PublicPrivate Partnerships PPP in Highways

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Public-Private Partnerships (PPP) in Highways
Seminar on Public-Private Partnerships in
Transport Sector in Russia

• Cesar Queiroz
• Lead Highway Engineer
• World Bank
• Moscow, 3-4 March 2005

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Presentation Outline

• PPP and public policy requirements
• The main risks of highway projects
• International experience with highway PPP
  projects
• Traffic forecasting risks
• Impacts on revenues
• The Toolkit for PPP in Highways
• Allocation of risks
• Discussions

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PPP Public Policy Requirements

• Proposed highway projects should be part of
  Government program
• Subject to full social cost-benefit assessment
• to ensure public as well as private benefits
• to establish need, and provide basis for public
  participation in financing
• Concession award and agreement should
• be well designed
• be transparent and competitively procured
• have clear rules for regulation of the concession

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Some Key PPP Issues

• Ensuring open market access and competition
• Protecting the publics interest
• Defining the right level of Government
  contribution
• Selection of the most suitable PPP type
• Appropriate performance indicators

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Traffic Risk in Start-Up Toll FacilitiesStandar
d Poors (SP)

• 67 toll case studies comparing forecast
  performance with actual/observed
• Toll roads, bridges and tunnels
• User-paid and shadow tolls
• Key findings
• Systematic errors (optimism bias) in forecasts
• Consistency of error-drivers
• Produced a traffic risk index
• Sensitivity testing is essential

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SP Research Results 2002
Mean 70 Spread 18 - 146 !
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Traffic Forecasting Risk Index
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Error Drivers

• Miscalculation of road user willingness-to-pay
• Recession or economic downturn
• Future land use scenarios that never transpired
• Time savings less than expected
• Improvements to competitive (toll-free) routes
• Underestimate of ramp-up period (traffic
  stability), both severity and duration
• Less usage by trucks than anticipated

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Future Challenges

• Point-of-use charging
• depends on ability to pay/willingness to pay
• New toll collection technologies
• Reliability, take-up, back-office processing
• Pricing sophistication
• discounts (frequent user programs, resident
  discount schemes), peak/off-peak pricing,
  day-of-week, season-of-year

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Main Lessons for Success

• A well defined legal framework
• Simple and transparent procurement
• Shared risk-reward concession structure
• Projects should have social benefits as well as
  commercial viability
• Particular attention to traffic forecasting and
  hence revenues
• Public sector comparator advisable

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World Bank Toolkit for Public-Private Partnership
in Highways
Provides policy makers from economies in
transition with guidance in the design and
implementation of a Public Private Partnership
(PPP) in the highway sector
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Public Private Partnerships
Build Operate Transfer Concessions
Management Maintenance Contracts
Works Services Contracts
Operation Maintenance Concessions
Full Privatization
Low
High
Extent of private sector participation
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• Build-Operate-Transfer (BOT) Type of Concession
• The responsibility of the concessionaire
  comprises an initial construction, upgrading or
  major asset rehabilitation, and operation and
  maintenance of the facility (e.g., motorway,
  tunnel, bridge)

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Availability of the Toolkit

• Free of charge
• A multimedia product available on a CD ROM
• Also available at the World Banks web site
  www.worldbank.org/transport

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The Highway Toolkit Includes

• over 5000 pages of reference publications and web
  links
• five main modules, case studies and financial
  simulation software

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Toolkit Modules

• 1. Overview and Diagnosis
• 2. Project Characteristics
• 3. Public Sector Functions
• 4. Laws, Rules and Contracts
• 5. Implementation

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The Toolkit also includes

• Financial simulation tool
• Graphic simulation tool
• Case study
• Documentation
• Glossary

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Some WB-related Sites

• Toll Roads and Concessions http//www.worldbank.or
  g/transport/roads/toll_rds.htm
• Toolkit for PPP in Highways http//rru.worldbank.o
  rg/Toolkits/PartnershipsHighways/
• Port Reform Toolkit http//www.worldbank.org/html/
  fpd/transport/ports/toolkit.htm
• How to Hire Expert Advice on PPP
  http//rru.worldbank.org/Toolkits/Documents/Adviso
  rs/Full_Toolkit.pdf
• Labor Issues in Infrastructure Reform
  www.ppiaf.org/Reports/LaborToolkit/toolkit.html

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Allocation of Risks
100
MaintenanceContracts
ManagementContracts
Operation Maintenance Concessions
RISK TO PUBLIC SECTOR
BOT
BOO
Decreasing Public Risks, Increasing Private Risks
0
100
RISK TO PRIVATE SECTOR
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