bridging the gap – meeting the needs of ppp projects
TRANSCRIPT
Bridging the gap – meeting the needs of PPP projects
David Freer, Alex Sundakov, Vishal Joshipura July 2016
Presentation Outline
a) Paper Objectivesb) Public Private Partnerships: Overviewc) What normally happensd) What can alternatively happen – an examplee) How to make this the norm
Paper Objectives
• PPPs are popular for transport projects– They however have a spotty track record of meeting traffic
projections• One potential reason for this track record is that traffic advisor
and the financial advisor often do not work in harmony on such projects
• The traditional approach for developing transport projects does not work for PPPs
• We worked on a project where the two advisors worked as a team successfully
• We want to share this experience with you…
Public Private Partnerships
• Long term contract between public and private sector
• Concessionaire is compensated based on performance
• Most PPPs are project financed– Only project cash flows
available to repay debt• PPPs may or may not transfer
revenue risk to the private sector– Where revenue risk is
transferred, traffic forecasting is critical
Some Australian examples..
What normally happens
Traffic Expert Financial Expert
Develops T&R model and forecasts
Conducts financial analysis using T&R forecasts
They start and end in isolation
What normally happens
What normally happens
Traffic Expert Financial Expert
Develops T&R model and forecasts
Conducts financial analysis using T&R forecasts
Complains that: - Traffic forecasts need
to be higher- Several additional
sensitivities required- T&R model is not
reliable
Complains that: - Traffic forecasts should
be conservative- T&R budget needs to be
higher- Others do not understand
the complexities of traffic forecasting
What normally happens
Traffic Expert Financial Expert
Develops T&R model and forecasts
Conducts financial analysis using T&R forecasts
What drives this disconnect?
× Different Incentives× Lack of Subject Matter Knowledge of the other expert× Lack of Communication× Insufficient Budgets
Where we want to get to
What could happen: Dhaka-Chittagong Expressway
• Largest PPP in Bangladesh (US$3.5bn)
• One year feasibility assessment
• Traffic advisor and financial advisor worked in-sync throughout the process
• High quality analysis appreciated by the client
• On time and on budget project delivery
What could happen: Dhaka-Chittagong Expressway
Success DriversConstant Communication
Final Delta Plan
Results Framework and
Monitoring Template
Additional Concept Notes
Draft strategies
BDP2100 team
outputs
Investment Plan team
outputsInitial
findings Report
Investment Plan
Feb Oct
Outline of Investment
Plan
Stakeholder Feedback
Report
Initial Ranking of projects and identification for Programs
Mar Apr May Jun Jul Aug Sep Nov Dec
Revisions to Investment
Plan (if necessary)
GEDProject proposals
Sample
What could happen: Dhaka-Chittagong Expressway
Success DriversKnowledge Sharing• T&R advisor explained approach and interdependencies • Financial advisor explained impact of T&R forecasts on viability analysis and
fiscal impact on government• Constant sharing of progress updates, information gaps and expected
delivery timeframes
Similar Incentives• Feasibility study separated from transaction advisory• Fixed fee assignment – no success fees for financial advisor
Project Management• Project plan required constant communication and exchange of information• Strong overall project leadership
How to make this the norm
• At Project Inception, clarify roles and responsibilities• Formalize ways to engage regularly (in-country missions,
scheduled check-ins, easy access to information)• Take time to educate team-members on work required and
interdependencies between tasks• Align incentives as much as possible• Change mind-sets!
– Client and consultants
Banora Point Upgrade, New South Wales, Australia
Thank You