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Public Private Partnership Division Inbal Insurance Company Ltd.

PPP projects in Israel. September 2011. Public Private Partnership Division Inbal Insurance Company Ltd. Vision. Investments in infrastructure would enable to sustain Israel’s economy growth Private sector’s involvement would improve level of government’s supplied services

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Public Private Partnership Division Inbal Insurance Company Ltd.

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  1. PPP projects in Israel September 2011 Public Private Partnership Division Inbal Insurance Company Ltd.

  2. Vision • Investments in infrastructure would enable to sustain Israel’s economy growth • Private sector’s involvement would improve level of government’s supplied services • Optimizing risk allocation between the public and the private sectors would contribute to public wealth

  3. Industries under Focus The government has decided to focus primarily on the following industries: • Railroads/Mass Transit Systems • Roads • Water desalination and sewage treatment • Construction • Energy (IPP; LNG; Solar)

  4. PPP PPP/PFI –Major issues PPP/PFI In Israel

  5. Governmental body Inter-Ministerial Tender Committee Steering Committee Designated Company Authorities Involved Along the Process Concession Agreement Management The Tender WDA, JPTA, CTA Cross Israel Highway, Tel Aviv Mass Transit Ministry of Finance Relevant Government Ministries Inbal – The Division of PPP External Consultants

  6. Contractual Framework(Limited or Non-Recourse Structure) Government Project vehicle (SPC( Sponsor(s) Equity Lender(s) Financial Facility Construction Agr. (EPC) Operating Agr. (O&M (

  7. Project Feasibility Study Phase 1 - economic feasibility study: Cost/benefit analysis Project is economically feasible No Project will not be implemented Yes Business environment fits PPP/PFI No Public sector implementation using alternative method Phase 2 - prior to and during tender process Yes Project meets PPP/PFI criteria No Yes Signing a concession agreement & Controlling its execution Phase 3 - decision & implementation Analyzing the bids compared to the PSC Yes החלטת ממשלה

  8. Typical Risk AllocationOptimal Risk Allocation – each sector is responsible for the risks he can better mitigate

  9. Typical PPP/PFI project Time Frame Excluding legislative related delays Project stageTime Frame (Months) • Appointing Tender Committee/Consultants 1 • PQ Documents 3-4 • Bidding the PQ 3 • List/Short List after PQ 1 • Tender documents 2 • Bidding of Tender 4-6 • Tender process1-2 • Best & Final 1-2 • Sub Total 16-20 • Financial close 8-12 • Total 24-32

  10. Improvements in the Tender Rules Changes and improvements in the Tender Rules in order to facilitate the implementation of the projects: • Unified accounting principles (based on IASB). • Easing of tax treatment • Interest rate changes protection • Various indexation and protection options in accordance, to risks at the different project stages Steps to encourage institutional investors to participate in the PPP financing : • Indicative Rating to the projects (by Israeli rating co.) • Refinance option after Construction phase

  11. Encouraging foreign Participation • Why foreign participation is needed? • Single borrower limitation (15%) • Low competition (2 major banks) • Equity: NIS 54B for the big 5; NIS 37B for the big 2. • ROE: 13.1% - 22% (9/2006 - big 5) • 7-8 major groups participating in all government projects • Improvements in order to facilitate the participation of foreign bidders and foreign Lenders: • Foreign interest rate changes protection. • Foreign currency changes protection. • Various indexation and protection options in accordance, to risks at the different project stages • Payments to Concessionaire in foreign currency

  12. Foreign Entities participation • Technical Know-How • Bring professional expertise and experience. • Bring advanced technologies. • Bring more efficiency in the planning and execution of projects. • Improving the capability of Israeli entities. • Investment • Partnership between Israeli and foreign entrepreneurs. • Enlargement of foreign investments.

  13. Foreign Entities Involvement • Financing • Israel’s sovereign rating ( A – A+ ) attractive for international finance entities. • Improvements in Tender Rules encourages foreign participation : financing in USD / Euro with interest rate protection, various indexation protection at the different project stages. • Help to enlarge number of financing entities (single borrower limits for Israeli banks). • Stimulate competition – reduce financing costs • Offer new financing tools and solutions

  14. PPP PPP/PFI – Major issues PPP/PFI In Israel

  15. Volume of Operation by SectorsConstruction costs Transport: $ 6.3 billion Water: $ 2.0 billion Construction: $ 0.3 billion Energy : $ 1.4 billion Total $ 10 billion

  16. Main PPP Projects in Israel Cross Israel Highway (H-6) Carmel Tunnels LRTs Railways Roads No 431 + 531 Fast lane Desalination facilities Prison, Police National Academy Solar Plants, LNG Army Training Basis City

  17. Status of PPP Projects

  18. Status of PPP Projects

  19. Status of PPP Projects

  20. Geographic location: 531 Cross Israel Highway The ring roads around the Tel Aviv metropolitan area : North - 531 East - Cross Israel (Hw 6) South - 431 West - Ayalon (Hw 20) Ayalon HW-20 Tel Aviv 431

  21. Status of PPP Projects

  22. Development of sea water desalination plants in Israel along the national system (100) (30) (100) (100) Hadera Construction phase. Production at 12/09 Tendering stage (150)Sorek Full production Since 9/07 Palmachim Tendering stage Ashdod Ashkelon Full production Since 12/05

  23. Status of PPP Projects

  24. Status of PPP Projects

  25. Expected additional Projects • Additional Roads & LRT lines (Tel-Aviv) including T/K & Build/Design projects • Additional Desalination Facilities • Hospitals (Including hotels, parking areas, shopping malls) • International Airport in Megido • Education (school PFI) • An international airport and the Peace Corridor projects (Coordination with Jordan) • Additional renewable energy projects • Protection of the Environment ( a committee has been appointed to make a preliminary study of potential projects )

  26. Thank you for your attention

  27. Contacts Mr. Abraham Tenne Head of Desalination Division and chairman of the WDA Tel : 972-3-6369688/676 Mobile : 972-50-6221342 E-mail :abrahamt@water.gov.il

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