Development of Policy, Legal, and Insitutional Framework for - ppiaf

Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi
Final Report
What are the results of the Consumer Demand, Affordability, and Willingness to Pay
Survey?
What service delivery outcomes and improvements are expected from the project?
What are the Service Delivery Standards, and can those Standards be complied with
through operations and maintenance costs that are sustainable?
About the Funding:
Has the feasibility consultant’s cash flow projections been verified by the PPP Unit's
project advisor, and do they enable a competitive Financial Internal Rate of Return?
Given prevailing market expectations regarding Equity Financial Internal Rate of
Return, can tariff levels required to achieve such return be realistically attained given
the consumer profiles and willingness/ability to pay, and political factors impacting
tariffs?
Are the potential funding sources identified in the “market sounding” credible in
terms of their track record of success in similar projects, and their financial capacity?
Is the proposed debt-to-equity ratio within generally accepted gearing limits for this
sector, and are any Government guarantees or contingent liabilities required to
secure the debt?
Will the projected cash flows provide sufficient assurance of debt service, in
particular does the debt service coverage ratio comply with generally accepted
norms for the sector?
Is there a “take-or-pay” off-take contract that requires Government to pay for
capacity even if consumption levels and/or Accounts Receivable collection
performance does not provide the required cash flow to make payments required
under the contract?
Is there a supply contract, e.g. fuel supply for a power generator, for which
Government must provide a guarantee, or if supply costs pass through to the
buyer(s) can the buyer(s) afford it?
Because the PDF operates like a Trust and its Governing
Board sets policies consistent with its fiduciary
responsibilities, the contributors of the assets of this quasi-
Trust have broad discretion in the instructions that they
give to the Governing Board. These instructions can be
adjusted from time to time as circumstances change. As is
the case with a Unit Trust for investment purposes, those
providing the Corpus of the Trust may collectively, or in
some cases individually, instruct the Board (analogous to
PDF Project Priorities
The PDF policy board will set annual
priorities for the types of projects to be
funded by the PDF, and make these
public. Projects that fall outside these
priorities will not be excluded from
getting PDF funding, but the PDF
priority will be one of the factors taken
into account.
the Fund Manager in an Investment Trust) how they want their money to be invested. As is the
case with an Investment Trust, these investment decisions reflect the mix of risks that the
investors want to have in the Trust. Therefore, the contributors to the PDF may, from time to
time, instruct the Governing Board regarding their preferred risk profile. Some PPP projects
may have a relatively high level of risk (international PDF experience has been that a high-risk
project is one that has about a 25% probability of not reaching financial closure) and other may
offer lower financial and economic returns but have commensurately lower levels of risk. The
THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 52