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PPP Days 2010PPPs – Lessons from the Last 18 Months

Rajiv B LallMarch 22, 2010

Full

Privatization

Works &

Services

Contracts

Management

ContractsOperation

Concessions

Build Operate

Transfer

Concessions

Low High

Extent of private sector participation

Asset

Ownership

Public Public Public Public & Private Private

Commercial

Risk

Public Public Private Private Private

Typical

Duration

1-2 Years 3-5 Years 15-20 Years

(depends on

feasibility)

20-25 Years

(depends on

feasibility)

Indefinite

Sectors Roads EPC;

Sewerage

Project

Toll Stations City Bus Service Highways;

Bus Terminals

Telecom, Power,

Waste Processing

Private Sector Participation (PSP) in India

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PPP trends

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After establishing themselves in Roads, Power and

Telecom, PPPs foray into challenging Urban Infrastructure.

Contribution of private investment:

National Highways: Close to half

Power: Projected to double between 10th (01-06) and 11th (07-12) 5-Yearplans and reach USD 40 billion.

Telecom: 2/3rd of total investment in FY 08-09

Use of both traditional and innovative PPP structures Traditional PPP – highways, urban public transportation, airports

Innovative – power sector

Generation Transmission Distribution

MoU based PPAs

Competitive Bidding

SPV for project

development

Ultra Mega Power Projects

GoI/Power Finance Corporation

PPA

Tariff based

competitive

bid

Utilities

Private

Player

Central & State

Utilities

PSP

Inter state & intra state

JV- Central/State Transmission

Utility & private player

oTala transmission system

Independent Power

Transmission Corporation -

oPrivate sector awarded

projects through tariff based

bidding

o2 schemes under Western

Region System Strengthening

Utilities

Management

Contract

Operation

Concession

Privatization

Metering

Billing

Collection

Delhi

distribution

business

Distribution

Franchisee

Bhiwandi

Power

Supply

PPPs in all three components of Power

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Huge upsurge in Road activity

Source: NHAI (for Projects awarded from 1999 to March 2009); IDFC (rest)

Of the 47,000 kms earmarked for PPP development under NHDP, about 14,000 kms has been

bid out in 122 PPP Concessions across the country for a total investment of about Rs. 70,000

crores.

In FY 2010 we could do more in just PPP contracts than was awarded in EPC and PPP

contracts together in the peak year of 2005-06 when 4,740 kms worth of road contracts were

awarded.

Significant private sector interest

No of

Projects

Length

(km)

Project

Cost (Cr.)

From 1999 to March 2009: Projects

awarded 95 7,600 46,369

April - Dec 2009: Projects awarded/bids

won 27 2,568 25,404

Pipeline: Projects w/ likely bids 26 3,348 34,439

Jan-Feb 2010: Projects in RFQ stage 24 2,459 20,091

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The Port Sector PPP model has been very successful

Share of Private Sector in Container Volume

FY2002 FY2009

Private Terminals

Volume –2009

Mumbai 90

Kandla 138

NSICT (DPW) 1,427

GTI (APMM) 1,256

Pipavav (APMM)

195

Mundra (DPW) 808

Cochin (DPW) 260

Tuticorin (PSA) 439

Chennai (DPW) 1,143

Vizag (DPW) 90

Total (‘000 TEU) 6,054

(‘000 TEUs)

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Total TEUs: 2,885

Private TEUs: 1,385Total TEUs: 7,848

Private TEUs: 6,054

(‘000 TEUs)

Private52%

Government 48%

Private77%

Government 23%

All major airports are PPP

Notes:

The investments refer to original investments and there have been significant

cost overruns.

Currently Mumbai cost is estimated around Rs. 9,800 Cr as per press reports.

Government ownership is 26% in all 4 airports, in Delhi and Mumbai AAI holds

26%. In Hyderabad and Bangalore, AAI has 13%, with respective State

Government holding 13%. In addition to the Grant of 107 Cr, GoAP has also

given an interest free loan of Rs. 315 Cr to the Hyderabad airport.

Total

Investment

Govt

grant/VGF

Govt.

Ownership

Govt. share

of revenue

Land

Contribution

Rs Cr Rs Cr % % Acres

Mumbai 6000 - 26 38.7 1875

Delhi 10225 - 26 45.99 5060

Hyderabad 2920 107 26 4 5450

Bangalore 2400 350 26 4 4000

Airport

Privatized airports

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Of the 2009 passenger capacity of 110 million, 56% is handled by PPP airports.

In 2009, PPP airports handled 70% of freight by value.

Urban PPP projects: Emerging models validating proof of concept

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Urban Transportation:

Intra city bus service (Indore)

BRTS (Rajkot)

MRTS (Mumbai Metro ONE – Versova-Andheri-Ghatkopar Corridor)

Bus terminals (Amritsar, Jalandhar)

Water Distribution:

Latur Water Distribution (infrastructure upgrade and water distribution)

Karnataka Urban Water Supply Improvement Project (KUWASIP)

Solid Waste Management:

Rajkot solid waste processing plant (fully privately owned plant)

Electricity Distribution:

Bhiwandi

Delhi

Electricity Distribution: Bhiwandi, Maharashtra

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Description: Upgradation, operation and maintenance of the cityelectricity distribution network.

PPP type: Performance linked O&M contract

Project Structure:

Government and private sector contribute to capex. Private sectorpurchases power from the government entity at a predeterminedrate.

The private sector is responsible forplanning, O&M, metering, billing, collections, and need to achievea minimum reduction in T&D losses; and increase in collectionefficiency.

Revenue Source:

Revenues from users.

AT&C loss reduction by 30%; DT failure rate by 32.5%, and DTlosses by over 40%

Bus Terminal, Amritsar, Punjab

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Description: Renovation and expansion of existing inter-city terminalincluding construction of shops and amenities.

PPP type: BOT

Project Structure:

Entire $47 million (43% equity, 57% debt) of construction costborne by the concessionaire.

Government provided the land.

Revenue Source:

Parking charges from halting buses; lease rentals fromshops/offices; advertisement revenues.

Actual revenues surpassed projections. For 1st 3 quarters of FY 09bus charges constituted 68% of revenues, lease rents 23% andadvertisement revenues 9%.

City Bus Service, Indore, Madhya Pradesh

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Description: Operate and manage intra-city bus service.

PPP type: O&M contract

Project Structure:

A SPV (Indore City Transport Services Limited - ICTSL) providedcommon infrastructure (such as bus stops and terminals).

Concessionaires provided buses and operate them.

Revenue Source:

Fares (daily fares, and daily and monthly passes) and advertisingrevenues.

Concessionaire retains 60% of the advertisement revenue, 80% ofpass revenue, and the 100% of daily fare collection. Rest passedon to ICTSL. Concessionaire also pays monthly premium to ICTSL.

Karnataka Urban Water Supply Improvement Project

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Description: 24x7 water supply in 5 demo zones of 3 cities(Belgaum, Gulbarga and Hubli-Dharwad)

PPP type: Performance linked O&M contract

Project Structure:

Improvements to bulk water supply made by Karnataka UrbanWater Supply and Drainage Board.

Private sector upgraded the distribution network includinginstallation of meters and tariff collection system.

Revenue Source: Fixed plus performance-based payments.

60% of remuneration is quarterly fixed payment and theremaining 40% linked to targets in the preparatory and O&Mperiods. A bonus of up to $1.2 million can be earned for betteringperformance targets or a maximum penalty of 10% ofremuneration paid for failure.

Water loss reduction from 50% to 7%.

Waste Processing Plant, Rajkot, Gujarat

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Description: 300 metric tonne (MT) waste processing plant

PPP type: Build Own Operate (BOO)

Project Structure:

Land provided by the Rajkot Municipal Corporation (RMC). RMCalso delivers 300 MT of garbage per day.

Private sector constructed the plant.

Revenue Source: Sale of waste by-products.

40 MT of bio fertilizer/compost; 70 MT of fluff (used as fuel); 15,000bricks, recycled plastics and metals. Plant utilizes 85-90% of waste.

Way forward….

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Design & integrity of contracts

Bid parameter

Changes in contract

Capacity Building: State and ULBs.

I-CAP/IDFC/associated companies training programmes

PPP cells in several states (such as AndhraPradesh, Haryana, Orissa and Tamil Nadu) and Railways

Minimizing fiscal cost of projects

Control increase in VGF

Remove implementation impediments

Clearances

Land acquisition