PPP’s: Public Private Partnerships

· Project, financing, construction, operation, maintenance and exploitation (DBFO)

DESCRIPTION

Efficient PPP´s organization: +value / – risk

· Viable project selection: risk taking / transferring to partners
· Intensive capital, value creation and growing cash flow Management
· Quality, safety and operational improvements Management
· Conflict Interest Management

MANAGEMENT CRITERIA

· Change management
· Long-term
· Whole life cost (WLC)
· Value for money
· The user pays
· Deontology

· Engineering + Construction + Services

DESCRIPTION

Engineering Coordination:

· Traffic Studies and geometric design: construction, infrastructure
· Transport Planning: urban and regional
· Traffic Administration: operation, exploitation and maintenance
· Investment Control: ABC, cost optimization
· Program Control
· Facility Management: operational improvements

MANAGEMENT CRITERIA

· E-Toll pass. In shade toll
· Free Flow Toll
· Traffic Control Centers
· Fixed Total Investment amount
· Fixed Program

· Project Finance, off balance
· Treasury Management: IMM money market: FX (Foreign currency risk management)
· Financing foreign operations: capital and debt markets
· Subsidiaries Interest / Dividend repatriation politics

DESCRIPTION

Financial, legal and tax structures:

· Own resources: Equity / loan stock or sub-debt subordinate loans and unsecured / secured loans capital,
with / without collateral assets
· Others resources: bank loans and bonds
· Credit loans and guarantees risk coverage
· Equipment Leasing: direct and with debt
· Concession Resale in the secondary market: recycling own resources
· Refinancing after the construction period

MANAGEMENT CRITERIA

· Financial risk
· Credit risk
· Without shareholders recourse
· Currency exchange guarantee
· Inflation, devaluation, interest rate and taxes forecasting

· PPP´s Models

DESCRIPTION

Location: country exposure, currency exposure: book accounting / economic

· Translation exposure. Transaction exposure. Operational exposure.

Procurement Phase:

· Pre-contract risks, on project portfolio: development, not financial closing
· Bidding cost: international competition documentation
· Developer: partner selection
· Bid partners: Engineering + Construction+ Services
· Financial feasibility studies: own resources / other resources

· Public sector’s contribution: expropriations and finance
· Income Risk: availability / flow
· Construction, operation and financial risk

· Public sector’s payment sources: Commonwealth, National, Regional and Local
· Pro-forma financial statements: capital gains / residual value

· Balance. Income, Cash Flow and Origin/Application
· Debt coverage ratios
· Shareholders Returns: subordinated debt + dividends

· Contract models and Participants: legal structures

MANAGEMENT CRITERIA

· Distribution costs, risk transfer, long-term, sensitivity analysis, autonomy, mutual guarantees

· Construction and operation
· Commercial operation risk: public services, in limited competition

DESCRIPTION

Post-contract risk, to include in Financial Reports:

· Internal Operations:

· Availability of new projects, subcontractor capacity: budget / program / quality
· Self-insurance, personnel retention, labor liabilities
· Financing new projects, shares liquidity
· Failure Information System, risk rate for increased costs not passed

· Market and Strategic:

· Increased competition
· Partners Breach: cost overruns and delays, contractual documentation defects
· Long-term forecast Failure: concessions rescue / force majeure
· Operation, exploitation and maintenance Cost
· Services and environmental Compliance
· Debt Cost: interest, minimum coverage financial ratios breach
· Revenue Risk: availability / use: traffic (e-toll evaders)
· Tax law Changes

MANAGEMENT CRITERIA

· Operational improvements, refinancing, service level improvements
· Country Risk, exchange insurance, interest swaps