Capacity Building Program on Public-Private Partnerships

Capacity Building Program on
Public-Private Partnerships (PPP)
29 June to 3 July 2015
Crowne Plaza Hotel – Nairobi, Kenya
Sophie PIGNON – Bird & Bird
Christophe LEFEBVRE – EY
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DAY 1 – MONDAY 29 JUNE 2015
8:00 – 8:30
Registration
8:30 – 9:30
Opening Remarks

Maude Vallée, Principal Legal Counsel, ALSF

Dominique Hautbergue, CEFEB

Patrick Maghin, Advisor to the Director of Operations,
Expertise France
Welcome Addresses

Yves Boudot, Director of Regional office, AFD

Gabriel Negatu, Regional Director, East Africa Regional
Resource Center (EARC), ADB
Official opening

H.E. Mr. Henry Rotich, Cabinet Secretary of the National
Treasury
9:30 – 9:45
Group Photo
9:45 – 10:15
Coffee Break
10:15 – 11:00
Participant’s presentations
11:00 – 12h30
Overview of the different contracting models available to public
entities
Recap on key tools in public procurement and their respective pros and
cons – Comparative analysis in terms of type of purpose, length of the
contract, financial structure of the contract and allocation of the risks
of:

Service contracts

Management contracts

Lease contracts

Concessions and BOT contracts
12:30 – 14:00
Lunch
14:00 – 15:30
Focus on the duration and the overall approach of a PPP:
financing, building, operation / maintenance

The main characteristic of a PPP contract is its comprehensive
purpose: financing of a facility necessary for the public service;
design, building or transformation of the facility; operation and
maintenance of the facility and as the case may be,
complementary services in line with the public service
considered.

Understanding the position of the private entity: the private
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entity is in charge of managing the project and the profits are
spread all along the contract through a system of lease, which
can vary according to performance goals.
15:30 – 16:00
Coffee Break
16:00 – 17:15
Choosing the most appropriate legal set-up to one’s project

Importance of a formal prior assessment of the project (legal
framework, criteria, analysis of current situation…)
Determining operators / investors’ interests

Identifying the relevant financial strategy: the three main
options are (i) project finance (a Special Purpose Vehicle (SPV)),
(ii) corporate finance or (iii) a leasing approach.
Practical case study: analysis of examples of complex legal set-ups
according to two specific projects: a motorway and a football
stadium
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DAY 2 – TUESDAY 30 JUNE 2015
9:00 – 9:30
9:30 – 10:45
Recap of previous day

Discussion of topics raised by participants

Outline of the program for the day

Countries Presentations: Strengths and Weaknesses (Djibouti
and Ethiopia)
The major issues involved in a PPP : the public entity’s
perspective
1.
The project and calendar

Determining the time-period of each step of the project
(procedure, design, building and operating of the facility)
and whether or not the public entity will be in control of the
deadlines for each step.

Evaluating the impact of delays on the diverse costs of the
project.

Dealing with unsolicited proposals.
2. The principle of risk-spreading

How to best allocate the risks of the project: identifying the
type of risks and their likelihood (delays, pollution,
technical innovations…) and allocating each to the public
entity, the private entity or establishing a shared
responsibility.
10:45 – 11:15
Coffee Break
11:15 – 12:30
Identification of PPP contracts’ sensitive provisions

Drafting of sensitive provisions: identifying what is at stake and
how to handle these provisions.

Templates of provisions
12:30 – 14:00
Lunch
14:00 – 14:15
Countries Presentations: Strengths and Weaknesses (Gambia and
Kenya)
14:15 – 15:30
The guiding principles for structuring a project funding
The key actors and their expectations - Presentation of the different
actors, their respective roles, expectations and relationships with others
actors during the project.

The public sector

The shareholders
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
The constructor

The operator

The financial advisor

The lender(s)

The accountant and tax consultant

The subcontractors
15:30 – 16:00
Coffee Break
16:00 – 17:15
The main financing structures involving PPPs

Presentation of three different financing structures:
o
Project finance
o
Corporate finance
o
Leasing

Their characteristics

Diagram of presentation

Advantages and disadvantages

Concrete examples

Different financing instruments which can be used in a PPP
project:
o
Financial Investors in Equity
o
Junior Debt
o
Senior Debt
o
Syndicated Debt
o
Bond Debt
o
Leasing
o
Export Credits
o
Refinancing Instruments
o
Credit Enhancers instruments
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DAY 3 – WEDNESDAY 1ST JULY 2015
8:00 – 12:30
Technical site visit
12:30 – 14:00
Lunch
14:00 – 14:15
Countries Presentations: Strengths and Weaknesses (Malawi and
Mauritius)
14:00 – 15:30
PPP’s financial control
Preparing a financial feasibility study - Topics in economic viability,
affordability and value for money, the Public Sector Comparator (PSC)
will be analysed.
As part of the course the following value-for-money drivers will be
covered:

Risk transfer

Competition

Whole of life costing

Innovation

Performance measurement

Economies of scale

Output specification

Private sector management skills

Improved asset utilization
Approach for testing value for money and the use of a Public
Sector Comparator and how it is constructed
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15:30 – 15:45
Coffee Break
15:45 – 17:15
Incorporating financial issues into the consultation documents

Functionality of key contractual terms, including provisions
and options for dealing with, for example, delays, nonperformance and force majeure events

Parties' termination and/or enforcement rights and analysis
of where these tend to conflate or differ and why
Analysis of the financial consequences of these events
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DAY 4 – THURSDAY 2 JULY 2015
9:00 – 9:30
9:30 – 10:45
Recap of previous day

Discussion on topics raised by the participants

Outline of the program for the day

Countries Presentations: Strengths and Weaknesses (Nigeria
and Somalia)
Contracting issues and risk transfers
1.
Transparency mechanisms and risk transfers

Assessing the potential impact of the various risks on the
deadlines, the costs and the quality of the facility.

Key question: how to best allocate the risks between the
private entity and the public entity? Contrary to a public
procurement where all the risks are on the public entity and
therefore hidden, in a PPP contract, a transparency
mechanism is essential to identify the risks and spread them
in a balanced manner between the parties.
2. Public entity risk transfer optimization

Risk management and allocation in project contracts: we
will look at that the typical range of risks associated with
PPP projects and consider who is best-placed to bear those
risks and how this impacts the parties' interests as well as
what risks the private sector will accept to ensure that the
government retains value-for-money.

Comparative analysis of different evaluation methods to
integrate the risks into the project.

Anticipating
insurances.

Evaluating the cost of anticipating the different risks and
taking it into account for the data modeling of the project.
the
risks:
guaranties,
provisions
10:45 – 11:15
Coffee Break
11:15 – 12:30
Practical case study: simplified modeling of a project (Excel)
and
Considering the time available for the case study, the goal will not be to
develop a financial model but to understand how to use one. During
this case study, we will answer the following questions:

What is a financial model?

How is it built? Distinction between assumptions, inputs,
calculations and outputs

What is its value during the PPP structuration?
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Stress tests and sensitivity tests
12:30 – 14:00
Lunch
14:00 – 14:15
Countries Presentations: Strengths and Weaknesses (Tanzania,
Uganda and Zimbabwe)
14:00 – 15:30
PPP’s main provisions

Ground and below-ground risks (pollution, geological risks, etc)

The issue of administrative authorizations

Remedy provisions

Legitimate and exemption’s grounds

Price revision and royalty provisions

Rate setting’s mechanism

Termination provisions
15:30 – 16:00
Coffee Break
16:00 – 17:15
PPP’s main provisions: Practical exercise
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DAY 5 – FRIDAY 3 JULY 2015
9:00 – 9:30
9:00 – 10:45
Recap of previous day

Discussion on Countries Presentations

Outline of the program for the day
Negotiating the financial aspects of a PPP
1.
Developing a negotiation strategy: Analysis of the importance
and function of key clauses and annexes of different forms of
PPP contracts and use different examples in order to reflect on
their effect on the parties' objectives.
2. Main negotiating issues:

Land acquisition and costs

Project investment costs

Tariff

Concession period

Risk bearing/allocation

Renegotiation options on specific items

Other items specific to the particular project
3. Understanding candidates’ financial tenders

The public entity must assess the credibility of the
commercial and financial aspects of the bidders’ plans over
the contract period.

The underlying assumptions in each bid should be strictly
reviewed.

Track records of the bidders’ sponsors, financial advisors
and supporting financiers should be assessed, and
supporting financiers should be assessed.
The credibility of a bidder’s proposal will be assessed with respect to
the bidder’s own capital structure and the sources and availability of
funding.
9:45 – 10:15
Coffee Break
10:15 – 12:30
Comparing candidates’ financial tenders
1.
Evaluation criteria may include:

The amount of subsidies, if any, required from the public
sector

The performance specifications of the facilities offered

The cost charged to the users
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
Income generated for the public entity by the facility

The contract term (number of years)
2. Recommended Approach:

Apply the formula or formulae provided in the bidding
documents and obtain the numerical assessment for each
bid that passed the technical and financial evaluations.

The bidder with the highest score, according to the terms of
the bidding documents, should be declared the successful
bidder.

Prepare a Bid Evaluation Report.

Invite the successful bidder for negotiation of final contract
details.
3. Role plays: negotiation based on an example of risks
matrix
We will provide you with a real case study of a risk matrix. You will
reply to several questions concerning risks on a PPP project.
12:30 – 14:00
14:00 – 15:30
Lunch



Closing Remarks
Presentation of Certificates to Participants
Evaluation of the Training
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