M-10 Highway PPP Pilot Project in the Republic of Belarus Preliminary Information Memorandum
Total Page:16
File Type:pdf, Size:1020Kb
Ministry of Transport and Communications of the Republic of Belarus M-10 highway PPP pilot project in the Republic of Belarus Preliminary Information Memorandum CMS_LawTax_CMYK_from101.eps Table of contents Introduction 03 Key highlights of the PPP project 04 Belarus - Summary information 05 Public Partner 07 Strategic context 08 Technical overview of the Project 10 Envisaged approach to Project structuring 18 Risk allocation, Payment mechanism, Financial Structure 18 Legal Structure 20 Procurement process 22 Annex 1 - Project governance structure 24 Introduction The purpose of this document is to provide preliminary information on the M-10 highway PPP project (the “Project”) to potential Project stakeholders who may be interested in the Project including developers, investors, lenders, etc. This document has been prepared by the Ministry of Transport and Communications of the Republic of Belarus (“MoTC”, "Ministry of Transport" or “Public Partner”), and the consortium of MoTC’s advisors (PricewaterhouseCoopers, Ove Arup & Partners International Ltd, CMS Cameron McKenna Nabarro Olswang LLP and Egorov Puginsky Afanasiev & Partners) appointed by EBRD to assist MoTC in the development and procurement of the Project. The document is presented on behalf of MoTC in good faith and on the basis of information provided thereto that is believed to be accurate, complete and appropriate, however no representation or warranty, expressed or implied, is given by MoTC, its representatives, MoTC’s advisors with regard to the accuracy, completeness and appropriateness of the information contained in the Preliminary Information Memorandum. 4 M-10 Highway PPP Key highlights of the PPP project Public Partner The Republic of Belarus, represented by Ministry of Transport and Communications of the Republic of Belarus. Project scope The Private Partner will be responsible for the design, construction, finance, operation and maintenance (DBFO) of 5 sections of the M-10 highway with a total length of 85.25 km. Capital expenditures EUR 185.8 million. )estimate( Payment mechanism The payment mechanism will be structured to provide the Private Partner with availability payments during the operational period subject to meeting availability and performance criteria. It is anticipated that availability payments will be, in general, structured in two components: • Capital component, which will provide for the amortisation of debt and the return on the invested capital. It will be paid in local currency (BYN) but will be indexed (subject to the share of foreign currencies exposure in the funding plan) to take account of fluctuations of foreign currency to local currency to mitigate currency risk on this component on the side of the Private Partner during the operational period. • Operating component, which will provide for operating, management, overhead and maintenance expenses. It will be paid in local currency (BYN) and indexed to take account of local inflation. Key risks allocation The Private Partner will have the responsibility for a significant part of the risk related to design, construction, operation and maintenance (availability) and financing of the Project, whereas the Public Partner will bear the demand (traffic) risk. Contract period 20 years including approx. 2 year construction period and 18 year operation period. Preliminary timetable Project Phase Prequalification (start) 1Q 2019 Consultations (start) 3Q 2019 Final Bids Submission 1Q 2020 Financial close 3/4Q 2020 Construction period start 4Q 2020 M-10 Highway PPP 5 Belarus - Summary information Geography Belarus is an industrially developed economy country landlocked in Eastern Europe. It is bordered by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. It has an area of 207,600 square kilometers and a population of about 9.5 million. Belarus is divided into six provinces, with Minsk as the capital. The official languages are Belarusian and Russian, and the currency is the Belarusian ruble (BYN). Belarus has a moderate continental climate featuring winters with thaws and rainy, warm summers. The average temperature in January is -6°C and +18°C in July. International integration process Belarus is a founding member of the Commonwealth of Independent States (CIS), whose headquarters are located in Minsk. It has retained closer political and economic ties to Russia than any of the other former Soviet republics. Belarus and Russia signed a treaty on a two-state union on 8 December 1999, envisioning greater political and economic integration. Belarus is a member of the United Nations (UN). The country is a member of various international organizations such as International Monetary Fund, World Bank and IBRD as well as local integration associations such as the Eurasian Economic Union (EАEU) and regional Multilateral Development Bank - Eurasian Development Bank (EDB). Belarus is also a recipient country of EBRD funds. Belarus, Kazakhstan, and Russia have continued their integration process, and, since 1 January 2015, have launched the Eurasian Economic Union (EАEU), which is considered as a further step of integration after the Customs Union of these countries. Within the EАEU, single markets of goods, services, labour, and capital, with certain limitations, are introduced. Armenia joined the EAEU on 2 January 2015, and Kyrgyzstan joined the EaEU on 12 August 2015. Currently, the integration is in pursuit of free trade agreements with numerous countries. 6 M-10 Highway PPP Key statistics and economic development GDP - 2018 (Frcst) Gross External Debt, Public Credit Rating USD 56.9 billion USD 24.705 billion (as of July 2018) FITCH “B“ St. S&P “B" St. Source: IMF Source: National Bank of Belarus Source: tradingeconomics.com Real GDP Growth (%) Inflation (%) 14 120 1 08.7 12 100 10 8 80 6 4% 4 60 2 40 0 21.8 16.5 16.0 -2 20 9.2 12.0 10.6 4.6 4.9 -4 0 -6 2010 2011 2012 2013 2014 2015 2016 2017 2018 Oct 2018 compared to Oct 2017 is displayed for 2018 Source: IMF Source: National Statistics Committee Development of foreign direct investments in Belarus 4,5 8,0 4.0 4,0 7,0 3,5 6,0 6.8 3,0 5,0 2,5 2.2 4,0 2,0 1.8 1.6 1.4 1.4 3,0 1,5 1.3 1.3 2.3 2.9 2,0 2.6 2.7 1,0 2.2 2.4 2.3 0,5 1,0 0,0 0,0 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 USD bln. % of GDP Source: Ministry of Economy Development of exchange rate - EUR / BYN , USD / BYN (average for the period; in BYN) 3 3 2.404 2,5 2.200 2.178 2,5 1.761 1.988 1.932 2.028 2 2 1.586 1.357 1,5 1.178 1.073 1,5 1.021 0.875 1 1 0.833 0,5 0,5 0 0 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 (Jan - (Jan - Nov) Nov) EUR / BYN USD / BYN Source: National Bank M-10 Highway PPP 7 Public Partner Ministry of Transport and Communications acting on behalf of the Republic of Belarus The Public Partner for the Project will be the Republic of Belarus acting through the MoTC, which is subordinated to the Council of Ministers of the Republic of Belarus and is responsible for the transport sector development and regulation - civil aviation, road, rail, sea, inland waterway, including corresponding infrastructure. Within MoTC's structure, the Main Road Administration (GUAD) is responsible for the development and implementation of the state’s transport policy. MoTC will authorize the State Entity “Belavtostrada” to act on behalf of MoTC within the realization of M-10 PPP project. Besides acting as an implementing agency for the Project, Belavtostrada performs other functions, as follows: • Charging for tolls on toll roads. • Acting as an asset holder of the electronic tolling system (ETS) on toll roads of the Republic of Belarus. • Representing the owner of the electronic tolling system (ETS) from the side of the Republic of Belarus according to the provisions of investment agreement signed between the Government of Belarus and Kapsch TrafficCom AG. • Acting as an asset holder and operator of the Weigh-ln-Motion system. Strategic objectives of the Project set by the Ministry of Transport: • To improve safety, improve traffic access, reduce • Provide a defined level of service for road users travel time and environmental impact and thus through regulated operation and maintenance. improve the quality of life. • Foster value engineering and innovative • A successful pilot PPP project – affordable and approaches in design, construction, maintenance bringing best value for money, creating a positive and operation of Project Road. image of the PPP in the Republic of Belarus • Obtaining the optimum combination of domestically and internationally. construction and life-cycle costs from the Private • Demonstrate the possibility of funding by the Partner maximizing value for money. private sector of an infrastructure project in • Through an appropriate payment mechanism Belarus. achieve opening of the Project Road as soon as • Leveraging on the best PPP experience in the road possible and minimize impact of closures during sector from Europe and the CEE region. operation and maintenance. • Bankable structured project documentation • Hand back of the Project Road to a defined attracting wider interest from experienced standard and quality to MoTC at the end of the developers/ lenders and investors. Project PPP Period. 8 M-10 Highway PPP Strategic context Transport infrastructure is a strategically important Overall, 18 road projects have been identified in sector in Belarus, especially given the geographical the NIS, totaling USD 1 bln and comprising 43% situation of the country being located between the of the NIS top 100 projects by estimated value European Union and Eurasia. of investments. One of the high priority project identified in NIS - Reconstruction of M-10 road: the Historically, transport infrastructure development border of Russian Federation (Selische) – Gomel – has been funded from the State’s budget and carried Kobrin (the “Project”) has been selected as a pilot out only by the public sector.