20140311 mott mac donald smart communities malaysia
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20140311 mott mac donald smart communities malaysia
- 1. Dr Euan Low Where goes the smart money in smart infrastructure ? Lessons learnt from business planning of Smart Community Projects SMART CITIES SEMINAR PROGRAMME UKDTI Mission
- 2. • Creating value in smart communities • Defining Target Markets • Business planning for success Topics
- 3. ? Mott MacDonald is one of the world’s largest multi-disciplinary management, engineering and development consultancies. A wholly independent professional services company, engaged in over 120 countries. Our £1 billion employee owned business, with over 14 000 staff, combines management, commercial and technical specialists. Mott MacDonald is established as the world’s No 1 infrastructure transaction advisory firm and have expertise across a broad range of sectors. Working both buy and sell side, we understand the risks and opportunities of investments.
- 4. Smart Communities can • create new revenue generating assets; • increase land and property asset values; • improve mobility asset values through optimising transport options directly catered to individual people’s needs while reducing negative community impacts from vehicle use & ownership; • offer living solutions that are typically more resilient to external factors and are often more economically sustainable, and therefore can offer lower risks to asset values; Potential Contributions to Balance Sheet: Increasing Asset Value & Decreasing Liabilities
- 5. Smart Communities can • reduce living costs (energy & mobility) for Smart Community residents and increase consumers’ disposable income; • generate new revenues for residents from sale of excess renewable energy or sharing transport capacity; • increase revenues from sale of land & property development; • generate new revenues through creation of new markets for selling smart & sustainable services, products, & software solutions; • enhance resilience to revenue streams & reduce the cost of mitigating contingencies thus strengthening economical sustainability Potential Contributions to Income Statement: Increasing Revenues and Decreasing Costs
- 6. Creating Asset Value – Green Buildings
- 7. Market Dynamics Electric Power Consumption Dynamics per capita Pump price by Type of Fuel, US$/litre Mobility (to/from work) 25% Mobility (work related) 19% Mobility (non- work related) 31% Electricity 18% Kitchen Gas 7% average household energy bill : RM6,600/year
- 8. Environmental risks Demand risks Off-taker credit risk High debt / Poor cash-flow Fiscal Regime Currency devaluation Political & regulatory risk Price or Service Competition Ability to bill consumer & collect cash Policy or Rule changes New entry Dominant party behaviour Market Dynamics - Threats to revenue Construction & Operation RisksMarket Risks Financial Risks Political, Legal & Regulatory Risks Construction Risks Performance Risks Supply Risks Institutional strength Land acquisition risks Social risks Revenue Sub - sovereign Project risks Network Constraints
- 9. Demand Volume Tariff Collection rate Demand profile Value of service Taxes Subsidies Tariff categories Metering & meter reading Billing Collection efficiency Ability & willingness to pay GDP wealth distribution Sociology Population Seasonal variation Demographic Urbanisation Living patterns Economic growth Land availability Land price Demand Corporate tax Grants V.A.T. Carbon tax Green concessions Feed in tariffs $
- 10. Supply Capital expenditure Operating expenditure Financing Engineering design, procurement & construction Obtaining permissions, authorizations Operations Management Fuel costs Management Administration Operations labor Spares & repairs Equity Debt Insurances Taxes Profits Dividends Commercial risk profile for lenders Commercial risk profile for insurers Corporate tax V.A.T. Income & social taxes Import tax Carbon tax $ Project Development Costs Maintenance Customer care Equipment
- 11. Build your business case
- 12. Source: Brief Report on Existing Policies Affecting Smart Grid Development and Analysis of Barriers in Thailand (January 2012), WADE Thai
- 14. Development of SMART communitiesVISION POLICYSETTING BUSINESSCASE CONCEPTPLANNING DESIGNDEVELOPMENT FINANCIALMODELING DELIVERY CONSTRUCTION PERFORMANCEMONITORING ASSETMANAGEMENT MASTERPLANNING + + + + + + + + + + + Concept Governance Planning & design Procurement Options Design Processes Procurement Implementation Land Assembly Operation & Maintenance Diagnostic Review
- 15. Thank you to this Malaysian-British smart community Euan.Low@mottmac.com Philip.Chay@mottmac.com Richard.Curran@mottmac.com
Editor's Notes
- There are many threats to a Project Company. Expert business case preparation will provide both Public and Private sector participants with evaluation and analysis that enables informed decisions to be made in determining a robust contractual structure that will last the contracted tenure of the service.Most important is that investors and lenders will not provide the Project Company with money for Project Finance unless there is both 1. a sound business case for the Project. AND2. A clear and common sense management of the Project RisksExperienced investors have learnt that successful projects will have 1. Long-term government commitment, no political interference and experienced advisors2. The project will have a simple contractual structure and minimal number of contracted interfaces 3. A convincing business case and risk management strategy It is the public sector’s responsibility to show investors and lenders a convincing business case, comprised of:1. A measurable demand for the water services2. A robust payment mechanism for recovering costs and profits for the water services3. A technically feasible and affordable solution for providing the services4. All significant Project Risks have been identified and affordable mitigations have been identified.