Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Annex 4: Concession Contract Guide
• Specify service levels to be delivered by the private sector and the flow of
payments between the parties without extended negotiations; and
• Establish a consistent approach and pricing among bidders during any competitive
tendering procedure that follows the introduction of reforms.
1.2 Key Factors
This Guide does not purport to set out draft clauses, instead it seeks to point out
many of the issues that will need to be considered when developing concessiontype
arrangements. As indicated in the Introduction, in Civil Law Jurisdiction,
some of these issues may be addressed within the Civil Code and therefore would
not need to be repeated in the Agreement, or where permitted, the Agreement
may seek to deviate from the Civil Code and the wording should reflect that.
Therefore the Guide addresses not only general issues that may arise in relation
to concessions but also factors and situations that are particular to railways, and
their potential impact on a Concession Agreement. Although some of these factors
and situations are neither mandatory nor essential, they illustrate issues that
ought to be considered in concession-type arrangements.
• Will the private sector party be a special-purpose vehicle? Initially, this might
mean that the party uses its own contractors and their subcontractors to supply
services on its behalf. Usually, a special-purpose vehicle is a company set
up for a single purpose. After operations and maintenance costs are met,
company revenues are used to pay off debt, pay interest on the debt, and pay
a dividend on equity. The company may apply revenues towards increasing
and/or improving assets used in connection with the concession, but would
not be expected to acquire assets for any other purpose.
• Does the public sector intend to create both a Concessionaire and the executed
Concession Agreement, followed by a competition to divest the concession
company to the private sector (namely with the benefit of the Concession
Agreement)?
• Will the public sector contracting party be a Ministry, a government agency,
or a state-owned company, such as a railway holding company? If it is a Ministry,
state guarantees will not be needed as they would be if the contracting
party were a state-owned entity.
• Will the assets to be used for the concession be transferred to the Concessionaire
or will the transfer include only the rights to use the assets? As a
corollary, where only the rights to use are transferred, will any new assets developed
by the Concessionaire be transferred immediately to the Authority,
with a continuing right for the Concessionaire to use them?
• Will the concessioned railway assets be a subset of the host country’s railway
system? Will the railway, subject of the Concession Agreement, be used primarily
for freight, or must the Concessionaire allow infrastructure access to
rail passenger traffic?
The World Bank Page 240