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An Overview of the PPP advisory work bythe World Bank for the Russian Federation
Cledan Mandri-Perrott, World BankFinance Economics, & Urban and ECA ECSSD
Day 3Session 15
PPPsPPPs in Infrastructure in Infrastructure
Urban Sector Projects
Session 14
Urban Infrastructurein Europe:
Brownfield Projects
Day3
Greek Experience
Session 11
InstitutionalFramework
Day 3Institutions & Implementation
Session 12
Selecting anOperator
ChileUSA
KoreaIreland
Session 13
Country Examples:
Light Rail Transport (LRT)
Air Ports
Toll Roads & Tunnels
Session 15
PPP Projects: Russia
The Russian ContextEconomy• Largest country in the world in total area and resource-rich country
(reserves of mineral fuel);• Middle income country with a 2007 GDP per capita of $8612.• Expected GDP growth of over 7% in 2007
Country Risk• Post-soviet union Russia still associated with high political risk.• Stronghold of the Kremlin, perceived weak rule of law
Infrastructure and role of Public-Private Partnership• Russia plans a US$ 1,000 bn investment program in infrastructure
over the next 10 years (8% of GDP each year)• PPP expected to play a significant role and several initiatives have
contributed to increased in PPP projects being prepared over thepast 2 years
The Winter PalaceSource: http://eng.gov.spb.ru/culture
The City of St Petersburg
• Russia’s second largest city:1400 km²; pop. 4.5 million.
• A major center of business,production and trade.
• Economic performance:– GRP increased of 8.5% in
2006 v/s 2005;– Projected growth of GRP
between 2006 and 2010of 30-60%;
– S&P’s rating BBB.
• Several pilot PPP projectsbeing currently prepared
PPP Projects in St Petersburg
PPP Programme• Task 1: Design of the Fiscal Risk Management
Framework• Task 2: Analysis of international experience in
institutionalizing preparation and management of PPPprojects
• Task 3: Analysis of St Petersburg needs in establishing aPPP Management Unit
• Task 4: Analysis of possible organizational and legalforms for establishing a PPP Management Unit in StPetersburg
• Task 5: Recommendation of the optimal mechanism forestablishing such a PPP Management Unit
• Task 6: Development of methodologies that will be usedby the PPP Management Unit
PPP Projects in St Petersburg - 1
Western High Speed Diameter• to be done on a Design Build Operate and Transfer basis• World Bank strategic and financial advisors to the
Transaction• Very large transaction ( >4.5 bn USD) ability to mobilize
financing an issue• Joint federal and St petersburg project which implies:
– Federal concession law– Interface issues– Joint funding including Investment Fund support
• One strong consortium leading the pack• Difficulty with keeping competitive pressure to ensure a
balanced transaction for the Government
PPP Projects in St Petersburg - 2
Orlovski Tunnel• to be done on a Design Build Operate and Transfer basis• World Bank strategic and financial advisors to the
Transaction• Prequalification process commenced• Road Show launch successful• Large, but manageable, transaction (1 bn USD total
construction costs, 66% funded by Government capitalgrant)
• Use of Availability payment mechanism should simplifydue diligence process
• Presence of international tunneling adviser (MottMacDonald) should facilitate documentation andnegotiation process
PPP Projects in St Petersburg - 3
Pulkovo Airport Expansion
• World Bank overall advisors (unlike WHSD, Orlovski tunneland Nadex)
• Preliminary discussion on PPP options
• PPP legal options assessment (Federal versus Localframework)
• Rest of the process (pre-qual, bidding, award and closing)with specialist legal, financial, engineering specialist withWB playing a coordinating role
• Transaction around 1 bn USD total construction costs
The Nadex LRT Project• 29.9 km Light Rail transit line servicing 6 administrative and
residential districts
• System will be segregated from general traffic (elevated and atgrade) with 16 stops and 2 pedestrian bridges
• Overall capital investment around Euro 1 billion
• Project is considered a pilot line for potential light rail network
PPP Projects in St Petersburg - 4
Nadex Alignment
• Contract type: Design, Build, Operate, Maintain Transfer (SingleContract)
• Contract Duration: 30 years
• Status: ongoing.
• Legal Status: First time use of the St. Petersburg’s PPP law(December 25, 2006)
• Public Partner: City of St. Petersburg.
• Private Partner: to be selected as a result of open internationalbidding procedure.
Scope of Nadex Project
Policy Perspective
• NADEX fits into the City Master Plan:– (i) giving priority to mass transit system over private car– (ii) supporting provision of high-capacity rapid transit lines to link
major residential areas to each other, to downtown and majorattraction points
• Objective of NADEX to improve access to existing metro systemand an orbital rapid transit link between the southern planningzones areas
• NADEX is expected to be incorporated within an overall transportticketing, tariff and interchange system for the whole greater StPetersburg
• Tariff policy remains with the City, which will make an AvailabilityPayment to the private sector and will take revenue/traffic risk
• Revenue from fare-box ultimately collected by City
Legal/Regulatory/InstitutionalPerspective• Nadex will be the first project under the new City of St Petersburg
PPP law (2006)
• City law considered more flexible than Federal Law– No use of Federal Funds in the case of NADEX makes it possible– Wider scope of City Law in definition of PPP and bidding
requirements– Wider range of City Law in criteria to evaluate bids (incl. qualitative,
experience, etc…)– Wider definition of City Law in definition of private partner
• PPP framework strengthened with creation of PPP unit and strongcapacity building effort
• Regulation of the Project guided by the Contractual and FinancialAgreement between the City of St Petersburg and the privatepartner
Technical Perspective
• System designed to operate 365, including difficult weatherconditions (+/- 35 C), with full access to mobility impaired persons
• Reference design provided by the City and communicated tobidders
– Reference designed reviewed by technical adviser– Bidders will bid against reference design– Option to submit an alternative bid
• Private partner will have to comply to performance standards(frequency, punctuality, safety, cleanliness, etc…) with penalty feesapplied to Availability Payment
Financial Perspective
• City will finance a share of Capex and will make availability paymentsduring operation of Nadex
• Fare-box revenue goes to the City, which keeps control over tariffspolicy
• Private Partner is expected to raise debt and provide equity to financeinfrastructure and rolling-stock
• Evaluation criteria to include technical and financial criteria but alsomarking of PPP Agreement (level of risk transfer returned to the City)
City and Private PartnerFinancial (not actual)
Nadex: Source and Use of Cash
-15000
-10000
-5000
0
5000
10000
15000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Un
it
City Fund Equity Availability Payment Debt Capex Debt Servic ing Opex Dividends Taxes
Only for illustrativepurposes City Revenue and Expenses
-10000
-5000
0
5000
10000
15000
20000
25000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Un
it
Fare Collected Taxes Availability Payment City Fund
Risk Allocation between Cityand Private Sector
City of St Petersburg
Reference EngineeringDesign
Timely delivery of land
Removal of public utilities
Support in obtaining thepermits and licenses
Revenue and ridership riskPay the Availability Fee;Pay the Capital Grant.
Private PartnerAll risks associated with thedetailed design, construction
and operation (incl.construction price, operating
cost, etc…)
Performance of Nadexduring operation in line
with Agreement
Take all risks related toraising the private
financing necessary tocomplete the Project
EVENT TIMELINE
City Approval (Reg. 1657) Dec. 25, 2007
Bidding Procedure Launched Dec. 28, 2007
Roadshow (London)- Project introduced to potentialbidders and participants Feb. 7 & 8, 2008
Deadline - submission of PQ applications April 2008
Selection of Shortlist May 2008
Issue Bid Instructions Docs. June 2008
Access to Data Room June-Nov. 2008
Deadline for Submissions of Bids Nov. 2008
Selection of Preferred Bidder Dec. 2008
TIMETABLESchedule of Implementation
Status and challenges ahead
• Positive market response and six requests for pre-qualification received in April 2008
• Main challenge remains to maintain private sectorinterest through financial close
– Several other pilot projects being developed at the same timelikely to interest same companies (financiers, construction,etc…)
– Limited companies with skills and experience and not the onlyLRT being procured
• How market will price country risk and high constructioncosts (on capex, debt, DSCR, etc…) for pilot projects inSt Petersburg?
Bank role in this project
• World Bank (IBRD) acting as Financial adviser forNadex Transaction
• Reimbursable Technical Assistance (RTA) undertakenby ECA ECSSD and FEU (policy, technical, legal,financial)
• Part of a package of RTA with the City, including strongcapacity building effort (incl. safeguards)
• IFC and other IFIs (incl. EBRD, EIB) keen to participatein the bidding
Contacts
For comments or further details contact:
Penny Williams [email protected] Mandri-Perrott [email protected] Escobedo [email protected] Stiggers [email protected]
THANK YOU!
PPPs in Infrastructure
