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Risk Mitigation through Project Development

This document outlines the goals and challenges of infrastructure project development under Public-Private Partnerships (PPP) focusing on effective risk management. By fostering true partnerships, optimizing information generation, and balancing risk allocation among stakeholders, we can enhance project viability. Key areas include urban infrastructure, energy, and health sectors, with a strong emphasis on competitive bidding, environmental soundness, and safeguarding public interest. The role of various stakeholders, including state government and financial institutions, is elaborated to ensure successful project outcomes.

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Risk Mitigation through Project Development

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  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

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