Brazil
CP&ICapital Projects & Infrastructure
September 2010
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• High value
• High risk
• High profile
• High complexity
• Multi-year/long term
• Public and private investments
• Global strategic aligned / oriented
• Global contractors / subcontractorsinvolvement
• Complex contract managementenvironment
• Key issues / project for ExecutiveBoard members
From our experience of the management of large and complex capital projects it is
important that those involved in risk and project management take a holistic view in
delivering the business case, rather than a specialist view from each functions involved.
This approach seeks to integrate key components of project management process and
necessary inputs/outputs.
Key characteristics of capital projects are:
CP&IOur Approach to Capital Projects
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CP&I
Project life cycle
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CP&I
Competences
Industries
Imp
os
tos
Identificar
Controlar
AvaliarIdentificar
Monitorar
Controlar
Avaliar
ProjectSuccess
Taxes
PricewaterhouseCoopers
Global PerspectiveWorldwide exploration budgets by region
Slide 5
19%
14%
7%6%
5% 5%4%
3% 3% 3%
31%
16%
13%
6% 5% 7%5%
5%3% 3% 4%
33%
0%
5%
10%
15%
20%
25%
30%
35%
2009 2008
Source: IBRAM
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MiningA global perspective
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MetalsA global perspective
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CP&I Brazil
Global structure
Capital Projects Global structure
Countries
Cities
153
749 16
PwC Global presence World Brazil
The idea is to consolidate substantial practical knowledge of best practices incorporated on
structuring organization design and processes and local experience in mega projects. The
Capital Projects multidisciplinary team skills range from Tax to Engineering.
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CP&I Brazil
Global structure -
Carter Pate – PwC Global CP&I Leader
Capital Projects Global structure
Countries
Cities
153
749 16
PwC Global presence World Brazil
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Mega capital projects require, case by case, a differentiated structure and approach of
management, including financing, governance, risks and tax planning, among others:
CP&I
A different approach - Individual Projects
Is there a good estimation of the overall budget and time schedule? Do we haveproper controls to identify and analyse deviations in scope, costs and quality?
Are we able to qualify, quantify and respond to project risks?
Is the project adequately considering local issues, such as: Compliance with local regulation
Tax incentives
Relationship with local communities, authorities and entities
Does the project have an adequate structure, considering: Independent governance
HR structure
IT platform
Internal policies and procedures (in particular, H&S and sustainability issues)
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CP&I
Understand and work along the entire project life cycle
Services & System Support
Stakeholders Management
Governance & Inspection
Program Management & Performance
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CP&I
Project life cycle
Our involvement with Capital Projects considers the entire project life-cycle. We engage
oriented project engineering using, as part of our Project Planning and Assessment
approach, FEL and PMI methodologies together with other techniques.
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CP&I
Project phases –
Chinese Experience – Hongbin Cong
Different Perspectives
Additional Competences
Global Actions
Affordability modeling
Asset management
Project specification
Risk analysis
Option appraisal
Tax advice
Feasibility study
Business cases
Project selection
Financial structuring
Arranging debt
Arranging equity
Fund raising
Project Development Execution Operate CompletionProject Appraisal
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CP&I
Project phases
Project Appraisal
At this stage the project idea is conceived and tailored to achieve businesses and strategy
goals. A preliminary feasibility study is carried by the strategic team, evaluating basic data
about the alternatives such as CAPEX, risks and financing modelling.
When companies are considering new investments, executives are too optimistic about the
project risks. They seem to underestimate external factors and stakeholders.
Affordability modeling
Asset management
Project specification
Risk analysis
Option appraisal
Tax advice
Feasibility study
Business cases
Project selection
Financial structuring
Arranging debt
Arranging equity
Fund raising
Project Development Execution Operate CompletionProject Appraisal
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CP&I
Project phases - Cases
Project Appraisal
Affordability modeling
Asset management
Project specification
Risk analysis
Option appraisal
Tax advice
Feasibility study
Business cases
Project selection
Financial structuring
Arranging debt
Arranging equity
Fund raising
Russian mining companyWe performed a valuation of one of the largest iron ore mining and processing operations in Russia at therequest of the client’s shareholders.
Advice on purchase of coal companyPwC advised a mining company in its bid to purchase a coal company. We provided advice on how to
structure and use a financial model to undertake an investment appraisal. We also reviewed the financialmodel and advised the company on changes to be made to the model.
ThyssenKrupp - CSAPwC advised on the Tax Model and search for tax local incentives resulting on large cost savings
Project Development Execution Operate CompletionProject Appraisal
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CP&I
Project phases
Brazilian Experience – José Mauro Braga
Affordability modeling
Asset management
Project specification
Risk analysis
Option appraisal
Tax advice
Feasibility study
Business cases
Project selection
Financial structuring
Arranging debt
Arranging equity
Fund raising
Project Development Execution Operate CompletionProject Appraisal
Helping Local Companies to Raise
Capital from International Investors to
Fund Their Projects
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CP&I
Funding alternative
Project Appraisal Project Development Execution Operate CompletionProject Appraisal
PwC would like to present a funding alternative for mining projects in Brazil.
Mining Company and PwC would establish a partnership for the structuring of adedicated fund vehicle (“Fund”).
Mining Company would be the Anchor Investor of the Fund and would provide:
– Investment commitment to the Fund, that can be done through equity stake in assetsfrom its portfolio;
– Fully committed management team of experienced professionals.
PwC would be the Technical Advisor, providing fully support throughout the life of theFund.
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Contracting strategy
Project supply chainstrategy
Cost modelling
Procurement
Partnering
Program management
Partnership
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CP&I
Structure overview
Project Appraisal Project Development Execution Operate CompletionProject Appraisal
Fund vehicle
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CP&I
Structure overview
Project Appraisal Project Development Execution Operate CompletionProject Appraisal
Management structure
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CP&I
Project phases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal
At development stage, a multidisciplinary team is engaged to develop a set of studies and
planning for the project. The project commence to concretize and a procurement strategy
considering the full tax benefits is crucial to improve project feasibility.
Sound project definition and effective decision making at the outset of a capital project are
critical to a successful outcome.
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Contracting strategy
Project supply chainstrategy
Cost modelling
Procurement
Partnering
Program management
Project Development
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CP&I
Project phases - Cases
Project Development Execution Operate CompletionProject Appraisal Project Development
Project Development
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Contracting strategy
Project supply chainstrategy
Cost modelling
Procurement
Partnering
Program management
Queensland Rail (Coal Division)
Review of Coal Contracts
Full set of commercial contracts held between QR and the 19 mining companies operating 50major coal mines in Queensland and Northern New South Wales. All contracts were assessedfrom the perspective of true lifetime economic value and commercial risks to both parties.
Development of new Coal Contract Structure
Development of a new contract template for QR to use for both new contracts and potentialmigration of existing and rolling contracts.
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CP&I
Project phases
Project Development Execution Operate CompletionProject Appraisal Project Development
Project Development
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Contracting strategy
Project supply chainstrategy
Cost modelling
Procurement
Partnering
Program management
Votorantim Metais (Brazil and Peru)
Strategic Sourcing for several CAPEX categories,: reviewing:,strategy, organization, KPI’sand contracts
Facilitation of contracts negotiation
Best practices/ benchmarking
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CP&I
Project phases - Cases
Project Development Execution Operate CompletionProject Appraisal Project Development
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Contracting strategy
Project supply chainstrategy
Cost modelling
Procurement
Partnering
Program management
Anglo Coal Australia
PwC developed and implemented a new stage
gate process for all major new coal mine
development projects. A detailed set of new
guidelines was developed for every phase of
project development from concept through to
feasibility and post green light evaluation.
Project Development
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CP&I
Project phases - Cases
Project Development Execution Operate CompletionProject Appraisal Project Development
Risk appetite & allocation
Bid strategy
Tax structuring
Sustainability issues
Procurement
Partnering
Program management
PEGASO - Program of Excellence in Operational H&S Management
– Define and implement processes
– Program monitoring and results communication periodically
– Define models and tools in order to quantify program benefits
Strategic Project in SHE Excellence
– Align all company’s projects with 6 SHE strategic initiatives;
– Promote SHE concepts and establish templates
– Define medication criteria, reports and data consolidation
– Monitor the SHE project progress through the PMO creation
Petr
ob
ras
Contracting strategy
Project supply chainstrategy
Cost modelling
Project Development
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CP&I
Project phases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal Execution
Project Execution
At execution stage, the highest number of resources are consumed. There is a lot of
interaction between contractors and work interference. Project failure are easily perceived
and typically are: schedule slippage, cost overrun and specification shortfalls. Failure to
identify and act on the early warning signs of a project in distress exacerbates the issues
and, very quickly, a project can become out of control.
Risk management
Budgeting & forecasting
Project Governance
Contract execution
Project management
Controls
Information & reporting
Claims management
Communicationsmanagement
Compliance
Earned value management
Document management
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CP&I
Project phases - Cases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal Execution
Project Execution
Risk management
Budgeting & forecasting
Project Governance
Contract execution
Project management
Controls
Information & reporting
Claims management
Communicationsmanagement
Compliance
Earned value management
Document management
ThyssenKrupp – CSA
Project Assessment of this new steel mill plant
– Project risk identification, actions plan recommendation and implementation monitoringconsidering the follow dimensions: executive, technical (non-engineering), organization,functional, resources, regulatory and project management;
– Executive reports elaboration to the company board
– Critical and relevant risks monitoring;
– Project implementation follow-up.
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CP&I
Project phases - Cases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal Execution
Project Execution
Risk management
Budgeting & forecasting
Project Governance
Contract execution
Rio Tinto (Australia)
Review of reports generated by PMO
In response to the introduction of a new
management team with a renewed focused on costmanagement of the PMO, we were engaged toreview Rio Tinto’s internal reporting function. The
project required engagement with key stakeholdersand 'customers' of the reports with recommendationson improving reporting processes and usefulness of
the content to drive effective PMO decision making.
Project management
Controls
Information & reporting
Claims management
Communicationsmanagement
Compliance
Earned value management
Document management
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CP&I
Project phases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal Execution
Project Completion
The completion stage requires a special attention to contracts closure and technical
performance. To achieve technical specifications stated in contracts, several tests and
analysis are held to allow products acceptance and certificates issuing. Leadership
management is required at most, in order to settle all contracts, change orders and claims.
Project benefit evaluation is carried out and lessons learnt are taken to the next project.
Mediation/Arbitration
Delay & disruptionanalysis
Expert witnesssupport
Review of physical &technical performance
Advise commercialclose-out
Information & reporting
Compliance
Post implementationreview
“Lessons learned”
Operate Completion
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CP&I
Project phases - Cases
Project Appraisal Project Development Execution Operate CompletionProject Appraisal Execution
Project Completion
Operate Completion
Mediation/Arbitration
Delay & disruptionanalysis
Expert witnesssupport
Review of physical &technical performance
Advise commercialclose-out
Information & reporting
Compliance
Post implementationreview
“Lessons learned”
Anglo Coal Australia
Major Capital Projects – Continuous Improvement
Development and implementation of new processes for the capture, analysis, anddissemination of ‘lessons learned’ across future major capital projects:
1. collating and reviewing new knowledge from a recently commissioned mine
2. embedding the ‘lessons learned’ process across all its major capital projects
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