Public Private Partnership: Issues for Consideration December 7, 2012

1. Public Private Partnership:Issues for ConsiderationDecember 7, 2012

2. Public Private Partnerships – Key Goals Public Sector Leverage expertise of reputed private sector players Monetization of public sector assets Reduced need for capital investments by government Faster execution through contractual milestones Private Sector Clear land title and reduced litigation risk Access to prime real estate parcels Single window clearance for approvals Reputational benefits 2

3. Public Private Partnerships – Challenges Projects are typically large and complex Land acquisition is often an integral part of the project Transparency of bidding process Potential impact of regulatory changes Need for multiple governmental approvals during implementation Risk of delays and stoppages in case of changes in government Project returns could be severely impacted 3

4. Public Private Partnership Case Study: • In order to de-congest the city of Hyderabad and plan integrated development, AP Govt. issued RFPs in 2007 for development of a 400-acre land parcel • World renowned developer (Tishman Speyer), a leading financial institution (ICICI Venture(1)) and one of India’s largest infrastructure company (NCC) partnered with AP Govt • Plan was to develop an integrated self sustained township cum urban node • The project required extensive involvement of HMDA and GoAP • Critical time bound obligations included resolution of litigations, establishment of single window clearance, critical infrastructure support, including roads 1. Through Real Estate Funds managed by ICICI Venture

5. Case Study (cont’d) • One of the largest real estate PPP projects • Project cost was envisaged to be ~ US$ 1,060 mn, including land payments of ~ US $ 348 mn to HMDA • In addition, total committed minimum revenue sharing to HMDA was~ US $ 60 mn in 5 years • Total envisaged population was in excess of 100,000 • Entire project originally comprised of 400 acres, out of which ~ 233 acres were subject to litigations • 100 acres agreed to be acquired and paid for post signing the Development Agreement • Payment for 67 acres was to be made post submission of Project Report (within 6 months) • GoAP and HMDA had a time limit of 5 years for resolving the litigations on balance 233 acres

6. Case Study (cont’d) • 100 acres have already been acquired and consideration paid for in Aug 2007 • During 2007-08, the consortium incurred huge planning and design costs for the entire 400 acres • World renowned architects, planners and consultants were appointed and detailed building plans for some parcels were also prepared • The Consortium submitted its Project Report in Feb 2008 and was planning to acquire 67 acres • HMDA could not fulfill certain conditions subsequent pertaining to provision of roads, power and water • Time limit for resolution of litigations (on 233 acres) also elapsed in Aug 2012 • Consortium negotiation with HMDA for last 3 years for revised Dev. Agreement

7. Case Study (Cont’d) • Entire project curtailed from contracted 400 acres to 100 acres • Entire project was envisaged to be completed in 8 years; but no progress made since last 5 years • Consortium constantly following up with HMDA for revised documentation with proportionate reduction in infrastructure requirements • Fluid political situation and changes in key positions at HMDA and GoAP offices has brought decision making to halt • US $ 130 mn invested by consortium since last 5 years has yielded no return

8. Public Private Partnerships – Learnings Deliverables required from the public sector partner should be front-ended Avoid ambiguity in the contract terms that may lead to re-negotiation Finite timelines for decisions from public sector partner Need for conservative view on execution timelines Project timeline should preferably be within 3 to 4 years Tie-up of key project resources such as land at the outset Limit use of debt financing especially in the early stages of project impIementation 8

9. Thank You