Project financing and public private partnership (ppp)
1. Project Financing and Public
Private Partnership (PPP)
1. SYED AJMAL KAMAL
2. HAFIZ HASSAN QADRI
3. M. ASIM U.K
4. MUHAMMAD NAEEM
5. DANIYAL FAIQ
SIR OSAMA BASHIR SOMRO
2. Introduction –
Project finance is especially attractive to the private sector because they can fund major
projects off balance sheet.
“The financing of long-term infrastructure, industrial projects and public services based upon a
non-recourse or limited recourse financial structure where project debt and equity used to
finance the project are paid back from the cash flows generated by the project.”
International Project Finance Association (IPFA) defined project financing as:
Stages in Project Financing –
Identification of the Project
• Government announced
• Self conceived / initiated
Identification of market
• Product of the project
• Users of the product
• Marketability of the product
• Marketing Plan
6. Stages in Project Financing –
Technical and Financial Feasibility.
• Operations /
• Business plan / model
• Projected financial
• Financing structure
• Pay-back, IRR, NPV etc.
7. Sources of project finance
Equity refers to capital
invested by sponsor(s) of
the PPP project and others.
Debt refers to borrowed
capital from banks and
other financial institutions.
It has fixed maturity and a
fixed rate of interest is paid
on the principal.
8. Stages in Project Financing
– Equity arrangement.
Co – sponsors
Private equity participation
Angel investors – Private equity
9. Stages in Project Financing –
Negotiation and syndication.
Non- banking financial institutions.
International lending institutions.
10. Stages in Project Financing
– Monitoring and Review
• Project is running on
• Project is running within
• Project is receiving
• First-hand information.
• Project completion status
• Project schedule chart.
• Project financial status
• Project summary report.
• Informal reports.
11. Stages in Project Financing –
Repayment & Subsequent Monitoring
Appointment of directors
13. Conclusion – Highlights of
Highly concentrated equity and
• One to three equity sponsors.
• Syndicate of banks and/or
financial institutions provide
• Governing Board comprised of
mainly affiliated directors from
Extremely high debt levels
• Mean debt of 70% and as high as
• Balance of capital provided by
sponsors in the form of equity or
quasi equity (subordinated debt).
• Debt is non-recourse to the
• Debt service depends exclusively
on project revenues.
• Has higher spreads than
14. What isPPP?
Public private partnerships (PPP) are
agreements between government and the
private sector for the purpose of providing
public infrastructure, community facilities and
The private sector enter a contract with
government for the design, delivery, and
operation of the facility or infrastructure and
the services provided.
The private sector finance the capital
investment and recover the investment over
the course of the contract.
The asset transfers back to the public sector at
the end of the contract
15. Typical structure for PPPs
16. Why use PPPs?
• Focus on outputs
• PPPs make projects affordable
• Better value for money over the lifetime of the project
• More efficiency in procurement
• Faster project delivery with more projects in a defined
• Risks are allocated to the party best able to manage the risk
• Better assets utilization and social and economic benefits.
• Public sector only pay when services are delivered
• Injection of private sector capital
17. Building the
Central PPP Unit- to lead, drive
and co-ordinate the PPP process
PPP Units in
• Department of Transport
• Department of Environment and Local
• Department of Education and Science
• Department of Health and Children
• Office of Public Works
• National Roads Authority
• Rail Procurement Authority
• Courts Service
18. NEED FOR PPP(PUBLIC PRIVATE
The highways sector is witnessing significant
interest from both domestic as well as
foreign investors following the policy
initiatives taken by the Government of
Pakistan to promote Public Private
Partnership (PPP) on Design, Build, Finance,
Operate and Transfer (DBFOT) basis.
20. SOME OF PPP MODELS ARE
BUILD OPERATE AND TRANSFER (BOT)
Critical success factors in this model are:
•Shortest construction period
•Advantage of good technical solution
•Lowest construction cost and toils
•Largest share of revenue to the government
•Shortest concession period
•Safe standby credit from government in the event of cost over-run
•Least environmental impact
21. SOME OF PPP
A few variation in this model are:
Build, own, operate, and transfer (BOOT)
Build, own and operate (BOO); No transfer of ownership to the
Build, own, operate and lease (BOOL)
Build, own, operate and sell (BOOS)
Build, operate, lease and transfer (BOLT); The operator builds the
highway infrastructure, operates it for certain period, leases it
from the government, and finally transfer it at the end.
Build, operate,train and transfer (BOTT)
SOME OF PPP MODELS ARE GIVEN
LEASE DEVELOP OPERATE
Lease, develop and operate
The government retains
ownership of an existing facility,
receives payments from a
private lessee as specified in
the lease agreement, who, in
turn, finance and operates the
23. SOME OF PPP MODELS ARE
Rehabilitate, operate and transfer (ROT)
This model is similar to BOT, the work being rehabilitation of an existing
REHABILITATE OPERATE TRNASFER
24. FACTORS AFFECTING PPP
As an underlying principle, risks have been allocated to the
parties that are best suited to manage them. Project risks
have, therefore, been assigned to the private sector to the
extent it can manage them.
The commercial and technical risks relating to construction,
operation and maintenance are being allocated to the
Concessionaire, as it is best suited to manage them. The
traffic risk, however, is significantly mitigated as the
Project Highway is a natural monopoly where existing
traffic volumes can be measured with reasonable accuracy.
On the other hand, all direct and indirect political risks are
being assigned to the Authority.
Owing to the absence of an
alternative road, highways
should be open to use by
residents without any payment
of tolls until free service lanes
Frequent users should be
entitled to discounted rates, in
accordance with the tolling
Operation and maintenance
Operation and maintenance of the
Project Highway is proposed to be
governed by strict standards with a
view to ensuring a high level of
service for the users.
In sum, operational performance
would be the most important test of
28. PPPU and
As far as Pakistan concern
about project financing and
Private Public Partnership
Multiple projects have been
executed, and some are in
work in progress and some
are in under pipeline.
According to Private Public
Partnership Units (PPPU) a
finance department of
Government of Sindh.
HYDERABAD MIRPURKHAS DUAL CARRIAGEWAY - HMDC
Karachi Thatta Dual Carriageway Project - KTDC
Performance Based Contracts for Health Facilities -
Safety & Security at National Institute of Child H - NICH
Sindh Ambulance Service - SAS
Sindh Nooriabad Power Project - SNPC
Sir Aga Khan Jhirk Mulla Katiyar Bridge - JMK
Vehicle Inspection and Certification System - VICS
50 MW POWER PLANT FOR K-IV PHASE I - 50MWPP
BRTS Green Line & Orange Line (Bus Operations) - BRTG
BRTS Yellow Line (Infrastructure) - BRTY
Contracting Out of DHQ Civil Hospital -
Dhabeji Industrial Park - DIP
Education Management Organizations - EMOs
English Medium Schools - EMS
Fish, Meat, Fruit & Vegetable Market Project - FMFVM
Ghotki-Kandhkot Bridge Project - GKBP
Khajoor Mandi Khairpur - KWDM
KMC Theme & Safari Park Project - SAFARI
Malir Expressway Project - MEW
Teachers Training Institute for Education - TTI
31. PIPELINE PROJECTS (9)
ARFA KARIM IT
CITY PROJECT -
BRTS Blue Line
Station - DPS
Domicile & PRC
Project - DPRCA
Larkana Fruit &
Link Road (M9-
N5) Project -
Livestock Farms -
Project - MANGO
Plant for Dates
Project - SDPD
Undertake projects for the benefit of the citizens, including the
socially and economically disadvantaged
Allows governments to approach projects hitherto
unobtainable due to lack of funding
Provide incentives to the private sector to adopt green criteria
PPPs allow the injection of private sector capital.