Sustainable PPP Markets with Life-Cycle Project Alliancing

19.05.2011

Building Europe Together with Public Private Partnerships

Project Alliancing
Initial Situation
Traditional contracts
Master Servant Short Term Essentially adversarial Objectives and drivers not aligned Motivated by individual performance not project outcome Are not suitable for complex project developments or full life projects Risks often placed on those unable to influence them Competition between client and contractor rather than cooperation

19.05.2011

Building Europe Together with Public Private Partnerships

Project Finance
Project Map

19.05.2011

Building Europe Together with Public Private Partnerships

Project Finance
Risk Matrix
Risk
Pre-completion

Type
- Cost over-runs - Delays

Mitigation
(a) Fixed price turnkey contracts (b) Warranties / penalties / incentives (c) Fixed project specification (d) Strong contractors (a) Committed supply contracts (b) Committed off-take contracts (c) Strong operators (d) Performance guarantees (a) Warranties (b) Proven technologies (c) Public consultation and approval eg. 75/25 (a) Equitable ROE, ( eg. 15-20 %) (b) Acceptable cover ratios ( e.g 1.5 -2.0) (c) Escrow and reserve accounts (d) Dividend constraints (e) Loan syndication (f) Insurance / financial derivatives (g) Standby funding arrangements (a) Experienced lawyers. (b) Clear, simple documents (a) Clear regulatory regime (b) Investment insurance (c) IFI support

Post-completion

- Revenue forecasts - Revenue build-up - Operating costs - Management failure - Performance - Environmental - Safety - Structure: debt/equity ratio, - Structure: return on capital - Structure: risk / reward ratio - Foreign exchange - Interest rates - Debt service cover - Taxation - Regulatory framework? - Concession law? - Regime stability - Force majeure aggt. - Political intervention

Technical

Financial

Legal

Political

19.05.2011

Building Europe Together with Public Private Partnerships

Project Alliancing
Opportunities for Companies
Financing with EU-Know-How, EU-Grants, Venture Capital Opening new markets in other European countries Starting system supply: complex prod. & service solutions Profiting from permanent cashflows (service-contracts) Securing through selling shares in the operation-phase Generating new orders in the core business through
building new consortia in other PPPs improved international communication channels (national platforms) improved networking to EU (international platform)

19.05.2011

Building Europe Together with Public Private Partnerships

Project Alliancing
Life-Cycle Consortium

Developer

Provider
EuroPPP Consortium

General Contractor

Investor

System Supplier
Building Europe Together with Public Private Partnerships
6

19.05.2011

Project Alliancing
Principles
Best for Project Pain and Gain Share Open Book No Dispute Learning Organization Focused on full project life

19.05.2011

Building Europe Together with Public Private Partnerships

Project Alliancing
Relationship Contracting
Project Sponsors Project Alliance Charter PPP Adviser

Planner Constructor

Technical Adviser Financial Adviser

Supplier

Project Developer

Business Developer
Legal Adviser

Investor Operator Political Adviser

Project Development Agreement

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Business Development Agreement

Project Trust Agreement

8

Building Europe Together with Public Private Partnerships

Address
Contact
C.R.E.A.M. Europe PPP Alliance Public Private Partnership Association Avenue de l`Opale 1 Appart. 5 B 1030 Brussels Fon: +32-2-7366-984 Fax: +32-2-7320-795 www.cream-europe.eu Name E-Mail Mobile Skype Dipl.-Ing. Zoran Jelic z.jelic@cream-europe.eu +49-175-9400639 cream_zj

19.05.2011

Building Europe Together with Public Private Partnerships