Deals Creating bankable deals with government in the
Deals Creating bankable deals with government in the face of fiscal pressure Strictly Private and Confidential 15 November 2012
Agenda Page 1 2 3 The Global and Regional Experience The Caribbean PPP opportunity Indicative deal structure 1 6 9
PPPs are. . . Improvement/Expansion of public facilities Government Private Sector Public private partnerships (PPPs) are arrangements between government and private sector entities for the purpose of providing public infrastructure, community facilities and related services Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012
PPP structures can improve project and service delivery Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012
Section 1 – The Global and Regional Experience Globally, governments understand that infrastructure development sets the stage for sustainable growth Canada – US$12 B Germany – US$42 B EU – US$252 B USA – US$150 B Japan – China – US$129 B US$585 B+ India US$500 B Singapore – US$13. 2 B Australia US$4. 7 B In 2009, CIBC World Markets est. global infrastructure spend in 20 years at $35 trillion. The above projected spend between 2009 – 2015. Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 2
Section 1 – The Global and Regional Experience The infrastructure project finance global market is rebounding; the Caribbean needs to engage… Market • • Overall global project finance market volume stood at US$227. 9 bn for 2010 300 Total Market Volume US$Bn • Annual Private Finance Invested Globally 15% average growth from 2004 to 2008, 40% reduction from 2008 to 2009 54% increase in 2010, making up more than half the dip experienced in 2009 Global Loans by Sector (US$m) 2010 2009 Power 73, 300 56, 289 Oil & Gas 25, 951 25, 640 Transportation 52, 315 25, 451 Leisure and Property 13, 824 7, 474 Telecommunications 13, 383 8, 118 Water & Sewerage 1, 578 4, 699 Mining 8, 858 4, 071 Industry 6, 306 3, 454 11, 306 2, 797 Waste & Recycling 200 150 100 50 0 2004 Sector Petrochemicals 250 1, 267 1, 194 Other 86 n/a Total 208, 174 139, 186 Creating bankable deals with government in the face of fiscal pressure • Pw. C 2005 2006 2007 2008 2009 2010 Source: Project Finance International 15 November 2012 3
Section 1 – The Global and Regional Experience Infrastructure development can help to grow private sector business activity and spur economic growth The use of PPPs is not restricted to the delivery of a physical structure such as a road or a building, but includes the delivery of services, and will be of utmost importance, where the Caribbean does not have certain specialist skills • Wastewater treatment and sewerage facilities • Education infrastructure – upgrade or build schools • road network – upgrade or maintenance • Healthcare facilities – upgrade or build facilities • Power plants • National Security – prisons – upgrade or new rehabilitation centres • Renewable energy options • agriculture and agro processing Creating bankable deals with government in the face of fiscal pressure • Pw. C • Low cost housing 15 November 2012 4
Section 1 – The Global and Regional Experience Caribbean countries have a long list of capital needs, some of which are already being satisfied through PPP structures Between 1990 and 2010, total PPI Investment in LAC region was approximately US$614 billion 37% of the overall PPI globally. Current investments in the region relate to road infrastructure, hospitals, power generation, tourism, education, among other key areas. Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 5
Section 2 – The Caribbean PPP opportunity Despite broad defining characteristics in the Region deals are being done, and more opportunities exist! Population: 42 million (Cuba and Haiti makes up approximately 50% of that) Small states: GDP (per capita): US$11 K (avg) Significant reliance on tourism and other services Debt to GDP ratios: 80% - >100% Ratings: Below investment grade , except for Trinidad among independent nations) Vulnerability to external shocks (incl. natural disasters) High dependence on imports High government debt FDI: circa US$ 4 – 5 billion in 2011 Cuba and Haiti are still largely unexplored, international entities are already focussed on the opportunities – these are approximately 50% of the region’s population. Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 7
Section 2 – The Caribbean PPP opportunity Many paths. . . One destination Greenfield Brownfield New venture, untried (spend on studies, etc) Tried and proven business case Ability to try new innovative methods “Stuck” with some legacy issues High start up costs Ability to operate and generate income earlier – existing business New employment, but may need to source non resident capabilities Recast employee values, but captive audience Higher credit risk - may require credit insurance, or allow for lower tenor Potentially lower credit risk, may allow for higher tenor More rigorous and time consuming DD process Less rigor, easier sell Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 8
Section 3 – Indicative deal structure Funding Sources for infrastructure development come from number of sources Construction Companies Infrastructure Pension Funds Banks Bond Market Govt. Text Multilaterals Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 10
Section 3 – Indicative deal structure PPP structures PPP contract Redevelopment Construction Design Construction Subcontractors Creating bankable deals with government in the face of fiscal pressure • Pw. C Bank/Banks Maintenance Subcontractors Equipment SPV shareholders Debt Maintenance Project company(SPV) Equity Investors User payments Govt payments Operating services Public sector 15 November 2012 11
Section 3 – Indicative deal structure Successful PPPs need to resolve issues related to: • Defined purpose • Alignment between stakeholders • Clear expectations: - Value - Return - Timetable … Both public and private sector need to have aligned objectives - Project Size • Political v Regulatory environment • Rigor in project selection • Market confidence Creating bankable deals with government in the face of fiscal pressure • Pw. C 15 November 2012 12
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