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Public Private Partnership For Infrastructural Development In The NIGER DELTA

NIGER DELTA DEVELOPMENT COMMISSION & NIGERIAN BAR ASSOCIATION CONFERENCE ON LAW, PEACE & DEVELOPMENT IN THE NIGER DELTA 6 th May 2008, Presidential Hotel, Port Harcourt . Public Private Partnership For Infrastructural Development In The NIGER DELTA. OUTLINE. KEY ELEMENTS OF PPP’S

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Public Private Partnership For Infrastructural Development In The NIGER DELTA

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  1. NIGER DELTA DEVELOPMENT COMMISSION & NIGERIAN BAR ASSOCIATION CONFERENCE ON LAW, PEACE & DEVELOPMENT IN THE NIGER DELTA6th May 2008, Presidential Hotel, Port Harcourt Public Private Partnership For Infrastructural Development In The NIGER DELTA AYULI JEMIDE

  2. OUTLINE • KEY ELEMENTS OF PPP’S • 2. CORE PPP PRINCIPLES & THE NIGER DELTA • RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S • 4. TALKING POINT ON PPP/INFRASTRUCTURE PROJECTS IN THE NIGER DELTA • SOME USEFUL CASE STUDIES • IMPERATIVES FOR PPP’S IN NIGER DELTA AYULI JEMIDE

  3. 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! AYULI JEMIDE

  4. HOW WILL CORE PPP PRINCIPLES PLAY OUT WITH NIGER DELTA PROJECTS? AYULI JEMIDE

  5. 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

  6. 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

  7. RULE NO. 3 PPP must address STAKEHOLDER concerns NEEDS ANALYSIS: Do they 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

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

  9. 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

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

  11. 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

  12. WHO CAN CONTRACT IN PPP’S? Question NO. 1 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

  13. Question NO. 2 WHO CAN LEGISLATIVE? AYULI JEMIDE

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

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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. SOME USEFUL CASE STUDIES AYULI JEMIDE

  22. 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

  23. 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: the forests went sparse and respiratory disorders were common • 43 % of homes had no electricity • Homes with electricity were used to paying < 1/10th of current production cost NOT AN INVESTORS HAVEN FOR A POWER PROJECT AYULI JEMIDE

  24. 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

  25. 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

  26. 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

  27. AFGHANISTAN HEALTH PROJECT • BACKGROUND INFORMATION • In 2002 Afghanistan had one of the worse basic health indicators in the world: • 25% of children died before their 5th birthday • 165 of every 1000 children died at birth • 1600 maternal deaths in every 100,000 • Over 60% of population had no access to any basic health service AYULI JEMIDE

  28. HOW WAS PROJECT STRUCTURED? AYULI JEMIDE

  29. WAS IT SUCCESSFUL? AYULI JEMIDE

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

  31. 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

  32. 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

  33. 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

  34. 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

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

  36. THANK YOU FOR LISTENING AYULI JEMIDE

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