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Project Documentation

Project Documentation. A presentation for the HK Efficiency Unit PPP Project Financing Seminar John Maxwell/Christopher Bradley 30 September 2005. Introduction. Project Documentation Overview Project Agreement Key Terms Recent Developments in maturing PPP markets.

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Project Documentation

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  1. Project Documentation A presentation for the HK Efficiency Unit PPP Project Financing Seminar John Maxwell/Christopher Bradley 30 September 2005

  2. Introduction • Project Documentation Overview • Project Agreement Key Terms • Recent Developments in maturing PPP markets

  3. Project Documentation Structure Sponsors/ Shareholders Government Project Agreement O&M Contractor Guarantor Construction Contractor Guarantor Project Company O&M Agreement Construction Contract Construction Contractor Operations Contractor Interface Agreement Architect Sub-contractors

  4. Project Documents • Project Agreement • Construction Contract • Operating Contracts • Ancillary Contracts

  5. Financing Overlay

  6. Project Agreement • Term • Land • Design, Construction and Completion • Operations and Maintenance • Payment • Time and cost issues • Termination • Termination compensation

  7. Term • Usually fixed number of years • Factors to take into consideration • Must be long enough to earn back debt and costs

  8. Land • Who will have responsibility to obtain? • Is a particular site key to the Project? • Appropriate form of land grant • Responsibility for planning permission

  9. Design, Construction and Completion Design: • Concessionaire risk/responsibility but within specified output criteria • Construction: • Will be agreed construction schedule • Concessionaire will warrant quality and rectify defects • Completion • Completion will be signed off by Government, and lenders will also be involved • Protections against late service commencement

  10. Operation and Maintenance • Agreed operation and maintenance regime • Availability • Performance Monitoring • Handback

  11. Payment Mechanisms • Can be structured many ways • demand based (shadow or real) • availability based • hybrid based

  12. Time and Cost Issues • How delay and increased cost will be dealt with will depend on project and how payments will flow • Time • Time and money • Force Majeure

  13. Termination • Rights to terminate • Concessionaire will be concerned to protect investment by limiting rights to terminate • Lenders also will be concerned to protect their loans to the Concessionaire • Will depend upon compensation regime - where protected will be less concerned

  14. Termination Compensation • If it DOES all go wrong, how much will the Government pay, if anything? • Competing Interests, but usually: • lenders are protected and ‘kept whole’ • Concessionaire is protected where not at fault • rationale for payment even where at fault is that Government acquires asset

  15. Developments in maturing PPP markets • Standardisation of documentation • Improved risk allocation/value for money • Monoline wrapped bonds/Credit Guarantee Facility • Support/Experience for public sector • Flexibility and partnership • Confidentiality and freedom of information • Refinancing controls • Winning over public opinion/political issues • Treatment of employees

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