Professional Documents
Culture Documents
M. Hasan Mahmud, Senior Investment Officer, PPP Division, Infrastructure Department, IDB
July 21, 2010
Islamic Development Bank (IDB) Group
Shari’ah Compliance
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• Agricultural Development & Food Security
Total Employees : 1,014
• Infrastructure Development
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• Private Sector Development
• Intra‐Trade among Member Countries
• R&D in Islamic Banking & Finance
R&D in Islamic Banking & Finance
Industry, 12%
Transport &
Coms; 31%
Coms; 31%
As of May 2010
Non‐ Sovereign
Operations Sovereign Guaranteed Operations
Project
Project
Processing/ Inter‐
Departmental
Credit Review
Committees
Management Results
Review APPROVAL Execution
Analysis
Risk Mitigation Tools
Ri k Miti ti T l
Sovereign Non‐Sovereign
Project Risks Guaranteed Project Guaranteed Project
Sovereign Structure PPP Structure
Country:
• Implementation Agreement
a. War and Civil Commotion Government Guarantee • Concession Agreement
b. Transfer and Convertibility
Legal:
• Implementation Agreement
a. Enforcement of Judgments Government Guarantee • Concession Agreement
b. Court Procedures
Construction: •EPC Bonds & Guarantees
a. EPC/ other contracts •Sponsor Guarantees
Government Guarantee •EPC Contract
b. Site Conditions
Operation:
a. Operations •O&M
O&M Contract
Contract
Government Guarantee •O&M Bonds
b. Inputs (utilities)
c. Economic Environment
Financial: •Assignment over project cash‐flows
a. Repayment Capacity
p y p y • Implementation Agreement
Government Guarantee
Government Guarantee • Concession Agreement
b. Market Risk
• Off‐take Agreement
Multisource Financing
All payment obligations in respect of the facilities rank pari passu at all times.
(IDB) Islamic Facility
Utilizations, draw‐downs and any prepayments are typically addressedConventional Facility
pro rata across all
facilities.
1 Common Terms Agreement
1. Common Terms Agreement
The asset of the Islamic Facility Providers is treated as security and is assigned/pledged
2. Shared Security Agreement
to the common pool for the benefit of all lenders.
Ownership
The common Rights of pool (typically overseen by the Lenders
Ownership Rights of
security Lenders’ Security In the event of a
In the event
Agent of a
Inter
or Inter‐
the Leased Assets
creditor Agent) is shared pari passu liquidation the
by all the lenders (conventional and Islamic).
Common Security Pool
Assigned/Pledged to common security pool
In thethe Pool
event of enforcement of security all parties act in accordance is shared by all lenders
with the inter
creditor arrangement. on a pari passu basis
Key Focus Areas
K F A
• Non‐sovereign Financing in the Energy, ICT and Transport sectors
• Infrastructure Financing in Africa
• Creating relationships to leverage IDB’s participation in Infrastructure development
• Going forward, create Products/Funds
– Credit enhancement tools/instruments
Credit enhancement tools/instruments
– Position IDB as a catalyst for attracting co‐financiers and mitigating risk
– Advisory services for PPP focused project development/country capacity building
Signature Achievements
• Aggregate Net Financing* of over US$ 2,200 m.
Signature Achievements
Sr. No. Project Description |DB Participation (US$ m) Country
1. Janub Combined Cycle Power Plant 170 Azerbaijan
2. Rural Electrification 146 Morocco
3. Neelum‐Jhelum Hydropower 138 Pakistan
4. Renewable Energy Program 100 Turkey
5. Tehran Power Transmission Project 66 Iran
6
6. Regional Power Transmission Interconnection
Regional Power Transmission Interconnection 30 Afghanistan &
Afghanistan &
Tajikistan
Key Focus Areas
Key Focus Areas
• Facilitate Regional Integration
– Promoting economic cooperation and regional integration among MCs
• Development of Transport Corridors
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– Focusing on the Development of international transport corridors within MCs
• Improve transport Infrastructure
– Improving the transport services through better infrastructure
• Increase Accessibility
– Provide access to the remote areas.
Signature Achievements
Signature Achievements
Sr.
Project Description IDB Participation (US$ m) Country
No.
1.
1 Khanewal ‐ Multan Motorway
Multan Motorway 160 Pakistan
2. Akieni‐ Okondja Road 107 Gabon
3. Marrakech ‐ Agadir Highway 106 Morocco
4. Arboutchatak‐bitkine Road 62 Chad
5. Singrobo‐yamou Soukro Highway (Phase Iii) 61 Cote d'ivoire
6. Aqaba
b Coastall Highway
h 31 Jordan
d
Key Focus Areas
Key Focus Areas
• Facilitate Access for all to water and sanitation services
– Promoting cost‐effective solutions
• Improve health conditions and standards of living
Improve health conditions and standards of living
– Raising awareness on the link between sanitation and health issues
– Strengthen capability of Municipalities in handling solid waste
• Improve water supply and sanitation
– Promote sustainable water infrastructure
• Increase accessibility/affordability of private housing for low‐income populations
– Provide access to land and shelter to most the needy
– Innovative housing solutions including “green houses”.
I ti h i l ti i l di “ h ”
Signature Achievements
Sr. No. Project
j Description
p IDB Participation (US$ m)
p ( $ ) Countryy
1. Qom Water Supply 129 Iran
2. Expansion Of Damascus Water Supply 106 Syria
3. Mashhad Sewerage Project 69 Iran
4. Choutrana & Meliana Waste Water Mgmt. 28 Tunisia
5
5. Abidj W t S
Abidjan Water Supply Reinforcement
l R i f t 15 C t d'i i
Cote d'ivoire
6. Nouakchott Water Supply 16 Mauritania
• Four Core Sectors
• 80% Financing Allocation Focus on Four Core Re‐Balancing Regional
g g
Sectors Allocation
Scaling Up
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Enablers
• Mobilize Private Sector and PPP Financing
• Introduce New Financing Instruments (Guarantees and
I t d N Fi i I t t (G t d
Syndications)
• Sponsorship and Promotion of Infrastructure Funds
• Internal and External Collaboration
I t l dE t l C ll b ti
• Support Regional Integration
M. Hasan Mahmud
Senior Investment Officer
PPP Division
Infrastructure Department
Project Concept
• The SKVE is planned as a 51.2km three‐lane dual carriageway
• It will include nine (9) interchanges and six (6) toll plazas
• It is divided into 4 main sections:
– Section 1A was successfully completed in Year 2001 by Gadek‐Perspec
– Sections 1B, 2 & 3 part of the new construction; however, project company will also
toll section 1A
• The Expressway is destined to be part of the regional road network for Klang Valley which is
located in the suburbs of KL; Will provide an alternative east‐west movement and an
essential link between Putrajaya‐ Cyberjaya to the East, and the Port Klang area to the West
• Sponsored by SKVE Holdings, a SPV set up by Hunterton Sdn Bhd and Virtual Peaks Bhd of
Mala sia
Malaysia.
• Total cost estimated at RM 1,582 million (Approx. US$ 440 million)
Uniten
Interchange
B15/LDP Pulau Indah Interchange
Interchange
Pulau Carey Interchange
WCE Interchange & Toll & Toll
• The total project cost is estimated at RM1,582 Million (USD440 Million)
• The land cost valued at about RM 500 Million (USD139 Million) comprising 32% of total cost
• Pre‐operating expenses includes project preparation expenses such as engineers’ reports,
traffic surveys, legal fees for the concession negotiation etc
• Capital expenditures (Capex) include road, bridges and toll plazas construction and
supervision
• The proposed project financing include equity (5%), quasi‐equity (49%) and debt (46%)
• Local senior lenders will finance the project over a 17 years‐period
• Subordinated debt provided by Bank Pembangunan having a tenure of 23 years, and is
subrogated in right and payment of principal and interest to the project’s senior
indebtedness including IDB
indebtedness, including IDB
Conditions Precedent a. Submission of a Public Opinion Survey result within 6 months from
execution of the CA
b. Submission of a duly executed Shareholders Agreement to the EPU
within 12 months from execution of the CA
h h f f h
c. Submission of Financial Term Sheet within 12 months from
execution of the CA
Concession Period 40 years from the Effective Date
Performance Bonds 5% of the contract value of each section
Maintenance a
a. In respect of Section 1A, from the first date of tolling until the
In respect of Section 1A from the first date of tolling until the
termination or expiry of the Concession; and
b. In respect of the other Section of the Expressway, from the
completion of the construction works in relation thereto until
termination or expiry of the Concession
In the event of termination, the Government shall pay appropriate
, p y pp p
compensation, as agreed in the CA, to the Company not later than 6
months after the termination
Islamic Development Bank ٢٤
Salient Features of Concession Agreement
Salient Features of Concession Agreement
Termination by The Government reserves the right to terminate the CA with three months
Government
Government notice, if the Company:
notice, if the Company:
a. Without reasonable cause, fails to commence construction or fails to
perform its obligations under the CA; or
b. Without reasonable cause, suspends or abandons the whole of the
construction works for a continuous period of sixty (60) days or fails to
complete construction works or breach any of the terms under the CA;
or
c. Breaches the terms of the CA or goes into liquidation
Step‐in Rights of In the event of default by the Company, the Government shall have the right
the Government to assume the operational responsibility of the Company under the CA. The
the Government to assume the operational responsibility of the Company under the CA The
Government shall ensure that the moneys collected shall be utilized in the
following manner:
a. Firstly, towards the operational cost of operating and maintaining the
Concession including the Government's costs
b. Secondly, towards the discharge of the payment obligations of the
C
Company to its lenders
t it l d
Economic Benefits
Economic Benefits
• Easement of traffic from and to the Port Klang area
• Reduced travel time to Putrajaya/Ciberjaya
• Increased productivity through reduction in trip time and transportation cost
I d d ti it th h d ti i t i ti dt t ti t
• Boost economic development along the route
• Potential improvement in financial viability of land development projects by facilitating access
• Estimated EIRR of 14%.
d f
IDB’s Involvement
• Signature experience for IDB in many ways;
– First toll road project on PPP basis
– IDB financed its share in the project by raising local RM 270 million Sukuk (IDB’s first LCY
Sukuk)
– Dual impact: project finance and capital market development
– Proved instrumental in promoting Islamic finance in the region by boosting confidence of
investors in sukuk transactions
k k
Other risks are covered with insurance.
Furthermore, cost overrun requires
additional funding that may not be easily
The sponsors have also agreed to sign a project
Th h l dt i j t
available. funds agreement, which will provide that
any cost overruns for the project will be covered
by the shareholders.
Appropriate independent audit mechanism used
to ensure design compliance
Islamic Development Bank ٢٨
Key Risks & Mitigants
Key Risks & Mitigants
Key Risks Risk Description Risk Mitigant
Traffic Risk
Traffic Risk Actual Traffic on the tolled road
Actual Traffic on the tolled road Experienced Traffic Consultant & highly reliable base year
Experienced Traffic Consultant & highly reliable base year
differs significantly and adversely data of 1998 & 2001
from the figures projected in the The project was deemed viable as early as 1998 by JICA
Traffic Study. Rigorous vetting & calibration of the assumptions used in
the projection model
Lead to the problem of Market risk
with major implications on revenue A debt service reserve account, to be partially funded by
collection and debt servicing the sponsors, is also set up to partially offset the risk.
Regulatory Risk Termination of the Concession GoM will be entitled to complete the construction works
Agreement by either party and call on the performance bond during the
construction period, or indemnify SKVE for the value of
completed works if termination occurs in the course of
completed works if termination occurs in the course of
operations.
Senior lenders are therefore well protected, as the value
of construction works will at all times be higher than
of construction works will at all times be higher than
outstanding senior debt.
Government may not allow the toll This risk is mitigated by the provisions in the CA, which
rates as stated in the CA to be
t t t d i th CA t b allow SKVE to seek compensation from the Government
ll SKVE t k ti f th G t
charged to consumers in the event that the toll rates as stated in the CA are not
approved
Islamic Development Bank ٢٩
THANK YOU
THANK YOU
M. Hasan Mahmud
Senior Investment Officer
PPP Division
Infrastructure Department
Project Company 9 Korean Electric Power Company (KEPCO), South Korea(65%)
Sh
Shareholding
h ldi 9 Xenel
X l Industries Limited (XENEL), Saudi Arabia
I d i Li i d (XENEL) S di A bi
Commercial 9 Offtaker: National Electric Power Company (NEPCO)
pp ;g p p g
9 Gas Supplier: NEPCO; gas price is a pass through under the PPA
Debt Arrangement 9 Debt
Debt Requirement: US$ 310 million
Requirement: US$ 310 million
¾ IDB Financing: US$ 80 million; mode of financing: Leasing
¾ KEXIM direct loan: US$ 118 million
¾ KEXIM covered loan: US$ 96 million
covered loan: US$ 96 million
¾ PROPARCO: US$ 50 million
• MEMR used two‐envelope evaluation process to select the successful bidder
• Envelope I contained technical aspects of the proposal. Envelope II contained the
bidder’s final tariff proposal.
• MEMR received four qualified proposals.
Bidding Consortium Countries
International Power, Saudi Oger United Kingdom, Saudi Arabia
AES, Mitsui, Tohoku United States, Japan, Japan
KEPCO, XENEL Korea, Saudi Arabia
Mitsubishi, GAMA, Enara Japan, Turkey, Indonesia/Jordan/Greece
• The KEPCO XENEL Consortium proposed the lowest tariff
• MEMR recommended to award the project to KEPCO XENEL consortium.
• KEPCO, South Korea
CO S h
– Shareholders: Korean Government (51%) , foreigners and others (49%)
– Represents 94% of the total power generation in Korea
– Installed capacity of 60 GW
– Rated A (S&P), A2 (Moody’s), A+ (Fitch)
• XENEL, Saudi Arabia
– Founded in 1973, a private company incorporated in Saudi Arabia and completely
owned by members of Ali Reza family.
– Has diversified experience in Energy, Industries, Construction, Healthcare, real estate
and global investing. Total workforce of 7,000 staff.
• Capacity and technology
C i d h l
– The project consists of a gas fired CCGT power plant with a net capacity of 373 MW.
– The project will use two Siemens Gas Turbines and one Steam Turbine from Skoda.
• Fuel
– The
The Project uses natural gas as a main fuel and distillate heavy fuel as back up.
Project uses natural gas as a main fuel and distillate heavy fuel as back up.
– Fuel is procured by NEPCO, which is responsible for all costs associated with the
procurement and transportation of the fuel
– Gas price is a pass‐through under the PPA
p p g
• Implementation schedule
– 18 months for the first 254 MW (Phase 1); 9 months for the next 119 MW (Phase 2)
18 months for the first 254 MW (Phase 1); 9 months for the next 119 MW (Phase 2)
Implementation
MEMR Shareholding
Agreement KEXIM
Political &
Power Purchase commercial cover
NEPCO
Agreement Commercial
Al Qatrana
Financing
Financing Lenders
Electric Power Agreements
GoJ Guarantee
Water Supply Company
WAJ
Agreement
IDB
O&M
MoF/Dept. of Land Lease EPC
Agreement
Land & Survey Agreement
SNC Lavalin,
Fichtner India
Economic Benefit
Adding power to the national grid to meet increasing power demand
Attracting FDI
Attracting FDI to the Country
to the Country
Creating local jobs
Investment Rationale
Strong Sponsor Support: Highly committed qualified sponsor
Attractive sector fundamentals
Attractive sector fundamentals
Guaranteed offtake: 25 year concession term & no market risk
The contractual structure of the project documents allocates risk properly and is similar to the
structures generally underpinning IPP/IWPP
g y p g / projects in the Region.
p j g
Sovereign guarantee: GoJ guarantees the payment obligations of NEPCO
Sound project financial projections