Yaroslav Rozhankivskyy: Три складові і три передумови максимальної продуктивн...
Dr. ulrich koegler effective psp in metro and rail projects vfff
1. Booz & Company Kuwait City, April 17th, 2012
Getting it right: effective private
engagement in rail & metro
systems
Kuwait Rail & Metro Conference 2012
Dr. Ulrich Koegler, Vice President at Booz & Company
This document is confidential and is intended solely for
the use and information of the client to whom it is addressed.
2. Regional rail development and key questions
Core components of effective private sector engagement
Booz & Company 120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx Prepared for Kuwait Metro & Rail Conference 2012
April 17th, 2012
1
3. GCC region is the midst of a massive rail and metro development
drive
Al Jalamid
Al Hadetha Qurayyat
Station
Mine /
Hazm
Planned Rail Networks in GCC
Al Jouf Kuwait Umm Qasr
Al
Baithaa
Boubyan Port Comments
Salemy
Kuwait City Station to Airport
The GCC in general, Kuwait
Ha’il Qasr
Ras Az Zawr United Arab
Zubariya
Nairiyah Jubail Emirates
included, is in the midst of a massive
Bahrain
Al Al Majma’a
Station
Workshop Damma
m Qatar Sharjah Ras Al Khaimah rail development drive
Qassim
Khor Fakkan
Yanbu Sudair Ras Laffan Port Khalifa v
Hafouf Fujairah
Al Dukhan
With little prior experience in
Port Messieed
Madina Riyadh
Station Sohar
Hardh Musaffah Muscat
King Abdullah
Ghweifat Ruwais
(KSA border)
Al Ain/Oman
border
railways, GCC governments faced
Economic City
Rabigh
Shah significant challenges in aiming to:
Oman
Jeddah
– Deliver various urban and national
Saudi Arabia rail projects
Makkah Al Taaf
Duqm
– Meet their policy goals of economic
Khamis
diversification
Mesheet
– Sustainably delivering quality
Gizan service levels that attract users
– Determining the right approach
Yemen private sector engagement is a key
enabler.
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
2
4. So far, most are being directly procured through government-
owned entities
Selected Rail Project Overview EXAMPLES
Envisaged or Likely Operation
Project Description Type Status
Procurement Approach Date
Kuwait National Rail Rail system connecting Boubyan port to Long-haul
Kuwait city and to the border with KSA Feasibility PPP 2018
Road rail
North – South Rail Phosphate line from Jalamid to Ras El Kheir Long-haul Direct procurement through
with extension to Jubail/DMM and to Riyadh operational 2011
(SAR – state owned) rail SAR (state-owned Company)
Haramain High High Speed Line of 440 Km, linking Mecca, Under Direct procurement through
Madinah, Rabigh (KAEC), and Jeddah HSR 2014
Speed Line construction SRO (state-owned)
Rail system in Makkah to ease transport of Direct Procurement
Al Mashaer Al Completed/Op
Makkah residents and Pilgrims during Haj Light Rail 3 year O&M contract 2011
Moqadassa (MMMP) erational
season Awarded to Serco
Princess Noura A 11.5 km automatic light rail at Princess
Noura Bint Abdulrahman women’s university Monorail Completed Direct Procurement 2013
University
Construction of four new lines to provide Feasibility/
Makkah MRT passenger transport through Makkah Metro Direct Procurement 20151)
Design
Three metro lines connecting Jeddah Airport
Jeddah Monorail and different locations within the city Monorail Tender Direct Procurement 20161)
Two high speed light rail lines (North-South
Riyadh Light Rail and East-West) providing passenger Light rail Delayed PPP 2018
transport through Riyadh
Booz & Company 120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx Prepared for Kuwait Metro & Rail Conference 2012
April, 2012
3
5. Identifying where and how private sector participation is most
beneficial comes down to a few key questions
Government objectives: What are the government broad policy goals (attracting know-how,
assuring service delivery, safeguard / asset , funding, developing capital markets) ?
Project goals: What are the government specific project objectives in terms of timeline, funding/
fares, network connections, and primary target users? How important is safeguarding long-term
reliability of the asset ?
Institutional enablers: What institutional framework and land transport regulations are required
to be developed? And what institutional capabilities and entities are needed to manage and
oversee project delivery?
Engagement model development and implementation: How could the right engagement model
be developed and tested in the market? How available is project finance for metro and rail
projects?
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
4
6. Regional rail development and key questions
Core components of effective private sector engagement
Booz & Company 120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx Prepared for Kuwait Metro & Rail Conference 2012
April 17th, 2012
5
7. Three core components account for success
Core Components of Effective Private Sector Engagement
Government Role
Clear strategy for projects selection and development
Strong institutional framework and capabilities to
manage private participation and regulate the sector
1 Transparent governance and procurement process
Government
Funding Strategy
Goals and Role
Understanding of socioeconomic benefits vs. costs
Accurate knowledge of funding requirements and
funding sourced based on balanced risk allocation
Core Financing
Components
Private Engagement Enablers
2 3 Definition of objectives behind adopting a PPP scheme
Identification of the right PPP enablers that attract
Benefits & Private
investors in a given market / economy
Funding Engagement
Enactment of planning and operational standards that
Strategies Enablers
ensure successful implementation of the scheme
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
6
8. 1 Government Role
The government role spans policy, regulation, procurement, and
enforcement
Government Contribution Roles
Policy Setting & Planning Regulation
Integrated Transport Fares Definition and
Planning Economic Regulation
Rail sector planning Demand Management
Budgeting and Funding Performance Monitoring
Standards Development
Government Roles
Procurement Enforcement
Tendering and Licensing Standards Enforcement
Infrastructure Ownership Regulations Enforcement
and Management (economic, safety)
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
7
9. 1 Government Role
Rail tends to be actively promoted by government policies as an
efficient and alternative mode of transportation
ILLUSTRATIVE
Switzerland – Key Policy Pillars of Supporting Rail Development
Vision
to Shift transportation From Road to Rail
I II III
Rail Expansion and Maximization Internalization of External Costs Liberalization and
of Economic Benefit of Road Freight Transport Private Sector Participation
Interconnect rail network with Allocate fair share of Reform sector and ensure
major industrial and logistics infrastructure, environmental and competition, product innovation
hubs safety related costs to road and service improvement
Ensure speed, convenience and freight transport Optimize cost recovery
financial efficiency of both
passenger and freight rail
Funding Programs:
Sidings, Terminals and Combined Transport
Source: Various EU Transport Authorities, Swiss Department of Transport and Federal Roads Office websites, Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
8
10. 1 Government Role
A comprehensive regulatory framework, covering technical, safety,
and economic matters is essential for sector development
Railway Sector Regulatory Framework
Railway
Vision
Sector Policies, Institutional
Framework and Governance Model
Technical Health,
Commercial Safety and
Regulations
Regulations Environmental
and Standards
Regulations
Infrastructure design and System Certification
Fares and tickets
construction standards Approval, Inspection & Audits
Access fees and policies Technical standards for rolling stock Infrastructure Protection
Environment and Sustainability
Customer rights and protection Technical standards for interoperability Fire Protection
Security, Emergency and Disaster Readiness
Market and competition regulations Technical standards for operation Accident & Incident Investigations
Land Use / Right of Way and Urban Development Regulations
Source: Booz & Company analysis
Booz & Company 120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx Prepared for Kuwait Metro & Rail Conference 2012
April 17th, 2012
9
11. 1 Government Role
Sector governance, a pivotal enabler, remains a challenge for GCC
to effectively develop
CONCEPTUAL
Challenges for Railway Sector Governance Set-Up in GCC Countries
Typically Unclear Roles of the
Key Sector Entities
Emerging
Limited Capabilities
Role of the GCC
and Expertise
Rail Authority
Railway Sector
Governance
Challenges
Integration and
Lack of Existing
Interoperability
Policies, Standards
with GCC
and Regulations
Railway Systems
Short Time Frame
Source: Booz & Company analysis
Booz & Company 120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx Prepared for Kuwait Metro & Rail Conference 2012
April 17th, 2012
10
12. 1 Government Role
Supporting policies remain largely underdeveloped
EXAMPLE
Example of Incentives to Increase Use of Metro, Light Rail and Public Transport – Benchmarks
Singapore Hong Kong London Berlin
Success Critical
Factors/Levers
PT coverage Reach residential areas, increase connectivity of suburbs
and capacity Optimize network layout and density according to demand
Set and enforce quality standards
Service quality
PT supply Encourage competition between service providers
Fare integration: integrated tickets and multi-mode smartcards
Modal Network: feeder bus/rail services to main corridors
()
integration Physical: interchanges / park and ride facilities
Institutional: same entity responsible for all modes
Public transport fares are set at affordable rates
Affordable fares
PT Same entity sets PT fares vs. car usage fees and toll fees
demand Pedestrian and cycling access to public transport
Access to PT
Adequate waiting areas (e.g. bus/taxi shelters)
Limit number Heavily tax car acquisition & ownership
of cars Limit number of additional cars per year
Impose congestion charge
Road Limit car
Demand Parking spaces: limit number and increase costs
usage
Heavily tax petrol
Usage Provide on-line and on-road information about congestion
Efficiency through intelligent traffic systems
Road Capacity New roads (inc. tunnels or underground roads)
Supply Efficiency Build reversible “tidal flow” roads
Note: London has some integration, e.g. ticketing and fare collection, but is less developed on the other integration dimensions
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
11
13. 2 Funding Strategy
A funding strategy should be driven by clear socioeconomic
priorities and optimization of government funding
Funding Strategy Building Blocks
Alignment
Government
Strategic
Funding
Objectives
Policy
& Policies
Government
Invest/ Degree of
Financial Funding Funding Public-Private
Procure-
Appraisal Strategy Sourcing Sectors
ment
Strategy Cooperation
Governmental
Prioritization
Risk
and Work
Allocation
Plans
Policies
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
12
14. 2 Funding Strategy
Rail investments have significant potential socioeconomic benefits
in GCC, where people and freight mobility needs are growing fast
Potential Socio-economic Benefits for GCC – Overview
Benefit Impact
Enhance road safety through a safer mode of transport for passenger and freight traffics
Accidents Costs Savings which will reduce collisions and associated property damage, insurance and medical
costs and personal and production losses
Reduce greenhouse gas emissions, air pollution and transport noise through a more eco-
Environmental Cost Savings
friendly mode of transport
Benefits from
Reduce fuel consumption through a more fuel efficient mode of transport for passenger
Modal Shift Fuel Efficiency Savings
and freight traffics
Allow time savings for the new rail passengers due to improved services and for routes
Travel Time Savings
travelers due to fewer vehicles on the road
Enhance reliability for rail passengers and especially for rail freight traffic due to
Reliability Improvements
scheduled and precise time estimation for rail trips
Other qualitative benefits arise from implementing the rail project as a PPP e.g. quality of
Intangible Benefits
service, institutional capacity, promotion of competitive markets
Positive Impact of Rail Further strengthen country economy through direct and indirect stimulation of economic
Benefits from Market on Economy activity
Economic Land Use Improvements Allow further developments in areas traversed by rail
Stimulation
End-user Satisfaction If users expectations are being met
Economic Stimulation of Enhance economic productivity of planned industrial and residential/urban expansions by
Industrial Activity providing them with a more efficient, cost-effective and reliable mean of doing business
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
13
15. 2 Funding Strategy
Yet, they typically do not recover costs, hence, the need for
sustainable funding
INDICATIVE
Comparative Cost Recovery Ratios of International Urban Mass Transit Providers
Population
Hong Kong 157.0%
Singapore 126.0%
Mega Cities
London 81.0%
> 4 mn. New York 67.3%
Washington 57.0%
Madrid 51.5%
Typically,
Cairo 47.0% Average 83.3% Urban Rail and
Public Transport
Budapest 72.5% requires sustain-
2-4 mn. Vienna 48.5% able funding
Berlin 42.5% schemes
Average 52.3%
Copenhagen
< 2 mn. Marseilles 54.0%
Helsinki 53.0%
Prague 30.5% Average 51.4 %
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
14
16. 2 Funding Strategy
A wide range of funding possibilities can explored for railway
projects …
Overview of finance methods and examples
Funding Sources Operating Models
Internal Public utilities
– Tax revenues (land and non-based) Community
– User charges
State Corporation
– Developer contributions
– Central government development loans and Management Contract
grants Lease
– Municipal property assets PPPs
– Value Capture
– BOT
External – BOO
– Venture Capital & Infrastructure Funds – BOOT
– Non-Recourse or Project finance
– DBFO
– Corporate Finance
– Export Credit Finance – Etc.
– Bond Finance Operating Franchise
– Guarantees or Credit Enhancement Programs Private companies
– Overdraft facilities and short-term loans from
banks and building societies Infrastructure Trusts
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
15
17. 2 Funding Strategy
… while Governments would have to subsidize remaining
requirements through up to three levers
ILLUSTRATIVE
Government Invest/Subsidies
Subsidy Type Subsidy Model Description Assessment
Pros:
Monetary Monetary subsidies for investing in Capex
Capex Easy, one-off monitoring
Subsidies Cons:
In-Kind Government contributes certain assets
Require large one-off investment
Fixed subsidy independent of performance Pros:
Fixed Simple
or ridership Performance dependent
Fixed Performance Performance based subsidy independent of Subsidies provided in smaller
Based ridership regular installments
Opex
Subsidies Variable subsidy independent of
Variable Simple
performance but dependent on ridership
Cons:
Variable Variable subsidy dependent on both the Require constant monitoring
Performance Based performance as well as ridership
Indirect subsidies consisting of tax relief, Pros:
Indirect – Investor
Special right of way, land development, etc. Target only the most needy
Subsidies Targeted directly at passengers based on Cons:
Indirect – Customers
need and social status Difficult to implement
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
16
18. 2 Funding Strategy
Hence, private sector engagement schemes (such as PPPs) and cost
recovery policies need to be well synchronized
ILLUSTRATIVE FOR ROADS
Involvement PSP Scheme Definition Cost Recovery Approaches
of Private
Sector
High Private company is granted the right to develop, finance,
BOO design, build, own, operate, and maintain transportation Ticket revenue
Fares
project Access charges
The responsibilities for designing, building, financing and
DBFO operating are bundled together and transferred to private
sector partners Granting agency pays for the
Service availability of the infrastructure
Availability services regardless the volume
Single contractor has the responsibility for designing and Payments
Payment usually linked to KPis
DBOM constructing a facility, as well of operating and maintaining it
for specified period prior to handing it over to client
Retail
Integrated partnership that combines the design and Ancillary
Property development
BOT/BTO construction responsibilities of design-build procurements Services
Advertising
with operations and maintenance
Combines two, usually separate services into a single Develop- Neighboring land-related fees
contract ment to capture the developers’
DB Gains gains
Owners execute a single fixed- fee contract for both
architectural/engineering services and construction
Government provides capital
Manage- Gov’t grants and subsidies
The process of managing the facility from the beginning of Grants &
ment Incentives Government provides tax
the contract till the end of the contract date
Low Contract incentives and exemptions
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
17
19. 3 PPP Enablers
The starting point is capturing government objectives from
engaging the private sector
ILLUSTRATIVE
Potential Government Objectives & Benefits
Objectives Benefits
1 Share financial risk of project development with private
+
sector thus redirecting public funds towards more Free public funds for other uses
Fiscal urgently needed sectors Reduce risk for the public sector
Avoid cost over-runs by adopting a life cycle approach Reduce project life cycle costs
to project costing
Key Objectives
2 Enhance economic growth and deepen financial Accelerate speed of delivery
markets by attracting domestic savings and Increase service coverage and improve quality
Economic international investment Increase time and cost reliability
Improve project efficiency, cost, speed of delivery and Increase efficiency in project execution
accessibility of services Attract international and domestic capital
Order of Priority
3
Enable technology transfer and exchange
Provide technological benefits in terms of transfer of Train resources on advanced technology in road
Technological operations / maintenance
know how, service update and innovation delivered by
greater private sector participation Promote innovation
4
Decrease government direct involvement in provision Mitigate repercussions of privatization
of infrastructure sector services Redefine the role of the government
Political
Redefine role of government to become a regulator of Enforce social stability
transport sector Increase transparency of government processes
5
Raise standards of living by providing infrastructure Meet people’s needs
Social Raise living standards
services in a timely manner within an environmentally
Promote environmental sustainability
sustainable framework
- Balance social and commercial priorities
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
18
20. 3 PPP Enablers
This will ultimately help determine the most effective model for
private sector participation
Procurement Model Options Description
Retain Retain
Asset Potential PPP options Revenue Revenue
Revenues/ Collect Collect Collect
Benefits Revenue Revenue Revenue
(Might provide Own Own
Private Sector Role
Asset equity at times)
Operate Finance Finance Finance
and
Maintain Operate Operate Operate Operate Operate
Maintain Maintain Maintain Maintain Maintain
Finance Finance Finance Finance
Asset Construct Construct Construct Construct Construct
Delivery
Design Design Design Design Design
Design, Build
High Public Design and Build Operate and Build Own and
Options O&M Operate, and Privatization
Sector Risk Build Transfer Operate
Finance
Government Role
Govt Financial Govt Financial Govt Financial Govt Financial
Govt Finance Support Support Support Support
Government High Private
Cost Costs Funded Costs Funded Costs Funded Costs Funded Sector Risk
Government Owned Owned Owned Owned
Benefit Tolling Rights Tolling Rights Tolling Rights Tolling Rights
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
19
21. 3 PPP Enablers
Results reveal a significant improvement in time and cost when
adopting PPP schemes
ILLUSTRATIVE
Performance of PPP’s vs. Traditional Procurements
Cost Over-Run Time Over-Run
(% of Cost) (% of Time)
35.3%
25.6%
11.6% 13.2%
54 Projects
(21 PPP’s) Traditional PPP Traditional PPP
Procurement Procurement
(% of Projects) (% of Projects)
73.0% 70.0%
24.0%
22.0%
37 Projects1)
(37 PPP’s) Traditional PPP Traditional PPP
Procurement Procurement
1) Traditional procurement figures relate to previous public sector experience besides PPP projects in focus
Source: ACG/University of Melbourne, Australia; National Audit Office, PFI: Construction Performance, 2003 ,UK
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
20
22. 3 PPP Enablers
However, not every PPP has become a success – Failure cases exist
Worst Case PPP-Examples
Channel Tunnel
STAR and PUTRA Arlanda Express Metronet
Rail Link
(1994) (1999) (2003)
(2007)
BOT and Design-Construct- An airport rail link connecting Partial privatization of London Mainland railway (108 km)
Operate contracts with 60-year Stockholm City with Arlanda tube (Infrastructure maintenance) linking the Channel Tunnel
lease / concession for STAR Airport Investment volume of £15,3bn with London
and PUTRA Malaysian Light Operated by A-Train under a 30 Selection of PPP experienced Investment volume of £2,2 bn
Rail Transits respectively year concession consortium Operated by London
Investment volume lower than Expected ROI 15-20%, Continental Railways (LCR)
the budgeted RM 3.5Bn cost savings of £2-4bn
Weaknesses Weaknesses Weaknesses Weaknesses
Lack of transparency: Revenue risk was transferred Major delays caused by judicial Financial risk transferred
Contracts not bid for / unclear completely to private sector conflicts, complex bidding and completely to private sector
cost of systems to the public approval process Low public infrastructure
Due to too optimistic passenger Financial problems of service charge and too
Forecast of revenues too
demand forecasts, revenue consortium partners finally led to optimistic passenger
optimistic
targets were not achieved bankruptcy of Metronet forecasts
Lack of exit strategy, the Responsibilities were trans- As a result LCR sold back
government thus having to bail- ferred back to City of London operating license to
out and eventually takeover the Network Rail
LRT systems
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
21
23. 3 PPP Enablers
A crucial element for successful PPP’s is to understand investors’
perspectives
Market Testing Dimensions
1 Get an overview of the firm’s appetite for rail projects (greenfield in the GCC)
General Get details on the firm approach and experience in:
Appetite – Middle East market
– PPP transaction
2
Determine firm appetite for project different elements and its envisaged role
Contractual
Get firm’s comments about different contractual structure components e.g. package size, phasing, contract term
Structure
duration, risk allocation, etc.
3
Determine firm familiarity/experience with project technical specifications
Technical
Get firm’s comments on project technical specifications e.g. contract packages size, potential challenges, etc.
4
Determine firm appetite to invest its own capital on the project
Financing Get firm’s comments about several financing considerations e.g. raising third party equity, raising of project debt,
proportion of Kuwaiti shares, currency risk approach, Islamic Finance, Export Credit, etc.
5
Procurement
Get firm’s views on the procurement process and timeline and any other relevant issues, comments or
Process & Other
requirements in relation to the project
issues
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
22
24. 3 PPP Enablers
PPP transaction success may currently require some government
help to address global crisis fallout, and stimulate capital markets
Current Situation Government Potential Responses
Weakened global appetite for infrastructure Tactical / Short-term
long-term finance, given liquidity crisis and Reduce quantum of market-raised finance
regulatory change – Increase competition amongst financing sources
Expanded role of local banks, implying: to influence pricing
– Shorter-term financing (can cover construction) – Utilize government finance to lower PPP cost of
capital and availability fee
– Refinancing risks exist, complicated by a Reduce private capital risk
shortage of infrastructure-focused investors – Undertake part or all of its ultimate repayment,
– Potential market congestion with raft of PPP but distinguish between senior and mezzanine
projects scheduled in coming years in Kuwait equity
Reduce tenor of capital required
Other forms of transport infrastructure
– Employ shorter term private sector capital which
financing remain largely unproven, for
could be more plentiful and cheaper
example:
Strategic / Long-term
– Islamic finance
Promote development of infrastructure funds,
– Projects bonds
equity, and debt markets
Mismatch between government PPP ambitions Encourage export credit in equipment
and regional investor mix purchases and infrastructure development
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
23
25. 3 PPP Enablers
A robust evaluation methodology for procurement process is key
to conclude a PPP transaction
NON-EXHAUSTIVE
Rail PPP Procurement – Key Evaluation Principles
Principle Description
Provide clarity with respect to the methodology, process and results, with all parties having access to the same
Transparency
data
Neutrality Create a “level playing field” by not advantaging/disadvantaging any party over another
Allow for “apples-to-apples” comparison of applicants/bids by clearly defining the type and form of data to be
Comparability
provided by applicants/bidders as part of their RFQ application/bid submissions
Confidentiality Preserve utmost confidentiality of all evaluation materials, discussions and results
Auditability Provide an audit trail to allow relevant parties with the necessary access rights to revisit the basis of decisions
Provide consistency of approach across projects in the same sector being procured by the same
Consistency
government/procuring authority
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
24
26. 3 PPP Enablers
Ultimately, PPP is about ensuring long-term service performance,
hence need for monitoring against KPIs
NON EXHAUSTIVE
Sample Scorecard for Operations Performance Indicators of Public transport
Category KPI Frequency Target Actual Score
Punctuality – On time availability of vehicles M 95%
Fleet Failure – Number of failures per coach.km M OEM Guidelines
Service Availability
Fleet Availability M 85%
On board equipment reliability S 98%
Coaches cleanliness M TBD
Clarity of on board information signage and systems M TBD
Service Quality
Average time to repair defects S Less than 24 hours
Average time to respond to emergency incidents S Less than 1 hour
Nr of complaints resolved within 1 hour as % total number of M More than 95%
complaints
Customer Service No of complaints as % of total passengers M Less than 5%
No of resolved complaints as % of total complaints M More than 90%
Sustainability Excess energy consumption per pax.km S TBD
Number of safety defects per year S Less than 10
Safety and Security
Number of accidents per year S None
Above 100% of Target 90% – 100% of Target Less than 90% of Target M = Monthly ; S = Semi-Annually
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
25
27. Overall, successful PPP schemes require a collaborative approach
between the private and public sectors
Demand Side – Public Sector Supply Side – Private Sector
1 Create the appropriate legal and regulatory 1 Local developers and operators should partner
framework to encourage international private with international infrastructure operators to
investments (e.g. PPP, concession law) – bid for PPP projects in the region
– acquire best practices in managing and
2 Prioritize the projects according to long term
strategy and structure them in order to allow for developing infrastructures
easier debt and equity financing – optimize the life cycle cost, and quality of the
service delivered
3 Adopt a value for money approach to define the
risk allocation and to select the PPP scheme 2 Institutional investors should start to
4 Support the development of local institutional – Use other forms of financing which may involve
investors (e.g. infrastructure funds) with medium to tapping into capital markets
long term investment perspectives – Plan to be engaged for a longer term
(e.g. 15+ years)
5 Further market targeted infrastructure projects
in order to attract world-class investors and
3 Banks should accept to step in for short term
developers
financing (provided that they receive the comfort of
Understand Customers! government and sponsor guarantees) in order to
kick-start infrastructure projects
Source: Booz & Company analysis
120417 Booz - Kuwait Metro & Rail Conference 2012 - Effective PSP in Metro and Rail projects vfff.pptx
Booz & Company
April 17th, 2012
Prepared for Kuwait Metro & Rail Conference 2012
26