Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Boosting Infrastructure Financing through Risk Mitigation Instruments Financing Sources
Transcript
Boosting Infrastructure Financing through Risk Mitigation Instruments Financing Sources for Public-Private Partnerships Forum Kuala Lumpur, 25 November 2015 Dr Armand Hermawan CFO Indonesia Infrastructure Guarantee Fund Printed: 20/11/2015 Indonesia infrastructure context Total infrastructure stock 2012, % of GDP 100 Roads Ports Power Rail Airports Water Telecom 87 80 80 71 73 76 60 54 57 58 70 ~60-65 64 58 40 20 0 Brazil1 UK Canada India USA Germany Spain China Poland South Africa Indonesia2 1 For Brazil, road data contains all of transport. The estimate shown is based on data provided courtesy of Dr. Armando Castelar. 2 Indonesia transport stock is an expert estimate and ranges approx. 5-10% of GDP in 2012 Source: various national statistics; McKinsey Global Institute analysis 2 Indonesia infrastructure context Bn USD, real 2013 Investment gap ESTIMATES Investment required to meet the 70% “rule of thumb” for infrastructure stock ~ 1,160-1,1701 ~370-3802 ~ 560-570 2013 GDP value (USD billion, real 2013) 869 225 2011-2014 MP3EI plan New investment needed 2025 16231 E1.Estimate based on Global Insights GDP growth forecast in 2014-2025, ranging from 5,1% to 6%. All data are in real base 2013 2 An additional ~US$ 277 bn (1.5-2% GDP) would be needed to include capex depreciation Source: Indonesia Coordinating Ministry For Economic Affairs, Global Insights, McKinsey analysis 4 Indonesia infrastructure context 5 Indonesia infrastructure PPP context PPP potential ESTIMATES Bn USD, real 2013 ~370-3802 ~ 1,160-1,1701 145-180 225 ~ 560-570 2013 GDP value (USD billion, real 2013) 869 ~90-110 55-70 2011-2014 MP3EI plans New investment needed 2025 16231 1 Estimate based on Global Insights GDP growth forecast in 2014-2025, ranging from 5,1% to 6%. All data are in real base 2013 2 An additional ~US$ 277 bn (1.5-2% GDP) would be needed to include capex depreciation Source: Indonesia Coordinating Ministry For Economic Affairs, Global Insights, McKinsey analysis 6 four fundamental benefits by closing the infrastructure investment gap Increased efficiency ▪ ▪ ▪ ▪ Private sector has financial interest to deliver on time Optimise life-cycle cost (investment vs. ops cost) Meet budgets (known outputs for known cost) Competition between bidders drive price down Appropriate Risk allocation ▪ ▪ ▪ Risk allocated to party best able to manage it Risk reduction by redefining relationship between parties Maintains quality of service through effective incentive system ▪ ▪ Maximised use of private sector skill Execution and delivery expertise ▪ ▪ ▪ Injection of private capital and ability to raise additional capital Makes projects affordable if borrowing is limited Project can be funded off-balance sheet1 Leverage Private sector Strengths New sources of financing 7 fiscal initiatives and supporting institution Government of Indonesia Land Fund Viability Gap Fund Land Acquisition & Clearance Viability Risk Preparation Capital market and regulatory reform Policy (Bankabaility) Risks Bidding Cost of financing Infrastructure Fund Project Financing Construction Private Investors / Lenders Refinancing Operation 8 Indonesia Infrastructure Guarantee Fund Established: December 30, 2009 Authorized Capital: IDR 9 Trillion 100% Government-owned Core Mandate: Single Window for Infrastructure Guarantees 9 benefits of the Guarantee to PPP projects INVESTMENT CREDIBILITY Sustainability of investment Joint project supervision with the Government The project is more credible in the eyes of the private sector Increasing competition more competitive rates RISK Professional and efficient risk management Workable and clear risk mitigation plan BANKABILITY Lenders confident to lend Competitive interest rate due to guaranteed term 11 a case study: Central Java Power Plant PPP project Guarantee Agreement Gurarantee Agreement for ofIDR 300 Bio Central Java Power Project Project Ultra super critical coal fired power plant, 2x1000 MW Location Batang Regency, Central Java Province, Indonesia COD 2019 PPA Tenor 25 years PPP Structure Build, Operate, Transfer (BOT) Developer PT Bhimasena Power Indonesia, an SPV of consortium: • ADARO: 34% (Indonesia) • J-POWER: 34% (Japan) • ITOCHU: 32% (Japan) Guarantee Structure • Guarantee Agreement: Project Co. with IIGF & GOI • Coverage: political risks, force majeure affecting PLN & PLN EOD • Guarantee Tenor: • Equity : 16 years • Debt : 21 years 2x1000 MW; ~US$ 4 bio 6 October 2011 12 however, there’s challenges that need to be addressed PPP-specific Issue No end-to-end 1 ownership Challenged Government 2 capacity in pre-FS and project prep Relevant 3 Opaque project selection criteria Conflicting 4 regulatory framework Description ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ Misaligned incentives among GCAs and PPP agencies No single unit accountable from origination to completion Lack of mandate from highest authority Varying awareness and capabilities on what it takes to do a PPP Stringent procurement process limits access to world-class advisory firms for project preparation Opaque criteria for selection and prioritization of PPPs Limited consideration of financial viability during project selection results in projects tendered without viable fiscal support Over 30 laws and regulations govern PPPs Contradicting stipulations across sectors; and between national and local governments 13 …..resulting in 5 corresponding actions to unlock PPP potential Recommendation 1 Authoritative and credible PPP center Mainstreaming PPPs as an 2 infrastructure delivery mode Project development fund for 3 accelerating procurement of world-class advisory services Description ▪ ▪ ▪ ▪ ▪ ▪ ▪ 4 Define robust criteria to determine when PPP is most suitable delivery mode Adopt value-for-money (VFM) principles Pool all resources to ensure allocation across projects are maximized Develop readily available roster of technical, financial and legal advisors to support transactions Develop programs to address three key areas: – Awareness-raising – PPP Basics – Specialized transaction skills Capability-building program across the bureaucracy 5 Debottleneck regulations Serve as control tower, ensuring that PPPs reach financial close PPP champion, driver of transformation, owner of reforms ▪ ▪ Conduct regulatory audit Propose specific amendments 14 Thank You 15
