PROJECT FINANCE & PPPs

Transcription

1 PROJECT FINANCE & PPPs EIB Presentation, BOAD, 40 th Anniversary 1 14 November 2013

2 Definition of PPPs 1) An agreement between a government and one or more private partners whereby the private partner(s) undertakes to deliver an agreed upon quantity and quality of service; 2) In return for the delivery of the agreed upon quantity and quality the private partner(s) receives either a unitary charge paid by government or a user charge (e.g., a toll) levied by the private partner on the direct recipients of the service; 3) An emphasis on a whole-of-life approach. The private partner(s) is usually responsible for both the construction and operational phases of the project; 4) Some degree of risk sharing between the public and private sector that in theory should be determined on the basis of which party is best able to manage each risk, thus ensuring that the PPP optimizes Value for Money. (source: IMF Working Paper - The Effects of the Financial Crisis on Public-Private Partnerships - July 2009) 2

3 Objectives of the Cotonou Investment Facility The Investment Facility shall operate in all economic sectors and support investments of private and commercially run public sector entities, including revenue-generating economic and technological infrastructure critical for the private sector. The Facility shall: be managed as a revolving fund and aim at being financially sustainable. Its operations shall be on market-related terms and conditions and shall avoid creating distortions on local markets and displacing private sources of finance; support the ACP financial sector and have a catalytic effect by encouraging the mobilisation of long-term local resources and attracting foreign private investors and lenders to projects in the ACPs; bear part of the risk of the projects it funds, its financial sustainability being ensured through the portfolio as a whole and not from individual interventions; and seek to channel funds through ACP national and regional institutions and programmes that promote the development of small and medium-sized enterprises (SMEs). Revised Cotonou Partnership Agreement, Annex II, Article 3 3

4 EIB s involvement in the African PPP? market Recipient country governance, policy, legal, and regulatory environment: EIB, through the Cotonou Investment Facility, can provide TA grants for Government or public sector off-taker capacity building. Financing Options: EIB can provide non-recourse finance ( project finance ) and risk-mitigation products or a combination of instruments (TA, guarantees including partial-risk guarantees, PF and risksharing instruments) to catalyze lending, in particular for large-scale private infrastructure projects and PPPs. Procurement procedures for investor, operator and suppliers selection: EIB participation in the financing plan ensures fully competitive and transparent bidding procedures that directly benefit the project and enhance its economic and financial impact. 4

5 EIB s involvement in the African PPP market Negotiation of PPP contractual documentation: EIB would be closely involved in the process and advocate best practices drawing on its extensive PPP experience in Europe. International environmental and social standards: EIB's presence (as well as other DFIs' involvement) in the financing plan ensures a high degree of compliance with international environmental and social standards. Partnerships: Partnerships with other DFIs (IFC, AfDB), local financial institutions and promoters 5

6 PPP Contractual Framework Constructing and operating a power plant or any other infrastructure facility requires a number of contracts with all participants. They not only just document the legal structure. Contracts are also an essential part of a risk mitigation strategy. The diagram below provides an overview of the contract framework. Source: 6

7 The Power Sector: issues and potential Potential Power sector in general and renewable energy in particular are very well suited to PPPs 7 to 10% growth of energy demand in Africa p.a. Interest from some key international players EIB s involvment Significant EIB pipeline and activity in the power sector, with a high share of projects concerning renewables (Solar and Wind, Hydro and Geothermal) but also Gas-fired power plants (CCGT). Issues Project selection is key Strong public sector support and competence to provide a stable regulatory and political environment as well as an enabiling legal framework Long timeline for project preparation and closing Termination Payments, Government guarantee or direct agreements have to be strong and satisfactory to financiers 7

8 Cape Verde: Wind Power PPP Project Borrower Cabéolica S.A.* Currency EUR Amount 30m (46% of total project cost) Source of funding IF: loan and interest rate subsidy Co-financiers African Development Bank, Finnfund, Africa Finance Corporation Cape Verde has outstanding wind resources but the country relies heavily on expensive imported fossil fuel for power generation. The development, construction and operation of four onshore wind farms on four islands of the archipelago were intended to reduce that dependence substantially, as well as to reduce greenhouse gas emissions (92.000t CO² per year) and increase access to electricity in Cape Verde. It was the first renewable energy public-private partnership (PPP) in sub-saharan Africa. The EIB was involved at a very early stage and designated lead financier by the Cape Verde counterparty, working closely with the African Development Bank. * A special purpose vehicle formed to develop, build, finance and maintain the project. 8