Reflections on PPPs, Project Preparation, and Risk Mitigation

March 6, 2018

Beirut

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EBRD in Turkey (1) Key EBRD figures

The EBRD has been investing in the PPP market since 1993 with EUR 3.4 billion in direct

investments and 54 projects signed

Dominant sectors: Roads, Facilities Management (Hosp.), Airports, Water/Wastewater

Infrastructure PPP market in EBRD region

TOP 5 COUNTRIES/REGIONS OF EBRD INVESTMENT IN

PPP PROJECTS

Note: Cross-regional refer to investments in companies or SPVs which sponsor various PPP projects in EBRD Countries of Operations

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Diversified structures, with 18 PPP deals signed in Turkey, Greece, Croatia, Hungary, Serbia,

Slovakia, and Armenia

PPPs in period included EUR 1.0 billion in own account financing, mobilising (through

syndication) EUR 671 million, and an additional EUR 2.0 billion in commercial co-financing

EBRD in Turkey (1) Key EBRD figures Crowding-in: EBRD Infrastructure support,

2015-2017

3

8%

35%

33%

34% PPP (loans or equity to sponsor), 15 deals

Sovereign or sov. Guaranteed (ministries,

SOEs, municipalities, utilities), 51 delas

Non-sovereign state (SOEs, municipalities,

utilities), 71 deals

Private (corporate), 75 deals

EBRD’s Transport and Municipal signings by loan financing

structure: 2015-2017 = 214 deals for EUR 7.3 billion

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EBRD’s Key Lessons Learned

from PPP Experience

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PPPs: Interplay between public sector, private

sector, duration and risk

Degree of Private Sector operational involvement

De

gre

e o

f P

riva

te S

ecto

r R

isk

Public Sector

Service Contracts

Management Contracts

Design-Build

Operational Concession

Design-Build-Operate-Maintain

Design-Build-Finance-Operate

Build-Operate-Transfer

Build-Operate-Own

Privatisation

Realm of PPPs

Adapted from P. Livesly.

($) Degree of Private Sector investment ($$$$$)

Du

rati

on

of

Pri

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ecto

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actu

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invo

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nt

& f

ina

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g n

ee

ds

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Creating the environment for private sector

participation in infrastructure: the EBRD approach

PPP preparation and investment

Regulatory and legal reforms to support private sector involvement:

clear understanding of risks between the public and private sectors; business case & VfM analysis

Commercialisation pathway for public entities: tariffs and user fees set at cost recovery levels; full cash flow / opex

analysis; IFRS accounting; performance contracting; some outsourcing (e.g., management contracts)

Planning framework established; first engagement at sovereign level >> then sub-sovereign >> then public sector ‘corporate utility’ lending, with legal

reforms to create environment for commercial principles

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Is a PPP doable and justified?

Key Questions? Key Considerations

Is the project

needed and

essential?

Political will and long-term ‘essentiality’ of infrastructure. PPPs should

be pursued first and foremost where a project’s underlying business

case is sound, and not because of a desire to place the investment

off-balance sheet for the public sector.

Is there Value for

Money vs. the public

procurement

alternative?

Risk-adjusted cost of the proposed project as a PPP must be lower

than the cost of the same delivered by traditional public procurement,

i.e., value of ‘risk transfer’ from the public sector to the private sector

(e.g., construction risk, technology risk, completion delay risk, O&M

risk, etc)

Can you afford it,

and is there political

will to pay?

The credibility of the underlining sources of funding of PPPs is crucial,

with the stability and ‘political economy’ of both user charges and

direct government (availability) payments coming into play.

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Preparation of bankable PPPs and commercialised public sector projects

EUR 40m Facility, directly funded by EBRD, applicable to all

Countries of Operation of EBRD

Efficient mobilisation using pre-selected ‘framework consultant’ approach

Dedicated EBRD IPPF team, operational since September 2015

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IPPF’s architecture

EBRD (EUR 40m)

IPPF Unit

manages Framework Consultants

Prepared Projects

PPP Window

Sustainable

Infrastructure

Window (SIW)

Public Sector Clients

Policy Dialogue

Window

Policy Initiatives

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Delivery approach is designed for quality and

efficiency

PPP Window for mobilising private sector finance

Usage of 4 pre-selected Framework Consultant Consortia: world-class quality, ready for mobilisation

KPMG (financial advisor)

Mott MacDonald (technical)

DLA Piper (legal)

PWC (financial advisor)

Arup (technical)

CMS Cameron McKenna (legal)

Mazars (financial advisor)

Ecorys (technical)

Allen & Overy (legal)

Castalia (financial advisor)

D’Appolonia (technical)

Clifford Chance (legal)

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IPPF Results (through Feb. 2018) (2)

Since operational start in October 2015, IPPF has committed EUR 5.3m (and mobilised an additional EUR 3.0 from

Global Infrastructure Facility and IFC) across the PPP Infrastructure Window to date, for a total of 6 PPP projects

Healthy potential pipeline of additional PPPs in Kazakhstan, Jordan, Bosnia & Herzegovina, Poland, and Greece

Bulgaria: Sofia

Airport (with IFC) EUR 454,000

9%

Jordan: Marka Airport - Technical and

Institutional Feasibility EUR 348,000

7%

Ukraine: Port Olvia (with IFC) EUR 500,000

9%

Ukraine: Port Kherson (with IFC) EUR

500,000 9%

Belarus: M-10 Road Concession EUR

1,700,000 32%

Egypt: 6th of Ocotber Dry Port EUR

1,773,000 34%

PPP Window Awarded

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Use of the PPP Window:

IPPF ‘fee plus reimbursement’ approach

IPPF

IPPF Contribution Agreement

(signed between EBRD & public sector

promotor)

PPP Prepared and Tendered

(approx.18 months)

Financial Close

No financial close

– all costs written

off

Public Sector

Promotor

(government)

Transaction Support Fee (TSF)

(3 % to 10% on top of IPPF’s prep cost)

Reimbursement of PPP preparation cost

Reimbursement of cost of TSF

Private Sponsor

(concessionaire)

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Scaling PPFs

True scale requires ‘national PPFs’ – can be based on MDB PPF model

The handful of MDB PPFs can act as catalysts for national PPFs –

MDBs can support with design and initial capitalisation

Scaling up: If 50 new national PPFs each were to produce a pipeline of 10 well-prepared, bankable PPPs, the resulting 500 PPPs would move

the needle on private sector investment to help reduce global infrastructure gap

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Innovating on Risk Mitigation

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tet

Requirements for IFI risk mitigation instruments for

institutional investors

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tet

Risk Mitigation Scheme (“RMS”)

Overview

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tet

First RMS Greenfield Bond for

Elazig Hospital PPP, Turkey

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Application and Benefits

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Matthew Jordan Tank

Head of Infrastructure Policy and Infrastructure Project Preparation Facility (IPPF)

One Exchange Square

London, EC2A 2JN UK

Tel: +44 20 7338 7498

Email: jordantm@ebrd.com

Marcos Martinez

Senior PPP Specialist

Manager, PPP Window

Infrastructure Project Preparation Facility (IPPF)

One Exchange Square

London, EC2A 2JN UK

Tel: +44 20 7338 6000

Email: martinem@ebrd.com

Marek Waskiewicz

Analyst

Infrastructure Project Preparation Facility (IPPF)

One Exchange Square

London, EC2A 2JN UK

Tel: +44 20 7338 6000

Email: waskiewm@ebrd.com

IPPF Contact details

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