UNECA Conference Addis June 2011 - Taz Chaponda

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					  CABRI Presentation on PPPs in Africa
                    High-Level Workshop on
Public-Private Partnerships’ implementation in the Energy Sector

     Implementation Framework to Enhance Private Sector
       Investment and Participation in the Energy Sector

                     30 June – 1 July 2011

                         Taz Chaponda

• Introduction to CABRI

• The Role of PPP Units in Africa

• Nigeria Power Sector Reforms

• Lessons from CABRI Dialogue
Collaborative Africa Budget Reform Initiative
• CABRI is a professional network of senior budget officials in African
  Ministries of Finance and/or Planning

• CABRI was officially launched in May 2008, and in December 2009 it
  became a legal and independent membership based organisation

• Its main objective is to promote efficient and effective management of
  public finances
    – Developing appropriate approaches, procedures and practices
    – Capacity building and research programme in public finance management
    – Develop common positions on budget related issues

• Holds annual conference, regional seminars, e-networking, series of
  publications and documents
      Private investment in infrastructure for Sub-
               Saharan Africa, 1990–2008
                        1990–2000                                   2001–08

 Total: US$21.7 billion (2008 US$)                    Total: US$72.3 billion (2008 US$)

Source: World Bank and PPIAF, PPI Project Database.

Common Roles of PPP Units
PPP Units can play an important role in developing the government project pipeline
and in strengthening market confidence in the PPP program

  • Regulatory Role (“gatekeeper”): Serves as the agency within government
    that oversees PPP procurement and grants formal approvals to procuring
    ministry/ agency

  • Technical Assistance to ministries/ agencies: Serves as a technical
    resource centre and provides technical support to government institutions
    seeking to enter into a PPP.

  • Deal making (“deal broker”): Serves as a “marketing” agent for PPP deals
    at an advanced stage, promoting them within the market and helping to
    structure the transaction with relevant players.

  Source: PPIAF
  PPP Units Across Africa
There are about 15 PPP Units across Africa although only a handful a fully
functional, while the rest require significant technical assistance

• Well-established, fully functional units
     – South Africa, Egypt and Mauritius

• Start-up phase, partially functional units
     – Kenya, Nigeria, Mozambique (Maputo), Lesotho, Rwanda

• Nascent, still in planning
     – Malawi, Swaziland, Namibia, Ethiopia, Tanzania, Ghana, DRC, etc.

Source: PPIAF
Challenges facing new markets
•   Enabling legislation: Deals can and have proceeded in the absence of a PPP
    law. A modern procurement law might suffice. Alternatively, a sector-specific
    law can cover concessions, or even a project-specific agreement based on
    international norms. What matters is enforceability.

•   Long-term Debt finance: Longer term debt tenors can be achieved when
    donor support is available, such as partial risk guarantee, political risk/ credit
    guarantee. Such forms of credit-enhancement can improve risk rating to
    stretch tenors to about 10 years, followed by refinancing arrangements

•   Local Skills: International transaction advisors are increasingly mobile, as long
    as perception of client government is fair. Advisors are more amenable to
    donor funded project as payment risk is removed.

•   Affordability: In some countries, sector reform will be necessary to raise tariffs
    to more sensible levels so that user fees can partially close fund gap (eg. power
    sector). However, for most countries, Viability Gap Funding necessary.

Source: PPIAF
               Nigeria: Power Sector Background
•   In 2005, the FGN initiated the reform of the power sector with the
    unbundling of PHCN under the EPSRA (2005)

•   The following assets are available for privatisation
        •    6 Power Generation Companies (GenCos)
        • 11 Distribution & Marketing Companies (DisCos)
        •    1 Transmission Company (TransCo)

•   Assets of Interest to LASG
        • Eko Electricity Distribution Company Plc
        • Ikeja Electricity Distribution Company Plc
        • Ijora Thermal Power Station

•   Despite massive investment in electricity infrastructure by the FGN
        • Only achieved generation of barely 3,200MW – Dec 2010
        • Compared with target of 5,379MW

•   President Jonathan launched Sector Reform Roadmap – 26 August 2010
           Nigeria: Power Sector Background
•   Critical Enablers

    •   Multi-Year Tariff Order (MYTO) – 2008 -2013

    •   Nigerian Bulk Electricity Trading Company (NBETC)

    •   Power Purchase Agreement (PPA)

    •   Credit Enhancement & Risk Guarantee (FGN & World Bank)

    •   Nigerian Electricity   Liability   Management   Company

    •   Gas Supply & Purchase Agreement (GSPA)

     Privatisation - Investment Incentives
• New commercial Multi-Year Tariff Order (MYTO)

• 5-Year tax holiday

• Duty exemption for equipment for gas fired GenCos

• Partial Risk Guarantees (PRGs) for GenCos

• Disco Tariffs to be supported by PRGs

• Labour liabilities to be resolved before handover

• NELMCO to take over stranded liabilities

•World Bank MIGA instrument to insure against political risk

           Captive Power Solutions in Lagos State
                              • AES Nigeria a subsidiary of AES USA was the
                                project   sponsor     responsible for   the
                                implementation of the project

                              • The project is an Independent Power Project

                              • It operates nine (9) barge-mounted gas turbines
                                that produce 270MW

                              • Raised above 120 million US dollars to refinance
                                part of project cost and total project cost was in
                                excess of 200mn US dollars

                              • Other captive power projects include Akute/
                                Adiyan Water works 12.15 MW, gas-fired

                              • Alausa 11.7MW dual-fired plant (gas and diesel)

                              • Island Power 9.7MW plant commissioned in
                                2011 (gas-fired with diesel back up)

9 April 2012                                                                  11
Establishing a successful PPP programme
• Establish, clarify and consistently apply the legal and policy framework. PPPs depend
  heavily on contracts that are effective and enforceable.

• Use legal terms and approaches, where possible, that are familiar to the international
  private sector

• Clear investment plans which, demonstrate both potential project benefits and fit with
  national plans, will help ensure stakeholder buy-in

• Underlying economics of potential PPP projects should be attractive to the private sector -
  avoid sending out wish lists of disconnected projects

• Establish a clear and consistent PPP process map that investors can easily reference and
  access to understand the processes

• A PPP unit within with relevant commercial and legal skills can send a powerful signal to
  the private sector about the government’s competence and seriousness of intent

• Capitalize on the experience of others (private/public groups) who have managed similar
  processes to enhance efficiency

• PPPs have emerged as a viable and growing investment vehicle across SSA
  with particularly high demand in power, public transport, water and
  sanitation. Less successful in social infrastructure.

• Major constraint to growing the PPP market is a lack of technical skills in
  finance, legal, and engineering which limits quality of project preparation
  and bankability.

• There is considerable diversity across African countries in terms of their
  readiness for PPP procurement; Capacity Building and Technical Assistance
  must be tailored for different country contexts

• In the Energy sector, Nigeria has embarked on am ambitious Power Sector
  reform programme which depends on the ability of key institutions to
  work together to resolve the huge power deficit.
Recent Publications from CABRI
     • The Appraisal of Infrastructure Projects (2010)

     • Infrastructure Financing and Public-Private Partnerships
       in Africa (2010)

     • Implementation and Monitoring of Infrastructure
       Projects: A Risk Management Approach (2010)


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