Date post: | 07-Nov-2014 |
Category: |
Economy & Finance |
Upload: | jannat-salimova-tekay |
View: | 1,239 times |
Download: | 3 times |
Public Private Partnerships Russia: Some Lessons for Kazakhstan
Jannat Salimova-Tekay
22 May 2012
Page 2
Contents
Section Page
1. Comparing Municipal Infrastructure in Russia and Kazakhstan
3
2. Municipal Infrastructure in St. Petersburg5
• Yanino Waste Recycling Plant9
• North Water Station Modernisation 16
3. Some Lessons for Kazakhstan21
Page 3
Russia
► Federation► Enables some municipalities
to make their own laws concerning PPP
► Concession Law► Enacted in 2005► Used primarily for road
projects (М1, M10)
Kazakhstan
► Unitary state► Changes in legislation for
specific projects should be adopted at the central level
► Concession Law► Can only be used for projects
with strong cash flows (not applicable for most projects in municipal infrastructure)
Comparing municipal infrastructure in Russia and Kazakhstan
Page 4
Russia
► Tariffs and Subsidies► Regulated at local level► Targeted social subsidies► Possibility of budgetary
grants from local budgets
Kazakhstan
► Tariffs and Subsidies► Regulated at local level► Targeted social subsidies► Budgetary grants only at the
approval of the central government
Comparing municipal infrastructure in Russia and Kazakhstan
Page 5
Russia
► Private sector participation► Private operators in water,
solid waste and power utilities
► Technical characteristics► Most assets were
commissioned in the Soviet era and are now considerably worn down
Kazakhstan
► Private sector participation► Limited to several cases of
heat and power utilities ► Almost all cases of
privatisation of late 90s were renationalised
► Technical characteristics► The situation is similar to the
Russian
Comparing municipal infrastructure in Russia and Kazakhstan
Page 6
Municipal Infrastructure in St. Petersburg
Page 7
Municipal Infrastructure in St. Petersburg
The City of St. Petersburg Municipality
► One of the first in Russia to implement PPP projects
► The first law on PPP (2006)
► An experienced PPP implementation team
► Large number of projects at advanced implementation stage
The World Bank estimated the PPP programme implemented in St. Petersburg as currently one of the
largest globally
Page 8
Some PPP Projects in St. Petersburg
Pulkovo International
Airport
$ 1.3 billion
Yanino Waste Recycling
Plant
$ 450 million
Western High Speed
Diameter
$ 4.5 billion
North Water Station
RUR 11 - 14 billion
and many others…
Orlov Tunnel
$ 1.5 billion
Page 9
Yanino Waste Recycling Plant
Page 10
Project Summary
► Project Objectives► Reduction in solid waste disposal volumes
► Environmentally sound, reliable and modern technologies
► Fiscal burden reductions
► Proposed Solution► PPP based on St. Petersburg law
► Recycling of not less than 350K tonnes of SW► 20% of all volumes
► Below the 30% permitted for disposal
► The DBFOT-type 30-year contract
Page 11
Implementation Stages
► November 2009 - Announcement of tender
► February 2010 - Three investors pre-qualified
► December 2010 - Two bids submitted
► January 2011 – The Greek consortium of “Aktor" and "Helektor“ declared as preferred bidder
► May 2011 - PPP agreement signed
► July 2012 – The expected financial close and contract effectiveness
Page 12
► The Partner commits to:► Raise the financing and
complete the construction within 3.5 years
► Provide at least 80% recycling depth
► Comply with environmental and availability standards
► Transfer the plant to St. Petersburg in 30 years of the signing
► The City commits to:► Deliver at least 350K tons of
SW pa to the plant► Fixed payments
► Determined by the agreed payment mechanism
► Less the penalties for failure to comply with the processing requirements
► Preferred Bidder’s capex estimated at RUR 12 billion ($400 million) for the proposed biomechanical processing technology
Commercial Terms
Page 13
Payment Mechanism
RUB
Households Agency
Output products
Transportation companies
Partner
Residual waste
Waste
Waste*
RUB*
RUB
* Payment and volume of waste are guaranteed by the City
Домохозяйства
Тариф
Тариф
Платеж
Агентство ТБО
Партнер
ТБО
ТБО
Транспортные компании
Непереработанные отходы
Продукты переработки
►Payments for waste Recycling►Compensation from the City
Partner ConsumersCity
Payments for Waste Recycling
Compensations
Households
Tariff
WasteTariff
Solid Waste Agency
Collection Co’s
PaymentPartner
Waste
Waste
Products of recycling
Un-recycled waste
Page 14
North Water Station Modernisation
Page 15
Project Summary
Project structure►Design, construction, modernisation and
operation
Technical characteristics
►NWS capacity: Before: 608,000 m³/day After : 800,000 m³/day
►NWS provides about 40% of water supply in St. Petersburg
►Pilot testing to demonstrate the suitability of the proposed technology
Capex ►RUR 11 - 14 billion ($ 450 million)
Timeline►Contract term: 30 years
Construction period of 6 years (start of operation 2-3 years before completion)
Page 16
Implementation Stages
Large and technologically complicated project
Includes the North and the Main Water Stations
Discussion with the City and
banks
Exclusion of the Main Water Station
Tight schedule for prequal submissions
Pilot testing at prequalification stage
High standards to the construction and operation track record
Close cooperation with investors and the
City, including seminars
Two months submission deadline extension
Pilot testing is permitted at the tender stage
The competition and the high level of interest to the project remain unchanged, ensuring the participation of strong bidders
Standards softened
Road Shows
The project requires construction of tunnels
Exclusion of tunnels
Page 17
Payment Mechanism
– Sources of guaranteed income
Partner
City Consumers
Supply of water
VodokanalPayments under water purchase and sale contract
Drinking Water Supply
Com
pens
atio
n pa
ymen
ts
Reb
ate
Guaranteed income: the amount that the Partner
will receive annually
Page 18
Some Lessons for Kazakhstan
Page 19
Lesson 1: State Support
► Virtually all projects obtained a financial support in the form of capital grants, minimum revenue guarantees or availability payments.
► Private investors are not ready to assume tariff risk in municipal infrastructure where tariff setting mechanisms are non-transparent and unpredictable.
► There seems to be no alternative to “availability payments” for the future PPP projects in the municipal infrastructure.
The Government is not ready to assume some risks
Without explicitly accepting the risks, the Government will still pay for them
Page 20
The Speed Temptation
Delays at the tendering and financing stages
Escalation of costs for all parties
Poor competition
Unfavourable conditions
Unrealistic timetable
Poor project development
Lessons for Kazakhstan
1. Private sector is ready to assume more risks when they are clear
2. A well-structured project is the best way to the right risk allocation
3. Delays in decision making almost always lead to significant cost escalations
Lesson 2: Realistic Timelines
Page 21
Lesson 3: Narrow Financial Markets
► Only a few banks and funds are ready to finance infrastructure
► Even fewer are able to lend in local currency (5 banks can lend in Roubles in Russia)► High interest rates (>10-11%)
► Fixed interest rates up to 7-10 years
► Tenors up to 6-9/15-20 years
► The Government does not assume refinancing risks
The financial markets in Russia are significantly broader than in Kazakhstan. Therefore, the
“financeability” of large projects must be thoroughly investigated
Page 22
Lesson 4: Shortage of Financial Instruments
► Interest rate volatility and lack of interest rate swaps► Lack of long-term Forex hedging► Most projects are supported by state equity grants and
guarantees: risks of future budget financial commitments. ► Proper project structuring is key to ensuring the interest
from banks
Implementation of smaller projects, initially in municipal infrastructure, will allow broadening the
PPP financing circles
Page 23
Questions?
Page 24
Contacts
Jannat Salimova-TekayHeadProject and Infrastructure Finance GroupCentral Asia and Caucasus
Tel.: +7 727 258 5960Fax: +7 727 258 5961Mobile: +7 702 737 9031Email: [email protected]