Presentation on the Brazil PSP - Private Sector Participation Program, a partnership between IFC, BNDES and IDB to develop innovative infrastructure projects

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IFC/BNDES/BID partnership to develop
projects for private participation

2. IFC and the partnership
Implicações
49%
31%
20%
 Assists Governments in the infrastructure project
development for PPP transactions
 Focus on innovative sectors or projects
 Has a revolving fund of about U$5.6 million to pay
for the costs of project development charging low
retainer fees, and postponing the payment to the
closing of transactions
 Takes the risk of feasibility (relevant part of the
payment is success fee)
 Largest multilateral agency focused on investing in the
private sector in the developing countries
 Offices in more than 100 countries
 Assets of more than US$ 30 billion (approximately 13% in
the infrastructure sectors)
 Infrastructure advisory department has more than 20 years
of experience on structuring innovative transactions in
emerging markets

3. Why focus in infrastructure project
development in Brazil?
There is plenty money to invest,
but well structured projects for private participation
are still a scarce resource
Raised by private
investment funds to
invest in infrastructure
in Brazil
To be Invested in
infrastructure by the
Federal Government
between 2007 and
2014, through the PAC
program
BNDES plans to finance
in infrastructure from
2010-2013
IFI plans to finance
under A/B loan
arrangements together
with commercial banks
in the first semester of
2008
+ + +US$ 10bn US$ 1.268bn US$ 172.8bn US$ 6.3bn
 During the privatization process of the 90’s
 No special strategy was adopted to maintain senior planning officers in the Government
 Lost many of the senior officers to privatized companies and to regulatory agencies
 Currently Brazilian subnational governments have difficulties to recruit and
retain people with experience and expertise in developing infrastructure
projects

4. Objectives and principles
 The partnership combines the local expertise of BNDES with
international expertise (IFC and IDB) on project development and
best practices
 IFC has unique experience on structuring PPP transactions in innovative sectors or environments
 BNDES has unique experience in structuring PPP transactions in Brazil
 IFC, BNDES and IDB are committed to develop and spread local and
international best practices for private participation in the
infrastructure sectors
 Transparency and competition for the projects are key to develop the PPP market
 IFC/BNDES/IDB partnership is focused on results
 Provide assistance to the Government from the development of the project idea until the closing
of the PPP contract
 Most of IFC/BNDES/IDB payment for the advisory services are success fees paid by the private
partner that gets the award
 IFC/BNDES/IDB are committed to the development of the country
 Transactions are structured to generate high development impact
 IFC/BNDES/IDB are committed to get the best deal for the Government

5. Objectives and Principles
 Training of Government officers
 Structuring PPP transactions is a learning by doing activity
 IFC/BNDES are committed to train the Government officers on best practices of
structuring PPPs while providing project advise
 IFC/BNDES/IDB as financers and investors in the private sector
have a deep understanding of the private sector drive and
interest
 Transactions are structured to guarantee bankability, adequate returns for investors,
and environmental and social sustainability
 IFC hires and manages the project consultants
 As IFC rules and procedures to hire consultants are more flexible than BNDES, all
consultants are hired by IFC
 IFC coordinates and manages the day to day work of the project consultants

6. How does it work from a formal standpoint?
 IFC/BNDES/IDB have signed a very simple Administration
Agreement, which
 Establishes the objectives and principles of the partnership
 Regulates the contribution of each partner
 Creates the Oversight Committee, which is a board in which each member of the
partnership has a sit
 Regulates the process of planning and reporting of the partnership
 How the IFC/BNDES/IDB is hired by Governments in Brazil?
 Contract single source – IFC is formally hired but mentions in the agreement that it
will provide the service using the resources of its partnership with BNDES and IDB
 Technical cooperation agreement - IFC and BNDES are hired together and mention
in the agreement that they will provide the service using the resources of their
partnership with IDB

7. Projects: Hospital do Suburbio
 First PPP in the health sector in Brazil
 Emergency hospital with 298 beds
 Catching area: 1 million inhabitants of a very
poor region in a big city in the Northeast of the
country
 Private partner has to equip, and operate
clinical and non clinical services
 The objective was to hire a high quality
operator to create an example of high quality
service in the public health network
 Construction of the hospital was done under a
public works contract
 Private sector investment of about U$30 million
in the life of the contract and operational
costs of about U$ 45 million/year
 The Government payment to the private
partner will be of U$50 million/year
 10 years contract, that can be extended to
more 10 years conditioned to adequate
quality
 Auction was in Feb 2010, and the winner was
Promedica-Dalkia
 Record development timeframe:
IFC/BNDES/IDB was hired in Feb 2009 and PPP
contract signing was May 2010

8. Projects: BA 093 road concession
 First road metropolitan network (126 km) to be
conceded to the private sector in Brazil
 Connects the main logistic and industrial hubs of
the city of Salvador and its metropolitan region
(Ports, airports, and 3 industrial poles)
 50% of the GDP of the State of Bahia, and 70% of
the industrial tax revenues of the Government are
in the area of influence of these roads
 Estimated investments of U$400 million and U$400
million of operational costs, in a 25 year
concession
 First road concession in Brazil developed using the
Equator Principles
 Most competitive concession auction since 2007
in Brazil (9 players)
 For the auction roof tariff was R$3,35 per
passenger car and the final tariff was R$2,319
(30.8% discount)

9. Projects: Pontal irrigation project
 First Brazilian irrigation PPP
 Involves an area of 7,717 irrigated hectares in the
desert region of the São Francisco valley in the
Northeast of Brazil
 The region is already a production hub of irrigated
fresh fruits with all the logistic infrastructure for this
kind of production
 It is estimated that it will generate 20.000 direct
and indirect jobs
 Estimated investment in infrastructure U$40 million
(the Government has already invested about
U$100 million).
 On farm investment can be more than U$
250 million depending on the crops chosen
by the private partner
 The PPP model that was developed for this
project focus on attracting and selecting
good agriculture players, instead of
construction companies.
 Requires the private players to partner with
local small farmers combining the private
player market, production and processing
expertise with the local farmers expertise

10. Projects: Pontal irrigation project
 First Brazilian irrigation PPP
 Involves an area of 7,717 irrigated hectares in the
desert region of the São Francisco valley in the
Northeast of Brazil
 The region is already a production hub of irrigated
fresh fruits with all the logistic infrastructure for this
kind of production
 It is estimated that it will generate 20.000 direct
and indirect jobs
 Estimated investment in infrastructure U$40 million
(the Government has already invested about
U$100 million).
 On farm investment can be more than U$
250 million depending on the crops chosen
by the private partner
 The PPP model that was developed for this
project focus on attracting and selecting
good agriculture players, instead of
construction companies.
 Requires the private players to partner with
local small farmers combining the private
player market, production and processing
expertise with the local farmers expertise