Market and Regulatory Risk Issues and Challenges in PPP
- 1. M. SERDAR KABUKÇUOĞLU April 2011 Kyrenia/TRNC DEVELOPMENT BANK OF TURKEY Market and Regulatory Risk Issues and Challenges in PPP Kalkınma
- 2. PPP in the World - 1999
- 3. PPP in the World - 2010
- 4. Public Necessity for construction Fulfilment of public duties Solving infrastructure problems Restricted budgets Minimizing costs Pressure to increase efficiency Management efficiency Newer technologies Workplace efficiency Personnel development Private
- 5. Public 1 Contract Management Transfer of control Right to use Services are provided Building, extending or renovating a facility on behalf of Public 2 Asset Management Better value of many Budgetary benefit Efficiency Additionality Keeping environment Profit Positive net cash flows Stable economic environment Stable political situations 3 Risks/opportunities Management Private
- 6. Public A public service To a certain group In a certain place With a certain proposed budged For a certain time By constructing and/or operating 4 Project Management Private
- 7. Public Regulatory Ministry of Finance State Planning Organization Treasury Operational Ministries Municipalities SPV/Project Company Investors Financial Institutions 5 Financial Management 7 Regulations 8 Tender & Procurement Management Investers Funds Companies Individual investors SPV Special Purpose Vehicle Project Company Sponsors Funds Banks IFIs 6 Stake-holder Analysis Private
- 8. Risk Sharing Public Private 100% 100% 0% 0% PPP Privatization Public Assets
- 9. Project Risks Macro Economic Risks Political Risks Complation risks Environmental risks Operating risks Revenue risks Input supply risks Inflation Interest rate risks Exchange rate risks Currency convertibility Expropriation War and Civil Disturbance Change of law Quasi-political risks Main Risks for PPPs
- 10. Project Risks Does the project make overall sense? Can the project be completed on time and on budged? May the project face any environmental problems during the implementation, especially construction? Is the project company capable of operating the project on the proposed cost levels and accessing the finance? How realistic is the operating revenues proposed in the project? Can any raw materials or other inputs be obtained at the projected costs and projected time? Does project contract fit the projected operations and results?
- 11. Macro-Economic Risks Inflation Exchange rate Appropriate funding conditions Maturity Interest rate Grace period Guarantees
- 12. Political Risks Changes in regulations Political interference Cancellation of license Expropriation Discriminatory taxes, import restrictions Transfer of earnings War and civil disturbance
- 13. PPP is a project (tailored and uniqe) Government is owner of the project, so it is responsible for formulation and designing of the project and it is leader, auditor of the project «Good Governance» Projects should be Well defined Viable Bankable Clear specifications of outputs PPP does not make a bad project good Solutions? 1 2 3
- 14. Contracts should take care Transparency Competitive dialogue Risk sharing Solutions? These are should be taken in the projects Legitimacy Additionality Value of many Sustainability Risk evaluation Risk assesment Due dilligence Risk mitigation plan 5 4 6
- 15. Effective procurement process Solutions? Stakeholders Support Public sector employees Labor unions End users Govermental incentives/supports Tariff subsidies Financial instruments Tax and custom Guarantees Loan guarantees Sovereign guarantees 8 7 9
- 16. A PPP Task Force? A common policy for PPP A framework regulation Realistic targets Building a market interests Pricing Tendering Project filtering Project design Monitoring Keeping social targets of the project 9
- 17. Thank you for your attention
- 18. Ahmet Keşli, «International Standarts of PPP Law and Experiences of Turkey» , PPP Platform of Turkey, ADFIMI Development Forum, 5-6 October 2010, İstanbul Darren Grimsey and Mervyn K. Lewis, “Public Private Partnerships The Worldwide Revolution in infrastructure provisions and Project Finance” ,Edwar Elgar Publishing Ltd., 2007 “ Europe 2020, A strategy for smart, sustainable and inclusive growth”, Communication From the Commission, Brussels 3.3.2010, COM(2010)2020 E.R. Yescombe, “Principle of Project Finance” , Yescombe Ltd. London-UK,Academic Press,2002. Falko Josef Seliner, “PPP Life Cycle”, Taiex Workshop on PPP, Ankara, 17 March 2010 “ Fundamentals and Issues of PPP” , the National Council for Public Private Partnership, www.ncppp.org Haluk Doğançay, “A New Project Financing Model for Turkey: Public Private partnership (PPP)” , EFCA Task Force for Project Finance, 9 December 2004 “ Never Mind the Balance Sheet” , CEE Bankwatch Network, November 2008 Prof. Maurizio Mensi, «Public Private Partnership, The Legal Framework», Academy of Economy and Finance, 16-17 March 2010, Ankara Onur Kordel, “Turkey: A Comparative Overview of Public Private Partnerships; With Those in Turkey” , Bener Law Office, 29 July 2008 Prof. Dr. Ralf von Ameln, “Public Private Partnership and Competitive Dialogue” Stephan Harris, “Public Private Partnerships: Delivering Better Infrastructure Services”