PPIAF Steering Group Meeting Paris, France December 6, 2006

ppiaf.org

PPIAF Steering Group Meeting Paris, France December 6, 2006

PPIAF Steering Group

Meeting

Paris, France

December 6, 2006


Structure of Presentation

• Trends in PPI Activity

• What Does This Mean for PPIAF

• Recent PPIAF Activities

• PMU Issues


Trends in PPI Activity


Investment in PPI Projects, Developing

Countries, 1990-2005

US$ billions

140

120

100

$138

$114

$95

PPI activity

continued to increase

in 2005

80

60

40

50% higher than in

2004

20

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

In real terms still

lower than 1997 peak

US$ billion

2005 US$ billion

Total since 1990: US$961 billion in more than 3,200 projects

Source: The World Bank and PPIAF, PPI Project database


By Sector, Increased Share of Telecom

Investments in 1990-2000 Investments in 2001-2005

Transport

16%

Water

6%

Transport, 12%

Water, 3%

Natural Gas, 5%

Natural Gas

5%

Telecom

43%

Power, 21%

Telecom , 59%

Power

30%

Total: US$762 billion (2005 US$)

Total: US$370 billion (2005 US$)

Source: The World Bank and PPIAF, PPI Project database


By Region, Greater Diversification

Investments in 1990-2000 Investments in 2001-05

Europe

and

Central

Asia

14%

South

Asia

5%

East Asia

and

Pacific

27%

Middle

East and

North

Africa

3%

Latin

America

49%

Sub-

Saharan

Africa

2%

South

Asia

11%

Middle

East and

North

Africa

6%

Europe

and

Central

Asia

26%

Sub-

Saharan

Africa

6%

Latin

America

32%

East Asia

and

Pacific

18%

Total: US$762 billion (2005 US$)

Total: US$352 billion (2005 US$)

Source: The World Bank and PPIAF, PPI Project database


By Recipient, Growing Share of LICs

60

Investment commitments in infrastructure projects with

private participation in developing countries by income group

50

40

% 30

1990-2000

2001-2005

20

10

0

LOW INCOME

LOWER MIDDLE

INCOME

UPPER MIDDLE

INCOME

Source: The World Bank and PPIAF, PPI Project database


By Type of Projects, More Greenfield

2005 US $ billions

Developing Countries, by Period and Type of PPI

50

45

40

35

30

25

20

1990-1995

1996-2000

2001-2005

15

10

5

0

Concession Divestiture Greenfield project

Source: The World Bank and PPIAF, PPI Project database


Investor Behavior Shows Risk Aversion

• More greenfield projects as investors shun

regulatory and political risk (less privatization)

• Since 2002, 40% of investment went in new

projects

• More projects with management contracts

and leases with limited financial exposure


Case Study: Water Sector Trends

Decline in PPI in sector accompanied by an increase in number of closed projects

12

Investment commitments

US$ billion

Projects

45

10

8

6

4

Buenos Aires

concession

Manila

concessions

Chile

privatizations

Johor

concession

Syabas

concession

40

35

30

25

20

15

2

10

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Other investment commitments Large commitments Projects

0

Source: The World Bank and PPIAF, PPI Project database


Water Sector Trends

• Investment concentrated in 10 countries, esp.

China/Malaysia

• Greenfield activity in water treatment and bulk

facilities on the rise

• Decline in investment in water utilities

• Concessions declining but not disappearing,

increasingly with public-private financing

• Management & lease contracts on the rise - 25% of

projects in 2005

• New actors emerging with a more diversified pool of

players


Diversification of Private Sponsors

Across Sectors

• 1990-97 - top 5 sponsors 54% of

projects

• 2002-05 - share fell to 27%

• Top 10 investor lists 1990-2001 &

2001-05 - EdF and Tel Italia only

european firms to make both lists


Growing Share of Developing Country

Sponsors: in Water PPP Projects

45

40

35

30

25

20

15

10

5

0

Water projects with private participation in developing countries by

main sponsor type

Projects

1990 1995 2000 2001 2002 2003 2004

Developed country sponsor

Developing country sponsor

Source: The World Bank and PPIAF, PPI Project database.


Diversification of Sponsors: Recent

Transactions

• West Manila concession: 4 short-listed bidders

– Other Manila concessionaire (Manila Water)

– 3 Filipino companies in partnerships with Hong Kong,

Malaysian, Singapore and Indian companies

• Argentina: Catamarca concession (renewal)

– Spain FCC plus 3 Argentine: LatinAguas (Salta, Rioja,

Corrientes), Roggio (Cordoba), Sielecki (Formosa)

• Sub-Saharan Africa:

– Cameroon: Veolia, SAUR and ONEP (Morocco)

– Ghana: won by consortia Vitens + Rand Water


Diversified Players – Examples

from Water

Where are the new players coming from?

• Construction companies (bulk treatment plants)

• Manufacturing companies

• Established utilities diversifying overseas – Singapore, Rand, ONEP, Uganda

Diversified European players, largely operators

• Gelssenwater, Berlin Water (Germany)

• AcquaNet, Vitens (Netherlands)

• Eau de Marseille (France)

• Acea, Amga(Italy)

• Aguas de Portugal

• Severn Trent (UK)

• Aguas de Barcelona (Spain)


Chinese Flows to Africa – Strong

Growth

• By mid-2006, Chinese

commitments in Africa $9

billion – 3 times 2005 levels

• 2001-06: 100 Chinese funded

infrastructure projects

• Largely financed by EXIM,

terms of financing not clear

• Preliminary data: Chinese

financing likely to outstrip

OECD ODA and PPI by

significant margin

25

20

15

US$B

China

10

PPI

ODA

5

0

1996 1998 2000 2002 2004 2006

Year

Numbers preliminary not ready for public quotation


Chinese Commitments to AFR INF By

Country

Angola, 22%

Mozambique,

17%

Zimbabwe, 11%

Nigeria, 26%

Others, 8%

Sudan, 8%

Zambia, 4%

Gabon, 4%

Source: World Bank/PPIAF Non Traditional Donors Project Database


Chinese Commitments in AFR by Sector

Telecom

12%

Water

5%

Energy

39%

Transport

20%

General

24%

Source: World Bank/PPIAF Non Traditional Donors Project Database


PPI Trends…In Sum

• Increase in private flows in infrastructure, but still

concentrated in select countries

• Activity in telecom & transport sector continues to

expand

• Average project size increased in transport & energy – a

few large deals accounted for a large share of total

investments

• In water sector, focus on smaller projects, a few

countries and bulk facilities – private sector interest

continues


PPI Trends (contd.)

• Increase in number of greenfield projects rather than

privatization of existing assets

• Growing interest in management & lease projects

• Greater regional diversification of private sponsors with

new non-traditional players

• Chinese flows increasing rapidly in certain infrastructure

sectors and countries in Africa


What does this mean for PPIAF?


Implications for PPIAF

• Continued importance of basic sector reform,

strengthening government capacity

• By sector:

– Telecoms: Strong financial flows continued role for PPIAF

in lowest income countries for regulators capacity

– Transport: Strong momentum, moment to capitalize

– Water: No need to give up, PSP alive and well, new models

emerging

– Energy: Increasing interest in hydro and cross-regional

projects


Implications for PPIAF (contd.)

• Support innovation, share experiences with hybrid

contracts

• Special focus on management contracts as pragmatic

approach

• Just in time advice for project concept, negotiations

and restructuring

• Local/regional investors – analyze risks, opportunities.

Support local currency instruments.

• China in SSA – Strengthen government capacity to

evaluate options and support strong legal and

regulatory frameworks

• Make knowledge products timely, relevant, accessible

in a fast changing landscape


Recent PPIAF Activities


Recent PPIAF Funding by Region

FY06

FY07*

MNA

5%

SAR

14%

Africa

38%

LCR

0%

Global

1%

MNA

3%

SAR

13%

LCR

9%

ECA

14%

Africa

52%

Global

11%

ECA

11%

EAP

12%

EAP

17%

$17.4 m

$7.8 m

*As of 11/30/06


By Sector

FY06

FY07*

Water

19%

Energy

15%

Transport

12%

Water

9%

Energy

27%

Transport

17%

Telecom

14%

Telecom

5%

Multi-Sector

44%

Multi-Sector

38%

* As of 11/30/06


By Country Classification in the Strategic

Framework

Funding Across Country Categories (FY06 - 2nd Qtr FY07)

60

50

Percentage

40

30

20

10

0

Advanced Reforming Turnaround Slow Performers


Ratings of Ongoing Portfolio

80

70

72

73

60

50

%

40

Feb-06

Nov-06

30

20

22

21

10

6

6

0

S W U


Outcomes

Outcomes of PPIAF Activities:- Inception to Date

Completed

Pending

Total

Inactive

Facilitating Transactions

91

19

110

(10)

Strengthening/Creating

Regulatory Institutions

40

11

51

(2)

PPP Legislation

30

13

43

(6)

PPP Sector Reform

Strategies

35

23

58

(2)


Regional: Implementation Framework for

CASAREM

• A new electricity transmission line to

transmit power from Tajikistan and the

Kyrgyz Republic to Afghanistan and Pakistan

is being planned

• The CASAREM (Central Asia-South Asia

Regional Electricity Market) Multi-Country

Working Group established for this purpose

• Phase I of this project will likely involve

exporting of 1000 MW of electricity from

Tajikistan to Pakistan through a high-voltage

transmission line through Afghanistan

• The four Governments have requested

PPIAF support to develop the necessary

institutional, financial, risk mitigation and

legal framework for the Phase I investment


ARMENIA: Concessioning of Armenian

Railways

• Armenian Railway (AR), a vertically

integrated state-owned corporation,

suffers from inefficient operations.

PPIAF funded study in 2005-06

examined restructuring options.

• Government has now decided to

concession AR.

• An Inter-Sectoral Commission and

Ministerial Decision Making Group

set-up.

• Government is now receiving followon

PPIAF support on:

– enabling legal framework for concession

– oversight regime on safety, tariffs, access,

and service quality, and

– developing concession term sheet

PPIAF Funding: $75,000


INDONESIA: Infrastructure Risk

Management

• Few new infrastructure projects since Asian crisis

as investors perceived high risks, little

transparency, poor Government commitment.

• Government commitment emerging

• Recently completed PPIAF activity on framework

for central PPP unit ($75,000)

• New risk management activity advising MoF on

form and level of Government support for PPPs,

including guarantees and subsidies

• Development of methodology to identify fiscal cost

and risks of support

• Allows Government to monitor (and disclose)

financial obligations assumed and assess if best

served by creating a ring-fenced guarantee fund

PPIAF Funding: $445,000


Greater Focus on Outreach

• 15 Gridlines to date – aiming for 3-4 each

quarter

• New Quarterly Newsletter with wider

distribution

• High number of website hits for PPI database

information

• Revamping of website underway


Knowledge Products: Body of Knowledge

on Utility Regulation

• Summaries of key regulatory

concepts and over 300 references

and case studies

• Used by regulators, universities, and

think tanks both as a reference and as

a teaching tool

• Online version makes the BoK even

more accessible

• Aims at establishing an internationally

recognized measure of expertise to

serve as guide for capacity building

and professional development

www.regulationbodyofknowledge.org

PPIAF Funding: $282,000


Knowledge Products: Urban Bus Toolkit

• A new web-based interactive toolkit offering

– a practical guide to state and city policy makers

– for enhancing bus transportation services

– to secure a more market based approach for engaging the private sector in

providing urban bus transport services

• Toolkit has 3 modules in line with the process of

reform to enable:

– Identification and diagnosis of the problem

– Selection of the appropriate urban bus transport scenario

– Making the transition from the existing to the desired situation

• Available at http://www.ppiaf.org/UrbanBusToolkit/


PMU Issues


PMU Costs

New TA Commitments

FY05

17.2

FY06

17.4

PMU Admin Commitments

2.2

3.0

As % of Commitments

TA Disbursements

PMU Expenses

As % of Total Expenses

10.3%

13.6

2.2

12.7%

13.7%

15.6

3.0

15.1%

•Maintained at 15% with reduction of staff in DC

•Increasing costs of field offices

•Financing estimates FY07 range from $15m to $20m

•Good prospects of Australia joining as a donor


Trust Fund Admin Matters

• MDTF I - closure

• MDTF II – extension

• ADB Relationship

• TAP Membership – Meg Osius, Nasser

Munjee

• Program Council Membership

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