Professional Documents
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PPP Feasibility Studies
PPP Feasibility Studies
PPP Feasibility Studies
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• The need for a pre-feasibility
study before a feasibility study.
Participants • Learn about the three important
shall features of a PPP project.
Learning understand • Understand the main activities
Objectives required to detail the scope of a
the followings PPP project, design its technical
1
requirements, and assess
technical risks
• Understand the basic techniques
and good practices required to
Participants produce a series of feasibility
shall assessments of the technical,
Learning understand commercial, economic,
Objectives environmental, social, legal, and
the followings fiscal dimensions of the project
2
etc
Participants
shall Understand the basic techniques
Learning and good practices required to
understand identify and allocate risks
Objectives the followings
3
Luke 14:28
Contract
Identificati Structuring Tendering Contract Mangeme PROJECT
Appraisal & Award Mangeme nt &
on & & nt Operation
Screening Constructi s
Drafting on
(Pre - Feasibility)
(Feasibility). .
Project Cycle
ICRC
Developm
Procureme Implementati
PROJEC
Maturity
ent T
nt. on.
1 2 3
To avoid the risk of sinking To prevent strong To engender a good
resources into the analysis incentive for a biased working relationship
and structuring of a non- decision. between officials of the
feasible PPP project. procuring entity and TA
PRE-FEASIBILITY DECISIONS
3
1 2 The project can be made
viable through Govt.
The project appears to be The project is not
support eg OBA or VGF
sound as a PPP and can move suitable as a PPP
on to the next stage i.e.
feasibility study; 4
1
y Aff
li t o
b i rd
it a a bi
s u lit
P P y
P
PPP SUITABILITY
01.
02.
Is the project’s size big enough to justify the implicit costs of the
transaction (to justify structuring and managing a complex tender)? Is it
not too big for the market? Is it too large for local construction companies
to take on, or so costly that it could not be successfully financed?
04.
05.
Are there clearly identifiable revenue streams (from Govt. or public end-
users) with strong growth prospects?
A destructive competitive market does not & will not exist soon.
AFFORDABILITY
Commercial Feasibility
Private sector cash flows for the project
Fiscal Feasibility /
Affordability
Public sector (User) cash flows for the
project
Value for Money
Cash flows for the project thru PPP
in comparison to Cash flows for the project thru traditional
delivery.
Technical Feasibility 1
Investors
Profitability ratios – IRR, NPV etc
Lenders
Leverage ratios – Debt/Equity
ratio, DSCR etc
Economic Feasibility
Satisfy Closely
engage
INFLUENCE
Monitor Inform
INTEREST
Human Resources Feasibility
If a Project involves institutional change there will be an impact on the existing staff.
Therefore, identify nature and number of staff to be affected, formulate a clear and
concise plan for communicating with staff and addressing their needs and issues of
concern in a fair and equitable manner
If there will be
retrenchment,
what are the social
safety needs ?
Value for Money Assessment
If compared with a public sector procurement option, will the PPP deliver a higher net
economic benefits to society, taking into consideration the whole-life costs of the project
Project Project
N25m N30m delivered
delivered
through PPP through
traditional
Legal Due Diligence 1
A PPP Project is like any other project and so
must comply with relevant laws
Infrastructure Concession
Regulatory Commission Act (ICRC)
2005 and Regulations.
Legal Due Diligence 3
A PPP Project is like any other project and so
must comply with relevant laws
Performance Requirements,
and O & M Requirements
Project Design &
Construction
Minimum Detail Functional
The identification of the key Design
design requirements that will
later be included in the PPP
contract as the specification for
construction of the
Reference
infrastructure, including time
Design
requirements (time limit to
construct and commission); and
Financial structure
from the Govt.
perspective Risk allocation
(revenue regime, structure
contract term, etc.
Risk Allocation
Structure
Demand risk, Revenue risks, Project
input or resource risk,
protestation risk, Risk
reputational damage risk,
political risk, Technology risk, Risk
early termination risk ie
capricious termination, Risk
termination for convenience
or public good risk, Force
Majeure risk etc
Early Termination Risk
Private Party’s default
Lender is paid back with a
haircut
Part of Equity may be paid
Govt. default
back
Lender is paid back outstanding
loan in full with interest and
breakage costs
Outstanding Equity is paid back
with estimated profit
Force Majeure
Govt support
Viability Gap Funding or
Revenue Regime Output Based Aid
User Pays or Govt. pays
Third Party revenues.
Cession Daily
Refinancing
3rd Important
Dimension
Financial
Financial model is a tool that presentsModel
the financial
characterization of the project over its lifetime. It
incorporates, all the expected private sector investments,
revenues, costs, taxes, analytical parameters e.g. cost of
loans, cost of equity, insurance parameters, and the relative
inflation rate
• Project term
• Construction period
• Inflation rate and discount rate
• Construction costs
• Market demand
• Operating Costs
• Third party revenue
• Residual values
• Financing terms
Sensitivity Analysis 3
Minimum sensitivity analysis should include the
following
1. Increase in investment cost by 10% to 30%;
2. Increase in operating costs by 10% to 30%;
3.Decrease in revenue by 10% to 30%.
1.
6. 2.
THANK
YOU
5. 3.
4.
References
APMG Public-Private Partnership Certification Guide Chapters 1
- 7 The World Bank Group, 1818 H Street NW, Washington, DC
20433, USA 2016
Draft PPP Manual from Infrastructure Concession Regulatory
Commission 2017
Cuttaree V. Successes and Failures of PPP Projects. Retrieved
from World Bank website 17/6/2008