Private Finance Infrastructure in Developing Countries

Private Finance Infrastructure 

in Developing Countries 

GERMAN 

DEVELOPMENT 

INSTITUTE 

9th June 2004 

Bonn 

Peter René Jamin 

HOCHTIEF 

Projektentwicklung, 

Infrastructure 

Development 

P. Jamin Presentation DIE Bonn 9th June 2004 p. 1

HOCHTIEF HOCHTIEF HOCHTIEF – Global Global Global Presence 

Presence 

HOCHTIEF HOCHTIEF has has continually 

continually 

developed developed its its worldwide worldwide 

presence presence and and is is now now 

now 

active active in in all all important important markets markets 

markets 

through through a a a tight tight net 

net 

of of subsidiaries and and branch 

offices offices. offices 

With With over over 82% 82% of of our our revenues 

revenues 

generated generated outside outside Germany, 

Germany, 

HOCHTIEF HOCHTIEF is is the the most most 

most 

internationally internationally oriented 

oriented 

construction construction company 

company 

worldwide. 

worldwide. 

America: 

America: 

Turner 

Aecon Group 

HOCHTIEF do Brasil 

HOCHTIEF Construcciones 

TI 

Europe: 

Europe: 

HOCHTIEF Construction 

VSB, Czech Republic 

HOCHTIEF U.K. 

HOCHTIEF Polska 

HOCHTIEF Russia 

TI 

TI 

Middle Middle East/ East/Africa East/ 

Africa Africa: Africa 


Concor 

Turner International 

P. Jamin Presentation DIE Bonn 9th June 2004 p. 2 

TI 

Asia Asia Pacific / / Australia Australia: Australia 

: 

Leighton Contractors 


Leighton Asia 

Thiess Construction 

John Holland

HOCHTIEF HOCHTIEF HOCHTIEF – Group Group Structure 

Structure 

HOCHTIEF 

AIRPORT 

HOCHTIEF 

DEVELOPMENT 

� Organised Organised in in five five units units for for optimal optimal resource resource resource integration integration 

integration 

� Leading Leading system system provider provider – design, design, finance, construction, 

operation operation operation and and maintenance maintenance under under one one roof 

roof 

� Construction Construction revenues revenues worldwide worldwide 11,503bn 11,503bn ` (2003) 

� Equity Equity Equity approx. approx. approx. 2bn 2bn ` 

HOCHTIEF HOCHTIEF AG 

AG 

Germany 

HOCHTIEF 

CONSTRUCTION 

SERVICES 

EUROPE 

� 34.039 34.039 Employees Employees worldwide worldwide (2003) 

(2003) 

HOCHTIEF 

CONSTRUCTION 

SERVICES 

ASIA PACIFIC 

HOCHTIEF 

CONSTRUCTION 

SERVICES 

AMERICAS 


HOCHTIEF HOCHTIEF HOCHTIEF – International International Toll Toll Road Road Road Experience 

Experience 

HOCHTIEF HOCHTIEF Portfolio Portfolio ( (Direct ( Direct investments 

investments): 

investments 

investments ): 

Trave Trave Crossing, Lübeck 

Lübeck 

50 % share, Project volume ~ 160m ` 

Bridge Bridge Rosario Rosario Victoria, Victoria, Argentina 

Argentina 

30 % share, Project volume ~ 425 m USD 

Santiago, Santiago, Americo Americo Vespucio Norte Norte, Norte 

, Chile* 

45 % share, Project volume ~ 575 m ` 

HOCHTIEF HOCHTIEF Group Group Group Portfolio: 

Portfolio: 

Bakwena Bakwena Platinum Platinum Toll Toll Road, Road, South South Afrika Afrika 

Afrika 

via Concor 

Cross Cross Israel Israel Highway, Highway, Israel* Israel* 

Israel* 

Cobequid Cobequid Highway, Highway, Canada 

Canada 

Highway Highway 407, 407, Canada* Canada* (until (until 1999) 

1999) 

via AECON Canada 

West West Link Link M7; 

M7; 

Lane Lane Cove Cove Tunnel, Tunnel, Australia 

Australia 

via Leighton 

* * Free Free flow flow multi multi lane lane electronic electronic tolling 

tolling 

... over 650 km 

of Toll Roads 


Private Private Private Private Finance Finance Finance Finance Infrastructure Infrastructure Infrastructure Infrastructure in in in in in Developing Developing Developing Developing Countries Countries Countries 

Countries 

Countries - 

Requirements Requirements Requirements Requirements of of of of the the the the Private Private Private Private Sector Sector 

Sector 

Sector 

Sector 

1. Political and Legal Basis 

2. Local Project Circumstances 

3. Bankability/Development Aid 

4. Investment Criteria 

5. Result 


Private Private Private 

Private 

Private Finance Finance 

Finance 

Finance Requirements 

Requirements 

Requirements 

Requirements 

1.1 1.1 

1.1 

1.1 Political Political 

Political 

Political and and and and Legal Legal Legal Legal Basis Basis Basis Basis ( (Law ( 

( 

( Law Law) 

Law 

Law 

Does Does a stable stable relationship exist between between the the country country and and the 

Development 

Development Development Aid Aid Aid Entity Entity (DAE)? 

(DAE)? 

Is Is there there a central central/Government 

central 

/Government PPP PPP-Unit PPP Unit Unit? Unit 

Does Does a clearly focused focused mid mid- mid to to long long term privatisation privatisation programme for 

the the entire entire region region with with with DAE support support exist exist? exist exist 

Is Is there there there an an efficient efficient and transparent international tendering tendering tendering and award 

procedure procedure which which is firmly firmly controlled controlled by the DAE? 

DAE? 

Is Is the the local local local legal basis (concession 

concession law law) law law) 

) for for the the project project satisfying satisfying, satisfying 

, and 

does does does it it cover all all required project permits permits? permits 







Requirements 

Requirements 

Requirements 

1.2 1.2 

1.2 


Political 

Political and and and and and Legal Legal Legal Legal Basis Basis Basis Basis (Contract) 

(Contract) 

(Contract) 

(Contract) 

What What are are the the award award criteria criteria? criteria 

? How is the the public public sector 

sector 

comparator comparator computed computed? 

computed 

Is Is the the DAE DAE a a contractual partner partner to to the Private Private Sector Sector? Sector 

? 

Are Are Force Force Majeure Majeure risks and and other liabilities liabilities sufficiently 

covered covered/insurable 

covered covered insurable or or or otherwise otherwise otherwise limited limited? limited 

Are Are legal legal entitlements/awards entitlements/awards enforceable? enforceable? Is it it possible to 

agree agree on international international arbitration arbitration? 

arbitration 

Is Is it it possible to to to disinvest disinvest shares in the the the concessionaire 

concessionaire? 

concessionaire 







Requirements 

Requirements 

Requirements 

1.3 1.3 

1.3 


Political 

Political and and and and Legal Legal Legal Legal Basis Basis Basis Basis (Tax) 

(Tax) 

(Tax) 

(Tax) 

Are Are the the local local tax tax regulations regulations for for privately privately financed financed projects 

projects 

acceptable acceptable? 

acceptable ? 







Requirements 

Requirements 

Requirements 

2.1 2.1 

2.1 

2.1 Local Local Local 

Local 

Local Project Project 

Project 

Project Circumstances 

Circumstances 

Circumstances 

Circumstances 

Circumstances 

To To which extent is is the the the country country politically politically stable stable? stable 

Is Is there there previous privatisation privatisation experience experience? 

experience 

Is Is Is the the client client serious serious, serious , competent competent, competent , transparent and 

professional 

professional? 

professional 

professional? 

? What What about about his advisors advisors? advisors 

Do Do the population population population and and key key politicians politicians/parties 

politicians politicians parties support support the 

the 

project project? project 

Are Are all all necessary necessary public public inquiries carried out? out? 

out? 

Is Is Is the the time time frame for for the the project project award sufficient sufficient? sufficient 







Requirements 

Requirements 

Requirements 

3.1 3.1 3.1 3.1 Bankability/Development Bankability/Development 

Bankability/Development 

Bankability/Development Aid 

Aid 

Aid 

Aid 

Which Which part part of of the the financing financing financing is is provided by by by the the the DAE, DAE, and under 

under 

which which conditions conditions? 

conditions 

Does Does the DAE DAE support construction and and operation operation of the 

project project? project project ? Does it it enter into into direct direct contracts with banks banks? banks 

Is Is Is it it possible possible to to increase increase tolls tolls if if if the project‘s project‘s commercial 

commercial 

circumstances circumstances have have changed changed? changed ? Does the the DAE DAE cover cover shortfalls 

shortfalls 

or or guarantee revenues revenues? revenues 

To To which extent could could could the remainder remainder be financed financed locally locally, locally , or or is 

international international financing required required? 

required 







Requirements 

Requirements 

Requirements 

3.2 3.2 3.2 3.2 Bankability/Development Bankability/Development 

Bankability/Development 

Bankability/Development Aid 

Aid 

Aid 

Aid 

Is Is Is the the client‘s client‘s financial financial standing standing/rating 

standing 

rating rating sufficient sufficient? sufficient 

Does Does the project project cash cash flow flow provide provide a sufficient sufficient debt debt service 

cover cover ratio ratio? ratio 

Are Are the the required required securities securities/guarantees 

securities 

guarantees acceptable acceptable, acceptable , and and can 

they they they be be be provided under under the local local concession 

concession law law and and the 

the 

contract contract? contract 

If If there there is is an an element of of direct direct user user revenues revenues: revenues 

Does Does the concessionaire concessionaire have have direct access access to revenues revenues? revenues 

Can Can revenues be safely converted converted and and and transferred transferred? 

transferred 







Requirements 

Requirements 

Requirements 

4.1 4.1 4.1 4.1 Investment Investment 

Investment 

Investment Criteria 

Criteria 

Criteria 

Criteria 

Is Is Is the the investment at a comparatively 

comparatively acceptable acceptable level level? level 

Is Is the the return return return on investment sufficient sufficient, sufficient , and and 

is is it it at least least 

equivalent equivalent to the 

risks risks inherent inherent in in the project project? project ? 

Are Are there there revenue revenue sharing provisions provisions? 

provisions ? Where Where does does the money money go go? go 

Do Do satisfying provisions provisions exist exist for for voluntary voluntary or or non non-default 

non 

default termination termination of 

the the concession concession or other State actions actions? actions actions 

Does Does the DAE DAE – towards towards equity and debt debt providers – cover cover any any losses losses 

losses 

(revenue revenue and and profit profit) profit ) in in 

case case case of politically politically motivated motivated premature 

cancellation 

cancellation cancellation of of the concession 

concession? 

concession 







Requirements 

Requirements 

Requirements 

4.2 4.2 4.2 4.2 Investment Investment 

Investment 

Investment Criteria 

Criteria 

Criteria 

Criteria 

If If there there is an an element of of direct direct direct user user revenues revenues: revenues 

Is Is there there a proven long long-term long term demand demand demand (value value of of time)? 

time)? 

Are Are the the users willing to to pay pay? pay 

Do Do effective sanction sanction mechanisms mechanisms for for violation violation exist exist? exist 

Is Is Is the the project project project protected from toll toll-free toll free competition 

competition, competition 

competition, 

, also 

intermodal intermodal intermodal ( (road ( road road/rail road rail rail)? rail )? 

If If not not, not , does does the the public public sector sector sector or the DAE DAE support support make good 

good 

any any shortfalls shortfalls shortfalls resulting resulting from from that that competition 

competition? 

competition ? 







Requirements 

Requirements 

Requirements 

5. 5. 5. 

5. 

5. Result Result: Result 

Result 

Result : : 

: 

Win Win-Win Win 

Win 

Win Win Win 

Win 

- Situation 

Situation 

Situation 

Situation 

If If the the project project risks are adequately adequately distributed between between DAE, DAE, 

Government Government and and Private Private Partner, Partner, a a long long term private 

private 

committment committment is is advantageous to all all 

involved involved parties parties: parties 

Efficiency Efficiency gains gains, gains , stability stability, stability , security security for budgets budgets and and finance 

planning planning of of the public public sector sector, sector sector, 

, and and 

Long Long term term, term 

, secure secure investments with with satisfying returns returns for for the 

the 

private private sector sector. sector sector. 

. 

This This This is is interesting for industrial industrial industrial and and and institutional institutional investors and 

and 

creates creates a capital flow into developing developing countries countries. 

countries 


Private Finance Infrastructure 

in Developing Countries 

Discussion 

Peter Jamin, 

HOCHTIEF

Private Finance Infrastructure in Developing Countries

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