NIGERIAN BAR ASSOCIATION (AKURE BRANCH) ANNUAL LAW WEEK The Role Of The Law in National Development 14 th August 200

1. NIGERIAN BAR ASSOCIATION (AKURE BRANCH)ANNUAL LAW WEEK The Role Of The Law in National Development 14th August 2008 Public Private Partnership For Infrastructural Development In Oil Producing States of Nigeria: The Niger Delta Experience AYULI JEMIDE

2. OUTLINE 1. DEFINITION 2. KEY ELEMENTS OF PPP’S 3. CORE PPP PRINCIPLES & THE NIGER DELTA 4. RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S 5. TALKING POINTS ON PPP/INFRASTRUCTURE PROJECTS IN THE NIGER DELTA 6. TWO USEFUL CASE STUDIES 7. IMPERATIVES FOR PPP’S IN NIGER DELTA AYULI JEMIDE

3. DEFINITION DEFINITION A Partnership between Government and an appropriately qualified private sector entity /group of entities, for the purpose of financing, designing, constructing and/or operating infrastructure or services that would normally have been provided through traditional, public channels. AYULI JEMIDE

4. Key Elements of Public-Private Partnership • A contractual partnership between a government (public) entity and a private company (or a non-profit private body) that provides a public service to citizens. • A good PPP should improve a service provided by Government at a reasonable cost to the end user. • Typically, the Public Sector is buying a service, and the private sector is investing for Profit. • Flexible contracting: Lease, Manage, Build Operate & Transfer, Joint Ventures, Service Contracts. Anything goes! • A contractual partnership between a government (public) entity and a private company (or a non-profit private body) that provides a public service to citizens. • A good PPP should improve a service provided by Government at a reasonable cost to the end user. • Typically, the Public Sector is buying a service, and the private sector is investing for Profit. • Flexible contracting: Lease, Manage, Build Operate & Transfer, Joint Ventures, Service Contracts. Anything goes! AYULI JEMIDE

5. HOW DO CORE PPP PRINCIPLES RELATE TO NIGER DELTA PROJECTS? AYULI JEMIDE

6. RULE NO. 1 PPP’S are ONLY forVIABLE projects • Feasibility: a) Is it possible? b) What will it cost? • Viability: a) Will cash flow maintain service levels? b) Will there be a profit or ROI? Can we identify viable project types in the Niger Delta? AYULI JEMIDE

7. Allocate RISKS to the party best able to handle them RULE NO. 2 Usual Parties: Govt, Investor, Financier -Insurance. Usual Risks: Political, Financial, Operations, etc, and now Security Which party can best handle the peculiar risks in the Niger Delta? How? AYULI JEMIDE

8. RULE NO. 3 PPP must address STAKEHOLDER concerns NEEDS ANALYSIS: Do the people need it? Is the need more pressing then other neglected areas? AFFORDABILITY TEST: Can the public afford the User Charges? Will it be robbing Peter to pay Paul? Which proposed PPP’s in the Niger Delta will ably address these issues? AYULI JEMIDE

9. RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S AYULI JEMIDE

10. Question NO. 1 WHO CAN CONTRACT IN PPP’S? 1) Those empowered by the Infrastructure Concession Regulatory Commission Act 2005 Section 1 “Any Federal Govt Ministry, Agency, Corporation, or body involved in the financing, construction, operation or maintenance of infrastructure, by whatever name called, may enter into a contract with or grant concession to any duly prequalified project proponent in the private sector for the financing, construction, operation or maintenance of any infrastructure……in accordance with the provisions of this Act. AYULI JEMIDE

11. Question NO. 1 WHO CAN CONTRACT IN PPP’S? 2) Government Agencies empowered by Law Examples: • Federal Roads Maintenance Agency (Establishment) Act Section 8 • Niger Delta Development Commission Act – Section 7(1)(b) & 8(e) AYULI JEMIDE

12. Question NO. 1 WHO CAN CONTRACT IN PPP’S? STATE GOVERNMENTS: Section 5 (2) ( a) (b) of 1999 Constitution: Vests Executive Powers in Governor: “shall to execute and maintain all Laws made by the House of Assembly and with respect to which the House of Assembly has for the time being power to make laws”. – Everything on the concurrent or residual legislative list? An enabling Law for PPP enacted by each State is advisable for clarity and investor confidence. AYULI JEMIDE

13. Question NO. 1 WHO CAN CONTRACT IN PPP’S? LOCAL GOVERNMENTS: 4th Schedule to 1999 Constitution lists functions of LG’S to include: Maintenance of roads, and in conjunction with the State: primary, vocational, and adult education etc Also Local Govt Laws have similar Executive-power provisions for the LGA Chairman as that of the Governor contained in the Constitution Are these sufficient for a serious investor? AYULI JEMIDE

14. Question NO. 2 WHO CAN LEGISLATE? AYULI JEMIDE

15. Question NO. 3 WHO OWNS THE ASSETS? ROADS FOR EXAMPLE: STATE GOVERNMENT 16% FEDERAL GOVERNMENT 17% LOCAL GOVERNMENT 67% AYULI JEMIDE

16. TALKING POINTS ON INFRASTRUCTURE AND PPP’S IN NIGER DELTA AYULI JEMIDE

17. Point NO. 1 PIONEER’S BURDEN Are there successful PPP projects in the Niger Delta? - Educate and Inform - Process to encourage credible investors - Legislation - PPP Unit with qualified project officers - Identify, remove, hindrances and obstacles AYULI JEMIDE

18. Point NO. 2 BANKABILITY THIS WOULD BE AN ISSUE: • Project Finance: Cash flow Lending • Infrastructure is not a briefcase project • Risk Analysis is high: Project risk, Operational risk, Economic risk, Endangered Asset. AYULI JEMIDE

19. Point NO. 2 Can we cross the Bankability hurdle? Some Options: • More Govt funding to reduce private sector risk • 100% Govt funding with Private Sector as Operators • State or Federal Government Bonds • Sovereign Guarantees & Indemnities • Spread funding into bite size portions • Structure collateral rewards i.e shadow tolls, guaranteed income plus @ a minimum IRR (rate of return). AYULI JEMIDE

20. Point NO. 3 RISKS !!! ALLOCATION OF RISKS WILL BE KEY TO PPP’S IN THE NIGER DELTA • Can we allocate risk to Communities? • How we allocate risk to a non-stakeholder? • High risk demands higher premiums and makes the user charges higher. AYULI JEMIDE

21. Point NO. 4 WHO TAKES RESPONSIBILITY? WOULD FEDERAL, STATE, AND LOCAL GOVTS TAKE RESPONSIBILITY FOR CERTAIN FORCE MAJEURE EVENTS? E.G. BAIL OUT CLAUSES THAT GIVE INVESTOR A GUARANTEE THAT THEY WILL NEVER LOSE THEIR MONEY AYULI JEMIDE

22. TWO USEFUL CASE STUDIES AYULI JEMIDE

23. LEKKI ROAD CONCESSION • State Govt passed the Lagos State Highway, Roads & Bridges Law to support this transaction. • State Government gave adequate Guarantees: Cash Bond, Access to Site, etc • Signed Non-Compete Clauses • Threw in other projects as sweeteners • Set up a Unit to monitor PPP’s • Stamp Duties Exemption from FGN • NAICOM Exemption for Offshore Reinsurance AYULI JEMIDE

24. TAJIKISTAN POWER PROJECT ABOUT TAJIKISTAN • Mountain region of Former Soviet Union • Civil war just ended • Per Capita income was $160 a year • 80% of population lived below poverty line • People used wood for heating so much that the forests were sparse and respiratory disorders were common • 43% of homes had no electricity • Homes with electricity were used to paying 1/10th of the current production cost • IN SUMMARY - NOT AN INVESTOR’S HAVEN FOR A POWER PROJECT AYULI JEMIDE

25. DEAL STRUCTURE On-lending @ 6% As Part Finance PAMIR ENERGY AKFED -70% ($8m Equity) IFC – 30% ($3.5m Equity) ($4.5m Debt) $1OM @ 0.75% Tajikistan GOVT WORLD BANK IDA Tajikistan GOVT 5.2% Margin POOL OF FUNDS + $5m Grant from Swiss Govt AYULI JEMIDE

26. LESSONS • 25 year Concession on Electric Utility Assets – It’s an interesting PPP! • Must not be a big project - 30,000 customers initially. • Employment is a major spin off - 595 employees. • Conflict ridden areas should seek funds from right places AYULI JEMIDE

27. MORE LESSONS • Government used its pool of funds to subsidize a “lifeline” Tariff – An ingenious Social Protection Scheme. • Donor and Funding Agencies are key factors in high risk PPP projects • Think outside the box – This pioneered a new mode of collaboration • Cheaper funding arranged by Govt. gave a fair return on investment AYULI JEMIDE

28. IMPERATIVES FOR PPP PROJECTS IN THE NIGER DELTA AYULI JEMIDE

29. 1. Use Low Hanging Fruit Pioneer with projects that: • Require minimal Govt. involvement • Are quick to achieve • Generate employment and capacity building • Are service oriented For example: Health care schemes or Education. AYULI JEMIDE

30. 2. Start With Parties Who Have Vested Interest • It is easier to work with the oil companies who already have a vested interest and sunken costs than to find “green” investors. • OPCO’S, Govt and NDDC should start a PPP task force immediately to fashion a roadmap AYULI JEMIDE

31. 3. Start With Service-Oriented PPP’s • PPP’S that affect standard of living should be uppermost. • Studies from Post Conflict countries say this is the fastest route to host community buy-in. Service oriented PPP’s are seen for their value NOT as contracts to the oppressors. • E.G – Education, Health, Capacity Building. AYULI JEMIDE

32. 4. Network with International Agencies • MDA’S (Multilateral donor and credit agencies are key) World Bank IDA, MIGA etc • TO: • Give risk guarantees • Grants and soft loans • Training and capacity building AYULI JEMIDE

33. CONCLUSION • IT IS NOT ROCKET SCIENCE !! AYULI JEMIDE

34. THANK YOU FOR LISTENING AYULI JEMIDE