Mechanisms for financing Dry Ports Development

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It is a long term infrastructure investment Often a public service development :◦ Of large size◦ Is capital intensive◦ Has a long life◦ Is asset specific◦ Is a stand alone entity◦ With high operating margins◦ And significant cash flows

Such projects are usually Government regulated and monitored allowed to operators on a long term lease or BOO or BOT basis

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Such project deserves a feasibility study but before that: Also the socio-economic consequences of implementing a

dry port in the region Interviews with interested parties Analysis of the possibility to have containers sealed at the

dry port to be sent directly to the sea port Consider advantages of a Public Private partnership

Traffic flows Existing Transport Infrastructure evaluation Modes of transport available Evaluation of reduction of tonne/km by road

transport when introducing D.P. Concept Actual functions of the dry port: road haulage, CFS

operations, empty storage, customs clearance Future expansion possibilities

Feasibility study done! What’s next? Convert recommendations to Actions Discussions with: Donors International Financial Institutions Government both national and local State owned Enterprises (Railways) Private investors

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Financing method

Options Merits Demerits

Capital Markets

Loans from International Funding Institutions

-Preferential interest rates-Long payment periods- Possible payment grace period

-Demanding terms and conditions-Long turnaround times-Require Govt guarantees-Increases Govt debt position

Loans from Local / International Banks

-Quicker disbursement times than IFI-Syndicated loans are available

-Can be expensive-Require Govt default assurance-Can strain current borrowing limits-Shorter maturity-Increase debt position on balance sheet

Private Public Partnership

BOT – BOOT –a.o.

-Debt burden less in the short term-Risk sharing-Govt retains

-Complex, requires finance expertise and adequate structuring-Higher financing costs-Clear defined project

Funds either from: National Budget International Funding Institutions

Infrastructure work for account Government Infrastructure (Roads, Rail, Pavement) Superstructure (Offices, Warehouses, Gates) Equipment (Forklifts heavy and light – trucks/trailers)

Government managed dry port?

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Financing by using debt and equity

Debt repaid by using cash flow generated by Operations

Secured loans to sponsors

Public :◦ Basic infrastructure components◦ Promote integration with the seaport◦ Monitor environment issues safety

conditions◦ Contribute to trade facilitation process◦ Support actions for good labour

relationship

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Private:◦ Public contribution in basic infrastructure funding

helps private partner to increase funding for operational facilities.◦ Regulatory and institutional reform needed for

inducing private involvement such as: Trade facilitation Improving customs regulations and practices Trade documentation harmonisation

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More business like approach with shared

financial risks Government control through representation in

Board of Directors Additional representation MoF / Customs

department Joint committee in the planning stage

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Project identification Risk identification and

minimising Technical & Financial feasibility

Funding arrangements Negotiations International,

National & Private Funds Commitments & Documents

Disbursement Monitoring & Review Financial & Project closure Repayments & Monitoring Assessments

Pre-Financing Stage

Financing Stage

Post Financing Stage

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A Public Private Partnership is the preferred format

Feasibility and Pre-Feasibility studies examining the value of implementing a Dry Port

A joint committee to be put in place before important decisions are made

Management of operations is better in experienced private hands

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