incentivize the private sector and kickstart investments (VGF, IFF etc) Use creative approaches like Annuity or availability PPPs Exploit Scale (Use program approach to create scale)Infrastructure Concession Regulatory Commission(I C R C) 19. Creative Approach - Annuity Concession Model for eg. Roads In order to accelerate use of PPP to improve roads in Africa, it is proposed that annuity payments concession model should be considered as a viable option. Annuity Concessions are a variant of the Build Operate Transfer (BOT) PPP model in which the private operator is remunerated via a fixed, periodic payment ("annuity") from the government rather than through toll proceeds. Under these PPP contracts, the private operator is responsible both for constructing the road, as well as for operating and maintaining it for a fixed period of time. However, this option significantly reduces revenue risk for the private sector and also incentivizes the private sector to then propose innovative financing and construction options19Infrastructure Concession Regulatory Commission(I C R C) 20. Annuity Concession Model eg. Roads Shorter Project Development Cycle Under annuity concession model the project lifecycle could be significantly shortened as depicted below: Development PhaseProcurement PhaseImplementation Phase6 monthsTBDFinancial and Transaction Advisor AppointedTechnical AdviserFinancial Model CompletedProject MonitoringEOI and RFP BiddingCommissioning TestBidders ConferenceVerify Output RequirementsBid EvaluationContract managementValue for Money Test Preferred Bidder Full Business Case Federal Executive Council Approval20Infrastructure Concession Regulatory Commission(I C R C) 21. Formula 1 PPP Delivery Methodology Faster PPPs : Implement a new standardized rapid process to accelerate! deals by approximately 50%, enabling PPP to deliver their expected! DISGUISED CLIENT EXAMPLE" impact early - by Mckinsey and Company! Current timeline! 48 wks"2 wks"Evaluation!Cabinet! approval!12-14 months"2 wks"From! Negotiation of Concession Agreement!Cabinet! approval!2 wks" Signing! of conces-! sion agree-! ment!~100! weeks1!Issues identied! Incomplete evaluation of" proposal upfront" Approvals made without" sufcient basis"To!Lengthy negotiation process due to lack of" timely and effective decision making" Lack of strong perspective of ideal outcome" due to poor upfront analysis"Filter! pro-! posal!Eval-! uate!Direct negotiation! Prep. RFP!Key areas of improvement! Establish decision gates" ( screening )" Dene and syndicate" upfront project plan"SOURCE: McKinsey analysis"Call tender!Evaluate bids! and negotiate!Evaluation to include" (in parallel)" Market-backed" assessment" Leverage Term" Sheet"Final-! ise!Reduce" time by! 50%! 40-50! weeks1!Standardize approach" for similar PPPs:" Front-load analyses and" decisions on Key Terms" Batch approvals" Guided comprehensive" RFP process"Focus on legal " negotiations" Streamline governance"Accelerated! completion of PPPs! deals! McKinsey & Company"| 9"Infrastructure Concession Regulatory Commission(I C R C) 22. The Indian PPP Story 1. India was in desperate need to upgrade its infrastructure in order to accommodate its economic growth potential 2. Government decided to aggressively apply PPP to complement conventional project delivery 3. Leading to an increasing number of PPP projects in past decade 4. Making India one of the leading PPP markets today 5. Front mover focus on the roads sector 6. Supported by a well established, coherent and cohesive enabling environment and process standardization 7. Including a set of relevant financial instruments 8. Leading to significantly improved infrastructure22Infrastructure Concession Regulatory Commission(I C R C) 23. PPP Ambition Government decided to aggressively apply PPP to complement conventional project deliveryUSD 1,000 billion 30%40%USD 514 billion 30% USD 222 billion70%20% 20%2002 - 20072007 - 2012 Public2012 - 2017PPPSources: 10th, 11th and 12th Five Year Plan23Infrastructure Concession Regulatory Commission(I C R C) 24. PPP Status Making India one of the leading PPP markets today and value in USD billionIn terms of number of projects UK 20089351 India 2009450Mainland Europe 2001 -200850215Korea 2007126Canada 201050145Australia 2005100South Africa 2009 1Including10055 3219projects in tenderSources: University of Sydney, IFSL, The Conference Board of Canada, National Treasury South Africa, Ministry of Strategy and Finance in Korea, PPP India database, adapted by VandenBroek Consulting Infrastructure24Concession Regulatory Commission24 (I C R C) 25. PPP Framework Supported by a well established, standardized, coherent and cohesive enabling environment (The PPP Ecosystem) PPP Program To date some 450 projects delivered through PPP and governments intends to use PPP for up to 40% of its upcoming infrastructure investmentsPolicy Pillar Periodic Five Year Plan clearly indicate PPP targets per sector Guidance is provided by Guidelines and Model Concession Agreements Various state level PPP Laws (Infrastructure Acts) or PPP policy statementsInstitutional Pillar Department for Economic Affairs coordinates and support PPP Most States established PPP Cells PPP Approval Committee Panel of Transaction advisors for expert support Nationwide Training program developedFinancial Pillar India Infrastructure Development Fund Viability Gap Fund Fiscal incentives India Infrastructure Finance Company Ltd Several state specific funds to facilitate PPPLocal conditions: Significant need for infrastructure in a rapidly growing economy hampered by fiscal constraints25Infrastructure Concession Regulatory Commission(I C R C) 26. PPP Institutional Framework PPPs can only be effective if built on a solid, clear and transparent PPP policies, laws and institutions4th PPP Transactions 3rd PPP Institutions 2nd PPP Laws 1st PPP PoliciesInfrastructure Concession Regulatory Commission(I C R C) 27. Quick Roll Out PPP Case Studies on Medical, Agriculture, Market and Road PPPs from Lagos, India, UK etcInfrastructure Concession Regulatory Commission(I C R C) 28. POWER PPP - AKUTE/ADIYAN WATER WORKS 12.15MW IPP 12.15MWprovidedby4x3MWGE Jenbachergasengines 13kmnaturalgaspipelineconnectedto exis2ngnaturalgasinfrastructure $25.5milliontotalinstalledcost 12monthconstruc2onperiodand commencedopera2onsinJanuary2010 10yearPPAwithLWC FacilityAgreement BenetstoLWC Constant,reliable,aordablepowerfor LWC(40%savings) Improvementinwaterdelivery(85%vs 32%) Servicelevelcoverageincreasedby95% 28Infrastructure Concession Regulatory Commission28(I C R C) 29. Medical/Hospital PPP Framework Private Operator$ Ministry of HealthPPPAgreementDetailed designs Capital financing Construction Medical supplies & equipment Clinical services Maintenance Non-clinical servicesNew Hospital$ Sector Policies and Strategy Service Package Reimbursement for all clinical and non-clinical services Performance monitoring Joint Services Committee Staffing and TrainingMEDICAL MOBILE UNITS (MMU)Infrastructure Concession Regulatory Commission(I C R C) 30. AGRIC EQUIPMENT MODEL PPP GUJARAT INDIA ESTABLISHMENT OF AGRICULTURAL TRACTOR AND Contents RESOURCE CENTRES IMPLEMENTS q Objective Facilitate Farm Mechanization andProductivity q Public Partner Government of Gujarat India q Private Partner John Deere Tractors India/USA q Role of Private Partner Establish centers with 500 tractors and 13 different implements per centre. Provide Trained Operators and Mechanics Provide Extension Support Services Train 1000 locals as tractor operators and 500 as mechanics. q Role of Government Provide land and revenue guarantees on minimum guarantees (Note if utilization exceeds minimum by agreed percentage excess revenue is 50/50 with government). q Role of Farmers Use tractors and pay only for operating and maintenance costs. Provide via cooperatives provide individuals to be trained as tractor operators and mechanics.Infrastructure Concession Regulatory Commission30 (I C R C) 31. State Road PPP Ahmadabad Mehsana Toll Road Company Limited Contents (AMTRL); Gujarat India q qPrivate Partner AMTRL and Public Partner PWD GoG Scope BoT Ahmadabad to Mehsana Widening & Strengthening of Existing 51.6 km long road from two lanes to four lanes divided carriageway and construction of continuous service roads on either side. Widening & Strengthening of Existing 11.5 km long two lanes Kadi - Kalol Spur road. Bypass of 2.3 km long at Sertha village on left side of the existing road. 2 Nos. Main Toll Plazas one Ahmadabad side and other Mehsana side at Km 20+000 and Km 65+500 respectively and two intermediate toll plazas at Chhatral and Nandasan respectively. 2 Nos. Road over Bridges (RoB) & 2 Nos. Minor Bridges, 1 No. Road under Bridge (RuB) and 5 Nos. Underpasses of minimum size of 5 m x 3 m and 5 Nos. Cattle Crossings of minimum size 3 m x 2.1 m. Provision of retro-reflective signboards to improve road safety with very good riding quality to enhance user comfort. Toll Rates are based on road user benefits including savings in Vehicle Operating Costs, Fuel and Time. Round-the-clock Highway Patrolling 24 hours Ambulance services Extensive tree plantation and transplantation of 1500 nos. trees. Provision of roadside arboriculture and landscaping. Completed 8 months ahead of schedule and under budgetInfrastructure Concession Regulatory Commission31 (I C R C) 32. PPP for Truck Stop Facility UK MalaysiaCurrently in Africa trucks stop at will on the Highways near cities, denying throughput of essential traffic the economic arteries of many nations; potential PPP project could develop income streams from service provision Infrastructure Concession Regulatory Commission(I C R C) 33. Nigerian PPPs First Mover Projects Pipeline- - - - -Power (Hydro Gencos) Transport (Roads) Trasport (Rail and Ports) Urban Infrastructure (FCT) Social (Hospital)Infrastructure Concession Regulatory Commission(I C R C) 34. Thoughts Points for All Invest in Nigeria q Consistent Democratic Government for 13 Years q Fighting corruption in Public and private sectors q Policy consistency and long term planning framework q Reform in critical sectors: Energy, Financial, Civil Service q Growth in the Non-oil Sector: Telecom, Agriculture, Services q Ratings Upgrade 34Infrastructure Concession Regulatory Commission(I C R C) 35. Private TO NIGERIA.TRANSFORMED BY PPPs This WELCOME Sector Strengths is the year ......2020.....!!!!923,764,000 Square Metres of OppurtunitiesInfrastructure Concession Regulatory Commission(I C R C) 36. ICRC Passion That Will Make A Difference - THANK YOUPoverty anywhere is a threat to security everywhereCONTACT DETAILS: Engr. Chidi Izuwah Snr Executive Director, PPP Res. Centre, Infrastructure Concession Regulatory Commission Email: c.izuwah@icrc.gov.ng Website: www.icrc.gov.ng Infrastructure Concession Regulatory Commission(I C R C)