Transcript NDDC/NBA CONFERENCE ON

NIGER DELTA DEVELOPMENT COMMISSION &
NIGERIAN BAR ASSOCIATION
CONFERENCE ON
LAW, PEACE & DEVELOPMENT
IN THE NIGER DELTA
6th May 2008, Presidential Hotel, Port Harcourt
Public Private Partnership
For Infrastructural Development
In
The NIGER DELTA
AYULI JEMIDE
OUTLINE
1. KEY ELEMENTS OF PPP’S
2. CORE PPP PRINCIPLES & THE NIGER DELTA
3. RELEVANT LEGAL AND REGULATORY FRAMEWORK
FOR INFRASTRUCTURE AND PPP’S
4. TALKING POINT ON PPP/INFRASTRUCTURE PROJECTS
IN THE NIGER DELTA
5. SOME USEFUL CASE STUDIES
6. IMPERATIVES FOR PPP’S IN NIGER DELTA
AYULI JEMIDE
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!
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HOW WILL CORE PPP
PRINCIPLES PLAY OUT
WITH NIGER DELTA
PROJECTS?
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RULE
NO. 1
PPP’S are ONLY for VIABLE
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?
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RULE
NO. 2
Allocate RISKS to the party best
able to handle them
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?
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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?
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RELEVANT LEGAL AND
REGULATORY FRAMEWORK
FOR INFRASTRUCTURE AND
PPP’S
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Question
WHO CAN CONTRACT IN PPP’S?
NO. 1
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.
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Question
WHO CAN CONTRACT IN PPP’S?
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) ?
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Question
WHO CAN CONTRACT IN PPP’S?
NO. 1
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.
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Question
WHO CAN CONTRACT IN PPP’S?
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?
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Question
NO. 2
WHO CAN LEGISLATIVE?
Exclusive
Concurrent
Residual
Federal Roads
Maritime
Aviation
Mines & Minerals
Railways
Nuclear Energy
Electric Power
Industrial,
Commercial &
Agric Dev.
Education
Urban planning
Transportation
State Roads
Water
Housing
Health
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Question
WHO OWNS THE ASSETS?
NO. 3
ROADS FOR EXAMPLE:
STATE
GOVERNMENT
16%
FEDERAL
GOVERNMENT
17%
LOCAL GOVERNMENT
67%
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TALKING POINTS ON
INFRASTRUCTURE AND
PPP’S
IN NIGER DELTA
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Point
PIONEER’S BURDEN
NO. 1
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
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Point
NO. 2
BANKABILITY
THIS WOULD BE AN ISSUE:
1. Project Finance: Cash flow Lending
2. Infrastructure is not a briefcase project
3. Risk Analysis is high: Project risk, Operational
risk, Economic risk, Endangered Asset.
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Point
Can we cross the Bankability hurdle?
NO. 2
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).
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Point
RISKS !!!
NO. 3
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.
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Point
WHO TAKES RESPONSIBILITY?
NO. 4
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
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SOME USEFUL CASE
STUDIES
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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
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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
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DEAL STRUCTURE
WORLD BANK
IDA
$1OM
@
0.75%
Tajikistan
GOVT
On-lending
@ 6%
As Part
Finance
PAMIR
ENERGY
AKFED -70%
($8m Equity)
Tajikistan
GOVT
IFC – 30%
5.2%
Margin
$5m
Grant
from
Swiss
Govt
($3.5m Equity)
POOL
+
OF
FUNDS
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($4.5m Debt)
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
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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
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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
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HOW WAS PROJECT
STRUCTURED?
NGO’S
DONORS
LOCAL
GOVT
• MONEY
• PROVIDE LAND
• OPERATE THE
HEALTH CENTRES
VIA CONTRACT
• LABOUR FOR
AFTER
BUILDING
HEALTH CENTERS COMPETITIVE
BIDS WITH SET
OPERATIONAL
• TRAIN
CRITERIA AND
COMMUNITY
LEVELS:
BASED
EQUIPMENT,
PERSONNEL
STAFF, PRICING
ETC
•SET UP HEALTH
COMMITTEES
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STATE
GOVT
• OWNS THE
HEALTH CENTRES
• REGULATES THE
STANDARDS AT
HEALTH CENTRES
WAS IT SUCCESSFUL?
2002
2005
Under 40% had access to basic
health
77% had access 3 years later
Few Community based health
Personnel
27 Health Centers manned by
Trained indigenes
Haphazard approach to health
care
Standardized classification of
health facilities in all the
communities
Limited local participation in
health care delivery (Mostly
NGO’s)
Ongoing Capacity Building
should see more health centers
run by locals when Concessions
are over.
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IMPERATIVES FOR PPP
PROJECTS IN THE NIGER
DELTA
AYULI JEMIDE
1.
Use Low Hanging Fruit
Pioneer with projects that:
a)
b)
c)
d)
Require minimal Govt. involvement
Are quick to achieve
Generate employment and capacity building
Are service oriented
For example: Health care schemes or Education.
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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
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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.
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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
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CONCLUSION
• IT IS NOT
ROCKET
SCIENCE !!
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• THANK YOU FOR LISTENING
AYULI JEMIDE