Public Private Partnership UnitFinance DepartmentGovernment of Sindh

May, 2011

Public Private Partnership UnitFinance DepartmentGovernment of Sindh

May, 2011

PPP PROJECTS IN SINDHPPP PROJECTS IN SINDH

Partnership For Development

Partnership For Development

PPP Unit comprises of Public and Private Sector specialists having professional expertise and relevant certification

PPP Unit

PPP Unit

DG

DirectorMarket

Development

DirectorFinance & Risk Management

DirectorCorporate Affairs

DirectorProject

Structuring

Assistant Director-I

Assistant Director- IV

Assistant Director- V

Assistant Director-II

Assistant Director-III

RMU

Vision

Objectives of PPP in Sindh Provision of infrastructure services Improve their reliability and quality

for accelerating economic growth Achieving the social objectives of the

government Mobilize private sector resources for

infrastructure projects; Incorporate principles of fairness,

competition and transparency in public-private partnership projects;

PPP Unit envisions that with out private sector participation, the public sector can not bring about efficiency in the Service Delivery System.

Provision of private finance is also very important and the vision is to covert abundant public sector resources into commercial assets generating constant flow of funds

Vision and Objectives

Administrative support Licenses and clearances , Utility

connections for power, gas and water, land or rights of way

Asset-based support leasing land and infrastructure facilities

Direct financial assistance Viability Gap Fund

Government guarantees Political risks ,delay of agreed user fee

adjustments,(MRG), Credit Enhancement, Force majeure

and Demand risk etc

These contractual obligations form part of RFP Well thought out plan VGF Board has to decide about the project financing issue on the pattern of TIFU *UK, *TIFIA USA and *IIFCL India. The Risks of project are well defined and well quantified

What do we offer to private sector?

KEENJHAR LAKE

Outbound Tourism Expenditure by Pakistanis

CAGR13.5%

► World Travel & Tourism Council (WTTC) research is done in co-operation with Oxford Economics

World► Travel & Tourism (T&T)

contributes 9.2% to GDP (US$5,751 bn) in 2010

► Real GDP growth for the T&T Economy is expected to be 4.4% per annum over the coming 10 years

Pakistan► T&T contributed 2.0% to

GDP (US$ 9.1b) in 2009► In 2007, Pakistanis have

spent amounts exceeding US$ 2b on international travel and tourism

Tourism Market AnalysisKey FactsSource: WTTC

Internationl Tourism Receipts as % of GDPSource: UNESCO

Statistical Report 2009

Karachi Economy

40% of Financial activity

53% of total collection of FBR

40% of large scale manufacturing

50% Bank Deposits

25% Federal Revenue

95% foreign trade passes through Karachi

Karachi

Percentage Household Income Distribution

Household Income Distribution► Population is currently

estimated around 16 – 18 million

► Average annual income growth: 5.8%

► Expected earnings top bracket of 14% is now expected to be PKR 47,000 per month

Key Facts

Commercial ► Most of the port related

activities through the two ports at Karachi and Bin Qasim

► Home to most of the consumer products and pharmaceutical companies.

► Financial Services hub of Pakistan

20%

40%

16%

7%3%

14% 5000 or below

5000 to 10000

10000 to 15000

15000 to 20000

20000 to 25000

25000 and above

20%

40%

16%

7%3%

14% 5000 or below

5000 to 10000

10000 to 15000

15000 to 20000

20000 to 25000

25000 and above

Earnings Top Bracket

FBR Yearbook 2006-07

The Lake► Largest freshwater lake in

Pakistan (24 Km long, 8 Km wide, 192 Km Periphery)

► Wetland of international importance (Ramsar Site)

► Wildlife Sanctuary and home to several species of local and migrating birds

► Major water reservoir► Perfect for short stay s away

from the busy routine of city► Proximity to Thatta City , with

its rich history and culture, enhances tourism potential

► An ideal location for eco-friendly tourism and nature

► Resort development can be a major economic stimulus

Historical places near Keenjhar Lake► Tourist sites in and around

Thatta having potential for development and organized tourism

► History of Thatta goes back several millennia to the Indus Valley civilization.

► Thatta Capital of Sindh and seat of power for 400 years for three Muslim dynasties

► Architecture continues to inspire modern buildings

► Close to 1000 year old lost city of Bhambhore

► Chawkandi tombs date back over 1000 years

► The tombs at Makli necropolis date back over 700 years

► Shah Jahan Mosque, built back in 1647, one of the largest mosques with 100 domes

Chawkandi Tombs

Bhambore

Shah Jahan Mosque

Makli

THE PROJECT

The Project Site► Located 10 Km from the

National Highway

► Direct connection with the Lake offering a 270 degree view with 8km shoreline

► Limited access provides better Security

► Maximized shoreline for waterfront development.

► Offers great flexibility for articulation of various Integrated Resort Facilities

► Large untouched land (with no existing man made structures/ facilities)

► A raised site with flat terrain suitable for infrastructure and other development

Project Site

N

EW

Project Site

The Visualization of the Project

FINANCIAL OVERVIEW

Resort Zone

Recreation Zone

ESTIMATED PROJECT COSTSDEVELOPMENT

OUTLAYS

► Land cost represents only 5% of the estimated project costs► 43% of the Resort Zone costs are estimated to be funded through sale

of farmhouse components► 60% of the project finance is expected to be raised from Commercial

Debt carrying interest @ 15% - 16% p.a.

Figures in PKR MillionsResort Zone

RecreationZone Total

Infrastructure & Land 1,795 424 2,219

Resort and Hospitality 2,916 - 2,916

Entertainment District - 2,586 2,586

Golf Course 940 - 940

Development Costs 5,651 3,010 8,661

IDC 1,021 307 1,328

Project Costs 6,672 3,317 9,989

Resort Zone

Recreation Zone

Quantitative Aspects► Resort Zoneo Equity IRR: 23%o NPV @16%: PKR 1.3billion

Qualitative Aspects► Flexibility in terms of

developing the project► Reduced upfront investment► Land price is payable on

deferred basis► Land is available for

mortgage► Extensive work already

undertaken► Feasibility shows bankable

financial ratios

INVESTMENT ANALYSISKEY RESULTS

DevelopmentPeriod

Operational Period

Payback: Year 9

DevelopmentPeriod

Operational Period

Payback: Year 9

TRANSACTION STRUCTURE

STRUCTURE

GoS

Private Party

Debt

Equity

Total Project Cost inclusive of

Land

CashEquity IRR: 23%Payback: 8.4 years(Yr 4 of operations)

Project Revenues

Commercial Lenders

20% Upfront Bid Amount to be paid on or prior to signing of concession agreement

Balance Bid Amount to be paid on or prior to COD at 8% p.a. Interest. Payment of Balance Bid Amount is a condition precedent to the

COD.

Project Revenues shall be governed by the Escrow Agreement whereby the proceeds

will be appropriated between the KPC account, Lenders account and Project

Development account

Under Escrow Agreement

The Concessionaire shall have a 95 years Lease on the Project Land with a right to mortgage subject to the provisions of the Concession Agreement

► Quoted Bid Amount (QBA) is the price at which financial bids are invited from potential developers

► QBA shall be:o Base land price; plus o premium on land

► Developer can either be an individual or a consortium

► Developer to incorporate a Project SPV which shall sign the Concession Agreement with the Government

► GoS to implement project through Keenjhar Project Company, a wholly owned project entity

CONTRACTUAL WEBOVERVIEW

Project SPVShareholde

rs Agreement

Sub-Lease/Sub-

Contract Agreement

Sub-Lease/Sub-

Contract Agreement

Concession Agreement

KPC

Private Party 1

Contractor/

Private Party 3

Contractor

Master Developer

Financing Agreement

Commercial Lenders

Escrow Agreement

Tourism Departmen

t (DoT)GOS

Sub-Lease/Sub-

Contract Agreement

Private Party 2

Contractor/

Allocate Project Land to the DoT

Transfer of Project Land under Master Lease arrangement from DoT to KPC

Hyderabad - Badin Road ProjectPublic sector partner

• Government of Sindh

Project advisors

• MM Pakistan (Pvt.) Ltd. (Technical and Lead Advisor)

• KPMG Taseer Hadi & Co. (Financial Advisor)

• Mandviwalla & Zafar (Legal Advisor

Procurement approach

GoS intends to award a Concession Agreement for the design, build, finance, operation and transfer of a 98.5 km road connecting Hyderabad to Badin through the towns of Tando Mohammad Khan, Matli and Talhar. It is currently envisaged that the contract term will be for a period of approximately 33 years. The Project (including the ownership of the Project related assets) shall be handed over to GoS at the end of the contract period.

Private partner’s role

The Service Provider will:

• Finance the Project

• Detailed designing of the Project based on conceptual designs provided by the Contracting Authority

• Construct the Project

• Satisfy all required tests on completion of construction of the Project

• Operate the Project during the PPP Contract and collect tolls

• Maintain and repair the Project during the PPP Contract period

• Hand over the Project to the Contracting Authority at the end of the PPP Contract period

Economic significance of project location

• 6 major junctions at Siri, Tando Mohammad Khan - Sajawal, Tando Mohammad Khan - Tando Allah Yar, Matli - Tando Ghulam Ali - Digri, Talhar and Badin Cantt

• Over 100 smaller link roads indicate mass-usage and importance of the Road

• Collects traffic from southern Sindh and connects to the N-5 National Highway towards the North

• Connects Hyderabad with many important industrial and commercial areas in the surroundings

• Tharparkar District, with vast Coal reserves, is situated on the Eastern side of the Project area

• Type of industries: Rice Mills, Sugar Mills & Oil Mills

Run-of-River Power GenerationRun-of-River Power Generation EOI for hiring Transaction Advisor floated on 3rd July, 2010 Scope of work

Identify the potential sites for ROR Power Generation in the province particularly at Sukkur Barrage;

Conduct Feasibility Study in respect of the top four promising sites identified in the survey;

Assist Government of Sindh in marketing the project to the relevant mix of investors, and administering the bidding process for the selected sites

RFP issued to the 7 pre-qualified consulting consortia Transaction advisor likely to start work by June 2011

20

Gorakh Hill Resort Project

►The development of Gorakh Hills fall under the Gorakh Hills Development Authority formed through an Act of Parliament in September 2008

►It was decided by the Government of Sindh in 2010 to develop Gorakh Hills under Public Private Partnership and mandated Transaction Advisors Ernst & Young in consortium with Meinhardt (Pakistan) Private Limited and Mohsin Tayebaly & Co to evaluate options for development of Gorakh Hills under PPP.

►The initial studies suggested a need for development of better access road and development of basic facilities for tourists visiting the hill top

►Detailed design of road that follows the existing route for most part that is reengineered to provide better road access has been completed

►A conceptual design for the tourist facility at the hill top has also been completed.

Gorakh Hill Development project (GHDP)

►Gorakh Hill is located 450 km North of Karachi, 300 Kms from Hyderabad, 93 Km in Northwest of Dadu and 46 Km from Sehwan Sharif

►Gorakh Hills development was initiated in 1998, with a plan to develop Gorakh Hills as a resort on lines of hill stations in northern Pakistan. A master plan was developed by M/s Naqvi & Siddiqui Associates in collaboration with M/s Shankland & Cox for the hills covering an area of about 1,908 Acres which included residential, recreational and hospitality components.

►PKR 198.269 million has been spent on various development works which include road from Wahi Pandi to Gorakh Hill summit, water pumping stations and supply line to the summit, electricity supply to the summit, construction of police check posts along the road to the summit, construction of bridges, culverts etc. shades and fencing at the summit and construction of contractors cottage and residential quarters for workers.

►The road from Wahi pandi to Gorakh Hill top has been prone to damage mainly due to seasonal torrents which flow through the numerous storm water drains that pass through the road and land slides at Khanwal Luk.

Gorakh Hills Background

Thank you