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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




            50

				
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