Latin America : Innovative financing schemes for urban transport projects in India Arnaud Dauphin Lead Urban Transport specialist Urban Mobility India New Delhi, November 2015 1 AFD, the French Development Bank 70 countries India since 2006 8 billion € commitment /year 300-400 million € /year 1 billion € for transport /year Bangalore, Kochi, Nagpur metros 2 BRAZIL : Salvador de Bahia Metro Line 1 and 2 3 Brazil : Salvador de Bahia – Project map Population : 4,4 M inhab. Length : 33,4 km 19 stations Commissioning: 2015 – 2020 Ridership: 500 000 pax/day -2016 4 Brazil : Salvador de Bahia – Main features Owner Federative State of Bahia Scope Greenfield - Brownfield project : 2 metro lines, 33,4km, 19 stations and passenger transfer terminals Investments cost US$ 1 bln (6605 Kr) Public funding $620 M – 3945 Kr (64%) Private financing $380 M - 2660 Kr (36%) IFI’s Involvement No but on going discussion with AFD for LRT rehabilitation Project structuring PPP – DBFOM Contractor CCR metro Bahia (Camargo Correa group) Construction schedule 42 months Operation 30 years (but operation in 9 months) 5 Brazil : Salvador de Bahia – financial mechanisms International bidding process Fixed amount of public financing disbursed on milestone- based payment during the construction (8 milestones) A minimum ridership threshold is guaranteed by the Owner in the tender docs (500 000 px/day) Bid evaluation based on the level of remuneration requested by the concessionaire to balance the project Concessionaire able to get concessional loans from BNDES – Brazil development bank Tariff adjustment mechanisms (based on consumer and energy index ) and demand risk sharing (+/- 10%, 10-25%, +25%) 6 Brazil : Salvador de Bahia - Financing structure Federal Government of Brazil State of Bahia Other secretaries, municipalities and development partners Secretary for urban Civil society Organizations development (SEDUR) (NGOs, civil society, transport management level State Federal District Participation Fund users and affected people) (PPP Guarantee) CTB (Bahia Urban Transport Company) Desenbahia Technical and financial audit, and (Development Agency of State of Supervisory Supervisory and evaluation consultants Bahia acting as a guarantor) CCR Metro Bahia (Private Consortium) Construction Phase Public funding paid at each Overall Project Management Consultant construction milestones (station Detail Engineering, construction Supervision -(EGIS) completion, tunnel bored, etc.) Civil works (Andrade Gutierrez, Camargo Corrêa e Soares Penido) Systems and Equipment (Siemens) Construction Construction level Rolling stock (Rotem) Annual lumpsum proposed in the bid: 127,6 million reais Operation and Maintenance Phase Remuneration : passenger x remuneration tariff proposed in 7 Operational level the bid (2,1 reais/pax) PERU : Lima - Calao Metro line 2 8 Peru : Lima Metro Line 2 – Project map Population : 10 M inhab. Length : 35 km and 35 Stations Commissioning: 2016 – 2020 Ridership: 600 000 pax/day -2020 9 Peru : Lima Metro Line 2 – Main features Owner Government of Peru Scope Greenfield project : 35 km (Line 2 - 28km, Line 4- 7km), 35 stations and 42 driverless trains Investments cost $5,88 bln Public funding $3,7 bln - (78%) Private financing $1,15 bln (22%) + $0,85 bln ECA financing for rolling stock IFI’s Involvement World Bank, IADB, CAF, KFW, AFD, EIB Project structuring PPP – DBFOM Contractor Consortium Iridium-ACS/FCC – Impregilo - Ansaldo – COSAPI (Spanish-Italian-Peruvian consortium) Construction schedule 58 months (but operation in 24 months) Operation 35 years 10 Peru : Lima Metro Line 2– Financing mechanisms International bidding process 60 deferred payment certificates during 15 years to the Concessionaire as compensation for the works performed Concessionaire use its certificate to borrow money from the Bank and secure the reimbursement by the payment streams Bid evaluated based on the remuneration requested by the concessionaire to balance the project Remuneration based on services offered (train.km) with quality of services requirements 11 Peru : Lima Metro Line 2 - Financing structure GOVERNMENT OF PERU IFIs: WORLD BANK, IADB, CAF, KFW, AFD, EIB, MINISTER OF TRANSPORT MINISTER OF FINANCE AND COMMUNICATIONS management level Public Project Bonds OSITRAN PROINVERSION AATE Municipalities of Lima (Organismo Supervisor de la (Peruvian Agency for private (Autoridad Autonoma de and Calao, other Inversión en Infraestructura de Investment) Transporte Electrico) ministries, agencies Transporte de Uso Público) Supervisory Supervisory and PROJECT PREPARATION TECHNICAL AND OPERATION and development CONTRACT REGULATOR PROCUREMENT SUPERVISOR partners Metro DE LIMA LINEA 2 SA Private project Bonds (Private Consortium) (Citigroup, Morgan Technical and financial audit, Stanley and Banco and evaluation consultants Construction Phase Santander) using deferred payment certificates Overall Project Management Consultant Detail Engineering, construction Supervision Public funding paid according Export Credit Agency to milestone-based cash Civil works Contractors (ACS-FCC-IMPREGILO) Loans back by Italian Construction Construction level payments (station SACE completion, tunnel bored, Systems and Equipment (ANSALDO) etc.) IADB Non sovereign Rolling stock (ANSALDO) loan Services in operation based lump sum according to AATE Operation and Maintenance Phase requirements (estimated at $195 M) AND OPERTAION 12 Operational level MEXICO : Mexico City Metro improvement and rehabilitation 13 Mexico : Metro improvement – Project Map Population : 21 M inhab. Length : 226 km and 195 Stations Ridership: 5,2 M pax/day -2020 14 Mexico : Metro improvement - Financing structure SISTEMA DE TRANSPORTE COLECTIVO DE DISTRICTO FEDERAL (STCDF) FIMETRO (Fiduciary Fund set for 50 years signing the loans and issuing bonds) Increase of tariff in 2013 to feed 100M€ in 2015 an investment fund (2 pesos Mexico city additional on top of 3 pesos // Metro Company Project Office paratransit 6-13 pesos) BBVA – Bancomer (Acting bank on behalf of FIMETRO) AFD, ECA, local banks Project improvement contractors : $1,18 bln – 8256 Kr (7 projects) PROJECT BONDS Rolling stock renewal Signalling improvement Payment to contractors based on International competitive bidding process Line 12 extension Track and alignment modernization 15 Mexico : Metro improvement – Main features Owner SISTEMA DE TRANSPORTE COLECTIVO DE DISTRICTO FEDERAL (STCDF) Investments cost $1,18 bln – 8256 Kr (7 projects) Contractor To be procured on separate basis Public funding 55% from the SPV (Deposit and future Revenues) External lending 45% (ECA, AFD, local banks) Project structuring Non sovereign financing (Lots or turnkey) Construction schedule To be defined for each contract Operation Works under operation Scope 7 brownfield projects : trains renewal, track and alignment improvement, line extension, signaling modernization IFI’s Involvement AFD 16 What can we learn ? PPP for mass transit transport could be feasible and financially sustainable Technical Private : Technical risks borne by the concessionaire: design optimization, construction, geological, interface management, completion date Public: Land acquisition and clearance, resettlement, archeological risks Milestone-based payment, incentive for concessionaire to speed up construction Financing structure More than 60 % of financing should be public (Investment, Bonds, IFIs,) Public Funds should be committed and secured Milestone-based cash payments to secure private sector financing and allow concessionaire to get its own financing or issue project bonds IFIs involvement for both public funding but also for the concessionaire 17 What are the key findings for Indian projects ? Regulatory framework Stable regulatory environment with long term commitments for both construction and operation Stakeholders Need strong players (most of the case civil works companies) able to gather financing and lead construction and operation Sophisticated and complex structure and arrangements, need good financial advisors for both public and private sides Contract negotiation should start during the procurement process (need to create a competitive dialog with bidders) Operation Ridership and fares risks should be borne by the public side with a minimal ridership threshold and a risk sharing mechanism in case of major demand variation Remuneration/pax incentive to start operation soonest 18 Thank you for your attention Arnaud Dauphin Lead Urban Transport Specialist [email protected] Sustainable Transport and Energy Division 5 rue Roland Barthes 75012 Paris www.afd.fr.