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Land Port Los Andes (Chile)
and Zamyn Uud Logistics Park
(Mongolia): Two Innovative PPP
Projects
Patricio Mansilla
PPP Consultant
January 16, 2009
Ulaanbaatar, Mongolia
1a
Agenda
1. PPP: Understanding the Concept
2. Project Description of Land Port Los Andes (LPLA)
3. LPLA Business Model
4. Regulatory Aspects of LPLA
5. Zamyn Uud Gateway Logistics Park Application
2
1. PPP: Understanding the Concept
3a
PPP Definition
• A public-private partnership (PPP) according to the PPIAF/World
Bank involves the private sector in aspects of the provision of
infrastructure assets or of new or existing infrastructure services
that have traditionally been provided by the government.
• While many governments have reformed their utilities without
private participation, some seek finance and expertise from
private companies to ease fiscal constraints and increase
efficiency. By engaging the private sector and giving it defined
responsibilities, governments broaden their options for delivering
better services.
• Agreements between public and private entities take many
shapes and sizes for both new and existing services. At one end
of the spectrum is a management or service contract, where a
private company is paid a fee for a service. At the other end is
full privatization or divestiture (outright sale), where a
4
government sells assets to a private company.
PPP Definition
• The definition embraced by The Canadian Council for Public-
Private Partnerships is as follows:
• A cooperative venture between the public and private sectors,
built on the expertise of each partner, that best meets clearly
defined public needs through the appropriate allocation of
resources, risks and rewards.
• The term "public-private partnership" carries a specific
meaning in the Canadian context. First, it relates to the
provision of public services or public infrastructure. Second, it
necessitates the transfer of risk between partners.
Arrangements that do not include these two concepts are not
technically "public-private partnerships" and do not fall within
the CCPPP’s scope of the work. 5
Why use PPP?
• Excess demand for the facility, product or service, managed by
the public sector.
• Potential short/medium term increase in demand for the facility,
product or service.
• Low public sector capacity (lack of financial resources or
inefficiencies) to increase the level of investment to meet excess
demand or to improve the performance/efficiency and quality of
the service.
• Fast way to achieve Social Responsibility/ Accountability in the
allocation of resources and sustainability.
• Cost recovery and private sector financing.
• Creation of a new industry, new formal sector in the economy.
• Employment, wealth and economic growth. 6
Several ways of partnership
Operation and
Management
Contracts
Service Operation
Contract Leasing
PPP
BOT
Partial
DBOT (DBFOT)
Divestiture
BOO
7
PPP Design: First Step
• First Step: Define the PPP Objective
• The Objective of a PPP could be to enlarge an existing
facility, construct a new facility, deliver a basic service
or even explore or manage natural resources.
• Defining the Objective will help to determine the
appropriate participation from a totally private
company, a public-private company or a special
purpose vehicle (SPV) regulated by a public agency or
existing Ministry.
8
PPP Design: Second Step
• Second Step: Define the PPP Structure
• Totally Private Company
• Public Company could look for a private partner to
develop a specific project (Build-Operate-Transfer -
BOT); participate in a joint venture; create a PPP
company with a long term relationship sharing equity,
costs, profits and risks; or deliver a service for a short
period of time.
• Ministries could look for private partners to develop a
specific project (BOT) or to deliver a service.
9
PPP Design: Third Step
• Third Step: Prepare the Framework for Public Dialogue
• Verify if an existing law can be amended or if it is necessary
to create a new law.
• Verify if public institutions have the structure required to start
the PPP process.
• Prepare professionals in public companies or ministries to
start a dialogue with the private sector to discuss and define
roles: Promotion, regulation, control, etc.
• Prepare preliminary studies for the project or services.
10
PPP Design: Fourth Step
• Fourth Step: Find the right private partner
• The appropriate private partner should be based on the Objective
and the required Structure.
• Establish requirements that the private partner must fulfill to
achieve performance excellence.
• Identify the right private partner through a competitive process.
• Maintain transparency throughout the process of choosing the most
suitable partner among interested private companies.
• Full disclosure of the process is critical to keep citizens informed of
the allocation of public resources in a PPP.
11
PPP Design: Fifth Step
• Fifth Step: Project Development
• Normally has three phases: Feasibility Studies,
Construction and Operation.
• Feasibiliy Studies could be developed in an earlier
phase if the project was designed with a BOT structure,
for example.
• Construction phase involves risk mitigation and private
sector funding
• Operation phase involves price regulation, control of
standards and performance.
12
PPP Alternatives
Company/ Competitive
Costs Revenues Profits Monopoly
Business Market
Private Pri Pri Pri Pri Pub- Reg
Public (BOT) Pri Pri or Pri-Pu Pri - Pub-Reg
Joint Venture Pri-Pu Pri-Pu Pri-Pu - Pub-Reg
Service Pu-Pri Pri Pri - Pub-Reg
SPV - BOT Pri Pri Pri - Pub-Reg
13
Public Investment / PPP Investment
Public Investment PPP Investment
Public Agency
Ministry
Public Company
Public Agency
Ministry PPP Contract
Public Company
Special Purpose
Vehicle
3
potential Financial Structure 2 potential subcontracts
contracts
Public Financing Private Operation
Financing Construction Service
Public Budget 70%-80% Debt Delivery
Multilateral 20%-30% Equity
Construction Operation
Agency Loan
Service Delivery
Donors
Banks
Bond Issue Bridge Loan
National or and
International Refinancing 14
Capital Market Capital Market
2. Project Description of Land
Port Los Andes (LPLA)
15a
Chile
16
Los Andes
17
The Project
• High congestion level in Valparaiso (sea port) and Los Andes due
to the lack of one point for customs control outside of the cities.
• Design, Construction and Operation of Land Port Los Andes -
administrative building, customs control zone, public service
buildings, commercial building, parking system and warehouse.
• 24.5 ha located in El Sauce, close to Los Andes city and the
border between Chile and Argentina called “Paso Los
Libertadores”
• Investment of US$25 million
• 20 years of concession
• 2 years of operation since 2006
• Service for around 700 trucks daily / 250,000 trucks annually,
moving approximately 2.5 million tons per year.
18
19
Truck Flow
20
21
22
23
PPP Land Port Los Andes
24
Public Organizations
National Customs Service
Agricultural and
Health Service
Livestock Service
National Police
25
Main PPP Services
PPP Services
Basic
Basic No
Mandatory Complementary
Commercial
Commercial Services
Services
Services
26
Basic No Commercial Services
• Maintenance of vertical and horizontal infrastructure
included in the project.
• Cleaning service
• Signal System
• Restroom Services
• Green areas maintenance
• Parking for public transport service
• Trucks control system
• Water Service
27
Basic Commercial Services
• Parking Services
• Office Rent for customs agents and Transport
companies
• Communication Services
• Public Transport Services
• Transshipment of Cargo (load and unload cargo,
export-import)
• Warehouse
28
Complementary Services
• Support of port activities: cargo transfer, fumigation,
spraying, cargo incineration, cooling service.
• Financial Services area
• Food Court
• Others allowed by the legal framework
29
Bidding Tools
• Law on concession
• Concession code
• Feasibility Studies
• Prequalification Terms of Reference
• Request for Proposals
• Bidders Technical and Financial Proposals
• Adjudication decree
• PPP Contract
30
3. LPLA Business Model
31a
Business Model for LPLA
Regional Ministry of MOU National Customs
Environmental Service
Office
Environmental Public Works
Regulation
Contributes Inspection
Management
Land and cargo control
Fee
Water rights
Puerto Terrestre Los Andes Services:
services Basic non
Cointer Chile
Azvi (Spain) commercial
20%Equity-80% Debt
Complementary
Credit Interest Commercial
Specific contract line payments
Payment for
services
Chilean Credit Institute of Cargo owners
Construction Spain (import-export)
Company DEPFA Bank Customs
Ireland Agents
32
Tariffs
Service Tariff
Access to the Land Port and use of $0
Infrastructure
Parking over 24 hours $1
Time overrun when using decks and $4
customs inspection
Transshipment (Loading and unloading $200
cargo)
Public parking per hour $0,5
Monthly parking $50
Office rent per m2 $20
Public transportation between land port $1
and Los Andes
Warehouse Depending on cargo and time 33
Concessionaire Bet
• Bidding Mechanism:
Final Score = 0.35 * Technical Offer Score + 0.65*
Financial Offer Score
• Financial Score - Increases as the bidder reduces the
port’s access tariff. The maximum tariff allowed by truck
was US$17.
• The winner (spanish Company Azvi) offered to charge
zero for the port’s access tariff, counting on the
revenues generated from transshipment, warehouse
and commercial services.
34
PPP Performance
• Average time for truck inspection: 16 minutes
• Average time for trucks with dangerous cargo: 7 minutes
• On average 40% of trucks in the Land Port go through
the control procedure.
• 50% of trucks stay in the land port for less than 5 hours
• 6% of trucks stay more than 50 hours.
• Average time for a truck to spend in the land port is 14
hours
• Land port operates at 94% of capacity
35
Customs improvement
• The Project implemented a full cycle of proceedings
and electronic control for entry and exit operations at
Los Andes Land Port (LALP) – all of which are
electronically connected to the port terminal system
• These two initiatives; the Exports Clearance Electronic
System and LALP were highlighted by the IMF as
international best practices
36
4. Regulatory Aspects of LPLA
37a
38
39
Resources Flow from Concessionaire
to the Government
Construction Period Operation Period
$280,000 year $80,000 year
Management Fee Management Fee
$800,000 $600,000
Guarantee Bond Guarantee Bond
40
Risk Mitigation
• The Chilean Ministry of Public Works is preparing the
bid for the “Trasandino Railway” which will connect
Chile and Argentina.
• If this project is successful the Chilean government
must compensate the Land Port Los Andes
concessionaire for any resulting decrease in demand
for its services.
• The compensation will include a comparison between
imports and exports cargo moved on average by truck
and the cargo movements by the new train.
41
42
5. Zamyn Uud Gateway Logistics
Park Application
43a
Main Logistics Park Development
Corporation (LPDC) Facilities/Services
LPDC
Facilities
Services
Road- Rail Road- Road Logistics Services
Rail-Rail Consolidation Cash and Carry
Cross Dock Road Facilities Wholesale
Rail Warehousing Distribution
44
Main Differences LPLA-LPDC
Concept Chile (LPLA) - DBOT Mongolia (LPDC) –JV
Objective Customs control of truck Improve the road-rail and rail-rail
exports and imports. No transshipment service for imports and
railway. re-exported cargo, because of the
gauge change. No customs.
Dimension 24.5 ha 400 ha
Investment US$25 million US$21million - US$26 million
Demand (trucks per year) 250,000 54,000 (2008) – 108,000 (2014)
Demand (cargo) 2.5 million tons 1.6 million tons -3.2 million tons
Period of PPP agreement 20 years 60 years plus 40 years
Main risk Construction of the new No improvement of railway’s north
railway connecting Chile- section; No improvement of north
Argentina section of road to Russia.
45
Business Model for Zamyn Uud Logistics Park (ZULP)
Private Min. Finance
MFFA Contributes Shareholders Contributes SPC-UBTZ
Equity Land
Dividends Contributes Dividends Dividends
Tariffs Equity
Operation
Company Payment for
Regulatory Operation
Services:
Agency or Logistic Park Contract services
Parking
Regulation by Development Co. Road-Rail
contract Rail-Rail
Tariff Regulation Fee
Consolidation
Payment
Warehouse
Regulation Bond Coupon
Issue Payments (i + p)
Construction Specific contract Capital
Users
Company Markets
46
Corporate Governance
Logistic Park
Development Co.
Board of Directors
Mongolian Government
Mongolian Freight Forwarders Assoc
Private Shareholders
Project Ethics
Manager and Officer
Team President and Chief
Executive Officer
Chief of Planning
Chief Financial Chief of Human
and
Officer Resources
Development
47
Flow of Revenues
Road to Road Rail to Rail
Warehouse
Operation
Fee Fee Fee
Logistic Park
Development Co.
Rental tariff for m2 Revenues from the
and % of business Business or fee
Revenues from the
Business or fee
Commercial Real Estate
Parking
Services Development
48
Regulation
• LPDC will have a monopoly over transshipment services
• Maximum Tariffs by each service could be determined ex-ante the
creation of LPDC or could be used as a competition variable in the
tender process to choose the private partner. Benchmark strategy
could be very useful once LPDC is in operation.
• Non discrimination policy and free access to the services must be
guaranteed to the users who respect the tariff policy.
• Regulation can be managed by a special agency, Ministry and can
be explicitly stated in the official rules of the PPP LPDC.
• Standards and Performance indicators must be established in an
Operations Manual for the LPDC.
49
THANK YOU
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