PPP Project Development Fund Initiative: Payment by Result 

Presentation Outline• What is PPP Project Development Fund?

• PPP Project Delivery Cycle

• Stakeholder Map

• Problem Statement• Published PPP Pipeline Projects 2014

• What is Payment by Result?• Candidate PPP Projects for Payment by Result

• Prison (Land Swap)• Roads (Brownfield)• Power (Brownfield)

• Conclusion

What is PPP Project Development Fund?

• PPP Project Development Fund is the financial resource required todevelop bankable projects that can be taken to the market. Activitiesinvolved in project development includes but not limited to thefollowing:• Project Design & Techno-Financial Feasibility• Environmental, Social & Market Studies• Establish Contractual Framework• See next slide for the process in the Nigerian jurisdiction.

Stakeholders

Private Sector BanksImplementing

Officials

Debt Financiers

Trainers

Developers/Equity Investors

Civil Society

Media

Public Policy Makers

Public Sector Banks

Equity Funds

Local Companies

MNCs

Think Tanks

Opinion Makers

Academia

CSOs

Print & Electronic

Three Arms

MDAs Top Bureaucracy

FEC Members

PPP Unit

MoF Staff

PPP Unit

ICRC & PIU Staff

Sub-national government & entities

NGF, ALGON etc

Core Stakeholders in RED FONT Colour

STAKEHOLDER MAP

Problem Statement

• Lack of Project Development Fund to develop the National Pipeline projects or engage Transaction Advisory (TA) Services (See next Slide for the Published PPP Pipeline Projects. Ref: www.icrc.gov.ng)• The project pipeline shows projects at different stages and 80% are under

development. Most of the projects under development are technically at concept stage due to lack of funds to engage a TA or carry out project development activities.

• Nigeria is an emerging PPP markets with great potential. The social and economic returns from upscaling infrastructure stock through PPPs is highly desirable with invaluable development.

• It will therefore be desirable to initiate creative solutions to close the funding gap required for project development which will stimulate the PPP market and sustain investors appetitie.

Funding solution to close the funding gap for project development

• Payment by Result or No Cure No Pay.• This model is used to procure the services of TAs competitively to develop

PPP projects with very high economic potential for Bankability. (See nextslide for list of candidate projects)

• The framework is designed to engage the services of a TA whose payment issubject to successfully procuring a PPP Partner and reaching financial close.

• The payment is generated from the entry fee paid by the PPP Partnerprocured.• The contract sum $X or 2% of entry fee is paid which ever is lower.

• Though its not completely new model

Candidate Projects for Payment by Result• Land Swap Model for building new facilities like prison

• Consider a land swap deal for the redevelopment of Ikoyi Prison (Lagos Nigeria) now in the heart of uptown Ikoyi-Lagos with high premium land value for…….

Candidate Projects for Payment by Result• Brownfield Road projects with heavy traffic: Consider the Lagos-

Ibadan Road that conservatively could record over 200,000 ridership daily.

• Brownfield Power projects with huge potential for growth

Candidate Projects for Payment by Result

Conclusion

• Payment by result has delivered a number of projects in Nigeria andstill considered a preferred intervention so far. However the LegalInstitutional and Regulatory framework for PPPs needs to bestrengthened to ensure confidence and comfort to attract best in classTAs into the competition.

• Other initiatives like a Revolving PPP Project development fund and aframework to enable entry and participation of Private Equity Fundin project development may stimulate the PPP Project Pipeline andbuild investor appetite.