Risk Mitigation through Project Development

1. Risk Mitigation through Project Development Focus on Safer Airplanes in addition to better Parachutes Pradeep Singh President & CEO ILFS Infrastructure Development Corporation March 15, 2005

2. The Project Development Goals for Infrastructure Projects To achieve true “Partnership” in Risk Management in Public-Private Partnerships • Optimal Information Generation to minimize Risks • Balanced Risk Allocation among various State and Private Stakeholders • Appropriate Management of Allocated Risks through Policy, Legislative and Regulatory Structures

3. The Project Development Challenge • Political and Bureaucratic understanding and buy-in for the need for Project Development effort • Risk Capital to undertake extensive studies, structuring and documentation • Technical Capacity to undertake Project Development • Policy & Decision making apparatus within governments • The patience of an elephant and the staying capacity of a bull

4. Cost & Price Certainty Regulation Governance Project Development

5. State Government of Andhra Pradesh, ADB - PSD dept., IL&FS Partnership in India • Undertake Project Development for Infrastructure Projects for Public Private Partnerships Goal Objectives • Develop bankable projects for competitive bidding to Private Sector Parties (PSP’s) • Balanced Risk Structure • Environmentally and Socially Sound Projects • Robust Contractual Arrangements • Competitive Pricing and • Safeguarding of Public Interest

6. Proposed Sectors • Urban Infrastructure • Industrial Parks and Area Development Projects • State Roads and Bridges, Ports, Airports, etc. • Energy and Environment • e-Governance and ITES • Health and Education • Capacity Building and Training • Any other sector mutually decided

7. Proposed Structure • A Steering Committee • Chaired by Chief Secretary to Government • 5 Department heads of the Government • 3 Members from IL&FS and • 2 members from ADB • An MoA between the Govt. and ADB outlining • Project development framework • Inter-se Roles

8. Proposed Process • Government proposes Projects to the Steering Committee with preliminary project details • ADB, ILFS together establish Project Development framework, budget and milestones (Initial Screening Report) • IL&FS leads the Project Development work along with Technical Consultants • Steering Committee provides Periodic reviews & guidance

9. Proposed Financing Arrangement • ADB Role goes beyond TA Assistance • ADB and ILFS to bear the Project Development Risk • Project Development expenses to be capitalized and recovered from the Projects along with a Success Fee • Government to reimburse ADB if it decides to drop a Project mid-way

10. Role of State Government • State Government to mandate ADB/ILFS to develop each Project • Coordinate with various government departments and allied agencies to facilitate • project clearances • project agreements • fiscal concessions, if required • Contribute in-house technical and other manpower • Review the Projects through Steering Committee • Undertake Policy, Legislative reform as necessary

11. Role of IL&FS • Assist State Government in project identification • Prepare Initial Screening Report • Undertake detailed Project Development to create pipeline of bankable infrastructure projects • Procure & manage external technical consultants as necessary • Design & Implement procurement process including bid evaluation, negotiation and selection of private sector partner • Assist in Policy Formulation & Capacity building

12. Role of ADB • Provide value addition in project development process - its halo effect • Advise on best practices for project development and procurement • Contribute financial resources for Project Development • Assist in Capacity Building of Government Departments • Commit financial resources for Project Implementation, as appropriate

13. THANK YOU