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Experts Group Meetings on PPP Projects for Ports
Amman, 23 -24 November 2019
Experts Group Meetings on PPP Projects for PortsAmman, 23 -24 November 2019
o Overview of PPP models
o Current Trends and Lessons
o Cases presentation
Overview of PPP Models
Why PPP ?
a. Transport is one of the public authorities' main areas of responsibility.
b. Partnership with the private sector can bring great added value
c. The government keeps its primary regulatory role, while the private sector injects investments and expertise into developing infrastructure projects.
d. The operational and project execution risks are transferred from the government to / or shared with the private partner
e. PPP allows government funds to be redirected to other important socioeconomic areas, and thus reduce budget deficits
Port Model Public / Institutional Functions Private Sector Role
Public Service Port Ownership and operations Traditional activities (« dry side »)
Tool Port Ownership and outsourcing Operating – equipmentand workforce
Landlord Port Regulation and concessions(or similarly)
Operating concessions contracts
Private Sector port Infrastructures Ownership and operations
General Classification of Port Models
Arguments and Facts
PROs CONs TRENDS
Public Service Port
Tool Port
Landlord Port
Single integrated organization
Coordinated investments
Sovereign functions
Weak weight of users
Potential tensions
Same
Dominant before Globalization
Frequent use
Most recent dominant
Private Service Port
Market orientedLoss of sovereignty &
monopolySpecific facilities /
activities
Port Model
Functions / Activities Public Service Port Tool Port Landlord Port Private Service
General management
Seaside infrastructures
Dredging
Pilotage
Towage
Mooring
Other services to ships
Dry infrastructures
Equipment - General
Eqt / services - Handling
Storage
Other logistics services
WHAT REGULATION?
Public
Private
P & P
PORT OPERATIONS & SERVICES* - Most frequent functions sharing
Current Trends and Lessons
SECTORS PRIVATE - incl. potentially TRENDS
Oil & Gas• Frequent at Ports (part of the industrial
process)• Big National or international users • Standard PPP and operation schemes
• Light Control by Public PAs• New offshore solutions?
Dry Bulk (Minerals, Grains…)• Frequent at Ports (part of the industrial
process)• Big National or International users• Standard PPP and operation schemes
• Special PPP: iron, coal, grains.• Light control by Public PAs• Specific status / regime
General Cargo Breakbulk / conventional
• As part of a package deal for all activities• Frequently « left » to public / Pas• Often considered as low profit
• Diverse solutions• Multi-purpose facilities • PPP of product volumes
Containers
• «THE» reference of all Port PPPs• Linked with handling technique & Shipping
Lines’ needs • Standardization of process and practices
• Pursuance of the PPP wave• Growing pressure from Lines• Ongoing / Next: automatization• … with social changes
SECTORS PRIVATE - incl. potentially TRENDS
RO-RO - automotive industry• Special dedicated terminal facilities• Important yard areas used as storage• Expected similar rules/practices in linked
ports
• Function of markets• More dedicated areas*• « Spatial » tensions with others
Ferries (Pax and Ro-Pax) • Dedicated or shared Terminals facilities• Specialist / niche markets
• growing weight of Companies• pressure for standard services
Cruise • More and more privately-operated terminals• Pressure to get similar treatment at ports
• Continued « privatization»• Tourist industry specials
Fishing • multi-users or industry specialist• not much standardized / small ports
• Dedicated harbors / areas• to meet demand’s requirements
Other specialist(reefer, Project cargo….)
• Special facilities either with others (containers:
• Or to meet demand of space -beyond others
• Dedicated Terminals / Yards• Specific design
Lessons from the models
• Things are less simple and evolving since the big wave of liberalization and privatization
• Multiple possibilities to mix models and schemes
• Next tables showing different objectives and practices of PPPs
• As also illustrated in the cases presentation
Lessons from concepts and definitions
• Plenty of definitions / diverse policies / various interpretations
• Useful models, long experience relative standardization
• Frequent « mixed schemes / solutions »
• Adaption to Country / Ports context (incl. Political regime /Port status…)
• Importance of national institutional context, investment needs
• Differences deriving from Port activities: market trades (type, volume…)
• Balance of powers Public / Private, national and foreign industries (export/ import)
Lessons from concepts and definitions
• Different approaches depending on Ports activities
• Complexity of PPP depends on number of actors / users
• PPP depending on possibility to allocate space
• Dedicated Yards vs Multiusers terminals
• Same issues for the berths
• Needs of special planning to reduce tensions
PPP options in adequacy of targets
Transfer / outsourcing activities
• Management contract
• Sub-contract
• Lease contract
Rehabilitation / modernization
• Upgrade
• Specialization
• Concession or BOT
Expansion / modernization
• Concession
- Infrastructure
- Equipment
- Operations
• With / without transfer
Greenfield Projects: new Port / facilities
• BOT & BOOT = with or
without operations
• Lease, with or without
construction
• Integral privatization
Shareholders/ Stakeholders
VALUE & IMPACTS(potential)
RISKS
ALL • Expected value / returns of PPP• Efficiency, quality of services
• Market, financing, legal, social• Errors of investment: technical,
dimension• Exit strategy
Public Authorities / State
• Funding Project development• Returns from PP contract (fees …)• Alleviation of management• Focus on central national powers• Less administrative procedures
• Loose of control• Tensions over contract application
Semi public Port Authorities(« autonomous » status)
• Same • Plus: capacities / expertise• Loss of revenues vs savings
• Underestimates of PPP values• Delays and / or other tensions
Shareholders/ Stakeholders
VALUE & IMPACTS(potential)
RISKS
PrivateMaritime operators
• Service quality• Control of operations• Alignment on other ports practices• Vertical integration
• Under or slow funding• Over estimation of markets and
revenues
PrivateDry side operators
• Market / customers oriented• Quality of operations and services
• Private monopoly instead of public• Reduced market access
PrivateDemand side users
• Quality of operations and services • Handling mainly (biggest % of Port
costs)
• Dependency vis-à-vis service providers• Reduction / selection of third-party
services
Lessons for PPP preparation and implementation
• First priority: strategy - medium /long term vision
• Scenarii / options incl. potential impacts (economic, / competition, social aspects)
• Risks: market, funding, value return…
• Define P and P roles incl relationship and constraints for both
• Deepen / adapt PPP model / clear framework
• Legal, financial, resources / HR aspects and requirements
• Identification / selection of potential Private partners (criteria & process)
Cases presentation
Benchmark (summarized)
Spain France Italy Malta Greece
General management
Public entity
Public Public entity Public entity Public C°
Land Public Public Public Public Public
Port Ownership Public Public C° Public (regions) Public Agency P+P
Infrastructure Private P+P Private Private P+P
Operations & services
Private Private Private Private Private
Self-Financing Yes Partly Partly Partly Partly
N.C. European Ports – Compared
situations (part of a benchmark, valid for major Ports)
❖Mixed PP solutions Public Authorities: National and Regional levels
❖Regional and municipal levels largely involved in small and medium Ports
❖Public Authorities represented either directly or by dedicated sub-companies
❖Important involvement of municipalities
❖Self-financing completed with facilitation and/or subsidies (if/as authorized)
Poland Germany Netherland Belgium France
General management
Public entity P+P P + P J/V Public Public
Land Public Public Public Public Public
Port Ownership State-City J/V State-CityJ/V State-City J/V City Public C°
Infrastructure P+P Private Private Private P+P
Operations & services
P+P Private Private Private Private
Self Financing Partly Partly Yes Yes Partly
Mediterranean European Ports
–Compared situations
❖Mixed PP solutions in accordance with National Laws and/or Special Law
❖Public Authorities: National and Regional levels
❖Regional and municipal levels largely involved in small and medium Ports
❖Public Authorities represented either directly or by dedicated sub-companies
❖Important involvement of municipalities
❖Self-financing completed with facilitation and/or subsidies (if/as authorized)
Cases presentation
Detailed
History – Overview about contextColombia
o 1960s - management and operation of the main ports were centralized under Colpuertos*
o 1970s - government allowed private firms to operate terminals and berths in the major port districts alongside the public terminals managed by Colpuertos.⁽¹⁾
o 1980
- Colpuertos commercialized as a state-owned enterprise
- its performance did not improve
- financial crisis by the end of the 1980s
o 1991 - A law enacted defined private regional port societies as concessionaires
o 1991 – 1993
- Privatization of the general cargo port terminals
- A separate concession was offered for each port.
History – Overview about context
Croatia
o 1913 - Port of Rijeka ranked 10th in transport volume among European ports
o 1920 - Rijeka became an independent city-state →beginning of port's decline
oWWII - Rijeka was targeted by around 30 Allied bombing raids
o 1945 - retreating Germans damaged approx. 90% of the port facilities
oAfter WWII - Rijeka became a part of Croatia and Yugoslavia → a new market and further development.
o 1996 - Port of Rijeka Authority was founded (1st in the country)
oAs of 2011 - three concessionaires operating in the Port of Rijeka
History – Overview about context
Lebanon
o1887 - the ruling Ottoman authority gave the concession of the Port⁽¹⁾
o1960 : a 30-year concession was given to a Lebanese company called "Compagnie de Gestion et d'Exploitation du Port de Beyrouth⁽²⁾ - regional hub.
o1990 – Present: Government formed a temporary committee to manage the Port of Beirut. Terminal Container was extended (public funding - 2000) and a Management / Operation contract was implemented in 2005 (till present)
History – Overview about countriesIndia
• 198s - the concept of private ports was conceived in India
• 1991 – Government adopted liberalization policy and enacted major economic reforms
• 1996 - Guidelines of the central Government to allow private participation
• 1998 - Port Pipavav became India's first port under concession
• Present - Influenced by the success of the PPP policy, a number of private terminals in major ports on BOT basis as well as greenfield ports have come up in the country. These include container terminals, liquid and dry bulk berths.
• 1998 / 2007 - Private sector participation in ports has increased
Port of Piraeus – Greece
Port of Piraeus – Greece
• 50 years concession to Piraeus Port Authority(PPA)
• Corporatization of PPA with shares in the port to the public (25.5%)
• 2004 - Serious discussion for a PPP at Piraeus began
• 2007 – round of competitive bidding in the country’s port sector via a PPP
• 2008 - Concession awarded to COSCO pacific
• Initial payment: a one-off payment of EUR 50 million
• Concession Period: 30 years, with an extension option of 5 years conditional on completion of the Pier III investment Programme
→ one of the most successful Greek PPPs.
Risk Allocation - Piraeus
Share Capital Composition
Port Barcelona (BEST)
Barcelona Europe south Terminal (BEST) – Spain
• Investment cost: EUR 860M.
• Concession Period: 30 years
• Procurement model: DBOFMT – Design Build Finance Operate Maintain Transfer
• 3rd largest Spanish container port, and the 9th in Europe
• In order to deliver a leading, competitive and efficient container terminal, Barcelona Port Authority (BPA) adopted a PPP approach
• Contract awarded to: TERCAT SA (HPH) in May 2006
• Although initially planned for 2008, the works were delayed until 2010. In July 2012, the terminal started to operate
Risk Allocation – Barcelona
Port Barcelona Muelle Costa
Barcelona Muelle Costa Terminal – Spain
• Investment cost: EUR 22M.
• Concession Period: 15 (+7.5) years
• Procurement model: BOT – Build Operate Transfer
• Terminal opened to public: July 2013
Risk Allocation - Muelle
Critical Success Factors
1. Allocation of risks
2. Appropriate Procedures and regulations
3. Accurate project implementation
4. Duties and obligations of each partner
5. Clear and fair tendering process
CHALLENGES AND RISKS OF CONTAINER TERMINALS
Major Ports and Terminals
• Characterized by volumes, combining:
- Trades (in / out) attracting Shipping Lines services: « gate » port markets
- Transshipments – Interlining (way ports)
- Transshipments / feedering with « out ports » (not included in schedule)
- Hubs offering best coverage /connectivity
• Two categories of clients:
- Shippers for Gate Ports = freight revenue
- Shipping Lines for Transshipped boxes = costs (vs savings)
• Standardized Terminals designed for target capacities
- In technical and operational terms: access, berths, yards, handling, inland connections...)
- With pre-designed PPPs, more and more imposed by both industries (Ports and Lines)
Major Ports and Terminals
• Challenges and risks:
- Attract -and keep- the vessels of Mega Alliances and (or big Regionals)
- Sustain competition with neighboring Ports on the same range
- Options offered by Ports: dedicated or multi-users’ Terminals
• Highest Risk for PPP:
- Loss of Lines’ / Alliances’ services
- Over estimated investments / capacities
Major Ports and Terminals
44
Characterized by volumes, combining:
Two categories of clients:
Standardized Terminals designed for target
capacities:Challenges and risks: Highest Risk for PPP:
› Trades (in / out) attracting Shipping Lines services: « gate » port markets
› Transshipments –Interlining (way ports)
› Transshipments / feedering with « out ports » (not included in schedule)
› Hubs offering best coverage /connectivity
› Shippers for Gate Ports = freight revenue
› Shipping Lines for Transshipped boxes = costs (vs savings)
› In technical and operational terms: access, berths, yards, handling, inland connections...)
› With pre-designed PPPs, more and more imposed by both industries (Ports and Lines)
› Attract -and keep- the vessels of Mega Alliances and (or big Regionals)
› Sustain competition with neighboring Ports on the same range
› Options offered by Ports: dedicated or multi-users’ Terminals
› Loss of Lines’ / Alliances’ services
› Over estimated investments / capacities
Medium Container Ports / Terminals
Main features: Challenges and risks
❑ Gate Port : direct Trades only / mostly
❑ Service / calls according to attractivity / freight
contributions
❑ Connectivity: direct + transshipped
❑ Standard Terminal design and equipment
❑ Focus on captive markets, depending on
potential competition with other ports
❑ Low intra -port Competition between Lines
services and
❑ Same if single Terminal operator linked with
Shipping Line
❑ Over or under estimation of prospect
movements
❑ Wrong commercial / market positioning
Smaller / feeder Ports
Main features and challenges: Challenges and risks
❑ Local trade markets with / without
options
❑ Deep Sea Lines or common feeder
operator?
❑ Containerships or multi-purpose
(Con-Ro, Ro-Ro..)
❑ Connectivity: poor or satisfactory?
❑ Design: dedicated berth and yards or
multipurpose?
❑ Single ocean carrier’s service or common
feeder?
CONTRACTING PORT PPPs:(for CT)List of key provisions / articlesExample of concession contract
I. Usual generalities
Between the Parties etc. + Set up of a dedicated company
• Objectives
• Scope (perimeter) of transferred / conceded activities
• Infrastructures and equipment
• Personnel and social conditions
• Port Operations rules and regulations (Law/ by-laws)
II. Rights and obligations of the contracting Party – Private concessionaire
• Investments and maintenance
• Performance indicators (often detailed in Annex)
• Royalties: level and minimum guaranteed
• Tariffs - Equal treatment of Users
• Tax / Customs regime
CONTRACTING PORT PPPs:
List of key provisions / articlesExample of concession contract
III. Settlement of disputes
• Resignation: causes and effects
• Revision (same)
• Arbitration
IV. Duration
• Expiry date
• Conditions of renewal
• Repossession (return) and acquisition of assets
V. Administrative provisions
VI. Annexes
Potential issues / questions for discussion
Limits / frontiers between P and P
• Public property / ownership of assets & functions (strategic?), National sovereignty
• Public service obligations (counterparts…)
• Balance of powers
• Politics & Policy
• Influence / lobbying
Regulation
• Framework (Law & contracts)
• Body / qualified persons (mixed PP, independent?)
• Scope & fields
• Coordination (method)
• Monitoring, audit, evaluation,
• Beyond contact issues (eg impact, competition.)
• Review, follow up of conclusions / recommendations
• Corrective measures
Private Partners
• Profile, per category of PP activities
• Consultation process: open vs shortlist
• Selection: criteria / capacities (fin. , technical /pro …)
• Competitive dialogue
• Risks of overestimated offers
• Change of Partner (revision of contracts terms …?)
Indicators
• Port / terminal performance, all kinds (vessels, cargo, transshipment, dwell time,...)
• Financial (revenues, rates of return, distribution…)
• Economic (GDP contribution, …)
• Costs and prices (impact of tariffs…)
• Social (job creations…)
• Environment
Financing / funding
• General financial conditions (instruments…)
• Port specifics: Royalties and fees: entry ticket, yearly fixed, variable… Subsidies
• International institutions
• Conditions of payment
Risks
• Legal / contract
• Financial
• Commercial
• Social
• Environment, Safety, Security?