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Public-Private Partnerships (PPP). Michel Audigé Lead Port Specialist ECA region – The World Bank. Workshop on PPPs in Russia (Moscow - March 3-4, 2005) Port sector. The Four Main Russian Gateways to the Global Market. Distribution of Roles in The New Ports Era.

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Public-Private Partnerships (PPP)

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Public private partnerships ppp

Public-Private Partnerships (PPP)

Michel Audigé

Lead Port Specialist

ECA region – The World Bank

Workshop on PPPs in Russia

(Moscow - March 3-4, 2005)

Port sector

The four main russian gateways to the global market

The Four Main Russian Gateways to the Global Market

Distribution of roles in the new ports era

Distribution of Roles in The New Ports Era

Public Port and Marine Authorities

  • Provide basic infrastructure (access / protection / connection)

  • Establish a reliable administrative framework

  • Traffic Safety and Environment Protection

  • Technical regulation matters

  • Promote Port Community dialogue

    Commercial Terminals (Private Sector)

  • Handle operational aspects

  • Manage commercial risks

  • Propose and implement investment policy

  • Incentives for high performance and competitive tariffs

  • Play a crucial role in fostering efficient logistics development

Public private partnerships ppp

Source ADB

Definition of ppp schemes

Definition of PPP Schemes

  • Very wide spectrum, from work and service contracts to full privatization

  • Pros and Cons of PPP schemes

  • In any case, a long – up to 18 months -- and complex [two or three steps] process to ensure success, i.e., resulting from long term “win-win” deals

  • In each case a “tailor-made” design is required

  • Size matters, i.e., US$100 million minimum per deal

Ppps options and challenges for success

PPPs : Options and Challenges for Success

Key Challenges for Success:

  • Policy Framework (i.e., PPP legislation, institutional capacity, economic regulation and communication program)

  • Transaction Design (i.e., market structure, cost recovery and affordability)

  • Financiability (i.e., adequate risk allocation mechanisms)

  • Public Sector Risk Management (I.e., assessing and monitoring government’s commitments under PPP schemes)

Ppps pros and cons

PPPs : Pros. and Cons.

Reference EBRD 2004

Public private partnerships ppp

Why Seeking for PPPs in Ports?

  • Mainly for mobilizing private financing, but also

    • to improve port competitiveness [examples: Antwerp, Mexican, and Laem Chabang ports];

    • to strengthen linkage with global market [illustration: Maersk in St. Petersburg (Transib), and Algeciras];

    • to boost international trade to/from Russia with the rest of the world [promising development of international container trade, doubled in the present decade.]

Developments in the container business

Developments in The Container Business

  • Increase in flows of containers;

  • Increase in maximum vessel sizes;

  • Growth of ICT and automation;

  • High performance demands;

  • Major international players; and

  • Need for investments in terminal facilities and modern handling equipment.

Development of the international container trade sources various

Development of The International Container Trade(Sources: Various)

Public private partnerships ppp

A competitive land bridge for containerized cargo?

Source: MOTC Finland - 2005

Key factors for a successful ppp in ports

Key Factors for a Successful PPP in Ports

  • Objectives of the PPP: difficult choice between two extremes:

    • Maximum revenue for Port Authority


    • Maximum competitiveness for port users];

  • Public and transparent tendering process;

  • Optimal risks’ allocation [2 slides];

  • Standard timeframe for a well designed PPP; and

  • Two-step vs. Three-step approach [3 slides].

Optimal risks allocation 1 2

Optimal Risks’ Allocation (1/2)

  • Political Risks(Confiscation / Expropriation / Nationalization, Civil Strife / War).Mitigation through International Arbitration and Risk Guarantee (IBRD and MIGA)

  • Government Performance Risks (Compliance to contractual terms in a Concession Agreement). Mitigation through insurance and guarantees (IBRD and MIGA)

  • Environment and Safety RisksEnvironmental and safety constraints to be defined in Concession Agreement

  • Construction RisksRisk generally borne by Concessionaire. Acquisition of land by Government before construction. Issue of geotechnical risks

Optimal risks allocation 2 2

Optimal Risks’ Allocation (2/2)

  • Technical Operation RisksRisk to be borne by Concessionaire

  • Revenue Risk in existing facilitiesOften an acceptable risk to be borne by Concessionaire (adequate provision on tariff in Concession Agreement)

  • Revenue Risk in newly-built facilitiesA major risk (traffic volume, tariff setting, revenue in local currency). Often not possible for Concessionaire to bear all the risk

  • Financial RisksInconvertibility/Transfer Risk to be insured. Issue of Exchange Risk. Other risks borne by Lenders. World Bank Partial Risk Guarantees.

Public private partnerships ppp

Indicative Transaction Timetable [15-18months]:

(Two steps process)

Phase i strategic review and due diligence 6 months

Phase I: Strategic Review and Due Diligence [6 months]

Phase ii transaction 9 months

Phase II: Transaction [9 months]

Public private partnerships ppp

Three Steps Process

  • Pre-qualification: (Previous experience in port facilities financing and operations, Project finance capacity)

  • « Technical » Selection: (Essentially on the basis of a detailed Business Plan) using «Pass or Fail» criteria

  • Financial Selection: (on the basis of unified documentation, i.e., draft lease / concession agreement) – Simple selection criterion, e.g., fixed annual fee plus royalty (per container movement) of service provided by Concessionaire to the port users

What is eligible for ppp schemes

What Is Eligible for PPP Schemes?

  • In any case, PPP can only result from economically and financially justified projects

  • Size does matter [Transaction costs -> minimum project size of US$100 million and more…]

  • Private sector interest in port business [see ADB graphic]:

    • Cargo handling, especially containers; and

    • Marine services (towage, berthing, etc…)

  • Added Value logistic services

  • Port/City interface redevelopment for urban purposes

    past experience in Russia and worldwide

Public private partnerships ppp

List of PPI in The Port Sector in The Region (1992-2003)

Source: WB PPI Database 2003

List of ppi in the port sector worldwide 1992 2003

List of PPI in The Port Sector Worldwide (1992-2003)

Source: WB PPI Database 2003

Possible ppps prospects in russia

Possible PPPs’ Prospects in Russia

… as listed in the Russia Transport Strategy until 2020:

  • St. Petersburg and Ust Luga railway/ferry services with Kaliningrad;

  • Transshipment facilities for oil, grain and containers in the port of Novorossiisk;

  • Vostochnyy/Vladivostok ports and railways access;

  • Plus logistics services and development of inland waterways:

    • Astrakhan water transport node;

    • the Makhachkala port; and

    • Reconstruction of the Kochetov lock on the Don River.

Possible ppps prospects in russia1

Possible PPPs Prospects in Russia

World bank group comparative advantages

World Bank Group comparative advantages

  • Close partnership with Russian authorities

  • Advisory services from either the IBRD and/or the IFC

  • Skill-mix and worldwide experience

  • External consultants and experts

  • Reputation to act as an “honest broker”

  • Increased confidence of the private sector

  • Balancing interest of both Public and Private sectors

  • Transparent and competitive PPP process and more

     The Port Reform Toolkit (

Wbg financial support for ppp s

Hard Currency:

Loans (Investment & Policy, IBRD, IDA)

On-lending facilities

Co-financing schemes (A/B Loans, IFC)

Guarantees (IBRD, IDA, IFC, MIGA)

Insurance (MIGA)

Equity and related products (IFC)

Local Currency:

Currency Conversion Option (FSL)

Currency swap


WBG: Financial Support for PPP’s

Financial Products

Advisory Services/1

Institutional Building Capacity:


  • WSP

  • BNPP (Bank & Netherlands Partner)

  • TAF (PIDG)

  • FIAS

    Project (transaction) Execution:

  • DEVCO (IFC Advisory Services)


  • Cities Alliance

  • PIDG (EAIF, Guarantco, Infraco – also includes financing products)

/1 Includes Partnerships with other donors

Next steps 1 2

Next Steps (1/2)

  • Independent review of the Russian port sector to:

    • Review the relevance of its current institutional framework and administrative organization

    • Determine the level of competition intra- and inter-ports as well as the efficiency and relevance of regulatory mechanisms in place

    • Assess the level of operational performance, tariffs and shippers’ degree of satisfaction for the service provided

    • Assess current and future port capacity (in volume and by type of cargo)

    • Intermodalism and value added logistics

    • Evaluate the prospects for promoting PPP schemes.

Next steps 2 2

Next Steps (2/2)

  • Short/medium term action plan to:

    • Develop an appropriate regulatory legal framework

    • Increase port capacity – and efficiency – through PPP schemes

    • Improve the overall rail, road and inland waterways connection between the ports and their hinterland, especially with Russia’s oil/gas production centers

    • Introduce modern information and communication technologies

    • Where necessary, improve port/city interfaces to minimize the impact of port related businesses on the functioning of the city

Public private partnerships ppp1

Public-Private Partnerships (PPP)

Michel Audigé

Lead Port Specialist

ECA region – The World Bank

Workshop on PPPs in Russia

(Moscow - March 3-4, 2005)


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