Download Toolkit Hwys cq Tallinn Oct2004

Tallinn Technical University
World Bank Toolkit for PublicPrivate Partnership in Highways
Cesar Queiroz
Lead Highway Engineer
World Bank
Tallinn, 4 October 2004
Presentation Outline
• Public policy requirements
• The main risks of highway projects
• International experience with highway PPP
projects
– Traffic forecasting risks
– Error drivers
– Impacts on revenues
• World Bank Toolkit for Highway PPP
• Case studies
• Discussions
Public Policy Requirements
• Proposed highway projects should be part of
Government program
• Subject to full social cost-benefit assessment
– to ensure public as well as private benefits
– to establish need, and provide basis for
public participation in financing
• Concession award and agreement should
– be well designed
– be transparent & competitively procured
– have clear rules for regulation of the
concession
S&P Research Coverage
• 67 toll case studies comparing forecast
performance with actual/observed
– Toll roads, bridges & tunnels
– User-paid & shadow tolls
• Key findings:
– Systematic errors (optimism bias) in
forecasts
– Consistency of error-drivers
– Produced a traffic risk index
– Sensitivity testing is essential
Infrastructure Finance
Traffic Risk in Start-Up
Toll Facilities
Standard &Poor’s
September 2002
S&P Research Results 2002
X <= 0.19010
5.0%
0
0.2
Comparison of Actual/Forecast Traffic
Normal(0.72, 0.32); n = 67
X <= 1.2583
95.0%
0.4
0.6
0.8
1
1.2
1.4
1.6
Actual (Observed) Traffic
Mean ~ 70%
Spread: 18% - 146% !
Traffic Forecasting Risk Index
Project Attributes
More Reliable
Less Reliable
Tolling Regime
Shadow tolls
User-paid tolls
Tolling Culture
Tolls well established
No toll roads in
country
Infrastructure
Estuarial crossings
Dense urban
networks
Extension of existing
road
Green field site
Highly congested
corridor
Limited/no
congestion
Few competing roads Many alt. routes
Clear competitive
advantage
Weak competitive
advantage
Only highway
competition
Multi-modal
competition
Stand-alone facility
Reliant on other,
proposed highway
Error Drivers
• Miscalculation of road user willingness-topay
• Recession/economic downturn
• Future land use scenarios that never
transpired
• Time savings less than expected
• Improvements to competitive (toll-free) routes
• Underestimate of ramp-up period (traffic
stability), both severity and duration
• Less usage by trucks
Tolling Experience
No tolling
experience:
actual traffic =
56% of forecast
Host Country with No/Limited Tolling Experience
Normal (0.56, 0.31)
X <= 1.0000
91.7%
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0
0.2
0.4
0.6
0.8
1
1.2
Host Country with Tolling Experience
Normal (0.87, 0.26)
X <= 1.0000
69.0%
1
0.9
Tolling
experience:
actual traffic =
87% of forecast
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Future Challenges
• Point-of-use charging
– depends on ability to pay/willingness to
pay
• New toll collection technologies
– Reliability, take-up, back-office
processing
• Pricing sophistication
– discounts (frequent user programs,
resident discount schemes), peak/offpeak pricing, day-of-week, season-ofyear
Main Lessons for Success
•
•
•
•
A well defined legal framework
Simple and transparent procurement
Shared risk-reward concession structure
First attempt with toll roads tend to have
mixed results
• Projects should have social benefits as
well as commercial viability
• Particular attention to traffic forecasting
and hence revenues
• Public sector comparator advisable
World Bank Toolkit for PublicPrivate Partnership in
Highways
Toolkit’s Objective
To provide policy makers from
economies in transition with some
guidance in the design and
implementation of a Public Private
Partnership (PPP) in the highway
sector
Definition of PPP
A Public-Private Partnership (PPP)
constitutes a sustained collaborative
effort between the public sector
(government agencies) and private
enterprises to achieve a common
objective (e.g., the road project) while
they pursue their own individual
interests.
The Toolkit
The toolkit is structured under
five headings and is navigated
through a series of tree
diagrams under each of these
headings. It also includes a
library and interactive financial
models.
Availability of the Toolkit
• Free of charge
• A multimedia product available
on a CD ROM
• Also available at the World
Bank’s web site:
www.worldbank.org/transport
Contributors
Financing Institution
Public-Private Infrastructure Advisory Facility
(PPIAF) www.ppiaf.org
Executing Agency
The World Bank www.worldbank.org
Consultants
Groupe Egis (http://www.groupegis.com)
in association with
Coudert Brothers (http://www.coudert.com)
The Highway Toolkit Includes
• over 5000 pages of reference
publications and web links
• a 500 word glossary
• case studies and financial
simulation software
Toolkit Modules
1. Overview and Diagnosis
2. Project Characteristics
3. Public Sector Functions
4. Laws, Rules and Contracts
5. Implementation
Toolkit Modules
1. Overview and Diagnosis:
rationale for private participation in
the highway sector, alternative
contractual forms, guide to
conduct a diagnostic of the sector
2. Project Characteristics
3. Public Sector Functions
4. Laws, Rules and Contracts
5. Implementation
Toolkit Modules
1. Overview and Diagnosis
2. Project Characteristics:
key considerations in the design of a
public-private partnership,
discussions of well-known PPPs
3. Public Sector Functions
4. Laws, Rules and Contracts
5. Implementation
Toolkit Modules
1. Overview and Diagnosis
2. Project Characteristics
3. Public Sector Functions:
analyzes the roles of the public
sector and presents the tools at
Government's disposal for
performing such roles
4. Laws, Rules and Contracts
5. Implementation
Toolkit Modules
1. Overview and Diagnosis
2. Project Characteristics
3. Public Sector Functions
4. Laws, Rules and Contracts:
guidance on the design of legal and
contractual frameworks for private
participation in highways, with
boilerplate provisions
5. Implementation
Toolkit Modules
1. Overview and Diagnosis
2. Project Characteristics
3. Public Sector Functions
4. Laws, Rules and Contracts
5. Implementation: outlines the key
steps in introducing PSP, bringing
elements from previous modules
and distinguishing by type of private
sector contract
1. Overview and Diagnosis
Why Embark on PPP?
• Context and Key Issues
• Expected Benefits from PPP
• Why (and where) is the Private Sector
more efficient than the Public Sector?
• Overview of PPP experience
• PPI project data base
Choosing the right option
• Forms of PPP
• Making the diagnosis
• PPP policy and strategy
2. Project Characteristics
Tailoring appropriate PPP
• A continuum of alternatives
• Comparing PPP with music
PPP Equalizer
Examples of well-known PPP
3. Public Sector Functions
• Protect community welfare
• Planning and policy making
• Provide adequate framework
• Facilitator
• Contract award
• Regulation
4. Laws, Rules and Contracts
• Legislation




Legislative framework
Adjust legal framework
Regulatory framework
Standards
• Contracts
 Maintenance contracts
 Operation and maintenance concessions
 BOT type projects
5. Implementation
• Actors
• Main Steps
• Managing the Reform
• Selection and contract award
Public Private Partnerships
Works & Management
&
Services
Contracts Maintenance
Contracts
Operation &
Maintenance
Concessions
Build
Operate
Transfer
Concessions
Low
Full
Privatization
High
Extent of private sector participation
BOT-type of Concessions
The responsibility of the
concessionaire comprises an
initial construction, upgrading
or major asset rehabilitation,
and operation and maintenance
of the facility.
Allocation of Risks
100
Maintenance
Contracts
Management
Contracts
RISK
Operation &
Maintenance
Concessions
TO
BOT
PUBLIC
SECTOR
Decreasing
Public Risks,
Increasing
Private Risks
0
RISK TO PRIVATE SECTOR
BOO
100
In addition to the five modules, the
Toolkit also includes:
•
•
•
•
•
Financial simulation tool
Graphic simulation tool
Case study
CD Map
Documentation
• Glossary
And where is the
toolkit?
Graph Simulation Case Study
The Government of Farland is
considering to build a road
between the cities of Farport
and Farcapital (located 50 km
apart) through a Public Private
Partnership (PPP) scheme.
Graph Simulation Case Study
Basic data include:
Construction cost: US$200 million
Source of funds: Subsidies, equity and credit
Real interest rate: 10%
Concession duration: 30 years
Initial traffic: 15,000 vpd
Toll rate: US$5.00 (indexed on inflation)
Inflation rate: 7% per year
Graph Simulation Case Study
Using the above information
and other default data in the
Graphic Simulation tool of the
Toolkit for Public-Private
Partnership in Highways, please
answer the questions below:
Graph Simulation Case Study
Question 1: In the absence of
Government subsidies, ceteris paribus,
what would be the return on equity
(ROE)? What would be the change in
the internal rate of return (IRR) of the
project?
Answer: ROE would reduce from
15.63% (with a Government contribution
of 44% of the construction cost) to
6.94%. No change in IRR (12.27%).
Graph Simulation Case Study
Question 2. While subsidies may be paid by the
Government during the construction period, it
recovers some of this payment through taxes
during the operation period. What would be the
Government contribution to this project that
would lead to a financial balance for the
government throughout the concession period?
Answer: About 23% of the construction cost, as
22% would generate a US$171,000 surplus and
24% would lead to a US$2,464,000 deficit.
Graph Simulation Case Study
Question 3. In the absence of Government
subsidies, ceteris paribus, what would be
the required initial toll rate to yield a
return on equity (ROE) of 16%?
Answer: With no subsidies, an initial toll
rate of US$8.00/veh yields a 15.08% ROE;
an initial toll rate of US$9.00 yields a
17.82% ROE. So an initial toll rate between
US$8.00/veh and US$9.00 would be
required.
Some WB-related Sites
• Toll Roads and Concessions
http://www.worldbank.org/transport/roads/toll_rds.htm
• Public-Private Options for Roads
http://rru.worldbank.org/Toolkits/PartnershipsHighways/
• Port Reform Toolkit
http://www.worldbank.org/html/fpd/transport/ports/toolki
t.htm
• How to Hire Expert Advice on PPP
http://rru.worldbank.org/Toolkits/Documents/Advisors/F
ull_Toolkit.pdf
• Labor Issues in Infrastructure Reform
www.ppiaf.org/Reports/LaborToolkit/toolkit.html