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PPP projects in Israel
September 2011
Public Private Partnership Division
Inbal Insurance Company Ltd.
Ministry of Finance The Division of PPP Projects
Vision
Investments in infrastructure would enable to
sustain Israel’s economy growth
Private sector’s involvement would improve
level of government’s supplied services
Optimizing risk allocation between the public
and the private sectors would contribute to
public wealth
2 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Industries under Focus
The government has decided to focus primarily on
the following industries:
Railroads/Mass Transit Systems
Roads
Water desalination and sewage treatment
Construction
Energy (IPP; LNG; Solar)
3 Ministry of Finance Ministry of Finance
The Division of PPP Projects
PPP
PPP/PFI – Major issues
PPP/PFI In Israel
4 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Authorities Involved Along the Process
Concession Agreement
The Tender Management
Governmental body
WDA, JPTA,
Steering CTA
Committee
Inter-Ministerial
Cross Israel
Tender Committee Designated Highway,
Company Tel Aviv Mass
Transit
Ministry of Finance
Relevant Government Ministries
Inbal – The Division of PPP
External Consultants
5 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Contractual Framework
(Limited or Non-Recourse Structure)
Government
Sponsor(s) Project vehicle Lender(s)
Equity Financial Facility
(SPC(
Construction Agr. Operating Agr.
(EPC) (O&M (
6 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Project Feasibility Study
Phase 1 - Project is
economic economically
feasible
No
feasibility study: Project will not be
Cost/benefit implemented
analysis Yes
Business
environment fits No
PPP/PFI Public sector
Phase 2 - implementation
prior to and Yes using alternative
during tender method
process Project meets
PPP/PFI criteria
No
Phase 3 - Yes Signing a
Analyzing the concession agreement
decision & Yes &
implementation bids compared החלטת ממשלה
to the PSC Controlling its
execution
7 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Typical Risk Allocation
Optimal Risk Allocation – each sector is responsible for the risks he can better
mitigate
Risk Public Private Shared
Technology
Land acquisition &
Expropriation
Detailed design
Cost overruns
Completion delay
Archaeological findings
(mainly Public)
O&M costs
Collection risk
Force Majeure
Discriminatory change in
laws and legislation
Political risk
Market/Demand risk
9 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Typical PPP/PFI project Time Frame
Excluding legislative related delays
Project stage Time Frame (Months)
• Appointing Tender Committee/Consultants 1
• PQ Documents 3-4
• Bidding the PQ 3
• List/Short List after PQ 1
• Tender documents 2
• Bidding of Tender 4-6
• Tender process 1-2
• Best & Final 1-2
• Sub Total 16-20
• Financial close 8-12
• Total 24-32
10 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Improvements in the Tender Rules
Changes and improvements in the Tender Rules in order
to facilitate the implementation of the projects:
Unified accounting principles (based on IASB).
Easing of tax treatment
Interest rate changes protection
Various indexation and protection options in accordance,
to risks at the different project stages
Steps to encourage institutional investors to participate in the
PPP financing :
Indicative Rating to the projects (by Israeli rating co.)
Refinance option after Construction phase
11 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Encouraging foreign Participation
Why foreign participation is needed?
• Single borrower limitation (15%)
• Low competition (2 major banks)
– Equity: NIS 54B for the big 5; NIS 37B for the big 2.
– ROE: 13.1% - 22% (9/2006 - big 5)
• 7-8 major groups participating in all government projects
Improvements in order to facilitate the participation of foreign
bidders and foreign Lenders:
Foreign interest rate changes protection.
Foreign currency changes protection.
Various indexation and protection options in accordance,
to risks at the different project stages
Payments to Concessionaire in foreign currency
12 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Foreign Entities participation
• Technical Know-How
Bring professional expertise and experience.
Bring advanced technologies.
Bring more efficiency in the planning and
execution of projects.
Improving the capability of Israeli entities.
• Investment
Partnership between Israeli and foreign
entrepreneurs.
Enlargement of foreign investments.
13 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Foreign Entities Involvement
• Financing
Israel’s sovereign rating ( A – A+ ) attractive for
international finance entities.
Improvements in Tender Rules encourages
foreign participation : financing in USD / Euro
with interest rate protection, various indexation
protection at the different project stages.
Help to enlarge number of financing entities
(single borrower limits for Israeli banks).
Stimulate competition – reduce financing costs
Offer new financing tools and solutions
14 Ministry of Finance Ministry of Finance
The Division of PPP Projects
PPP
PPP/PFI – Major issues
PPP/PFI In Israel
15 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Volume of Operation by Sectors
Construction costs
3%
Transport: $ 6.3 billion
20%
Water: $ 2.0 billion
Construction: $ 0.3 billion
14%
Energy : $ 1.4 billion 63%
Total $ 10 billion
Transport Energy
Water Construction
16 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Main PPP Projects
in Israel
Cross Israel Highway (H-6)
Carmel Tunnels
LRTs
Railways
Roads No 431 + 531
Fast lane
Desalination facilities
Prison, Police National Academy
Solar Plants, LNG
Army Training Basis City
17 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Transportation Projects Status Foreign Entities
Involvement
Cross-Israel Highway - In operation Both in the
Central Section operation and in
the financng of
the project.
Highway 431 In operation Financing of
construction
phase: HSBC
(together with 3
Israeli banks)
Cross-Israel Highway – Construction – work began in Both In the
Section 18 June 2007 and is expected to operation part
be completed by September and in finance
2009. part
18 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Transportation Projects Status Foreign Entities
Involvement
Tel Aviv and Jerusalem Fast Construction – Construction “Siemens” is a
Lanes work began in August 2007 subcontractor
and is expected to be responsible for the
completed by the first quarter unique toll system
of 2010.
Jerusalem LRT Construction – Construction A French company
work began in August 2006 (“ALSTOM”) holds
and is expected to be 20% share in
completed by the third quarter consortium
of 2010.
Tel Aviv LRT Financial Closing – expected “Siemens” is part of
to be completed in April 2009. the concessionaire.
Financing of
construction phase:
RBS, Bayerische LB,
KFW
19 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Transportation Projects Status Foreign
Entities
Involvement
Carmel Tunnels Construction –work began in A Chinese
November 2006 and is expected company
to be completed by the end of (“CCECC”) is
2010. involved in the
tunneling works
Highway 531 Financial Close –to be
completed in July 2009.
20 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Geographic
531 Cross location:
Israel
Highway The ring roads
around the Tel Aviv
metropolitan area :
Ayalon
HW-20 North - 531
Tel Aviv East - Cross Israel
(Hw 6)
South - 431
West - Ayalon
(Hw 20)
431
21 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Desalination Projects Status Foreign Entities
Involvement
Ashkelon (100 m3/year) In operation A French company
(Veolia Water ) is part
of the consortium(50%)
Palmachim (30 m3/year) In operation
Hadera (100 m3/year) Construction - Financing of the project :
construction of the facility Calyon Bank , EIB,
will be completed by the Espirito Santo Bank,
end of 2009. Dexia Bank, KFW.
Sorek (150 m3/year) RFP released in January Foreign companies are
2009. Proposals to be part of bidding groups
submitted in June 2009
22 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Development of sea water desalination plants in Israel along the
national system
)100(
Hadera
Construction phase. Production at 12/09
Tendering stage 505
)150(
405
280 305
Full production Sorek
Since 9/07
)30( 160
Palmachim 100 130 145
)100( 36
Tendering stage Ashdod 0
)100(
04
05
06
07
08
09
10
11
12
13
20
20
20
20
20
20
20
20
20
20
Ashkelon
Full production
23
Since 12/05
Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Energy Status Foreign Entities
Involvement
Solar Power Plants in the Negev RFP for 2 Thermal Foreign
Desert power plants released companies are
in March 2009 part of bidding
PQ for Photovoltaic groups.
plant expected to be
released in April 2009.
LNG PQ to be released
pending Government
approval.
24 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Status of PPP Projects
Construction Status Foreign
Projects Entities
Involvement
Beer Sheva Prison Construction - construction The operational
of the facility will be company is going
completed by June 2009. to be foreign
Courts, Government Center Parking In operation
Lot, Knesset expansion
Training Center for The Israeli Police PQ –bids were submitted in Foreign participant
June 2008. part of bidding
RFP expected to be group.
released in Q3/09
Ashdod Hospital PQ – bids were submitted in
December 08.
RFP expected to be
released in Q2/09
25 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Expected additional Projects
Additional Roads & LRT lines (Tel-Aviv) including T/K &
Build/Design projects
Additional Desalination Facilities
Hospitals (Including hotels, parking areas, shopping malls)
International Airport in Megido
Education (school PFI)
An international airport and the Peace Corridor projects
(Coordination with Jordan)
Additional renewable energy projects
Protection of the Environment ( a committee has been appointed
to make a preliminary study of potential projects )
26 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Thank you for
your attention
27 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Contacts
Mr. Abraham Tenne
Head of Desalination Division and chairman of the WDA
Tel : 972-3-6369688/676
Mobile : 972-50-6221342
E-mail :abrahamt@water.gov.il
28 Ministry of Finance Ministry of Finance
The Division of PPP Projects
