40 essential infrastructure projects at the

forefront of ppp in emerging markets
Emerging
Partnerships
top 40 ppps in emerging markets
Emerging Partnerships was researched and written by James Kenny and René Lavanchy and edited by John Kjorstad
and James Kenny.
A special thanks to the following individuals from Infrastructure Journal and IFC for their tireless work and valued
contributions: Victoria Adams-Kotsch, Dana Babb, Kimberly Coates, Jeanine Delay, Chrysoula Economopoulos, and
Tanya Scobie Oliveira.
Tis publication was made possible through the generous support of PPIAF.
Terms of use and copyright conditions
Tis publication is copyrighted. All rights reserved and no part may be reproduced, stored in retrieval system or transmitted in any form without
prior permission of the publishers.
Tis publication was commissioned and partly funded by IFC, a member of the World Bank Group, through its IFC Advisory Services in Public-
Private Partnerships department, with additional funding from PPIAF.
While IFC and Infrastructure Journal make every attempt to provide accurate and timely information to readers of this publication, neither IFC
nor Infrastructure Journal guarantee its accuracy, timeliness, completeness or usefulness, and are not responsible or liable for any such content.
Te views and opinions expressed herein are those of the interviewees and authors and do not necessarily represent the views and opinions of
Infrastructure Journal, PPIAF, IFC or its Board of Directors, the World Bank or its Executive Directors, or the countries they represent.
Emerging
Partnerships
top 40 ppps in emerging markets
2 Emerging Partnerships
3 Emerging Partnerships
Well-planned and thoughtfully implemented infrastructure is the foundation for reliable
access to quality basic services such as clean water, education, health care, power, and
transportation. Research shows that infrastructure investment correlates with higher
growth and poverty reduction.
Yet worldwide, nearly 1.3 billion people lack access to electricity while 780 million
people —or one in seven—lack access to clean water. Tese stark realities, felt most acutely
in the developing world, are compounded by a large infrastructure funding gap facing
emerging market governments.
Particularly in challenging economic times, well-structured public-private partnerships
are one solution for helping governments raise the large sums of capital required to meet
infrastructure needs and, consequently, spur development.
IFC, a member of the World Bank Group, has been providing advice to national and
municipal governments on designing and implementing PPP transactions to improve
infrastructure and access to basic services such as water, power, agribusiness, transport,
health and education since 1989. Working with the private sector to promote investment
in infrastructure is a priority for IFC, and we have a global group dedicated to providing
transaction advice and an investment group providing fnancing for PPPs.
By partnering with Infrastructure Journal to produce this publication, along with the
generous support of PPIAF, our intention is to highlight these top 40 PPPs as a source of
inspiration and as a catalyzing element for governments, the private sector, donor partners,
other multilaterals, and PPP practitioners at large to embark on this path.
Ultimately, the goal is this: To improve the quality of life in local communities in emerging
markets where the gaps are greatest and the benefts of infrastructure investment can be
most widely felt.
As you read through Emerging Partnerships, we invite you to consider how similar ideas and
the broader concept of partnership between the public and private sectors can positively
impact your own communities. We congratulate all those who played a role in each of
the Top 40 PPPs for serving as a source of inspiration, responding to some of the greatest
challenges in international development.
foreword
NENA STOILJKOVIC,
Vice President, IFC Business
Advisory Services
LAURENCE CARTER,
Director, IFC Advisory Services
in Public-Private Partnerships
4 Emerging Partnerships
5 Emerging Partnerships
Partnership is a word you often hear in the world of infrastructure, but it can be widely
misunderstood. Developing a true partnership is not easy. It requires commitment from all
parties to work together for mutual beneft. Success is measured not by individual gains,
but the combined results achieved by all stakeholders. Partnership is more than a successful
transaction or a service contract—it’s a shared vision and collective achievement.
In infrastructure, public-private partnerships (PPPs) have to be more than a means to an
end. PPPs are about transparency, service, risk transfer and delivering long-term quality
and afordability from procurement and fnancing through construction, operation and
maintenance. Value-for-money extends beyond a project’s capital expenditure. Partnership
is about delivering critical infrastructure for local development and long-term economic
growth. Tis is especially true of emerging markets, which present unique growth
opportunities but often lack the political framework to facilitate local or international
PPP investment.
IFC and Infrastructure Journal, along with PPIAF through its generous support, are
pleased to present this publication, Emerging Partnerships, a selection of 40 impressive
and noteworthy PPPs from around the world—each at the heart of development in
the markets that need it most. By giving these projects the visibility they deserve, our
partners—the esteemed judges that supported us with their time and expertise—have
provided an independent and objective appraisal of the rapidly developing world of PPPs.
Tey have rewarded and recognized those applied partnerships that tackle difcult issues
and those that may be replicated, paving the way for further development.
Troughout the selection process, which included more than 130 submissions from all
over the world, a story began to unfold. Te PPP dynamic is changing. In emerging
markets, it has shifted from predominately utility and transportation concessions ten
years ago to include many more social infrastructure projects including hospitals, schools,
prisons and even agribusiness. Te partnership model is an efective tool for addressing
global infrastructure funding challenges, and within some of the examples here, we can
already see it evolving yet further to overcome new obstacles including climate change,
urbanization, and water and food security.
Private sector development in public infrastructure requires more than just fnance. It
requires partnership. Please join us in reading this publication, and celebrating true
partnership and best practice in infrastructure and international development.
Welcome
VIPUL BHAGAT,
IFC Advisory Services in
Public-Private Partnerships
JOHN KJORSTAD,
Editor, Infrastructure Journal
6 Emerging Partnerships
7 Emerging Partnerships
12 Regional Overview
14 Judges Profles
16-28 Project Profles
16 Punjab Grain Silos
20 CLIFF Community
Sanitation
22 Bhutan Education City
24 Nong Saeng Power Plant
24 Central Java IPP
25 Gorai Dumping Ground
Closure
26 NKTI Hemodialysis Project
26 24/7 Water Supply
27 Aurangabad Water
Supply
28 Gujarat Rooftop Solar
30-33 Project Data
60 Regional Overview
62 Judges Profles
64-76 Project Profles
64 São Paulo Metro Line 4
68 Atotonilco Wastewater
Treatment Plant
70 IIRSA Norte
72 Porto Maravilha
72 Toluca and Tlalnepantla
Hospitals
73 Peru Health Care Portfolio
Bond Financing
74 Panama Pacifco SEZ
74 Hospital do Subúrbio
75 Ciudad Victoria Hospital
76 Ribeirão das Neves Prison
Complex
78-81 Project Data
84 Regional Overview
86 Judges Profles
88-100 Project Profles
88 KivuWatt
92 Chiansi Irrigation Project
94 Port of Cotonou
96 Lekki Toll Road
96 Addax Makeni Bioenergy
97 Cape Verde Wind Power
PPP
98 Centrale Thermique de
Lomé
98 Lesotho: National Referral
Hospital
99 Gautrain Rapid Rail Link
100 Henri Konan Bédié Bridge
102-105 Project Data
36 Regional Overview
38 Judges Profles
40-52 Project Profles
40 Queen Alia International
Airport
44 Pulkovo Airport
46 New Cairo Wastewater
48 R1 Expressway
48 Medina Airport
49 Rosvodokanal
50 Amman East Power Plant
50 KAIA Desalination
51 Jeddah Water Contract
52 Sabiha Gökçen
International Airport
54-57 Project Data
East asia, Pacific,
& south asia
Latin amErica &
thE caribbEan
EuroPE, cEntraL
asia, middLE East,
& north africa
sub-saharan
africa
10
58
34
82
8 Emerging Partnerships
9 Emerging Partnerships
criteria
In order to fnd the most unique and groundbreaking PPP’s for Emerging Partnerships, IJ and
IFC undertook a global outreach campaign to encourage governments, industry, academia,
nongovernmental organizations, multilaterals and anyone with a vested interest in PPPs to
nominate projects that have set new standards for efciently developing and fnancing critical
global infrastructure.
Nominations were accepted from August 6, 2012 until September 14, 2012. During this period,
over 130 online submissions were received with 120 eventually being put forward as eligible to be
considered by regional judging panels.
Candidate projects were distributed geographically among four regions and must have been
implemented in a qualifying emerging market country within these regions (see www.emerging-
partnerships.com/Criteria?Length=4 for country listing):
• East Asia, Pacifc and South Asia
• Europe, Central Asia, Middle East & North Africa
• Latin America & the Caribbean
• Sub-Saharan Africa
In order to be considered for Emerging Partnerships, projects nominated must also have reached
fnancial close for at least part of the project between January 2007 and June 2012, and could
encompass both hard and soft infrastructure, such as agribusiness, education, forestry, health,
hospitality, information technology, mining, municipal services, power/energy, telecommunication,
transport, waste, water and any other form of critical infrastructure.
Finalists were then selected by four independent judging panels, with each judging panel comprised
of an esteemed group of PPP industry experts from that region.
Each project that was eligible for consideration in a region was scored by the judging panel based on
the following criteria:
• Financial Innovation: Delivery of infrastructure through the use of creative fnance structures
• Technological Innovation: Delivery of infrastructure using new technologies
• Developmental Vision:
• Does the infrastructure project have a social impact and promote further advancement?
• Does the infrastructure project promote sustainability and put minimal stress on the environment?
• Replicability that sets a commercial standard and can be repeated elsewhere in the country or
region.
• Impact on the population and the number of people who will directly beneft as a result of the PPP.
Judges who had any afliation with a project up for consideration recused themselves from scoring on
that project in order to maintain independence.
During the judging panels, scores for all of the projects were tallied and, based on these numbers as
well as additional judging panel deliberation, the top 10 PPP projects were selected for each region.
Ten from the top 10 list in each region, the top three highest scoring projects which the judges also
felt had a particularly signifcant impact and embodied all the Emerging Partnerships selection criteria
are now showcased through in-depth profles within this publication.
east asia, pacifc
& south asia
regional overview
East Asia, Pacifc & South Asia
by James Kenny
In terms of regions, Asia is probably the most polarized when it comes to PPP activity with
countries like India, Singapore and China forging ahead with new and innovative infrastructure
while others such as Mongolia, Bangladesh and Pakistan make tenuous steps on the PPP ladder.
Most countries in East Asia, Pacifc and South Asia have ambitious plans and programs for
increasing the role of the private sector in closing the infrastructure gap through PPPs. With
the exception of China, few have yet to achieve concrete results. However, this is beginning
to change and countries such as the Philippines, an early leader in PPPs during the 1990s,
Indonesia, Vietnam, as well as smaller countries in the Pacifc have either completed PPP
transactions or are actively working on developing a pipeline of PPP projects.
Of those featured in this publication, India proved to be the dominant country with unique
projects such as the $6 million Punjab Grain Silos and $15 million Gujarat Solar Rooftop
project. Tis is hardly surprising considering the country has the second highest population
in the world and PPP activity has been entrenched since the early 1990s with the opening
up of India’s electricity generation to private players in 1991, which set up the structure of
Independent Power Producers (IPPs).
However according to Isabel Chatterton, manager of IFC’s Advisory Services in PPPs for the
South Asia region, there is still polarization within the country itself with PPP projects and their
success altering between diferent states:
“In India, although successful in the PPP market, we can see opportunities vary dramatically
with the replicability of existing PPP models in wealthy states compared to ones with lower
incomes. Outside of road projects, other sectors are not always successful models of government
PPPs across the country so this is something we are trying to work on and advise to change.”
13 Emerging Partnerships
According to Chatterton, IFC is working on a number of projects to address this imbalance,
such as engagement in the health PPP sector and forming diferent state partnerships with
specifc governments to move beyond certain projects and problematic PPP initiatives. IFC is
also attempting to establish health networks that will comprise primary, secondary and tertiary
care and enable the building of larger health facilities.
Work is also ongoing in the renewable energy space. A successful model has already been
implemented in the state of Gujarat and IFC is now assisting in developing it across the lower
income states in the north and northeast.
While positive steps are being made in India, it has not been the case across the wider region as
the country still towers above others when it comes to PPP activity. Help is on hand however
with the Asian Development Bank (ADB) implementing its Public-Private Partnership
Operational Plan 2012-2020 in order to promote project fnancing in cooperation with
the private sector across other countries in the region.
According to the ADB, the Asia and Pacifc region requires infrastructure investment of at
least $8 trillion until 2020, 68 percent of which will be for new capacity and 32 percent for
maintaining and replacing existing infrastructure. Te average annual infrastructure investment
during this period is about $750 billion.
Available funding from traditional sources falls far short of the investment need. In order to
address these massive infrastructure requirements, the ADB states countries have three principal
options: review traditional sources of funds and explore additional funding from them,
investigate mechanisms for generating more resources from of-budget sources, and fnally
consider a greater role for PPPs in procuring infrastructure and identifying and addressing
impediments to the development of PPP transactions.
As well as the implementation of the overall plan, the ADB is also doing its part to help
countries: more specifcally by providing assistance to the government of Mongolia in preparing
a concession law to support private-sector infrastructure projects; in Cambodia, it is working to
provide technical assistance on policy and pathfnder projects; and most recently announced it
is open to extending more funds for the pre-feasibility studies of PPP projects in the Philippines,
should the government require it.
Te IFC is also assisting in the spread of PPP growth in newer frontier countries. “Outside
of India we are trying to facilitate the frst PPP transaction within certain countries or aid
countries with an already burgeoning PPP market,” Chatterton said.
In Sri Lanka, she added that it’s the right time for the government to work with PPPs. IFC is
advising on several aspects of real estate PPPs and development of assets that have to do with
the country’s core infrastructure. Other regional examples of IFC work that she noted included
a health transaction in Bangladesh, hotels in Nepal, and an urban transport project in Bhutan.
14 Emerging Partnerships
Sanjay Mehta is Director of Essar Global Limited, London, the holding
company of Essar Group. He is also CEO of Essar Shipping & Logistics Limited,
Cyprus.
Mehta joined Essar Shipping Limited in June 2000 as Managing Director and
CEO. During his tenure he successfully restructured and made further investment
decisions for the Ruia family (major shareholder of Essar Group of companies) in
their shipping and logistics portfolio. Essar Shipping & Logistics Limited today
is the world’s leading integrated sea logistics company with a focus on crude oil
transportation and crude oil transportation management services for the global
oil majors. In addition, it provides integrated supply chain logistics services to the
steel making industry and thermal power generators based in South East Asia and
Asia Pacifc.
Mehta has an MBA from London Business School, London. He graduated with
an Honours degree from London School of Economics, London. Mehta has over
15 years experience in the international shipping and investment banking sectors.
Prior to joining Essar Shipping Limited, from 1994-2000 he headed up the
investment banking desk (South East Asia and Asia Pacifc) at American Marine
Advisors, Inc., New York. Prior to his tenure with American Marine Advisors, he
was with Goldman Sachs, New York, and Hambros Bank, London. Mehta sits
on the board and audit committee of Protection & Indemnity Club, Steamship
Mutual, London. He is also a board member at the American Bureau of Shipping.
judges
profles
the judges
sanjay mehta
Victor (chuan) chen
Layth irani
steve Gross
15 Emerging Partnerships
Layth Irani is joint General Manager and head of the Infrastructure
Finance Unit at Sumitomo Mitsui Banking Corporation Europe Ltd.
He has 25 years experience of acting as advisor, arranger and lender in
the transport, infrastructure and telecoms sectors. He has experience in
arranging fnancing for road, rail, port, airport and rolling stock project
and acquisition fnancing. He has worked on projects in Europe, the
Middle East, Africa, North and South America and Asia. Clients have
included local and national governments, multilaterals and export credit
agencies, construction companies and fnancial sponsors.
Steve Gross is Head of the Asian Business Development team for
Macquarie Infrastructure and Real Assets (MIRA). Gross sits on the boards of
a number of portfolio companies in China and oversees a team based across
Asia that develops all new Asian funds and separate managed accounts as well
as managing key stakeholder government and client relationships. Tis team
led the successful development of MIRA’s third Korean infrastructure fund,
frst Chinese infrastructure fund, the Macquarie Everbright Greater China
Infrastructure Fund, and the frst Philippines infrastructure fund. Prior to this,
Gross was the Chief Operating Ofcer (COO) of the European infrastructure
fund business with €7.3 billion under management. During his time as COO,
the team grew from 25 to over 60 staf and capital invested increased to €6.3
billion including investment in the largest water and wastewater business in the
United Kingdom - Tames Water. Other projects Gross has been involved in
include the acquisition of Bristol International Airport and acquisition of DCT
Gdansk SA, a greenfeld container terminal in Poland.
Gross holds a Bachelor of Commerce (degree with honors) from the University
of Melbourne, where he developed research into the crowding in of private
sector expenditure by government infrastructure spending. Following that
Gross completed a Master in Business Administration from the London
Business School where he graduated with distinction.
Chuan Chen is the Professor of Engineering Management at the
Business School of Sichuan University, Chengdu, Sichuan Province,
China. Chen previously worked at Tsinghua University as an assistant
professor and then Melbourne University as a lecturer in construction
management. He also acts as a consultant to the Private Participation
in Infrastructure (PPI) Database of the World Bank and a member of
the World Economic Forum Global Agenda Council on Infrastructure.
He holds a B.Eng. from Tsinghua University, M.Eng. from National
University of Singapore, and Ph.D. from Pennsylvania State University,
with specialization in construction and project management. Chen also
received a master’s degree in applied fnance from Melbourne University
under a staf scholarship. Chen’s research and teaching interests include
risk management, project fnancing, strategic infrastructure development,
and public-private partnership. Chen is an author of more than 50
publications.
16 Emerging Partnerships
Punjab Grain Silos
Punjab State, India
GOLD
selection
17 Emerging Partnerships
As the world plunged into the global recession in
2008, food prices began to rise, causing panic in
many countries with violence even erupting in places
such as Bangladesh and India as citizens rioted to
protest soaring costs. Since then governments and
policymakers have been taking tentative steps at
stockpiling food supplies.
With wheat a basic staple of nutrition in India, the
Punjab State Grain Silos is a project that was called
“hugely important” and one that “addresses a very
serious issue,” according to the judging panel. It not
only provides a real alternative to future food shortages
but is also a replicable model that can and is already
being adopted by other countries concerned about
storage and feeding their growing populations.
Te idea was spawned in India’s Punjab State, known
as the breadbasket of the country. According to a
report published by the Planning Commission of India
in late 2011, the warehousing capacity for rice and
wheat in the public, cooperative and private sector
in India was estimated to be 108.75 million metric
tonnes (MT) however there was need for an additional
35 million MT. As one of India’s prime grain
producers which also faced critical shortage of storage
capacity, the state government of Punjab engaged IFC
to advise on a pilot PPP scheme that would develop
state-of-the-art, long-term storage silos with a capacity
for 50,000 metric tons.
Te concession, which was one of the frst of its kind,
had a number of bidders and was awarded in July 2010
to LT Foods Limited, a large Indian grain exporting,
commodity trading and handling company. Under
the terms of the 30-year concession LT Foods agreed
to fnance, build, own, operate and maintain grain
silos using state-of-the-art technology and inventory
management methods. At the end of the concession,
the operator will be able to use the facility for private
purposes. Te new silos now ensure that, on a yearly
basis, 500,000 of India’s poorest will receive better
nutrition.
IFC estimated the total project cost, including the cost
of land and preliminary expenses, at approximately
INR 400 million ($8 million). Te IFC’s advisory
work was supported by DevCo, a multi-donor
program afliated with the Private Infrastructure
Development Group. Te project was implemented in
April 2011 and operational by March 2012.
According to Neeraj Gupta, senior investment ofcer
for South Asia with IFC, the move towards grain silos
and storage is a global strategic issue with parts of
Sub-Saharan Africa and the Middle East investigating
storage facilities.
“In the context of what’s happening globally with food
shortages, this silo project, its infuence and reach are
extremely important. Te success of the silos means we
In the context of what’s happening
globally with food shortages, this
silo project, its infuence and reach
are extremely important.
18 Emerging Partnerships
have been able to push the boundaries of reform and now we are seeing
the results with 10 other states in India attempting to adopt a similar
strategy. We are also seeing replication internationally, where plans for
similar silos are in various states of process in both Pakistan and Africa.”
As a result of Punjab Silos’ success, IFC is now advising on a similar
program, albeit on a much larger scale, in Pakistan’s Punjab and Sindh
provinces.
Speaking about the project, panel judge Chuan Chen said: “To date there
are very few PPPs in the agriculture sector in the Asian region and the
silo project not only fulflls an important role but can also be adapted
elsewhere. Tis makes it very exciting.”
IFC is now advising on a
similar program, albeit on a
much larger scale, in Pakistan’s
Punjab and Sindh provinces.
*For more information on this project and others in the region please see the project data
at the end of this chapter.
20 Emerging Partnerships
CLIFF Community Sanitation
Maharashtra and Tamil Nadu, India
SILVER
selection
21 Emerging Partnerships
As a partnership between the public and private
sectors and based on the enthusiasm of the judges,
the Community-Led Infrastructure Finance Facility
(CLIFF) Community Sanitation Project in India saw
the development rise to the top of the list. CLIFF
provides nonproft organizations working in the
developing world access to fexible fnance, enabling
them to deliver housing and infrastructure for the
urban poor.
With this project, CLIFF provided approximately
$1.5 million to Samudaya Nirman Sahayak (SSNS), a
non-proft arm of the Indian-based nongovernmental
organization (NGO) Society for the Promotion of
Area Resource Centres (SPARC). Te funding enabled
SSNS to deliver sanitation schemes worth over $7.2
million. Tis has resulted in the construction of over
230 toilet blocks, totaling 4,610 toilet seats, serving
an estimated 230,000 slum dwellers in the states of
Maharashtra and Tamil Nadu. SSNS continues to
replicate the program, and by the end of 2013 it will
have completed another 630 toilet blocks serving an
estimated additional 630,000 people.
Speaking about the project, the judges said although
it is not a formal PPP model, it should really be
considered as it addresses such an important and
sometimes overlooked issue.
Judge Sanjay Mehta, said: “It will be very interesting
if such a project can be replicated elsewhere and it
involves two very important issues, sanitation and
urbanization.”
One-hundred thirty million households in India
currently lack latrines. Community sanitation blocks,
when delivered and managed correctly, can be an
efective means of providing sanitation in India’s
dense slums. Tis program introduced a number of
innovations, including a genuine partnership between
local government, NGOs and communities of slum
dwellers. Te local government provided water and
sewerage connection, access to land, and funds for the
construction; SSNS was responsible for construction
management, and in many cases slum dwellers
themselves built the toilets. Te local communities
were also involved in assessing the demand.
Importantly, rather than the municipality managing
the toilets, the program supported local communities
to do this. Communities collected regular fees from
users and employed a caretaker to maintain the toilets.
Te government only released payments for toilet
blocks once set construction milestones were met. Tis
meant that to initiate the construction, SSNS needed
substantial working capital, which was not available
from commercial fnancial institutions at afordable
rates. To overcome this, CLIFF initially granted funds
to SSNS which they were able to recycle locally. Today,
however, SSNS also receives returnable funds from
CLIFF. As SSNS’ reputation and capital base grew,
and with support of a loan guarantee from Homeless
International, SSNS was able to approach banks for
loans. Now, SSNS is able to secure bank fnance to
partially fund construction.
CLIFF is managed by Homeless International and
funded by U.K. and Swedish governments. SSNS
works in partnership with SPARC, and community-
based organizations Mahila Milan and the National
Slum Dwellers Federation.
22 Emerging Partnerships
Bhutan Education City
Thimphu, Bhutan
BRONZE
selection
23 Emerging Partnerships
A pamphlet outlining the concept and strategy behind
the Bhutan Education City (BEC) presents the
Kingdom of Bhutan, nestled in the foothills of the
Himalayas, as a land of happiness and natural beauty
committed to sustainable development.
“Economic growth,” it states, “must be subject to the
happiness and wellbeing of the people.”
As the country’s frst major PPP infrastructure project
(and the frst to require its own legislation), the BEC is
the cornerstone of the Royal Government of Bhutan’s
plan to develop the country’s knowledge economy
within its Gross National Happiness framework.
Rather than continue to export bright young minds
to universities abroad, the BEC aims to keep students
in Bhutan while having robust international standards
that will attract students from neighboring India and
other parts of the world.
“Te main market for the education hub is India
and the region, where the demand for good quality
education is huge,” said Kinga Tshering, the chief
executive of Druk Holding & Investments (DH),
in a released statement. “India has only 450-odd
universities against a demand for almost 1,000.
Foreign universities are not keen to open campuses
in India because of its regulatory environment, which
makes it difcult for them to earn proft. Terefore,
Bhutan would like to ofer an alternative destination
for higher education.”
On this premise, the Bhutan Education City Act
was passed by parliament in 2012 with $9 million
committed to ancillary infrastructure development.
Since then, the BEC has institutionalized the
governance structure, completed the bid process and
signed memoranda of understanding to work with
leading global educational institutions such as the
Indian Institute of Management, Ahmedabad; Rafes
Institution in Singapore; TERI University in New
Delhi; and the Earth Institute of Columbia University
in New York.
Plans for the BEC include student and faculty
accommodation, a sports complex, retail areas, service
apartments and research facilities. Te campus will
include 500 acres of reserved green space, and employ
renewable energy and sustainable development
techniques.
In terms of urban development, the campus will
provide an extension to Timphu, the country’s
capital and largest city, as well as direct and indirect
jobs to over 30,000 people. All economic industries
including tourism, construction, the service sector, and
the fnancial sector are expected to beneft from this
project.
Te BEC is being spearheaded by DHI which is
the investment arm of the Royal Government of
Bhutan. In October 2012, a 13-member board
comprising secretaries from key ministries including
education, economic afairs, fnance, home and labor
and the Gross National Happiness Commission was
announced under the chairmanship of the works and
human settlement minister to oversee the project.
Having the board formed, DHI will hand over the
project to the statutory body, which will manage it
according to the roles, responsibilities and powers
defned in the BEC Act.
Initial ground works on the project were expected to
begin in early 2013.
24 Emerging Partnerships
Nong Saeng Power Plant
Nong Saeng, Thailand
Tailand has long had strong support for PPPs in its infrastructure projects and continues to push for growth in
the sector. In 2012 the country engaged the Asian Development Bank for project preparatory technical assistance
on a PPP motorway project and policy and advisory technical assistance on Reform and Renewal of Tailand’s
Railway Sector.
Tailand is also launching a 1,600 megawatt (MW) gas turbine combined-cycle power generation plant in
the Nong Saeng district of the Saraburi Province. Te plant will consist of two 800 MW power generation
plant trains and is being aimed at responding to increasing power demand in a country associated with robust
economic growth. It aims to provide reliable and least-cost power to prevent supply shortfalls; promote efcient
combined cycle technology and baseload alternatives to coal-fred generation; and support PPPs that enhance
efciency in the sector.
Te project is part of the governments’ electricity plan, which expects the country’s demand for electricity to
grow by an annual average of 4.19 percent by 2030. To meet such increasing demand, the Tai authorities have
formulated the plan to increase the national capacity of power generation from 31,349 MW in 2010 to 65,547
MW by 2030. Te project is also the frst PPP project since the credit crisis of over $1 billion in Tailand that
taps international fnancial markets. Te two units are slated to go on-stream in June and December 2014,
respectively.
Te plant is being developed and implemented under a 25-year power purchase agreement with the Electricity
Generation Authority of Tailand (EGAT), and a 25-year gas supply agreement with PTT Public Company
Limited (PTT). Project costs and fuel are passed through an oftake agreement. An interconnecting pipeline
from the plant connects to PTT’s existing Wangnoi-Kaengkoi transmission pipeline 20 kilometers away. A new
transmission line is also being constructed to connect to EGAT’s system 1.5 kilometers away. Te plant is being
developed by Japan’s electric power development company J-Power with long-term debt provided by the Asian
Development Bank, which funded around $170 million. Te other lenders are the Japan Bank for International
Cooperation (JBIC), Siam Commercial Bank, Kasikornbank, and Mizuho.
Central Java IPP
Central Java, Indonesia
Te $4 billion Central Java IPP (independent power producer) project involves building a new 2,000 megawatt
(MW) coal-fred power plant in Central Java, Indonesia in order to keep up with growing electricity demand and
to attract further private investment into the country. An equity bridge loan was signed in August 2012 with full
fnancing on-going at the time of publication. It is estimated that the plant will improve access to electricity to
7.5 million people and mobilize over $3 billion in investment. Te project is the frst to beneft from a new form
of government guarantee provided by the Indonesia Infrastructure Guarantee Fund (IIGF), established not only
to guarantee PPP projects, but also to provide consistent risk assessment of PPP projects. Te project is set to go
online by 2016.
A consortium of Indonesian company Adaro Energy and Japan’s Itochu and J-Power won the bid for the 25-year
power purchase agreement. Te plant will use ultra-supercritical coal-fred facilities, which will be able to burn
domestic sub-bituminous coal as fuel. Te project ties into a Japanese government initiative to “project package”
abroad to promote its growth. Te Deployment of Integrated Infrastructure Systems Overseas initiative, focused
25 Emerging Partnerships
Gorai Dumping Ground Closure
Gorai, India
Considered a groundbreaking initiative in India, the Gorai Dumping Ground Closure was an essential PPP
that transformed an area of densely populated Mumbai that had been used for dumping waste since 1972. Te
site spanned 19.6 hectares and had approximately 2.34 million tons of waste, up to 26 meters in height. Clo-
sure of the site was completed in 2009. Te dump had contaminated water supplies and was killing surround-
ing mangroves, while local residents were unable to open windows that faced in the direction of the dump
because of the overpowering smell. Creek waters were also being contaminated due to the infow of leachate.
Te Municipal Corporation of Mumbai (MCGM) appointed Infrastructure Leasing & Financial Services
(IL&FS) to manage the scientifc closure of the site, which was the frst of its kind in the country. MCGM
received a carbon advance of Rs 250 million ($4.5 million) against future delivery of carbon credits from the
Asia Pacifc Carbon Fund of the Asian Development Bank for the project. Te project was contracted out on
a design, build, own, operate and transfer framework for a 25-year period. Te PPP structure ensured that
the municipality retained a high degree of control over the project while bringing in the expertise of the
private sector.
Te dumping ground closure was implemented by United Phosphorous Limited (UPL) along with their
consortium partner, Van Der Wiel, Netherlands, over a period of 15 months. Te project proved important
for the country as it provided a model PPP structure that could be implemented elsewhere, while also
demonstrating that carbon fnancing can catalyze management of solid waste projects and enhance the
fnancial viability. On a practical scale the closure of the dump has seen a marked improvement in the quality
of life of people in Gorai living within these 19 hectares of green space in Mumbai. Property value in the area
increased with higher property tax collection for the municipality. Improvement in the environmental quality
is also noticed with elimination of foul odor in the atmosphere after three decades. Elimination of fre, health
hazards and breeding of fies and rodents in the area helps improve public health and hygiene.
mainly in the generation and transportation sectors, is being planned for various emerging Asian countries,
including Indonesia.
Indonesia’s demand for electricity is expected to rise by 9 percent annually and the Central Java project is one
of the frst in state-utility PLN Persero’s second fast track program to add more than 10 GW of new capacity
by 2014.
IFC was transaction advisor to PT Perusahaan Listrik Negara (PLN), the government-owned Indonesian
electricity company, and proposed the risk allocation structure in the power purchase agreement to maximize
bankability of the IPP while minimizing the risks to PLN.
Te guarantee mechanism and revised PPP regulations will pave the way for future PPPs in infrastructure
in Indonesia, bringing much-needed investment to the sector.
26 Emerging Partnerships
NKTI Hemodialysis Project
Quezon City, Philippines
Although relatively small in scale compared to some of the other projects considered, the National Kidney
Transplant Institute (NKTI) Hemodialysis Project in the Philippines proved popular among the judges due
to its more personable impact and its innovative procurement of equipment. NKTI initially invested in a new
hemodialysis center, however due to an annual budget defcit, the institute found it difcult to furnish the center
with new machines and equipment. As the budget only allowed the purchase of fve new machines per year
compared to the pressing needs of doubling its treatment capacity, a PPP solution was sought.
Te procurement process was successfully concluded in 2003 through a PPP lease arrangement between NKTI
and Fresenius Medical Care AG. Foreseen as Asia’s model in renal care, the new hemodialysis center now
provides the highest level of hemodialysis service in the Philippines, as well as in Asia.
Te center started servicing patients in August 2003, with the frst fve-year contract concluded and renewed
once again in 2009. Te new center alone is now serving more than 120 outpatients a day. Tere are also now
47 machines in operation at the new hemodialysis center. Aside from ofering this improved service and top
quality hemodialysis, NKTI has been relieved of its responsibility to maintain the new set of equipment. Most
importantly, there has been no price increase to patients, with cost per treatment considered afordable and
minimal. No hard impact evaluation study has been done to quantify how the project has enhanced access to
services and information, especially for poor households. However, interviews with hospital administrators
indicate the following: NKTI was able to acquire the latest available technology in dialysis treatment and expand
its services to more patients at the same cost of treatment and at less risk to the government. And because of
more machines and higher reliability of these machines, hemodialysis treatment was extended to more Filipinos.
24/7 Water Supply
Nagpur, India
Uninterrupted, 24-hour access to clean drinking water is the foundation for the long planned 24/7 Water Supply
Project in South Nagpur, India. Te project marks the frst ‘full city’ PPP contract in India and aims to provide
potable water round-the-clock to all citizens, including those living in slum areas, by replacing an old and leaking
water network. Te water quality will meet World Health Organization water quality standards and will be
available under constant pressure.
Te project was frst proposed by the Nagpur Municipal Corporation in 2009 and was to be completed by 2012;
however the project began construction in 2011 due to delays.
Vishvaraj Environment Pvt. Ltd. (subsidiary of Vishvaraj Infrastructure Limited) won the contract, which
includes the operation of the Water Utility of Nagpur for 25 years. To operate the contract, Vishvaraj
Environment has associated with a global partner, Veolia Water through its subsidiary Veolia Water India, to
create a special purpose company named Orange City Water Limited (OCWL). Not only will OCWL provide
27 Emerging Partnerships
Aurangabad Water Supply
Aurangabad (Maharashtra), India
Access to clean water is still a major issue in many parts of Asia. Te Aurangabad Water Supply project in
the state of Maharashtra in India was recognized by the judges as not just a vital project that will provide
drinking water for a population which exceeds one million people, but also one which sets a precedent and
has a major developmental impact on the region.
With Aurangabad being one of Asia’s fastest-growing cities, the project will have a direct impact on an
expanding population. Te development involves the laying of 1,200 kilometers of water pipes from the
Jayakwadi dam and is being developed on a build-operate-own-and-transfer (BOOT) basis for a 20-year
concession period.
Judge Chuan Chen said: “Te project is intriguing and can be replicated elsewhere, which is a major factor
in India or other parts of Asia. Te project is a practical solution to a practical problem.”
Te partners in the project are SPML Infra, Essel Infraprojects, Vatech Wabag, and National Water and
Sewerage Corporation, Uganda.
drinking water on an uninterrupted scale to 2.5 million people, but it will also include managing the drinking
water cycle of production, treatment, transport, storage and distribution to customers’ taps. Surface water
is produced and treated in fve plants for a total of 550 million liters per day and distributed through 2,100
kilometers of pipeline to 250,000 water connections.
Te contract includes an initial fve-year program of works (mainly network and house service connections
rehabilitation, and upgrading) amounting to $100 million, with 70 percent funded by the government of India
through the Jawaharlal Nehru National Urban Renewal Mission city-modernization program and the State of
Maharashtra, and 30 percent funded by Vishvaraj Environment.
Addressing a question raised by several judges about the willingness or ability of some citizens to pay for clean
water, the local chamber of commerce stated, “Te pilot experience has proven that the poor are willing to pay
(a subsidized tarif) for such better access to water.” As well as revolutionizing the water supply, the development
will reduce overall water loss and the city’s carbon footprint by spending less energy to pump water. Te project
was nominated by FICCI ( Federation Of Indian Chambers of Commerce & Industry) on behalf of VIL.
28 Emerging Partnerships
Gujarat Rooftop Solar
Gujarat, India
With over 300 days of sunshine a year, the state of Gujarat in western India is hoping to harness this plentiful
resource by pushing forward with the Gujarat Rooftop Solar project and a carbon emissions reduction program.
Te state plans to install 500 megawatts (MW) of solar capacity by March 2014, and IFC is appointed to
help execute this rooftop initiative and to advise on technical, legislative, analytical and marketing support.
Te pilot project will produce 5 MW of power entirely from solar photovoltaic panels installed on the city
of Gandhinagar’s rooftops (public buildings and private residences)—a clean and efcient way to address the
growing need for power in a developing country that is growing rapidly.
Azure power and SunEdison each won one of the two 2.5 MW projects, with the 25-year concession agreements
signed in April 2012. Te pilot received fnancial support from the Netherlands and Finland. Besides attracting
$15 million in private investment, 10,000 people will beneft from increased access to clean power at afordable
prices and 6,000 tons of carbon emissions are expected to be avoided per year. Te government also stands
to beneft from a net annual revenue stream of $400,000 for 25 years. Overall the project is a standout as it
demonstrates the technical, regulatory, and fnancial viability of rooftop solar panels, which will enable the
expansion of solar power in Gandhinagar and elsewhere in India.
Due to the success of the PPP, IFC is already working on similar projects in fve other cities in Gujarat and in
other states in India.
Gujarat Rooftop Solar
30 Emerging Partnerships
project data
East asia, Pacifc
& south asia
31 Emerging Partnerships
PuNJAB GRAIN SILOS
Punjab statE, india
Total initial
investment
$8 million
Government
client
Punjab State Grains Procurement
Corporation (PuNGRAIN)
Equity sponsors LT Foods Limited
Lenders DevCo (Private Infrastructure
Development Group)
Advisers to
authority
IFC (lead), SNC-Lavalin
(technical), Trilegal (legal), Mott
MacDonald (technical)
CLIFF COMMuNITy SANITATION
maharashtra and tamiL nadu, india
Total initial
investment
$7.2 million
Government
client
Various local governments in the
states of Maharashtra and Tamil
Nadu
Equity sponsors Samudaya Nirman Sahayak
Lenders Community Led Infrastructure
Finance Facility (Homeless
International)
BHuTAN EDuCATION CITy
thimPhu, bhutan
Total initial
investment
Bhutanese Ngultrum 20 billion
($364 million) for Phase I and II
Government
client
DHI Infra, a wholly owned
subsidiary of Druk Holding and
Investments (investment arm
of the Royal Government of
Bhutan)
Equity sponsors Infrastructure Leasing &
Financing Services Limited and
Infnity Infotech Parks Limited
Lenders National Société Générale Bank,
Commercial International Bank,
Arab African International Bank,
and Ahli united Bank Egypt
Advisers to
authority
Project Advisory Group,
Empowered Group, Ernst &
young
NONG SAENG POWER PLANTS
nonG saEnG, thaiLand
Total initial
investment
$1.185 billion
Government
client
Electricity Generating Authority
of Thailand
Equity sponsors Gulf JP NS Company, Limited
in Thailand, a wholly owned
subsidiary of Gulf JP Company
Limited which is 90% owned
by a local subsidiary of Electric
Power Development Company,
Limited (J-POWER) of Japan and
10% owned by Gulf Holding
Company Limited, a local power
development company
Lenders Japan Bank for International
Cooperation, Asian
Development Bank, Mizuho
Corporate Bank Limited,
The Siam Commercial Bank
Public Company Limited, and
KASIKORNBANK Public Company
Limited
Advisers to
sponsors
Baker & McKenzie
Advisers to
lenders
Allen & Overy
32 Emerging Partnerships
CENTRAL JAVA IPP
cEntraL jaVa, indonEsia
Total initial
investment
$4 billion
Government
client
PT Perusahaan Listrik Negara
Equity sponsors J-Power, Itochu Corporation and
Adaro Power
Lenders The $270 million Bridge Facility
closed in 2012 included Tokyo-
Mitsubishi uFJ Limited, DBS
Bank Limited, Mizuho Corporate
Bank Limited, Oversea-Chinese
Banking Corporation Limited,
Sumitomo Trust & Banking
Company Limited, Sumitomo
Mitsui Banking Corporation;
DevCo (Private Infrastructure
Development Group) provided
a technical assistance grant for
IFC’s advisory work
Advisers to
authority
IFC (lead), K&M Engineering and
Consulting (technical), Norton
Rose (legal)
GORAI DuMPING GROuND CLOSuRE
Gorai, india
Total initial
investment
$9.31 million
Government
client
Municipal Corporation of
Greater Mumbai
Equity sponsors united Phosphorus Limited and
Van Der Weil
Lenders Asian Development Bank’s Asia
Pacifc Carbon Fund
Advisers to
authority
Infrastructure Leasing &
Financing Services Limited
NKTI HEMODIALySIS PROJECT
QuEzon city, PhiLiPPinEs
Total initial
investment
Php 54 million ($1.33 million)
Government
client
National Kidney and Transplant
Institute
Equity sponsors Freseneus Medical Care
Philippines Inc.
Advisers to
authority
Build-Operate Transfer Center
(now renamed PPP Center of the
Philippines)
24/7 WATER SuPPLy
naGPur, india
Total initial
investment
INR 578 crore ($100 million)
Government
client
Nagpur Environment Services
Limited, a wholly owned
subsidiary of Nagpur Municipal
Corporation
Equity sponsors Orange City Water Limited, a
special purpose vehicle owned
by Vishvaraj Environment Private
Limited (Vishvaraj Infrastructure
Limited) and Veolia Water India
Private Limited
Lenders Industrial Development Bank
of India (IDBI Bank Limited),
Central Bank of India, and India
Infrastructure Finance Company
Limited
Advisers to
authority
Dinesh Rathi & Associates
33 Emerging Partnerships
AuRANGABAD WATER SuPPLy
auranGabad (maharashtra), india
Total initial
investment
$200 million
Government
client
Aurangabad Municipal
Corporation
Equity sponsors SPML Infra Limited, Essel
Infraprojects Limited, Vatech
Wabag Limited (India), and
National Water and Sewerage
Corporation (uganda)
GuJARAT ROOFTOP SOLAR
Gujarat, india
Total initial
investment
$15 million
Government
client
Gujarat Energy Research
and Management Institute,
promoted by the Gujarat State
Petroleum Corporation Limited
Equity sponsors Azure Power and SunEdison (for
separate transactions)
Advisers to
authority
IFC (lead), Deloitte Touche
Tohmatsu India Private Limited
(technical), CMS Cameron
McKenna LLP (legal), Hemant
Sahai & Associates (legal)
europe, central
asia, middle east
& north africa
36 Emerging Partnerships
regional overview
Europe, Central Asia, Middle East &
North Africa
by René Lavanchy
Te past seven years have seen governments all over Eastern Europe, Central Asia and the Middle East
express their support for PPPs. Advisers have been brought in, legislation has been passed and PPP
centers of excellence have been set up. Why, then, have so few been able to get a credible pipeline of
projects of the ground?
Panel judge Geofrey Hamilton of UNECE observed: “Governments… don’t have the capacity to
use PPPs in the volume that we feel can really make a diference… Te challenge is not really the
frst project; the challenge is to turn the frst project into a real pipeline. Tat really demands no short
cuts; it demands PPP units and good legal regulation and transparency. And that demands getting
governments to improve their capabilities and build their capabilities up. It has to be addressing this
if we’re really going to release the logjam and get governments to embrace PPPs in a more systematic
way.”
Judges identifed a discrepancy between administrations’ promises to pursue a PPP program and
efectiveness in delivering a pipeline. According to Infrastructure Journal data, countries such as the
Czech Republic, Romania, Slovakia, Kazakhstan and Dubai have closed fewer than six PPPs between
them, despite having political and legislative support for the model. Having a well-stafed PPP unit
does not translate directly into getting projects of the ground.
Such places seem at frst in stark contrast to Russia and Turkey, two countries picked out by judges
for their strong economic base and enthusiastic political backing for PPPs. National and local
governments in both countries have promised and, in some cases, launched PPP procurements
with a high capital value. However, when it comes to successfully closed projects procured in line
with international best practice, the diferences vanish. Russia, whose federal concession law is often
criticized for not ofering enough comfort to investors, has only signed two such deals in recent
years—the Pulkovo Airport concession (featured) and the Western High-Speed Diameter—while
Turkey’s transport and health care PPPs are understood to be held up by issues around contractual
rigor and risk allocation.
37 Emerging Partnerships
Tierry Déau of Meridiam and a member of the Emerging Partnerships judging panel commented:
“What I would focus on is the contractual and administrative framework. I would urge governments
to generally spend a lot of work on [that]. Te big hurdle is still bankability of contracts.” Croatia,
which has already closed several PPPs with international investors, has taken note and brought a new
PPP law into force in July 2012. It reduces the approvals process for projects from 120 to 30 days.
Half the projects shortlisted in this section are based in the Middle East, which has seen an exotic
range of procurements and approaches to fnancing infrastructure over the past decade. Judges were
pleased by the procurement of water projects in the area, as well as by the success of project developers
in marrying the project fnance model born in the West to Islamic fnance, in some cases closing
transactions with conventional loans sitting alongside Islamic facilities—no easy task.
Wealth in these states is no indicator of propensity to carry out a PPP program; closed projects are
just as likely in countries without large hydrocarbon revenues (Jordan, Egypt) as the richer oil states,
arguably because lack of government cash encourages alternative fnancing techniques. Meanwhile
Jordan, with negligible oil revenues, is recognized here for its airport concession and string of
independent power plant projects, while Egypt’s New Cairo Wastewater project was also scored
highly. In both cases, international fnancial institutions—IFC, the World Bank and Japan Bank
for International Cooperation—proved indispensible in providing long-term fnance and absorbing
country risk.
Infrastructure practitioners in the Middle East afrm that Egyptian ofcials are committed to
delivering a pipeline of PPPs, but the upheaval of the Arab Spring and its impact on fnancial
markets has obviously afected their ability to do this—as well as stalling PPP procurements in new
markets such as Syria and Yemen. Muneer Ferozie, IFC’s head for Advisory Services in PPPs in the
Middle East and North Africa (MENA) region, says: “Before the Arab Spring, PPP was a solution to
better infrastructure provision which most governments in the MENA region were either pursuing
or considering… Whilst it is true that the Arab Spring impacted the PPP programs, it has also
highlighted the need for creating more jobs and providing better infrastructure to the people—the
reality is requirements are large and PPPs provide a neat solution to address this challenge.”
PPP procurements for several large Middle Eastern projects, such as Abu Dhabi’s $2.7 billion Mafraq-
Ghweifat Highway and Saudi Arabia’s $7 billion Landbridge Railway, have been cancelled in recent
years. Panel judge Cathy Harris of K&L Gates commented: “Many of these countries have gone for
huge, often economic infrastructure projects and from time to time, certainly within the Middle East
in my experience, some of these have just been pulled. Perhaps to try trialing some pathfnders which
are more straightforward... may lead to greater confdence for developing markets.”
And there are positive signs in this direction, including from unexpected places. Moldova, Europe’s
poorest country by some estimates, has been pursuing a PPP program with IFC help since 2010
and last year signed a concession for a $7 million radiology and imaging center, one of several pilot
projects too small to trouble some international investors but which could have a major impact in a
country of 4.2 million.
“Te project is a typical example of an equally important trend of increased south-south investment in
Eastern Europe that we face daily,” said Georgi Petrov, IFC’s head of Advisory Services in PPPs in the
Europe and Central Asia region. Petrov added that due to the economic crisis in Europe, the typical
Western European investor has retreated and been replaced with either domestic or other emerging
market investors.
38 Emerging Partnerships
Geoffrey Hamilton is Chief of the Cooperation and Partnerships
Section of the Economic Cooperation and Integration Division in the United
Nations Economic Commission for Europe (UNECE) in Geneva. Te UNECE
is an intergovernmental body of 56 member states with a focus on developing
economic standards for pan-European integration and support for the transition
economies. His current responsibility is promoting PPPs for infrastructure
development where he leads a program on building the capacity of governments to
undertake successful projects. Currently he is setting up an International Center
of Excellence in PPP involving diferent countries around the world who will as
part of the initiative be hosting specialist centers. Tese centers will be responsible
for developing guides, maintaining information and training government
ofcials on PPP best practices in sectors, such as health, roads, water, schools and
sustainable energy.
His other interests include good governance, attracting foreign direct investment,
the economic aspects to peace building and security, property rights for the
poor and the protection of intellectual property rights for innovation. Before
joining the UNECE he worked at the United Nations Conference on Trade
and Development, the International Labour Organization, the Commonwealth
Secretariat and the Institute for Research on Multinational Enterprises in Paris.
He holds a Ph.D. and a Master’s from the University of Glasgow, Scotland.
judges
profles
the judges
Geoffrey hamilton
thomas maier
thierry déau
cathy harris
39 Emerging Partnerships
Thierry Déau is the founding partner and CEO, Meridiam
Infrastructure. Déau joined Egis Projects, a leading international project
developer and operator and subsidiary of the French Caisse des Dépôts in
1994, and was involved in managing and fnancing infrastructure projects
worldwide before being appointed chief executive of Egis in 2001. He
joined AECOM as a director in late 2004 to concentrate on developing
and managing the Meridiam Project, which was established in 2005
to enable public authorities to procure and manage the infrastructure
essential to the development of their local communities.
Cathy Harris is a partner in the London ofce of global law frm,
K&L Gates LLP, where her practice focuses on infrastructure and energy
projects. She has been involved from the inception of the PFI/PPP process
in the United Kingdom and with the adoption of similar models in other
European countries, the Middle East and India. Harris has advised on the
development of numerous acute hospitals, ranging from the landmark
University College London Hospital to the recently opened frst PFI hospital
in Northern Ireland. She is also experienced in the transport, defense,
education, emergency services, social housing and technology sectors. Cathy
is recognized by the independent legal directories including Chambers, Legal
500 and Best Lawyers and holds a Masters of Law from the University of
Queensland, Australia.
Thomas Maier is the Managing Director in charge of the
infrastructure sector at the European Bank for Reconstruction and
Development (EBRD).
Maier joined the EBRD as Senior Project Manager in August 1993 from
NatWest Markets where he worked on acquisitions, management buy-outs
and highly leveraged transactions in the United Kingdom and Western
Europe. At EBRD, he worked as Senior Banker in the Country Team
Romania/Moldova/Croatia/Ukraine and later as Director for the Municipal
and Environmental Infrastructure Team.
Maier is a board member in various investee companies of EBRD.
40 Emerging Partnerships
Queen Alia International Airport
Amman, Jordan
GOLD
selection
41 Emerging Partnerships
Many factors made the project
challenging at the beginning.
Tere was no track record of
PPP projects in Jordan except
for one wastewater project.
Te marriage of public infrastructure and private
fnance was virtually unknown in Jordan when in
late 2005 the government appointed IFC to advise
on the rehabilitation and expansion of Queen Alia
International Airport (QAIA), the country’s largest
airport and one of only two international gateways
into the kingdom.
Yet despite being the frst airport PPP in the country
and despite the region’s perceived risk, the project
secured $900 million of private investment, with IFC
taking another role as the biggest lender and joined by
six commercial banks.
QAIA’s infrastructure dated back to its opening in
1983. Years of almost uninterrupted growth meant
that by the mid-2000s, the airport was increasingly
crowded and approaching capacity. In addition, Jordan
was by now depending on tourism for around 10
percent of gross domestic product and foreign travelers
were arriving at an increasing rate.
Olivier Prudhomme, head of corporate development
at J&P-Avax, which has invested in the airport
concession and is building the new facilities, recalls:
“It was an unprecedented bid for our company. Many
factors made the project challenging at the beginning.
Tere was no track record of PPP projects in Jordan
except for one wastewater project. Tere were no
project fnance or PPP models.”
Having appointed White & Case as legal adviser
and Naco as technical adviser, IFC structured the
transaction in the frst half of 2006 on a build-operate-
transfer basis. Initially, the authority thought the
airport could be fnanced on the successful bidder’s
corporate balance sheet. A competitive procurement
along standard international lines followed, in which
six prospective bidders were prequalifed to bid. Before
bidding, consortia negotiated with the government to
allow a project fnancing, a structure they were much
happier to work with.
In April 2007, Airport International Group (AIG) was
chosen as the preferred bidder, having ofered to pay
over 50 percent of revenues to the government in fees
over the life of the 25-year concession. With Ernst &
Young in place as their fnancial adviser, the project
sponsors turned their attention to securing fnancing.
In the run-up to the global fnancial crisis, bank
liquidity was at an all-time high—but Jordan was an
untested market and the frst project of its kind usually
carries a risk premium.
“Banks were attracted by PPP projects and were very
aggressive. Most responses were ‘we are interested, we
have some appetite, but we’re not going alone’... Te
condition was for a multilateral to be involved, to
mitigate the political risk. Tat appeared to be a strong
requirement for the banks,” Prudhomme says. Without
42 Emerging Partnerships
the support of a multilateral, commercial lenders were ofering tenors of
up to ten years, insufcient for a project where the large investment would
be recovered over most of the 25-year concession period.
QAIA is not only the Middle East’s frst full airport concession, but the
frst to use sharia-compliant fnance. IFC lent $120 million in mainly 17-
and 18-year facilities, as well as underwriting a $160 million commercial
bank syndication, while the Islamic Development Bank (IsDB) lent
another $100 million. Tis required an innovative structure whereby
only the IsDB had security over airport assets, and other banks’ rights
were secured through the inter-creditor agreement in order to give all
lenders equal status. Although the revenue of the project was mainly in
Jordanian dinars and the debt in U.S. dollars, IFC negotiated this foreign
exchange risk by agreeing a clause with the government under which their
concession fee would fall if the dinar was devalued by over 10 percent.
Te sponsors provided $380 million equity and $258 million is coming
from airport cash fow.
Since AIG took over operations in November 2007, trafc has continued
to rise from 3.86 million that year to 5.47 million passengers in 2011. Te
new terminal is almost complete and due to become operational at the
beginning of 2013, bringing capacity to nine million initially. A second
phase expansion will eventually raise capacity to 12 million.
Te new airport, expected to create 23,000 jobs, will allow Jordan’s
importance as a tourist and economic center to grow. Te government is
released from subsidizing the airport and is now earning concession fees,
which reached $71.7 million in 2011.
*For more information on this project and others in the region please see the project data
at the end of this chapter.
Te government is released
from subsidizing the airport
and is now earning concession
fees.
43 Emerging Partnerships
44 Emerging Partnerships
Pulkovo Airport
Saint Petersburg, Russia
SILVER
selection
45 Emerging Partnerships
Te $1.5 billion Pulkovo Airport concession in Russia
broke new ground when it signed fnancing in April
2010. Not only was it the frst major PPP in the
country backed by international banks, it was the frst
that did not require state subsidy or guarantees, the
frst fnanced by commercial as well as development
banks, and the frst to be signed under the city of Saint
Petersburg’s PPP law. Tis is the best-regarded PPP
law in Russia and the one that most closely resembles
comparable laws in mature markets, because of
features such as the protection aforded to lenders and
ownership rights over assets.
Te project, with equity backing from Russian bank
VTB Capital, Frankfurt Airport operator Fraport, and
Greece’s Copelouzos Group, will see construction of
a new international terminal, already well underway,
as well as refurbishment of existing infrastructure,
replacing a terminal opened in 1973 and allowing
trafc to grow from around 10 million passengers now
to 30 million by the end of the concession in 2040. It
will remove a key transport bottleneck and promote
the economic growth of Saint Petersburg and the
surrounding area, according to IFC analysts.
Using the airport’s hard currency revenues, IFC
and the European Bank for Reconstruction and
Development were able to underwrite some $260
million of euro-denominated loans from a syndicate
of eight European banks after signing fnancing. Tis
remains a unique achievement in the Russian market,
where state-controlled banks and development lenders
predominate.
Judges praised the Pulkovo project for securing
fnancing in the aftermath of the 2008 fnancial crisis,
and for overcoming problems posed by federal laws.
Te project’s lenders beneft from improved security
to previous projects closed in Russia, while the public
sector makes no fnancial contribution and receives
a concession fee. As the frst PPP in the country
delivered to international standards of project structure
and fnancing, it is likely to encourage both the
public and private sectors to follow its example. Saint
Petersburg has already signed another, even larger PPP
project: the $3.7 billion Western High-Speed Diameter
urban highway.
Commenting on the project in 2011, Oleg Pankratov,
head of infrastructure capital at VTB Capital, said:
“In our view, the Pulkovo fnancing has become the
yardstick against which infrastructure transactions in
Russia and CIS [the Commonwealth of Independent
States] will be measured in the years to come.”
46 Emerging Partnerships
New Cairo Wastewater
New Cairo, Egypt
BRONZE
selection
47 Emerging Partnerships
Te New Cairo Wastewater plant in Egypt is one
of only two successfully closed PPPs out of over
six projects launched by the previous government.
However, several features of the project indicate that
it could be replicated elsewhere, a key criterion of
the Emerging Partnerships judging panel. Te project
addresses an important but relatively neglected
demand in Middle Eastern countries for wastewater
treatment among growing populations.
Te New Cairo settlement now numbers some
550,000 residents and is expected to grow to three
million by 2029, according to IFC data, with
academic as well as domestic customers generating
wastewater. Unfortunately, local sources and satellite
images indicate that wastewater from the settlement is
currently being dumped in the desert, losing valuable
water resources.
A competitive procurement process was launched
in 2008, attracting fve bids. Te winning bidder, a
team of Egypt’s Orascom Construction Industries and
Spain’s Aqualia, closed the project in February 2010
and are preparing to begin the 18-year operational
period.
Despite the local banking market never having
fnanced a PPP, four Egyptian banks agreed to
lend about $110 million in local currency—a key
requirement since the government, having sufered
the efects of heavy infation on its power purchase
contracts, refused to absorb foreign exchange risk.
Another innovation was the tenor of the debt, a record
for Egyptian project fnance at 15 years. Khaled El
Degwy, concessions director at Orascom, comments:
“It was not easy, given that this was the frst. We had
to provide some [corporate] guarantees to cover the
construction period, which is not a guarantee that
would be typically required in project fnance.”
Attracting long-term lending from local commercial
banks rather than international fnancial institutions
is a remarkable achievement for a pilot project and
should make New Cairo Wastewater both a replicable
and an economically rewarding transaction for Egypt.
Some of the contract documentation is being used to
procure another wastewater PPP at Abu Rawash.
Te resulting project will treat 250,000 cubic meters
of wastewater a day, about 2.3 percent of national
wastewater capacity in 2008. With a total upfront
cost of around $130 million at the time of closing, the
project is one of the smaller PPPs in Egypt’s original
pilot program, refecting judges’ views that successful
inaugural PPPs be not too ambitious in scale and
should have a social as well as economic impact.
El Degwy believes that further PPPs are a political and
social necessity in Egypt: “[Given] the public pressure
on public services… the government needs to do a
lot of infrastructure projects to address these public
concerns. We will carry the burden of handling design
issues, providing fnancing, and providing proper
operation of facilities.”
48 Emerging Partnerships
R1 Expressway
Slovak Republic
Despite being the Slovak Republic’s frst proper PPP, the $1.67 billion R1 Expressway that closed in August 2009
is an ambitious project. When fully complete, the new dual carriageway built by France’s Vinci and Meridiam
will be 51.6 kilometers long with 81 bridges, and is expected to improve health and safety as well as economic
competitiveness. Local roads in the area have been some of the most dangerous in the Slovak Republic in recent
years, and the expressway is reducing congestion in towns along the route, particularly the city of Banska Bystrica
it bypasses. By paying the sponsors a unitary charge in return for road availability, safety and performance, the
authority, the Slovak Republic’s Ministry of Transport, Post and Telecommunications, hopes to raise standards in
road management.
Judges praised the project for securing fnancing in the eye of a fnancial crisis: the winning bidders, a team of
France’s Vinci and Meridiam Infrastructure, were appointed preferred bidder in December 2008, shortly after
the collapse of Lehman Brothers, at a time when banks’ liquidity dried up and their negotiating techniques
hardened overnight. Despite this, the sponsors were able to attract some $1.45 billion of lending from 12
commercial banks plus the European Bank for Reconstruction and Development (EBRD) and Germany’s KfW.
Te EBRD in particular agreed to lend about $286 million in euro fnancing, a larger commitment than usual.
Te awarding authority provided no public subsidy and declined to take on responsibility for debt repayment in
the event of the concessionaire going bankrupt, thus avoiding unwanted public balance sheet consequences. Te
project nonetheless closed successfully in August 2009 in spite of competition for funding from other large road
PPPs in Europe. Te road opened in October 2011.
Medina Airport
Medina, Saudi Arabia
Te $1.2 billion expansion of Medina Airport in Saudi Arabia is the frst full airport PPP in the Gulf
Cooperation Council region, and fully funded by Islamic compliant fnance. Te project, designed in two
phases, will see a consortium of Turkey’s TAV, Saudi Oger and Al-Rajhi increase capacity from four to eight
million passengers a year when the frst phase is completed in 2015. Tey will continue to operate the airport
until 2037 under the 25-year concession agreement.
Currently, Medina Airport is almost full and airlines’ requests for landing slots are being denied. Te PPP will
deliver a new terminal, an extended and upgraded runway, a new lighting system for runways and new taxiways,
along with a number of other airside and landside developments. As well as improving the travel experience
for millions of pilgrims to the holy city every year, the project aims to obtain the region’s frst LEED silver
certifcation through energy efciency, recycling, low emissions and water use. Subsequent expansion phases will
increase capacity to 18 million passengers by 2037. IFC was lead adviser to Saudi Arabia’s General Authority of
Civil Aviation (GACA) and saw the project through its entire life from structuring to fnancial close.
Medina Airport was the third successful PPP procured by GACA after two projects at Jeddah’s King Abudulaziz
International Airport (KAIA): the Hajj airport terminal, and the KAIA desalination project (also featured). Tis,
and the fact that it was fnanced by Saudi banks with most of the debt in local currency, indicates that local
money is readily available for public infrastructure as well as for more traditional energy projects, and that these
transactions can be replicated.
49 Emerging Partnerships
Rosvodokanal
Russia
Rosvodokanal is the largest privately owned water operator in Russia, serving six cities and one region with
a total population of about 5.5 million through leasing contracts lasting up to 25 years. Water supply and
wastewater networks across Russia have not been upgraded for decades, and are in need of both rehabilitation
and extension, according to European Bank for Reconstruction and Development (EBRD) data, but there was a
mismatch between the short-term fnance available and the time needed to generate a return on investment.
In May 2008 and November 2011, the EBRD intervened to support this work with two 13-year, 1.5 billion
ruble loans. Te facilities will be used to fund upgrade works in all seven areas where Rosvodokanal operates—
Barnaul, Kaluga, Krasnodar, Omsk, Orenburg, Tver and Tyumen—and to help acquire other water companies.
“With no private sector interest in funding infrastructure projects for longer than fve years, the EBRD’s 13-year
loans provide the long-term fnance essential for such an ambitious program of capital expenditure projects to
modernize the supply of drinking water and treatment of sewerage,” Rosvodokanal said in a 2011 statement.
Te EBRD also used the negotiation of the frst loan to tighten up the transparency and competitiveness of water
services procurement in Russia. Under the terms agreed, Rosvodokanal was to amend all seven of its contracts to
introduce public disclosure requirements, service targets and penalties for underperformance, and to place the
contracts under the supervision of independent monitors. Te operator has agreed to follow this contract model
for future agreements, which it is actively pursuing.
50 Emerging Partnerships
Amman East Power Plant
Amman, Jordan
Jordan’s $300 million Amman East Power Plant was the frst independent power plant (IPP) in the Hashemite
Kingdom when it was inaugurated in 2009; it has proved its replicability. Since the project reached fnancial
close in 2007, a second IPP has also been signed, built and commissioned, with two more in development. Tese
combined cycle natural gas turbine plants are seen by the Jordanian government as important in reducing its
reliance on imported oil and achieving a more sustainable energy balance. Building on the success of this project,
half of Jordan’s power generation now comes from IPPs, according to IFC data.
Te 370 megawatts plant generates over 11 percent of Jordan’s 2012 generating capacity, and is helping maintain
a safe margin between capacity and demand of at least 10 percent in a country where electricity demand has
grown steeply in the frst decade of the twenty-frst century.
For lenders, Jordan presented signifcant macroeconomic and exchange rate risks which could impact on the
government’s ability to make power purchase payments. Nonetheless, the project sponsors, the United States’
AES Corporation and Japan’s Mitsui & Co, succeeded in attracting fnance from the U.S.-based Overseas Private
Investment Corporation, Japan Bank for International Cooperation (JBIC) and Japanese commercial bank
SMBC. Tis was enabled by the World Bank’s decision to provide two risk guarantees covering SMBC’s loan
and most of the project equity. As such, it is the frst project fnancing in Jordan supported by JBIC.
KAIA Desalination
Saudi Arabia
Te King Abdulaziz International Airport (KAIA) Desalination project is helping to address the increasing
demand for water in Saudi Arabia. Closed in June 2007 and operational since 2009, it is providing 30,000 cubic
meters of potable water a day for the busiest airport in the country. Since the city of Jeddah is unable to supply
any water to the airport, this is crucial to ensuring the viability of a site that houses both airport, housing and
Royal Saudi Air Force staf, and caters to over 22 million passengers a year.
As well as increasing water production at KAIA, the new plant replaces unreliable and inefcient heat-based
machinery with modern reverse osmosis technology, increasing energy efciency, reducing emissions and carbon
footprint. IFC estimates that the project will save the General Authority of Civil Aviation (GACA) about $12
million a year through various efciencies. Te plant’s capacity will rise to 35,000 cubic meters in the eighth year
of the 20-year concession, and is ready to be expanded when demand requires.
Te sponsors are a consortium of Greece’s SETE, Italy’s WTD, the United States’ Aquatech and Saudi Arabia’s
Haji Abdullah Alireza, with the project structured under a build-operate-transfer PPP arrangement. IFC was lead
transaction adviser to the grantor, GACA.
51 Emerging Partnerships
Jeddah Water Contract
Saudi Arabia
As Saudi Arabia seeks to diversify its economy away from oil and sustain a rapidly growing population, a
constant problem for the government is the lack of reliable access to water: even in the capital Riyadh, water
supply cannot be guaranteed 24 hours a day.
To resolve this, the government created the National Water Company (NWC) in 2008 to oversee massive
investment in infrastructure and supervise management contracts with the private sector, intended to improve
continuity of service. Tat same year, it awarded a seven-year contract for Jeddah’s water network to a joint
venture of France’s Suez Environnement and Saudi Arabia’s Acwa Power.
Te joint venture, known as Jeddah Water Services Company (JWS), has 21 key performance indicators to
meet under the contract. Water coverage must be raised to 100 percent of the four million inhabitants, and
wastewater coverage—about 40 percent in October 2012—must rise to 80 percent by 2015. Other targets
include increasing network efciency and raising the debt collection ratio. Te variable component of the joint
venture’s monthly fee is paid or deducted according to how targets are met. NWC staf continues to operate the
network, overseen by JWS managers, who are also responsible for overseeing an ambitious investment program
that has spent $300 million a year for the past four years.
JWS is currently helping the NWC design its business model and management is due to be handed back to
the state in 2015. However, although its plans are unclear, the contract may pave the way for further private
participation in the Saudi water network.
52 Emerging Partnerships
Sabiha Gökçen International Airport
Istanbul, Turkey
While Sabiha Gökçen International Airport, serving the Asian side of Turkey’s largest city Istanbul, was not the
frst airport in the country to be concessioned out, the project was one of the most ambitious. Te consortium
of Turkey’s Limak, India’s GMR and Malaysia Airports Holding that won the 20-year concession in 2007 had
to increase capacity from 3.5 million to ten million passengers a year. Under the agreement signed in March
2008, they had 30 months for construction, but Turkish Prime Minister Recep Tayyip Erdoğan asked them to
deliver it in only 18 months. Tis they did, signing project fnance loans of €336 million in June that year and
completing all works, including a 210,000 square meter terminal, by October 2008.
According to Limak, the expanded airport has transformed the surrounding area, stimulating the appearance
of a new commercial district. Te concessionaires have drawn up a masterplan that would see a technology
business park also built nearby. Because the region is prone to earthquakes, the new terminal is seismically
isolated, the largest such structure in the world.
Passenger fgures have more than justifed the project, rising to 13.7 million in 2011 and were on target to
reach 15 million in 2012. Te new terminal’s eventual capacity is designed to be 25 million. It was designated
the world’s fastest growing airport in 2009 and 2010 by Airports Council International. Te government is
promised €1.93 billion in fees over the concession period, and since then has successfully launched similar
projects to expand Izmir Adnan Menderes Airport and build the new Zafer and Çukurova airports.
53 Emerging Partnerships Sabiha Gökçen International Airport
54 Emerging Partnerships
project data
Europe, central asia,
middle East & north africa
55 Emerging Partnerships
QuEEN ALIA INTERNATIONAL AIRPORT
amman, jordan
Total initial
investment
$900 million
Government
client
Ministry of Transport
Equity sponsors Invest AD (Abu Dhabi
Investment Company), Noor
Financial Investment Company,
Edgo Group, Aéroports de Paris
Management, J&P Avax and J&P
(Overseas) Limited
Lenders Islamic Development Bank, IFC,
Crédit Agricole, Natixis, Europe
Arab Bank, Crédit Industriel et
Commercial, Alpha Bank, and
Piraeus Bank
Advisers to
authority
IFC (lead), White & Case (legal),
Dajani & Associates (legal), and
NACO (technical)
Advisers to
sponsors
Ernst & young (fnancial),
Ashurst (legal) and Arup
(technical)
Advisers to
lenders
Norton Rose (legal)
PuLKOVO AIRPORT
saint PEtErsburG, russia
Total initial
investment
$1.5 billion
Government
client
City of Saint Petersburg
Equity sponsors VTB Capital, Fraport, and Horizon
Air Investments (Copelouzos
Group)
Lenders Vnesheconombank, Eurasian
Development Bank, Nordic
Investment Bank, Black Sea
Trade & Development Bank, IFC,
European Bank for Reconstruction
and Development, KfW, DZ Bank,
Nordea, Espirito Santo Investment
Bank, uniCredit, Standard Bank,
Mediobanca and Raiffeisen
Advisers to
authority
Citi (fnancial), Dewey & LeBoeuf
(legal), Capital Legal Services
(legal), Mott MacDonald
(technical), Airport Strategy and
Marketing (traffc) and World
Bank (transaction advice)
Advisers to
sponsors
VTB Capital (fnancial), Freshfelds
Bruckhaus Deringer (legal) and
Halcrow (technical)
Advisers to
lenders
Clifford Chance (legal), Scott
Wilson now uRS Scott Wilson
(technical) and Willis (insurance)
NEW CAIRO WASTEWATER
nEw cairo, EGyPt
Total initial
investment
$200 million
Government
client
New urban Communities
Authority
Equity sponsors Orascom Construction Industries
and Aqualia Industrial (FCC
Group)
Lenders National Société Générale Bank,
Commercial International Bank,
Arab African International Bank,
and Ahli united Bank
Advisers to
authority
IFC (lead), Gide Loyrette Nouel
(legal), Parsons Brinckerhoff
(technical)
Advisers to
sponsors
Baker & McKenzie (legal) and
DLA Piper (legal)
Advisers to
lenders
Zulfcar & Partners (legal) and
Environmental Civil Engineering
Consulting Center (technical)
R1 ExPRESSWAy
sLoVak rEPubLic
Total initial
investment
$1.67 billion
Government
client
Ministry of Transport, Posts
and Telecommunications of the
Slovak Republic
Equity sponsors Meridiam Infrastructure and
Vinci
Lenders BayernLB, Banco Bilbao Vizcaya
Argentaria, Crédit Agricole,
Dexia, HypoVereinsbank, KfW,
Société Générale, BNP Paribas,
Erste Bank, ING, Natixis, NIBC,
and uniCredit
Advisers to
authority
PwC (fnancial), CMS (legal) and
Arup (technical)
Advisers to
sponsors
BNP Paribas (fnancial),
Linklaters (legal), and Willis
(insurance)
Advisers to
lenders
Ashurst (legal), Atkins (technical,
and Aon (insurance)
56 Emerging Partnerships
MEDINA AIRPORT
mEdina, saudi arabia
Total initial
investment
$1.2 billion
Government
client
General Authority of Civil
Aviation
Equity sponsors TAV Airports, Saudi Oger
Limited, and Al Rajhi Holding
Group
Lenders Sumitomo Mitsui Banking
Corporation, SABB (formerly
Saudi British Bank), National
Commercial Bank, and Arab
National Bank
Advisers to
authority
IFC (lead) and White & Case
(legal), Cowi/SH&E (technical)
Advisers to
sponsors
Sumitomo Mitsui Banking
Corporation (fnancial), Norton
Rose (legal), Atkins (technical),
Mott MacDonald (technical)
Advisers to
lenders
Baker & McKenzie (legal)
ROSVODOKANAL
russia
Total initial
investment
$63 million (2008) and $49
million (2011)
Government
client
Various Russian city and regional
water authorities
Equity sponsors Rosvodokanal
Lenders European Bank for
Reconstruction and
Development
Advisers to
sponsors
CMS (legal)
Advisers to
lenders
White & Case (legal) and Mott
MacDonald (technical)
AMMAN EAST POWER PLANT
amman, jordan
Total initial
investment
$300 million
Government
client
Ministry of Energy and Mineral
Resources
Equity sponsors AES Corporation, Mitsui & Co
Limited
Lenders Overseas Private Investment
Corporation, Japan Bank for
International Cooperation
and Sumitomo Mitsui Banking
Corporation
Advisers to
authority
K&M Engineering and
Consulting (technical)
Advisers to
sponsors
Chadbourne & Parke (legal)
Advisers to
lenders
Freshfelds Bruckhaus Deringer
(legal) and Mott MacDonald
(technical)
KING ABDuLAZIZ INTERNATIONAL
AIRPORT (KAIA) DESALINATION
saudi arabia
Total initial
investment
$40 million
Government
client
General Authority of Civil
Aviation
Equity sponsors SETE Energy Saudia for Industrial
Projects Limited, Water
Treatment and Desalination
(WTD), Aquatech and Haji
Abdullah Alireza and Company
Lenders SABB (formerly Saudi British
Bank)
Advisers to
authority
IFC (lead), Gide Loyrette Nouel
(legal), and Nippon Koei
(technical)
Advisers to
sponsors
White & Case (legal)
Advisers to
lenders
Baker & McKenzie (legal)
57 Emerging Partnerships
JEDDAH WATER CONTRACT
saudi arabia
Total initial
investment
$61 million (value of seven-year
contract)
Government
client
National Water Company
Equity sponsors Suez Environnement and
Miahona (ACWA Power
Development)
Advisers to
authority
CRA International (Charles
River Associates), Ernst & young
(fnancial), Freshfelds Bruckhaus
Deringer (legal), Prima Law &
Consultations Offce (legal), and
Hyder Consulting (technical)
SABIHA GöKçEN INTERNATIONAL
AIRPORT
istanbuL, turkEy
Total initial
investment
$696 million
Government
client
undersecretariat for Defense
Industries
Equity sponsors Limak Holding, GMR
Infrastructure Limited, and
Malaysia Airports Holdings
Berhad
Lenders ABN AMRO, Royal Bank of
Scotland, and yapi Kredi
Advisers to
sponsors
ABN AMRO (fnancial) and
Pinsent Masons (legal)
Advisers to
lenders
Clifford Chance (legal)
latin america &
the caribbean
60 Emerging Partnerships
regional overview
Latin America & the Caribbean
by René Lavanchy
Containing one of the world’s biggest economies, Brazil, and several of its smallest, it is no
surprise that Latin America and the Caribbean are home to every variety of PPP market: the
mature, the energetic, the hopeful and the non-existent.
Even the wealthier countries in the region have sharp social inequalities which improved access
to social and economic infrastructure could do much to address. Brazil, for example, is one
of the fastest growing major economies in the world but sufers from shortages of health care
provision in places, an underdeveloped penal system and the need to keep up with a rapidly
growing population. Colombia’s prosperity is also rising and the investment climate has
improved immeasurably recently, but the country’s interior remains poorly connected to major
cities and 37.2 percent of the population live below the poverty line according to 2010 World
Bank data. Mexico has leveraged billions of dollars of public money in support of infrastructure
in the past fve years, but the exploding population in Mexico City has left its water supply
badly exposed.
Chile, the region’s most mature market, has been successfully procuring PPPs since the 1990s
and is not covered in this report. At the other extreme, countries such as Bolivia, Ecuador and
Venezuela have yet to show an interest in PPP. Argentina has done several PPPs in the past, but
also does not show much of an interest these days. A third group, including Brazil, Colombia,
Mexico, and Peru, have all closed a respectable pipeline of projects in the last decade but are still
growing and exploring new areas and techniques. Most of the remaining countries are making
eforts to embrace the model, according to Richard Cabello, manager for IFC Advisory Services
in PPPs in the region.
What are the key challenges? In countries still preparing to launch their frst PPPs, lack of
budgetary resources and lack of expertise tend to go hand-in-hand. Cabello notes: “When we
61 Emerging Partnerships
discuss [PPPs] with newcomers, they haven’t done all technical studies needed at the early stage.
Tey haven’t the funding to do that. For us to engage, somebody has to do the upstream work.”
Even when studies are done, they are not always of the quality needed to attract international
investors.
In civil law jurisdictions, including all of Latin America and part of the Caribbean, specifc
enabling legislation has had to be passed in recent years in order to allow procurement of
projects to international standards. Mexico, Uruguay, Honduras and Colombia are all good
examples, according to Cabello. “Te procurement regulations are normally designed to acquire
standard goods and services,” he said. “Bidding processes of PPPs are a diferent animal and you
need regulations to deal with that.”
In the case of both Colombia and Peru, PPP legislation has been revised in the last three years
in order to more clearly defne the model and increase bankability. As of 2012, most countries
in the region that require PPP legislation have it and are moving to the stage of increasing
their capacity to deliver projects. Honduras set up a PPP unit in 2010, and Uruguay did so
the following year. Colombia set up a national concessions institute, INCO, in 2003, only
to reshape it into a new agency, the Agencia Nacional de Infraestructura (ANI), eight years
later amid dissatisfaction with its predecessor. All three countries are currently procuring and
preparing projects.
Te Caribbean has also embraced the PPP model, with Jamaica in the vanguard. However,
shallow domestic fnancial markets mean multilaterals are key. In October 2012, the
government of Grenada, advised by IFC, appointed a preferred bidder for its inaugural health
care PPP.
Te largest share of PPP procurements in Latin America and the Caribbean has been in
transport and energy, perhaps refecting the difculties in mobility and power transmission
across challenging geographies and climates. New road, rail, airport and port concessions are
helping to shorten distances within and between countries. One notable program is the South
American Regional Infrastructure Integration Initiative (IIRSA); and one of its projects, the
Amazonas Norte toll road in Peru, is featured in this publication and showcases the triumph of
fnancial and civil engineering over natural obstacles.
Health care is also an active new market for PPPs—Mexico did not launch its frst health care
PPP until 2004—but has seen notable innovation. Several projects in that sector, some also
featured here, have transferred clinical services—and risk—to the private sector, a phenomenon
not observed in more mature markets in Western Europe and Canada. Education projects are
newer still: Brazil’s frst schools PPP in Belo Horizonte has yet to reach fnancial close. Once it
does, Cabello is hopeful that Colombia and Peru will follow up with similar projects.
Financially, Latin American governments such as Peru and Panama have innovated through
the use of payment certifcates for construction and for operation and maintenance, which
are awarded to project sponsors to create payment obligations on the state’s part. Tese can be
securitized and used to raise fnance on the capital markets, by which governments seek to draw
pension funds into providing long-term fnance for infrastructure projects.
62 Emerging Partnerships
Henrique Amarante da Costa Pinto has worked
for BNDES, the Brazillian Development Bank, since 1982, where he
performed, among other roles, the following positions: Manager for Mining
and Metallurgy; Manager for Investment at Capital Market Division; and
Superintendent and Chief of Operational Division at BNDESPAR. He
is presently the Deputy Director for the Project Development Division at
BNDES where his main responsibility is to structure concessions and PPPs.
He’s been a member of several investment committees for private equity and
on the board of directors for many diferent companies. He is a mechanical
engineer graduate of the Federal University of Rio de Janeiro (UFRJ),
with a master’s degree in administration from COPPEAD-UFRJ and in
international securities investment and banking degree from the University
of Reading—United Kingdom.
judges
profles
the judges
henrique Pinto
ana corvalan
Geoffrey cleaver
chris mcmonagle
63 Emerging Partnerships
Geoffrey Cleaver is the head of Banco Santander’s Brazil
private equity team since 2004, where he manages InfraBrasil, an
infrastructure fund.
Prior to Banco Santander he worked for eight years at Latin America
Enterprise Fund (LAEF), a private equity general partnership focused
in Latin America. At LAEF he was co-responsible for the investment
portfolio of the funds LAEF I and LAEF II in Brazil.
Prior to this, Cleaver worked for ten years in investment banking and
private equity at JPMorgan. Cleaver has a bachelor’s degree in business
administration from FAAP—Fundação Armando Álvares Penteado.
Cleaver is a board member of Renova and Haztec, and a member of
the joint ABVCAP (Brazilian Private Equity Association)—ANBID
(Investment Banking National Association) Regulatory Committee.
Chris McMonagle is Development Director for Mott MacDonald’s
Infrastructure Finance and Investments business. An experienced transaction
advisor, management consultant and civil engineer, McMonagle has a
considerable deal of experience, originating, leading and delivering across
numerous sectors. Key expertise is in strategic, commercial and operational
due diligence with a special interest in top down due diligence to identify
and improve business fatal faws.
Ana Corvalan is an economist by background with over 26 years
of experience in corporate and investment banking. She worked in Latin
America for 11 years before moving to Amsterdam and soon afterwards to
London, where she has been based since 1998. Ana started her career at
Chase Manhattan Bank and has subsequently worked for ABN AMRO,
Calyon, Banca Intesa, BBVA and most recently for Espirito Santo
Investment Bank. She has worked in project and structured fnance for
over 15 years with a main focus on the infrastructure, oil and gas, power,
and metals and mining sectors, covering Europe, Middle East, Africa,
Central Asia, Latin America and Australia.
She is actively involved in promoting investment and project fnance
activities in Latin America, with special emphasis in the infrastructure,
energy and waste/water sectors. She is regarded as an expert in the region
and provides consultancy services to various public and private entities
across Europe and Latin America. Corvalan is a director of Euro Latam
Financial Consultants and a non-executive director of the International
Project Finance Association, with headquarters in London.
64 Emerging Partnerships
São Paulo Metro Line 4
São Paulo, Brazil
GOLD
selection
65 Emerging Partnerships
Trafc is now broadly in line with
forecasts, carrying 650,000 people
a day and rising.
When the World Bank began to consider supporting
the construction of São Paulo’s fourth metro line
in 2001, the city’s metropolitan area was home to
16.8 million people and growing. An extensive
public transport network was indispensable, but, as
the World Bank noted in a report, even with 270
kilometers of rail network and three metro lines, the
existing services were inadequate. High fares and lack
of interconnectivity between metro and rail lines was
driving up car use and congestion on the roads, and
access to jobs was uneven across the area.
Te state government wanted to introduce private
capital and management to the public transport
system, but with the country’s PPP law not yet in
force, civil works were procured conventionally
instead. When the law passed in 2004, a concession
project was prepared to fnance and commission the
new trains and systems, and operate the trains and the
line according to service targets.
Although the scope of the project was limited, its
aim—to close the frst successful PPP in Brazil
structured under the law of 2004—was challenging,
especially as the metro operator needed to be (literally)
perfectly aligned with the infrastructure, which was
still unfnished when the 30-year concession was
awarded to the ViaQuatro consortium in 2006.
Te winners promised not only to deliver the metro
trains on time but to introduce new technology to
the country: the frst driverless trains in Brazil and
automatic doors on platforms. Luís Valença, president
of ViaQuatro, recalls: “It was not an obligation but an
option. We have done that not because it’s cheaper —in
fact it costs a little more—but because it’s modern.
To have the best available technology in the frst PPP
project to give more to society in comfort, safety and
quality of service.”
Using the latest technology meant ordering trains from
abroad: the trains are built by South Korea’s Hyundai
Rotem and the train control system is supplied by
Siemens. As such, the project was ineligible for a loan
from Brazil’s national development bank, BNDES.
Tis presented the sponsors with a problem. “In
Brazil we don’t have commercial banks directly to
fnance this kind of project,” Valença says bluntly. In
fact, commercial banks would eventually take part,
but as part of a 12-year, $240 million syndication by
the Inter-American Development Bank (IDB). Tis
allowed the concessionaire to beneft from the bank’s
66 Emerging Partnerships
long-term, low-cost fnancing and grace period. Te IDB directly lent a
further $69 million to the PPP in a 15-year A loan. Financing was signed
in October 2008.
Inauguration of the line was delayed by problems with the civil works,
rather than with the PPP, and sections began to open in 2010 until in
October 2011 the whole line was in service. Trafc is now broadly in line
with forecasts, carrying 650,000 people a day and rising. According to
an independent survey carried in 2011, 89 percent of Line 4 passengers
expressed satisfaction with the service.
Line 4 connects up with three metro lines and three commuter rail lines,
as well as bus services. Despite rising car ownership, the metro system’s
share of motorized trips in the region increased from 16 percent in 2001
to 19.3 percent in 2011.
Te concessionaire is remunerated in three diferent ways: a charge per
passenger carried on the line daily, fxed payments to cover operation
and maintenance costs (subject to performance targets), and revenues
from commercial development at the metro stations. If passenger trafc
is within 10 percent of the 10-year forecast, they absorb the upside or
downside; if above or below, then the public authority shares in the gains
or losses. Ticket revenues are retained by the authority. Te new line has
been revenue positive for the state-owned metro company, improving its
proftability.
After capacity building work by the World Bank, São Paulo is now
preparing a PPP for line 6 that will include infrastructure works. Valença
approves: “Te main problem was the split of the authority between
the granting authority and the concession. [Te solution would be]
transferring 100 percent the investment to the concessionaire... We believe
it’s the best solution. You can guarantee that the schedule will be met.”
*For more information on this project and others in the region please see the project data
at the end of this chapter.
67 Emerging Partnerships
68 Emerging Partnerships
Atotonilco Wastewater Treatment Plant
Mexico
SILVER
selection
69 Emerging Partnerships
Te Atotonilco Wastewater Treatment Plant is the
largest infrastructure project in Mexico yet and has
been cited as the biggest wastewater treatment project
anywhere in the world, with an impact to match.
Te Valley of Mexico is the most populous metro-
politan area in the Americas, with over 20 million
inhabitants in 2010, yet only about 6 percent of
wastewater generated is treated. According to national
water authority Conagua, this has caused the spread of
toxic organisms and pollution of aquifers and surface
water bodies as the septic water is dumped and reused.
In 2009 Conagua launched a tender for a plant to
treat 60 percent of the Valley of Mexico’s wastewater.
Federico Patiño, director of the state-owned national
public works bank Banobras’ investment bank, notes:
“It’s more complex [than previous PPPs] because of the
size of the project. Also, there were only two proposals
in the bidding process because it was more convenient
for the companies to participate in association.
Nonetheless, it was well-structured fnancially. Tis
allowed the tender to take place successfully.”
Despite its considerable cost, the 25-year concession
project was closed without the support of a
multilateral fnancial institution. From the outset
Conagua could rely on Banobras to support the deal
through its investment bank and through its national
infrastructure fund, Fonadin. Normally Fonadin
subsidizes up to 40 percent of the costs of PPPs; in this
case, the threshold was raised to 49 percent on account
of the project size and the relatively low tarifs charged
to water users. Te majority of capital remained in
the form of debt and equity—Banobras leading the
debt fnancing and attracting commercial banks in
syndication—so that most funding is still dependent
on the sponsors successfully completing the project.
With the subsidy fxed at 49 percent during the tender
process, the winning bid was chosen on the basis of the
lowest tarif requested. Te concessionaire is repaid,
however, from Conagua budgets.
Construction has been underway since 2011 on a
159-hectare site and the frst phase is expected to
become operational in May 2014. When it does, the
plant will handle 23 cubic meters of wastewater per
second, rising to 35 cubic meters during heavy rainfall.
Mexico’s overall water treatment rate is expected to
rise from 36 percent to 60 percent, and 300,000
people living in areas irrigated by the wastewater will
be protected from pollution. Other wastewater PPPs
have since been closed in Mexico; three are currently in
preparation or procurement.
70 Emerging Partnerships
IIRSA Amazonas Norte Highway
Peru
BRONZE
selection
71 Emerging Partnerships
Tis 955 kilometer highway crossing northern Peru
passes through settlements housing 1.3 million people,
among the country’s poorest. Not only does it link
the Pacifc coast to the relatively isolated hinterland,
it is also part of a multimodal transport corridor that
extends across Brazil via the Amazon River. Te road
crosses the Andes and rainforest terrain, landslides
were a constant threat and its unpaved sections easily
reduced to mud. Trafc was heavily constrained and
journey times unpredictable.
In the early 2000s, Proinversión, Peru’s private
investment promotion agency, structured a project
to improve and operate the road as the country’s frst
PPP, despite having had enabling legislation since the
1990s. Part of the problem was the country’s sub-
investment grade credit rating. To increase bankability,
the government created the works annual payment
recognition certifcate, or CRPAO. Tese certifcates
form irrevocable, unconditional promises to pay and
are issued on completion of construction milestones.
Teir monthly frequency represents a regular cash fow
and provides comfort to investors.
Ronny Loor, general manager of the IIRSA Norte
concessionaire, says: “People in the fnancial market
understood it quickly and liked it. It was the frst
time it was [used] in the market.” Te government
also obtained a $60 million guarantee from the Inter-
American Development Bank, which partially covers
CRPAO payments in the event of government default.
Under the deal, the concessionaire would have to
build, rehabilitate or renew about 750 kilometers
of road in collapse or disrepair, installing bridges,
drainage and emergency communications. Financing
was closed in August 2006: the CRPAOs were
securitized to issue a $213 million bond acquired and
then issued ofshore by Morgan Stanley.
Works were challenging, demanding stabilization
of landslide-prone mountainsides and the ftting
of concrete walls. After weather-related delays,
construction was completed in 2010. Te highway
is now passable all year round. Whereas previously
it took over 36 hours to cross in perfect conditions,
“today it takes 15 [hours] from the coast to the jungle,”
Loor says. One-week waits to clear the road are a thing
of the past. Te interior has been opened up providing
greater access to health care and education; goods can
be transported reliably at last, promoting business in
the Pacifc port of Paita and trade between Peru and
Brazil.
Te concessionaire is paid for operation and
maintenance by the government, which retains tolls.
Te project’s model was quickly replicated: in 2007,
the much bigger IIRSA Sur highway concession
reached fnancial close with the same payment
mechanism.
72 Emerging Partnerships
Porto Maravilha
Rio de Janeiro, Brazil
Many major coastal cities have had to deal with derelict post-industrial docklands, and Rio de Janeiro in Brazil
is no diferent. Te alarmingly high (90 percent) ofce building occupation rate in the late 2000s presented
an opportunity to develop the city’s former docks. Te result was Porto Maravilha, a special economic zone
covering fve million square meters. To deliver the necessary infrastructure for this area, a 15-year concession was
structured under the PPP law and signed in 2010 with the Novo Porto consortium.
Seventy kilometers of streets will be renewed, and the concessionaire will install 84 kilometers of drainage
channels, 26 kilometers of gas pipelines, 75 kilometers of optical fbre lines and 500 kilometers of electric cable.
Te old Perimetral overpass that crosses the area will be demolished in 2013, beautifying the area and reducing
pollution; but not before nearly 4 kilometers of expressway tunnels and viaducts are built to carry the trafc.
After fve years of construction, the consortium will provide services and maintain infrastructure for 10 more
years.
Te cost of this investment, 4.2 billion reais for construction, is being met with the city’s sale of additional
construction potential certifcates (CEPACs) that the city government, via its investment vehicle, sold for 3.5
billion reais to the state-controlled bank Caixa Econômica Federal which is now selling them on to developers.
CEPACs allow the developer of a building in the area to build additional foors to the maximum allowed by
regulations. Te proceeds will reimburse the concessionaire and fund restoration of heritage buildings.
Toluca and Tlalnepantla Hospitals
Mexico
IFC took a scalpel to the public authority’s plans for health care PPPs when it was hired by the social security
institute of Mexico State in Mexico to structure transactions for the Toluca and Tlalnepantla hospitals. Te two
urban centers in this central state are both home to major industrial zones. Te growth of businesses and the
population had outstripped health care capacity, and some of the hospitals were out of date.
ISSEMyM (El Instituto de Seguridad Social del Estado de México y Municipios) originally proposed a new
oncology center and tertiary care hospital; but on evaluating their needs, IFC recommended that the existing
oncology center could be retained and no tertiary hospital was needed. Instead, it proposed two new secondary
care hospitals providing a full range of non-specialized hospital services.
After competitive bidding in 2009 to 2010, the Toluca contract was awarded to Prodemex and Tlalnepantla to
Marhnos, both Mexican frms. Te fnancing for Tlalnepantla was signed in August 2011, and brought in not
only conventional long-term project fnance debt but also securities known as development capital certifcates,
equity from institutional investors such as Afore Banamex and New York Life Insurance. It is the frst time such
investors have backed a Mexican PPP at the construction stage.
Together, the hospitals are expected to serve 6,000 inpatients and 20,000 outpatients a year. Te performance-
based hospital contracts introduced a new level of risk sharing in Mexican PPP by making the sponsors
responsible not only for construction and maintenance, but also equipment installation, consumables and certain
clinical services, to ensure that the facilities remain fully functioning over their 25-year agreements. Tis is
expected to reduce hospital costs by one-third.
73 Emerging Partnerships
Peru Health Care
Portfolio Bond Financing
Lima and Callao, Peru
An innovative deal in 2012 saw three diferent health care projects in Peru, developed by three diferent
consortia, fnanced through one bond issue. Bank of America Merrill Lynch (BAML) approached the
consortia, ofering to fnance construction of the projects through a bond issue. Te projects will result in
construction of two new hospitals in Lima and Callao provinces and a new central distribution center for
health care supplies, as well as refurbishment of existing distribution facilities.
Tey are the frst social infrastructure projects to make use of a government-backed security known as
investment remuneration according to works progress certifcates (RPICAO). Tis sees the government or
its agencies pay money into a master trust to fund payment obligations to contractors, which in turn can be
used to raise construction fnance. Social security authority EsSalud agreed to channel a portion of its income
from mandatory payroll deductions into the trust, enough to ensure a minimum level of debt service. Te
three concessionaires then sold the payment rights to BAML, who in turn bought them with a $230 million
zero-coupon bond issued through an ofshore vehicle. Te RPICAOs are issued over a 10-year period, longer
than actual construction, spreading out the cost and budgetary impact for the government while ofering a
guaranteed return to investors. Other payments covering operation and maintenance were similarly securitized.
Gianluca Bacciochi of DLA Piper, who advised BAML, comments: “One of the most intriguing aspects of the
deal is bringing in multiple operators, which took a tremendous amount of cooperation. Tey needed to get
enough similarity across the projects to describe it to the bondholders.”
Te completed hospitals are expected to treat about 500,000 in- and outpatients a year. With payment by
performance, including criteria for complaint numbers and complaints resolved, the hospitals are expected to
raise satisfaction with the health insurance system.
74 Emerging Partnerships
Panama Pacifco SEZ
Panama
At frst glance, the reconversion of the former U.S. Air Force base on the west side of the Panama Canal on the
Pacifc coast may simply resemble a rather large real estate project, but the Panama Pacifco Special Economic
Zone (SEZ) required IFC to deploy its PPP expertise to structure a project that transferred enough risks and
obligations to the concessionaire to deliver a sustainable mixed development.
Te base had reverted to the Panamanian government in 1999. Te project faced several challenges. Te 2,500
hectare site dwarfed any plot the government had previously developed. It had no connectivity to the country’s
main ports on the Atlantic and Pacifc coasts, and only an old saturated bridge ensured access to the property
from Panama City, the country’s capital. Te project aimed to bring additional investment and create more
jobs in the country. It could not displace activity from other areas, including the Colón Free Trade Zone on the
Atlantic side.
With IFC help, in 2004 the government passed a law establishing the Panama Pacifco special economic
zone and the regime applying to it. Te law also created the agency in charge of regulating and monitoring
development in the zone, and to which land ownership was later transferred. Te 40-year concession was
tendered in January 2007 and awarded to London & Regional Properties. Te concessionaire can buy/rent plots
of land at a fxed price from the agency with a sharing mechanism with government on any capital gains made
on the land, and is obliged to spend at least $408 million over the frst eight years, and $700 million in total.
Already 118 businesses are registered on the site—Dell alone employs 2,500 people there—and the airfeld is put
to commercial use, both supporting an aircraft maintenance center for Singapore Technologies, as an alternative
airport to Tocumen, and also receiving charters and unscheduled fights.
Hospital do Subúrbio
Salvador, Brazil
As Brazil’s frst health care PPP, the Hospital do Subúrbio in Salvador, capital of Bahia State, is well-placed to
make an impact. According to the United Nations Development Programme, the district where it is based ranks
much lower than the state and national average on the Human Development Index.
Tough not initially planned as a PPP, in 2009 with construction underway the state government hired IFC to
structure a project to supply equipment and carry out all services and maintenance. Brazil had engaged private
operators to run hospitals since the 1990s on short contracts, but with little investment and mixed results.
Because construction was excluded, less time was needed to recoup investment and the concession was set at 10
years.
In February 2010 a consortium of Brazil’s Promedica and France’s Dalkia won an auction for the concession at
the São Paulo stock exchange, requesting maximum annual payments of 103.5 million reais. Seventy percent
of payments would be volume based, corresponding to bands of patient numbers, and the rest linked to quality
indicators. Te deal closed in just three months from when the contract was awarded until the project reached
fnancial close.
75 Emerging Partnerships
Te results demonstrate not only quality of service, but the potential to improve a project after award. Because
patient numbers were much higher than expected (380,000 instead of the forecasted 175,000), the concessionaire
added beds and negotiated a higher payment from the authority. Te building is constrained in its capacity, and
IFC believes the project points the way to more full PPPs including design and construction, several of which are
underway elsewhere in Brazil.
Ciudad Victoria Hospital
Victoria, Mexico
When the High Specialism Regional Hospital reached fnancial close in February 2008, it set new standards for
PPP project structure in Mexico. Te second project in the government’s frst-generation PPP hospital program,
it called for the concessionaire to take on clinical risk by supplying medical equipment and maintaining it for
fve years, the “main point of contention” according to the lead sponsor, Mexican contractor Marhnos.
Tis was unprecedented in the country and came soon after a scandal over faulty equipment at France’s privately
run Toulouse-Rangueil University Hospital. Eventually one of the sponsors, France’s Dalkia, agreed to provide a
corporate guarantee if liabilities exceeded insurance cover. Impressively, the legal tenor of the fnance provided by
Dexia is just two years short of the 25-year concession. Payment of the concessionaire is on an availability basis,
with payments increased for the fve-year equipment maintenance period.
Inaugurated ahead of schedule in March 2009, the 100-bed hospital serves about 980,000 residents—580,000
in Tamaulipas State and 400,000 in neighboring Veracruz and Hidalgo—referred from primary care centers and
general hospitals, by providing the most specialized health care including neurosurgery, transplants, maxillofacial
surgery and haemato-oncology. As a result, according to Mexican president Felipe Calderón, 30 million patients
in Tamaulipas who have previously needed to travel to other states will have specialized health care in their region
for the frst time. Meanwhile, the federal government has pressed on with other hospital PPPs, and has continued
to successfully procure and close projects.
76 Emerging Partnerships
Ribeirão das Neves Prison Complex
Minas Gerais, Brazil
Rarely do PPP projects get the chance to drive a major improvement in a country’s human rights record. Brazil
is seeking to reduce the number of people provisionally detained in police stations where, according to reports
by human rights nongovernmental organizations, prisoners have previously been subject to abuse. In 2003, the
government of Minas Gerais State declared its ambition to be the best state in Brazil in which to live and invest.
One obstacle was the defcit of prison places. Procurement of a new prison complex at Ribeirão das Neves began
in 2008, and a preferred bidder was picked the following year. Despite the authority losing its advisory team
owing to the rigidity of Brazilian procurement regulations, the PPP unit managed to fully fnancially close the
deal by August 2010.
Te prison, now ready for operation, will house 3,040 inmates in semi-open and closed systems, signifcantly
reducing the state’s 8,000-place defcit. Uniquely for Minas Gerais, every prisoner is guaranteed education, work
and recreational facilities; yet despite higher service levels, the complex is estimated to cost 10 percent less than
conventional facilities. Te concessionaire is responsible for all operation and maintenance, including security,
and is paid according to performance.
Tis is Minas Gerais’ frst PPP funded without user charging. To overcome investor caution about the risk
associated with payments from the state, a guarantee structure was set up using a fow of state revenues that
would cover all capital expenditure, without creating any extra debt obligation for the authority. Te stage is set
for future availability-based projects and prison PPPs.
77 Emerging Partnerships Ribeirão das Neves Prison Complex
78 Emerging Partnerships
project data
Latin america & the caribbean
79 Emerging Partnerships
SãO PAuLO METRO LINE 4
são PauLo, braziL
Total initial
investment
$450 million
Government
client
Companhia do Metropolitano de
São Paulo
Equity sponsors Companhia de Concessões
Rodoviárias, Montgomery
Participações, Mitsui & Co
Limited, Benito Roggio
Transporte, and RATP Dev
Lenders Inter-American Development
Bank, Espirito Santo Investment
Bank, Banco Bilbao Vizcaya
Argentaria, KfW, Santander,
and Sumitomo Mitsui Banking
Corporation
Advisers to
authority
unibanco (fnancial) and
Demarest & Almeida (legal)
Advisers to
sponsors
ABN AMRO (fnancial), Mayer
Brown (legal), and Machado
Meyer Sendacz Opice (legal)
Advisers to
lenders
Fulbright & Jaworski (legal),
Felsberg e Associados (legal),
Arup (technical), Sinergia
Estudos e Projetos (traffc),
Willis (insurance), and DFREIRE
(environment)
ATOTONILCO WASTEWATER
TREATMENT PLANT
mExico
Total initial
investment
$820 million
Government
client
Comisión Nacional del Agua
(Conagua)
Equity sponsors Atlatec (Mitsui & Co Limited),
Promotora del Desarrollo
de América Latina (Ideal),
Controladora de Operaciones de
Infraestructura (ICA), ACCIONA
Agua, Desarrollo y Construcciones
urbanas, and Green Gas Pioneer
Crossing Energy
Lenders Banco Nacional de Obras y
Servicios Públicos (Banobras),
Santander, Banorte, El Banco
Nacional de México (Banamex),
and Scotiabank
Advisers to
authority
Galaz yamazaki Ruiz urquiza
(Deloitte), Thompson & Knight
(legal), Instituto de Ingenieria
uNAM (technical), and CH2M Hill
(technical)
Advisers to
lenders
White & Case (legal)
IIRSA AMAZONAS NORTE HIGHWAy
PEru
Total initial
investment
$213 million
Government
client
Ministry of Transportation and
Communications (Peru)
Equity sponsors Odebrecht, Andrade Gutierrez
(until June 2008), and Graña y
Montero
Lenders Morgan Stanley (bond arranger)
Advisers to
authority
Chemonics (funded by uSAID)
Advisers to
sponsors
Astris Finance (fnancial), Clifford
Chance (legal), and Rosselló
Abogados (legal)
Advisers to
lenders
Davis Polk & Wardwell (legal)
PORTO MARAVILHA
rio dE janEiro, braziL
Total initial
investment
$2.44 billion
Government
client
Companhia de Desenvolvimento
urbano da Região do Porto do
Rio de Janeiro (CDuRP)
Equity sponsors Grupo OAS, Odebrecht, and
Carioca Christiani-Nielsen
Engenharia
Lenders Caixa Econômica Federal and
Banco do Brasil
Advisers to
authority
Bocater Camargo Costa Silva
(legal) and Amaral D’avila
(technical)
Advisers to
sponsors
Machado Meyer Sendacz Opice
(legal)
Advisers to
lenders
Bocater Camargo Costa Silva
(legal, joint mandate with the
authority)
80 Emerging Partnerships
TOLuCA AND TLALNEPANTLA
HOSPITALS
mExico
Total initial
investment
$48 million (Toluca) and $57
million (Tlalnepantla)
Government
client
Instituto de Seguridad Social del
Estado de México y Municipios
(ISSEMyM)
Equity sponsors Prodemex (Toluca) and Marhnos
(Tlalnepantla)
Lenders Banco del Bajío (Tlalnepantla)
Advisers to
authority
IFC (lead), Jáuregui y Navarrete
(legal), Currie & Brown Mexico
(technical)
Advisers to
sponsors
Banco del Bajío (fnancial),
Woodhouse Lorente Ludlow
(legal) for Tlalnepantla
PERu HEALTH CARE PORTFOLIO
BOND FINANCING
Lima and caLLao, PEru
Total initial
investment
$115 million
Government
client
El Seguro Social de Salud (EsSalud)
Equity sponsors Funcional Card and unihealth
Logistica (distribution center);
IBT Group, BM3 Obras y Servicios,
Ibérica de Mantenimiento, Ribera
Salud, Eresa Grupo Médico, and
MENSOR (Villa Maria Salud and
Callao Salud hospitals)
Lenders Bank of America Merrill Lynch
(bond arranger), Citibank
(verifcation agent), and FiduPerú
(Peruvian trustee)
Advisers to
sponsors
Rodrigo, Elías & Medrano for
distribution center; Milbank,
Tweed, Hadley & McCloy, Estudio
Echecopar, and Carrizales & Vidal
for the hospitals (all legal)
Advisers to
lenders
DLA Piper and Rubio Leguía
Normand (both legal)
PANAMA PACIFICO SEZ
Panama
Total initial
investment
$408 million over the frst eight
years
Government
client
Government of Panama
Equity sponsors London & Regional Properties
Lenders Morgan Stanley (bond arranger)
Advisers to
authority
IFC (lead), White & Case (legal),
Icaza Gonzalez-Ruiz & Aleman
(legal), LeighFisher (airport
consultant), and Infrastructure
Management Group (land use)
Advisers to
sponsors
Aleman, Cordero, Galindo & Lee
(legal) and Atkins (technical)
HOSPITAL DO SuBúRBIO
saLVador, braziL
Total initial
investment
$32 million
Government
client
State of Bahia, Salvador
Equity sponsors Promedica and Dalkia
Lenders Banco do Nordeste do Brasil
Advisers to
authority
IFC (lead) in partnership
with Banco Nacional de
Desenvolvimento Economico e
Social (BNDES), and the Inter-
American Development Bank
(IDB)
81 Emerging Partnerships
CIuDAD VICTORIA HOSPITAL
Victoria, mExico
Total initial
investment
$75 million
Government
client
Secretaría de Salud (México)
Equity sponsors Marhnos, Dalkia, and IGSA
Power
Lenders Dexia
Advisers to
authority
Mancera (fnancial), Jáuregui y
Navarrete (legal), and Forma y
Concepto (technical)
Advisers to
sponsors
Dexia (fnancial) and Barrera
Siqueros y Torres Landa (legal)
Advisers to
lenders
Chadbourne & Parke (legal)
RIBEIRãO DAS NEVES PRISON
COMPLEx
minas GErais, braziL
Total initial
investment
$130 million
Government
client
Minas Gerais State
Equity sponsors Concessões e Construções de
Infra-Estrutura (CCI), Augusto
Velloso, Empresa Tejofran de
Saneamento e Servicos, and N.F
Motta Construções e Comércio
e o Instituto Nacional de
Administração Prisional (INAP)
Lenders Banco Nacional de
Desenvolvimento Economico e
Social (BNDES) and Itaú unibanco
Advisers to
authority
PwC (fnancial), Azevedo Sette
(legal), and Manesco Ramires
Perez Azevedo Marques Sociedade
de Advogados (legal)
Advisers to
sponsors
Itaú BBA (fnancial), Albino
Advogados Associados (legal),
and AGR Projetos e Construções
(project management)
Advisers to
lenders
QG Engenharia (technical)
sub-saharan
africa
sub-saharan
africa
84 Emerging Partnerships
regional overview
Sub-Saharan Africa
by James Kenny
More than any of the other regions featured in Emerging Partnerships, Africa faces some of the
most difcult challenges when it comes to infrastructure development due to rugged geography,
political instability and the limited fnancial resources available. Despite it being one of the
world’s fastest growing economic hubs, the lack of physical infrastructure hampers the wider
continent’s development and the gulf in private investment between certain countries can also
be disproportionally large.
In spite of this, and from the projects featured here, there is groundbreaking and innovative
work taking place in Sub-Saharan Africa in the PPP sector. Te $142 million KivuWatt Project
has gained the world’s attention and is set to transform power in Rwanda, while smaller projects
such as the Lesotho National Referral Hospital and the $30 million Chiansi Irrigation project in
Zambia are set to make an equally big impact on a human scale. With such admirable and eye-
catching projects in place, why does the region still lag behind other parts of the world in terms
of PPP volume?
Emmanuel Nyirinkindi, manager for IFC Advisory Services in PPPs in the Sub-Saharan Africa
region says while there is quite a lot of funding available for projects and investors can expect
strong returns, the disparity between countries can be an issue. “PPPs such as power stations,
ports, toll roads and hospitals represent a signifcant investment opportunity and present both
strong public sector benefts and private sector returns. Africa is at the start of an infrastructure
boom; however the current insufciency of actual physical infrastructure poses a hindrance
as well as an opportunity to governments, their citizens, and the business community. Te
disparity in implementing projects between countries like Kenya and other more fragile and less
experienced countries that haven’t undertaken their frst PPP can be daunting.”
In order to launch a successful PPP, countries need the political will to make decisions quickly
and transparently. Transparency in particular is a crucial ingredient—something not always
available with some governments.
85 Emerging Partnerships
Commenting further on some of the challenges the region faces, Edward Farquharson, executive
director at the Private Infrastructure Development Group and Emerging Partnerships judge, said:
“In Africa, there is often a problem of lack of capacity in the public sector which is an issue to
a certain degree all over the world. Tis sometimes manifests itself in the need to have a clear
understanding of what is needed of advisors, how to select and manage them, and how much
they should be paid. Good advice costs money but bad advice costs more. Afordability of good
advisors is clearly a challenge for cash-strapped governments, although for countries richer in
natural resources it is perhaps more a question of priority and knowing how to spend money
wisely on advisors and, more generally, on good project preparation.”
According to the World Bank’s 2010 report, Africa’s Infrastructure: A Time for Transformation,
the countries of Africa can be grouped into diferent categories and the infrastructure challenges
facing these groups difer markedly. Countries such as Cape Verde and South Africa are middle
income countries while Nigeria and Zambia are resource-rich with economies heavily reliant on
petroleum and/or minerals. Fragile states emerging from confict include Côte d’Ivoire and the
Democratic Republic of Congo, while the remaining low-income countries are neither fragile
nor resource rich, such as Senegal and Uganda.
Te most daunting infrastructure challenges are those facing the fragile states. Recent conficts
afecting these countries have often resulted in the destruction or dilapidation of their already
modest national infrastructure platforms. For example, in the Democratic Republic of Congo,
about 50 percent of infrastructure assets need rehabilitation.
Te World Bank’s 2010 report on Africa’s infrastructure also points out that non-fragile, low-
income countries such as Uganda need to allocate about 23 percent of their gross domestic
product (GDP) to build and sustain a basic infrastructure platform, a level difcult to envisage
in practice. Terefore, these countries will have to make difcult choices about the prioritization
of their infrastructure estate, as most have a long way to go in improving the efciency of
operating existing infrastructure. Resource-rich countries such as Zambia are in principle much
better placed to meet their infrastructure spending needs; in practice they have not tended
to do so. Resource-rich countries could meet their infrastructure spending needs for a more
manageable price tag of about 12 percent of GDP. Moreover, the large royalty payments they
received during the recent commodity boom provide a ready source of fnance. Yet resource
rich-countries actually lag behind non-fragile, low-income countries in their infrastructure
stocks and spend less on infrastructure.
One of the more lively debates brought up among the judges for this publication was the
importance of water and power, and which PPPs in these spaces are more crucial for the region.
According to the judges, while both power and water (and sanitation) are sectors where demand
far outstrips supply and the impact of inadequate services is signifcant in terms of barriers
to economic growth and alleviation of poverty, the water sector in particular presents huge
challenges in terms of attracting signifcant private sector investment. Tis is often due to
inappropriate tarif policies and the political risks in the minds of investors associated with the
sector.
While not every deserving country could be represented here, the projects chosen by the judges
show there are many positive strides being made within the electricity sector. PPPs such as
the €65 million Cape Verde Wind Power project and the $196 million expansion of Centrale
Termique de Lomé in Togo show Africa is pushing for new capacity which in turn will power
schools, businesses and other enterprises needed for the continent to keep pace with the
demands of a growing economy.
86 Emerging Partnerships
Nick Rouse became Managing Director of Frontier Markets Fund
Managers, the fund manager of the Emerging Africa Infrastructure Fund
(EAIF) and GuarantCo, in May 2005, having worked for Barclays Bank
for 33 years. Both funds are owned by four European governments:
the Netherlands, Switzerland, Sweden and the United Kingdom. His
involvement with EAIF dates from the fund’s inception and he was a
member of its Credit Committee and a non-executive director between
2002 and 2005. He was also a non-executive director of GuarantCo from
2004 to 2005. Rouse had worked in Africa with Barclays for the seven years
preceding his appointment, initially running Barclays Corporate Business
in East Africa and more recently as head of Credit Risk for Africa and the
Middle East.
judges
profles
the judges
nick rouse
Ed farquharson
simon jackson
steven Gamble
Gavin noeth
87 Emerging Partnerships
Simon Jackson has over 30 years of commercial banking
experience, mostly in the loan syndication market. During the 2.5 years
up to July 2012, he established the syndication function for the African
Development Bank (ADB) in Tunis, including an A/B loan co-fnancing
program with commercial investors, and enhancing the ADB’s role in the
growing market for syndication between development fnance institutions.
He was previously Head of Syndication for Sumitomo Mitsui Banking
Corporation in London, and has also worked for the European Bank for
Reconstruction and Development, Credit Suisse, Chase Manhattan Bank,
N.A., Morgan Grenfell & Co. and Grindlay Brandts. He is a graduate in
engineering science from Corpus Christi College, Cambridge.
Ed Farquharson is Executive Director of the Project Manage-
ment Unit of the Private Infrastructure Development Group (PIDG).
Farquharson joined the PIDG in November 2011 from Infrastructure
UK in Her Majesty’s Treasury, where he advised overseas governments
on the establishment of their PPP programs. Prior to HM Treasury,
Farquharson headed the international team at Partnerships UK,
the United Kingdom’s PPP/PFI implementing agency. Farquharson
previously worked for CDC Capital Partners where he led the transport
infrastructure team developing investments in road, rail, airport and port
projects in emerging markets. Prior to this, Farquharson lived for six years
in Zimbabwe and Mozambique where he was responsible for establishing
and managing CDC investments.
From 1983 to 1991, Farquharson was on Morgan Grenfell’s international
banking team, developing limited recourse project fnancings.
Farquharson has an MBA from Manchester Business School and is an
alumnus of London Business School and INSEAD. He also received a
degree in philosophy, politics and economics from Oxford University.
Steven Gamble is the Chairman of the African Loan Market
Association (ALMA) and a director of Norton Rose. He is based in
Johannesburg, South Africa, and has a wealth of experience in advising
international and domestic banks and companies in relation to structured
fnance, project fnance, asset fnance, acquisition fnance, banking and
general commercial transactions, with a particular focus on cross-border
and emerging markets work. Before joining Norton Rose’s Johannesburg
ofce in 2007, he spent time in their London, Singapore and Hong Kong
ofces before heading up the company’s English law banking and fnance
practice in Tailand in 2005.
Gamble is admitted to the law societies of England & Wales, Hong Kong
and Scotland and is recognized as managing a leading fnance practice by
IFLR 1000’s Guide to the World’s Leading Financial Law Firms. He is
also ranked as a leader in the feld of corporate/commercial work in Africa
by Chambers & Partners.
Steven Gamble was assisted by Gavin Noeth. Noeth is a banking & fnance
lawyer based in Sandton, South Africa. He specializes in project fnance and
PPPs.
88 Emerging Partnerships
KivuWatt
Lake Kivu, Rwanda
GOLD
selection
89 Emerging Partnerships
Situated in Rwanda on Lake Kivu, the world’s
eighteenth deepest lake, the KivuWatt Project ticks
all the boxes when it comes to a ‘game changer’ for its
technological and fnancial innovation and the sheer
impact it will have on the country’s development and
socioeconomic prospects.
Te project involves the construction of an integrated
methane gas extraction and production facility and an
associated 25-megawatt power plant. Once completed,
the project will raise and process methane gas trapped
deep in the waters of Lake Kivu for use as fuel to
generate critically needed electricity for the people of
Rwanda, while simultaneously removing harmful gases
safely. Te lake from which the gas will be harvested
is naturally hazardous, as methane from the lake bed
bubbles to the surface and has caused a number of
spontaneous explosions.
ContourGlobal will develop, construct and operate
the platform-based gas extraction system that will
be moored 13 kilometers of the Rwandan coast and
extract methane gas from a depth of 350 meters. Te
gas will be processed and transported by pipeline
to ContourGlobal’s power plant being developed
in Kibuye, Rwanda. By tapping an indigenous fuel
source, the project will signifcantly lower the cost of
electricity necessary to drive Rwanda’s fast growing
economy.
In the project’s frst phase, processed methane will
power three gas engine generator sets to produce
roughly 25 megawatts of electricity for the local grid.
Phase two is expected to add another 75 megawatts of
capacity, employing nine additional generator sets to
expand KivuWatt to 100 megawatts of power.
William Barry, senior vice president of new projects
at ContourGlobal and also project director on
KivuWatt, states that not only is it the technological,
fnancial and political innovations of the project that
make it unique, but also the sheer number of people
and organizations working together that makes it
impressive.
“In addition to the active involvement of Contour
ofces in New York, Paris and Rwanda, the project
has engaged contractors, subcontractors and
equipment suppliers from a dozen diferent countries
representing a total contract value of $90 million.
Tis is in addition to our lenders, their advisors, and
MIGA [Multilateral Investment Guarantee Agency].
Te coordination and commitment of our partners
has been critical to the success of this project. As
challenging as it’s been, everyone involved has been
pulling together and understand how important this
project is for the people of Rwanda and the region.
Nothing of this scale and complexity has been done
before and we are grateful for their support.”
As challenging as it’s been, everyone
involved has been pulling together
and understand how important
this project is for the people of
Rwanda and the region.
90 Emerging Partnerships
ContourGlobal signed the power purchase agreement and concession
agreement with the government of Rwanda and the state electricity
utility, the Energy, Water and Sanitation Authority (EWSA), in March
2009. EWSA agreed to purchase power from the project on a take-or-
pay basis for the 25-year concession period, backed by a full sovereign
guarantee of the oftake and the termination payments. Te tarif is
denominated in U.S. dollars but payable in Rwandan francs due to the
lack of foreign exchange reserves.
Te debt funding of $91.5 million was arranged by the Emerging Africa
Infrastructure Fund and FMO (the Netherlands Development Finance
Company), which respectively provided $25 million and $31.5 million.
Te remaining funding was provided by the African Development
Bank ($25 million) and BIO, the Belgian Development Bank ($10
million). Debt tenor is 15 years with a combination of fxed and foating
interest rates. Supported by a large upfront equity contribution from
ContourGlobal and buy-down of part of the debt, lenders were prepared
to accept uncertainties regarding the potential capacity achievable owing
to the novel nature of the technology being employed and the gas source.
Another issue for the project was the potential environmental and social
impact. As well as the requirements imposed by the government of
Rwanda, each lender and MIGA had its own list of environmental and
social requirements that needed to be met. Of particular concern was the
impact on the ecology and stability of the lake and the risk that, given
the novel nature of the technology being deployed, the gas extraction
operations could potentially upset the balance of the lake. As a result,
numerous baseline surveys have been contracted by KivuWatt and the
project’s lake efects will be actively monitored during operations to
ensure there is no detrimental impact.
Speaking about the fnancing of the project and also about the question
over its technology, Emerging Partnerships judge Simon Jackson, said:
“Robust completion guarantees are essential to a fnancing of this
nature. Te wonderfully innovative technology makes the outcome of
the project, both fnancial and developmental, close to binary—either it
works, in which case the numbers are impressive, or it does not, in which
case there would be little realizable value. In the absence of completion
guarantees, it would be very difcult to build a credit case for debt
funding.”
*For more information on this project and others in the region please see the project data
at the end of this chapter.
91 Emerging Partnerships
92 Emerging Partnerships
Chiansi Irrigation Project
Kafue District, Zambia
SILVER
selection
93 Emerging Partnerships
Although a smaller project in terms of scale and
fnance compared to others listed, the $30 million
Chiansi Irrigation Infrastructure Project in Zambia
represents a major innovation in the fnancing of
irrigation infrastructure in Africa and demonstrates
that public and private fnance sources can be
combined to make a unique agribusiness partnership.
Phase 1 of the project has been operating successfully
since 2009 and an expanded phase 2 is on track for a
2013 launch.
Situated in the Kafue district of Zambia, the core
objective of the project is to establish an equitable
partnership between smallholder and commercial
farmers in the project area, creating a centrally
managed irrigated farming enterprise which will
generate sustainable incomes for smallholder
households. In addition, the project will leverage
the bulk water canal and pumping infrastructure
constructed to provide irrigated market garden plots
for use by smallholder framers, enabling them to farm
year-round for the frst time.
According to Richard Avery and Paul Cartwright
from eleQtra (InfraCo) one of the key themes for the
success of the project has been the hands-on work
with the local communities and autonomy provided
for participating smallholder farmers. Commenting
on this structure, Cartwright said: “Trough the frst
phase, by working closely with the local communities
and people on the ground, we have developed a
fantastic road map for the next phase and how to refne
the model as we expand to full scale.”
Phase 2 will entail the construction of major bulk
water irrigation infrastructure which will ultimately
serve up to 3,800 hectares of land following future
expansion phases. Phase 2 will also include additional
infeld infrastructure and market garden plots, further
enhancing the incomes of an estimated 600 local
smallholder households.
Phase 1 was fnanced through an innovative fexible
repayment income note structure by a group of
development fnance institutions (DFIs) and
foundations including InfraCo Limited, FMO (the
Netherlands Development Finance Company), the
Emerging Africa Infrastructure Fund, and the Lundin
Foundation. Phase 2, which includes expansion to
serve a further 137 hectares of smallholder land as well
as 1,290 hectares of commercial land, will see grant
fnance sourced by the government of Zambia from
the Dutch Facility for Infrastructure Development
(ORIO) combined with private sector equity and
debt fnance sourced from DFIs and foundations.
An experienced commercial farm operator will
manage both the bulk water system and the farming
operations providing extension services to participating
smallholders.
94 Emerging Partnerships
Port of Cotonou
Cotonou, Benin
BRONZE
selection
95 Emerging Partnerships
Te Port of Cotonou in Benin impressed the Emerging
Partnerships judges due to its fnancing structure and
its possible long-term impact. Te project consisted
of the building of a new container operator and was
part of a major port sector reform plan. In the past,
a number of attempts to revitalize the port had been
attempted however none had been successful.
In 2009 Groupement Bolloré, composed of Bolloré of
France and the Société de Manutention du Terminal
à Conteneurs de Cotonou, won the bid for a 25-year
concession to build and operate the South Wharf
Container Terminal. Te project is of vital importance
as it has the potential to be of huge economic beneft
not just to Benin, but also to the wider region as a
potential trade gateway to landlocked West African
countries.
Te judges were particularly impressed with the
project’s fnancing structure. Te winning proposal
included an entry fee of $33 million, ongoing fees
of $29 per twenty-foot equivalent unit (TEU), and
guaranteed annual trafc levels. Te proposal also
included a commitment to pay $200 million in
concession fees during the frst eight years of operation
and invest $256 million in operating equipment
and civil works over the life of the concession. Te
concession specifed a completion date for wharf
construction (21 months after the signing of the
concession agreement) and outlined a termination
procedure: if the construction is not completed 34
months after the signing, the concessionaire can
terminate the agreement and be reimbursed for the
entry fee paid at the signing. Te agreement also
spelled out the concessionaire’s responsibility to pay
the Port Authority a fxed fee when the wharf is
delivered. Te project is set to begin operation in early
2013, and is expected to yield $200 million to $300
million in fscal impact and create more than 450 jobs.
96 Emerging Partnerships
Lekki Toll Road
Nigeria
Te 49.36 kilometer Lekki Toll Road is the frst ever PPP toll road concession in Nigeria and West Africa. Te
road serves the Lekki Peninsula of Lagos State, the fastest growing development corridor in the region. Te 30-
year concession impacts a population of over 3 million people living, working and doing business in and around
the corridor.
When it closed in 2008, the project attracted multi-sourced, multi-currency project fnance from top
international market participants and achieved the longest ever tenored project fnance loan in Nigeria—15 years
with a foreign exchange swap hedge and a certain portion as fxed interest rate.
Overall the road has provided critical access to new developments in the area such as the Lekki Free Zone,
future Lekki International Airport, Lekki Hydrocarbon Park, and Lekki Deep Seaport, all of which will become
signifcant catalysts of economic development and higher real estate values in the area.
Travel time has been reduced from two hours on the average to less than 45 minutes. New green belt and
vegetation along the road has also improved the environment. Additional benefts of the project to the
population of Lagos State include a number of services such as added security, street lighting, breakdown
assistance, an ambulance service, and a customer call center.
Addax Makeni Bioenergy
Sierra Leone
Te Addax Makeni Bioenergy Project in Sierra Leone involves the construction of an ethanol plant with the
capacity of 85,000 cubic meters per year and a bagasse-fred power plant with an output of 100,500 megawatt
hours per year. Te project was held in high regard by the judges as it represented a number of frsts for the
country. Tis will be the frst sugarcane ethanol project of its kind in Africa, and as such represents a major step
forward in Sierra Leone’s eforts to become a hub for renewable energy alternatives and a model for sustainable
investment in Africa.
It was also the frst independent power project with the frst power purchase agreement (PPA) the country
entered into. Te project anticipated that the PPA would need to be transferred under the upcoming
restructuring of the electricity sector in Sierra Leone. It was also the frst-ever project fnancing for the country
outside the mining sector, the frst water extraction license ever to be agreed, and the country’s largest ever
inward investment in the agricultural sector.
Te project is an impressive PPP in Sierra Leone and can be expected to have a strong development impact,
contributing not just to the reduction of greenhouse gas emissions but also to food security and socioeconomic
development. Te project also expects to create 2,000 jobs in 2013. Its success will directly afect the extent to
which the sponsors make further investments in other bioenergy projects in the region.
Cape Verde Wind Power PPP
Cape Verde
Te 25.5 megawatt Cape Verde Wind Power PPP, also known as the Cabeolica wind farm, was conceived in
2009 and involved the development of four onshore wind farms on the four main islands in the Cape Verde
archipelago (Santiago, São Vicente, Sal, and Boa Vista).Te €65 million project is the frst independent
power project in Cape Verde and the frst large-scale wind power project in Sub-Saharan Africa, providing
an important demonstration of the commercial viability of renewable energy PPPs across the continent. Te
project provides 20 percent to 25 percent of Cape Verde’s energy demands from a renewable supply, providing
95 percent of the estimated 500,000 population with reliable and cleaner energy at 20 percent lower cost than
previously, including new connections to the national grid for 50,000 households.
Te project reached fnancial close in 2010. It was fnanced by a combination of debt supplied by the
European Investment Bank and the African Development Bank, and equity from principal shareholder the
African Finance Cooperation (a private equity frm in West Africa), Finnfund and the lead project developer,
InfraCo Africa.
Te project has established a model for large-scale renewable power projects with private investment, which
can be replicated elsewhere in Sub-Saharan Africa. Furthermore, the project helps reduce greenhouse gas
emissions on the archipelago by 92,000 tonnes of carbon dioxide equivalent per year, as well as establishing
wind as a reliable energy source on the islands and creating local employment. Te project has now been fully
built and is producing power in all four sites at projected output levels.
98 Emerging Partnerships
Centrale Thermique de Lomé
Lomé, togo
Fuel fexibility is imperative for reliable electricity generation, particularly in Togo which has one of the smallest
electricity supply centers. In October 2007, ContourGlobal Togo S.A. signed a 25-year concession agreement
with the government of Togo for the rehabilitation, expansion and operation of the 100 megawatt Lomé thermal
power plant, called Centrale Termique de Lomé (CTL).
Te project’s fnancing was arranged and funded by the Overseas Private Investment Corporation (OPIC), a U.S.
government agency, via a $147 million loan. OPIC also underwrote the political risk insurance for the project.
Te fnancing structure had a debt/equity ratio of 75/25. Te total cost of the project was $196 million including
transmission line rehabilitation and soil decontamination investment.
Technological innovation is displayed by six Wärtsilä 50-DF generators, which are tri-fuel burning engines that
are capable of switching between natural gas, heavy fuel oil and diesel. Te plant will ultimately use natural gas
supplied by the West Africa Gas Pipeline, constructed to deliver natural gas to Benin, Ghana and Togo from
Nigeria. Until the natural gas supply is available, the plant is currently burning heavy fuel oil, in compliance with
the World Bank’s environmental standards. Te choice of the tri-fuel burning engines is helpful for Togo because
heavy fuel oil is substantially cheaper than the diesel and jet fuel previously used for all thermal generation of
electricity in the country.
Te reliable power generated by ContourGlobal Togo will accelerate economic development in Togo and
signifcantly increase access to distributed electricity for the population, local businesses and industry. Te full
social and economic impact will be reached when natural gas becomes available to fully fuel the plant. Te plant
was designed by Wärtsilä and is fully standardized so it can be repeated elsewhere in the country or in the sub-
region. A similar project is ongoing in the neighboring country of Benin.
Lesotho: National Referral Hospital
maseru, Lesotho
In October 2011, the IFC-advised Lesotho Hospital PPP replaced the country’s main public hospital, Queen
Elizabeth II Hospital, with the new 425-bed Queen Mamohato Memorial Hospital, supported by a network of
refurbished urban clinics that were opened in May 2010. Te new, advanced referral hospital at Bots’abelo, the
site of the government’s medical campus in the capital of Maseru, provides a wide range of tertiary-level clinical
services, highly-trained staf, and specialized medical equipment. It also serves as the nation’s primary clinical
training facility for health professionals. Te project is managed by the Tsepong Consortium led by Netcare, a
leading South African healthcare provider.
Judges were impressed with the new referral hospital’s ambitious and achieved plans to replace Queen Elizabeth
II Hospital with a new facility and network of refurbished urban clinics that provide vastly improved services and
also address the previous facility’s shortages of hot water, heat, medical supplies, pharmaceuticals, trained staf,
and reliable equipment.
99 Emerging Partnerships
Gautrain Rapid Rail Link
south africa
Although regarded as a slightly older project by the judges, they concurred that the Gautrain Rapid Rail Link
in South Africa was extremely impressive and had made a major impact on the lives of both citizens and
tourists in South Africa. In June 2012 the project was completed with the fnal section of track being fnished
ahead of the World Cup, enabling a safe, cost-efective and environmentally-friendly transport solution. It
supports economic growth for the region and has facilitated Black Economic Empowerment, a program
launched by the South African government to redress inequalities of Apartheid, through skills transfer between
international law frm Pinsent Masons and local law frm Ledwaba Mazwai.
Te all-new system was a game-changing concept in public transport in a country where under-funding
and political indiference had reduced the existing transport networks to a level where they were unsafe and
decrepit.
Financing was complicated by the necessary fnancial involvement of Gauteng Province as the grantor,
providing generous subsidies during construction and into the operating period to ensure the economic
viability of the project. Te local banks that underwrote the project were fnancing the frst rail PPP in Africa,
which at the same time has the largest debt funding requirement of a South African PPP to date.
Te 80 kilometer route includes a 15 kilometer section under the center and northern suburbs of
Johannesburg—a major civil engineering undertaking. Te tunnel had to be constructed using diferent
methods, including the use of a custom-built 160-meter tunnel boring machine imported from Germany,
in order to cope with the changing ground conditions.
Edward Farquharson, an Emerging Partnerships judge, said: “It’s a fascinating project as it’s the frst full-service
health PPP in Africa, excluding South Africa. What’s interesting about this project is it includes clinical services,
which is a really difcult process to take on and manage.”
Te project not only transforms health services in Lesotho but also provides a strong example of PPP in action.
Te facilities employ over 700 people, and directly serve the greater Maseru region’s population of over 500,000,
with Queen Mamohato Memorial Hospital also standing in as the national referral hospital for Lesotho’s total
population of just under 2 million people.
100 Emerging Partnerships
Henri Konan Bédié Bridge
côte D’ivoire
Te 1.9 kilometer Henri Konan Bédié Bridge is signifcant as the frst PPP project in Africa to use a minimum
revenue guarantee. It is also the frst part of a new program of privately-funded infrastructure developments
implemented by the government of Côte d’Ivoire.
Te project involves the design, build, maintain, fnance and operation of a 6.4 kilometer highway, including
a 1.9 kilometer bridge close to the Port of Abidjan, the largest port in West Africa. It is expected the bridge
will help address signifcant congestion and pollution in Abidjan. Te existing bridges and infrastructure are
under severe strain and unable to manage the city’s growing trafc. Te Henri Konan Bédié Bridge will provide
important demonstration efects for future initiatives in the transport sector, and approximately 840 direct jobs
will be created during the construction phase.
A senior debt tranche of €127 million has been agreed, €58 million of which is supplied by the African
Development Bank with the remaining €69 million supplied by the West African Development Bank, ECOWAS
Bank for Investment and Development, Africa Finance Corporation, Dutch Investment Bank and the Moroccan
Bank of External Trade. Bouygues Travaux Publics and Pan African Infrastructure Development Fund have
contributed a total of €28 million in equity and a further €44.5 million in subordinated loans to the deal. Te
Côte d’Ivoire government has supplied the remaining €76.2 million. Te Multilateral Investment Guarantee
Agency, the political risk insurance arm of the World Bank Group, provided $145 million in insurance covering
equity investments and subordinated loans on the deal.
101 Emerging Partnerships Lesotho: National Referral Hospital
102 Emerging Partnerships
project data
sub-saharan africa
103 Emerging Partnerships
KIVu WATT
LakE kiVu, rwanda
Total initial
investment
$142.25 million
Government
client
Energy, Water and Sanitation
Authority (EWSA)
Equity sponsors ContourGlobal
Lenders Netherlands Development
Finance Company (FMO),
Emerging Africa Infrastructure
Fund, African Development
Bank, and Belgian Investment
Company for Developing
Countries (BIO)
Advisers to
authority
Mott MacDonald (technical)
Advisers to
sponsors
Iv-AGA (technical), Exponent
(gas extraction modeling),
Norton Rose (legal), Trust Law
Chambers (legal), and Marsh
(insurance)
Advisers to
lenders
Royal Haskoning (technical),
Netherlands Organisation for
Applied Scientifc Research
(TNO – gas extraction
modeling), Clifford Chance
(legal), K-Advocates (legal),
Independent Consultation
Services of Ebasco (INDECS –
insurance), and Mazars (model
audit)
CHIANSI IRRIGATION PROJECT
kafuE district, zambia
Total initial
investment
$30 million
Government
client
Ministry of Agriculture and
Cooperatives, Ministry of
Finance and National Planning,
Ministry of Lands, and
Department of Water Affairs
Equity sponsors Chanyanya Smallholder’s
Cooperative Society and eleQtra
(InfraCo) Limited
Lenders The Facility for Infrastructure
Development (ORIO)
PORT OF COTONOu
cotonou, bEnin
Total initial
investment
$256 million
Government
client
Cotonou Port Authority
Equity sponsors Bolloré and the Société de
Manutention du Terminal à
Conteneurs de Cotonou
Lenders DevCo (Private Infrastructure
Development Group) and
Millennium Challenge
Corporation
Advisers to
authority
IFC (lead), Gide Loyrette Nouel
(legal), Consortium Grand Port
Maritime du Havre/Catram
Consultants/Amyot Juridique et
Fiscal (technical)
104 Emerging Partnerships
ADDAx MAKENI BIOENERGy
siErra LEonE
Total initial
investment
€267 million ($347 million)
Government
client
Government of Sierra Leone
Equity sponsors Addax & Oryx Group, Netherlands
Development Finance Company
(FMO), and Swedfund
International
Lenders African Development Bank,
Emerging Africa Infrastructure
Fund, Infrastructure Crisis Facility
Debt Pool (IFC), Netherlands
Development Finance Company
(FMO), Belgian Investment
Company for Developing
Countries (BIO), German
Investment and Development
Corporation (DEG), and Industrial
Development Corporation of
South Africa (IDC)
Advisers to
authority
Herbert Smith (legal) and Tony
Blair Africa Governance Initiative
Advisers to
sponsors
BNP Paribas (fnancial), Eversheds
(legal), SNR Denton (legal), Froriep
Renggli (legal), Homburger
(legal), Basma and Macaulay
(legal), Coastal and Environmental
Services (technical), De Smet
Agro Engineers and Contractors
(technical), and Agricane
(agriculture)
Advisers to
lenders
Norton Rose (legal), CLAS Legal
Solicitors (legal), SGS Engineering
uK Ltd (technical), Independent
Consultation Services of Ebasco
(INDECS – insurance), PKF (model
audit), and Schaffer (agriculture)
CAPE VERDE WIND POWER PPP
caPE VErdE
Total initial
investment
€65 million ($86 million)
Government
client
Government of Cape Verde and Electra (Empresa de Electricidade e Água)
Equity sponsors African Finance Corporation, Finnfund, and InfraCo Limited (eleQtra)
Lenders European Investment Bank and African Development Bank
Advisers to
sponsors
Clifford Chance (legal), Gabinete de Advocacia, Consultoria e Procuradoria Jurídica (legal),
Sinclair Knight Merz (technical) and Willis (insurance)
Advisers to
lenders
Linklaters (legal), Eva Caldeira Marques Advocacia e Consultoria (legal), Altermia
(technical), CME Energy (technical), MegaJoule (technical), and Willis (insurance)
LEKKI TOLL ROAD
niGEria
Total initial
investment
50 billion Naira ($313 million)
Government
client
Lagos State Government
Equity sponsors Asset & Resource Management
Company Limited (ARM), Larue
Projects Limited, and African
Infrastructure Investment
Managers (AIIM)
Lenders African Development Bank,
Standard Bank, Stanbic IBTC
Bank, united Bank for Africa,
First Bank of Nigeria, Zenith
Bank, Diamond Bank, and
Fidelity Bank
Advisers to
authority
Ministry of Justice - Lagos State
Government (legal), Steer Davies
Gleave (traffc), and Operis
(model audit)
Advisers to
sponsors
Allen & Overy Standard Bank
(fnancial), Rand Merchant Bank
(fnancial), Trinity International
(legal), Aluko & Oyebode (legal),
High-Point Rendel (technical),
and GOBA Consulting Engineers
(traffc)
Advisers to
lenders
united Bank for Africa
(fnancial), FBN Capital
(fnancial), Orrick Herrington
& Sutcliffe (legal), G Elias &
Co (legal), GOBA Consulting
Engineers (traffc), and Operis
(model audit)
105 Emerging Partnerships
GAuTRAIN RAPID RAIL LINK
south africa
Total initial
investment
$513 million
Government
client
Gauteng Provincial Government
Equity sponsors Bombardier, Bouygues Travaux
Publics, Murray & Roberts and
Strategic Partners Group
Lenders Standard Bank, Rand Merchant
Bank, and Société Générale
Advisers to
authority
Kagiso Tiso Holdings (fnancial),
Pinsent Masons (legal), and
Ledwaba Mazwai (legal)
Advisers to
sponsors
Société Générale (fnancial),
Webber Wentzel (legal), and Steer
Davies Gleave (legal)
Advisers to
lenders
Freshfelds (legal), Bowman
Gilfllan (legal), and Capita
Symonds (technical)
HENRI KONAN BEDIé BRIDGE
côtE d’iVoirE
Total initial
investment
€232 million ($285 million)
Government
client
Gouvernement de Côte d’Ivoire
Equity sponsors Bouygues Travaux Publics,
Total Côte d’Ivoire, Pan African
Infrastructure Development
Fund (PAIDF), and National Bank
of Investment (BNI)
Lenders African Development Bank,
African Finance Corporation,
ECOWAS Bank for Investment
and Development, West African
Development Bank, Netherlands
Development Finance Company
(FMO), Banque Marocaine du
Commerce Exterieur (BMCE),
and Multilateral Investment
Guarantee Agency (MIGA)
Advisers to
lenders
White & Case (legal), Egis
International (technical), MVA
Consultancy (traffc), and Marsh
& McLennan (insurance)
CENTRALE THERMIQuE DE LOMé
Lomé, toGo
Total initial
investment
$196 million
Government
client
Government of Togo
Equity sponsors ContourGlobal and IFC
Lenders Overseas Private Investment
Corporation
Advisers to
sponsors
Shearman & Sterling (legal),
Gide Loyrette Nouel (legal)
Advisers to
lenders
Allen & Overy (legal)
LESOTHO: NATIONAL REFERRAL
HOSPITAL
masEru, LEsotho
Total initial
investment
$100 million
Government
client
Government of Lesotho
Equity sponsors Netcare SA Healthcare Group,
Excel Health, Afri’nnai, Women
Investment Company, and D10
Investments
Lenders Development Bank of Southern
Africa (DBSA)
Advisers to
authority
IFC (lead), Phatshoane Henney
Attorneys (legal)
106 Emerging Partnerships
107 Emerging Partnerships
credits
Front cover (left to right): Apa Nova, Luc Benevollo for Vinci,
Jonathan Ernst/World Bank, Alejandro Perez/IFC
Page 16 (all): IFC
Pages 18-19: IFC
Page 20 (all): Homeless International
Page 22: Druk Holding and Investments
Page 29: IFC
Page 40 (top left): J&P - Avax
Page 40 (top right): J&P - Avax
Page 40 (bottom): Foster + Partners
Pages 42-43: J&P - Avax
Page 44: VTB Capital
Page 46 (all): Orascom Construction Industries
Page 53: Limak
Page 64 (all): ViaQuatro
Pages 66-67: ViaQuatro
Page 68: Banobras
Page 70: ODEBRECHT PERú OPERACIONES y SERVICIOS
Page 76: The Minas Gerais PPP unit
Page 88 (all): Orli Arav
Pages 90-91: u.S. Airforce/Sgt Samuel Bendet
Page 92: EleQtra and InfraCo Africa
Page 94: Vredeseilanden
Page 101: IFC
108 Emerging Partnerships
107 Emerging Partnerships
IFC Advisory Services in PPPs
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by harnessing the potential of the private sector to increase access, enhance quality, and
improve effciency in public services such as water, power, health and education.
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in infrastructure. In particular, it helps governments prepare and review policy, legal and
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2013
Emerging Partnerships is the result of collating
information and submissions from the public,
conducting judging panels with worldwide
industry experts and research and interviews
conducted by both Infrastructure Journal
and IFC.
In partnership with