IPFA Presentation - United Capital PLC

U N L OC KING R A P I D D E V E L O P MEN T O F
TR A N S P ORT I N F R A S TRU CTU RE I N
N I G E RIA
Industry Overview and PPP Opportunities
N O V E M B E R
2 0 1 5
Wale Shonibare
Managing Director, Investment Banking
United Capital Plc
“The World Bank estimates that every 1% of government funds spent
on physical infrastructure stock leads to an equivalent 1% increase in
GDP”
AGENDA
Outline
1
Background
2
Transport Sectors
3
Financing Needs & Challenges
4
Experience from other Countries
5
Key Structuring Issues for Rail in Nigeria
6
Case Studies - Key Success Factors
7
Key Next Steps
Background
Background on Infrastructure

The international benchmark for infrastructure stock
Infrastructure Stock as a % of GDP
as a % of GDP is 70%. Nigeria currently stands at 25%

In order to bring Nigeria up to the benchmark by
2043, there is need for expenditure of ~USD 2.9
trillion
87%
Benchmark
76%
70%
80%
58%
47%
BRICS (Excluding Russia)
Poland
Indonesia
South Africa
The 2015 Africa Competitiveness Report by the
World Economic Forum ranks Nigeria‟s infrastructure
at 134th out of 144 countries
China

India
It is expected that 48% of the required funding
requirement will come from the private sector. This
amounts to ~USD 1.4 trillion
Brazil

Nigeria
25%
Other
emerging
markets
Expected Infrastructure Spend (2014 – 2043)
Funding Source
%
Amount (USD Bilion)
Private
Federal
State & Local
Donor
TOTAL
48
29
23
0.4
1,392
841
667
11.6
2,911.6
Source: National Integrated Infrastructure Master Plan
(NIIMP), ITF, GWI, Mckinsey Global Institute analysis, United Capital
Research
Nigeria needs USD 78 billion over the
next four years to finance its
infrastructure deficit with USD 37 billion
expected to come from the private
sector
4
4
Background
Transport Infrastructure



Nigeria’s expenditure on transport infrastructure
as at 2013 stood at USD 2.3 Billion.
Infrastructure spend requirements over the next 30 years
Funding Requirements
(USD Billion)
Transport Sector
Roads
350
Urban Mass Transit
250
Railway
75
Maritime
50
In line wit h t his, ~USD 22 Billion is needed over the
Aviation
50
next 4 years translating t o an average of ~USD 5
Maintenance Cost
over the period
37
TOTAL
812
This level of expenditure has created a funding
gap of ~USD 800 Billion which can be covered
over the next 30 years according to the NIIMP.
Billion per annum.
Spend on transport infrastructure
(USD Bn)
1.9
2
2.1
2010
2011
2012
2.3
2013*
Source: 2013 National Integrated Infrastructure Master Plan (NIIMP),
United Capital Research
2013* - Current figures as at NIIMP formulation
5
5
Rail Trans port
 Railway
systems
encourage
inter-regional
development
as population
and
urbanization
are on the
increase.
 Nigeria has
3,505km of
railways
which is
currently
insufficient
and
underutilized
 The 2015 Global Competitiveness Index of the
World Economic Forum ranked the quality of
Nigeria’s rail infrastructure at 100th out of 144
countries.
 To bridge this gap ~USD 75 Billion is required
over the 30 years of the NIIMP. USD 19 Billion out
of this would be used to execute new
construction of more than 6,000km of standard
gauge rail while the rest will be used for
rehabilitation of existing lines and development
of rail stations and other rail services.
Construction
Location
Length
(Km)
1898-1901
Lagos-Ibadan
193
1901-1909
Ibadan-Jebba
295
1907-1911
Kano-Baro
562
1909-1915
Jebba-Minna
255
1914-1916
243
1922-1927
Port HarcourtEnugu
Kafanchan-Jos
1958-1961
Kafanchan-Bauchi
238
1961-1964
Bauchi-Maiduguri
302
179
Region
Rail infrastructure stock
Km rail per 100 square km
SouthWest
1.9
1.8
North
East and
Central
NorthEast
~56% of the rail lines (km) in Nigeria were
constructed during the Colonial Era
0.4
Nigeria
0.4
India
Brazil
0.2
South
Africa
China
Source: 2013 National Integrated Infrastructure Master Plan (NIIMP),
CIA Factbook, NRC Article
6
6
Road Trans port
 Nigeria has the largest road network in West Africa and
the second largest, south of the Sahara with an
estimated 200,000km of road network connecting
villages to cities.
Freight and Passenger
Movements
10%
 The 2015 Global Competitiveness Index of the World
Economic Forum ranked the quality of Nigeria’s road
infrastructure at 125th out of 144 countries.
 The road sector accounts for the lion’s share of required
transport infrastructure investments. Over the 30 years of
the NIIMP, total investment required is ~USD 350 Billion
for upgrading and expansion of existing road structure.
100
30
21
India
Brazil
90%
Consequences of Road Sector Decay
N12 Billion loss due to delayed
turn-around and increased travel
time
Km road per 100 square km
Nigeria
Others
N88 Billion loss due to increased
Vehicle Operating Costs
Road infrastructure stock
21
Roads
S Africa
Source: National Integrated Infrastructure Master Plan (NIIMP),
United Capital Research, Federal Ministry of Works Investors Manual
N75 Billion loss due to reduction
in asset value
Total annual loss to the economy
approx. N175 Billion
7
7
Aviation
 Required investments for the aviation sector
amounts to ~USD 50 Billion
comprising of
rehabilitation and remodeling of the eleven
(11) airports in Nigeria.
 The 2015 Global Competitiveness Index of the
World Economic Forum ranked the quality of
Nigeria’s aviation infrastructure at 121st out of
144 countries.
 Government plans to concession the country’s
major airports to the private sector under the
Build-Operate-Transfer (BOT) model.
Aviation
PPPs
Project Title
PPP
Structure
PPP Company
Domestic Terminal at
Murtala Mohammed
Airport, Lagos
Concession
/BOT
Bi-Courtney
Limited
Lekki-Epe International
Airport
DBFOM
N/A
Nnamdi Azikiwe
International Airport,
Abuja
Concession
/BOT
Abuja
Gateway
Consortium
(Contract is
currently
revoked)
8
8
Urban M as s Trans it
Proposed Lagos State Ferry Service route
NIIMP indicates a finance gap of USD 300 million
Mile 12
Ikorodu
Ijede
Oworonsoki
Oke Afa
Badore West
IBB
Festac
Iddo
Mile 2
Lasu
Satellite Town
Olodi Apapa
Ebute Ero
Marina
Falomo Bridge
Lekki
Liverpool
West Line
Central Line
Apape Line
North Hopper Line
North Direct
East Line
Iddo - Ebute Ero Crossing
CABLE CAR
Source: Trico Capital

The 12.85 km Lagos Cable Car Project is currently
the only cable car initiative ongoing in Nigeria for
urban mass transit .

It is expected to cost USD 250 Million under a
Concession/BOT PPP structure being executed by
Ropeways Transport Limited.

This project seeks to have 9,000 vehicles taken off
the roads each day, thereby alleviating
congestion and reducing pollution.
9
9
M ar i ti me
 The 2015 Global Competitiveness Index of the World
Economic Forum ranked the quality of Nigeria‟s port
infrastructure at 110th out of 144 countries.
 Required investments over the 30 year period of the NIIMP
amount to ~USD 30 Billion of which sea port infrastructure
would represent ~USD 25 Billion .
 Nigeria currently has 6 major ports: Lagos Port, Tincan
Island Port, Rivers Port, Delta Port, Calabar Port and Onne
Port.
 Bureau of Public Enterprises concluded the Seaport
Concessioning Programme in 2006 which brought in the
current set of private sector operators in Nigeria.
Port Infrastructure Needs in Nigeria :
•
•
•
•
•
•
•
•
Rail Lines
Electricity
Marine services
Development and maintenance of quay walls
Towage and pilotage services
Bunkering facilities
Inland waterway fleet
Road network
Maritime Sector Contribution to
GDP of Developing Economies
(2012)
India
28.1
China
9.7
Russia
5.9
Brazil
2.8
S/Africa
1.3
Nigeria
0.15
0
5
10
15
20
25
30
Source: 2013 National Integrated Infrastructure Master Plan (NIIMP),
United Capital Research, Federal Ministry of Works
10
10
F inancing Needs & Challenges
Financing Needs for Transport Infrastructure

With around 48% expected to come from the private
sector, about USD 1.4 trillion will be required over the 30 year
period.

The sources of finance are as follows:
Infrastructure spend funding
source
‒ Local project sponsors
~0.4%
‒ International project sponsors
‒ Local banks
‒ International banks
48%
‒ Local institutional investors
‒ International institutional investors
Private
29%
State & Local
Federal
23%
Donor
‒ Multilateral finance organizations

However, there are issues to be resolved in order to take full
advantage of the options available

We need to foster an environment that encourages sustainable
investment in infrastructure.
Source: National Integrated Infrastructure Master Plan (NIIMP)
11
11
Pr ivate Sector F inancing - C hallenges
Local Project
Sponsors
 Often inexperienced; lack of credible track record
International
Project
Sponsors
 Little local knowledge; very risk averse; concerned about transparency
Local Banks
International
Banks
Local
Institutional
Investors
International
Institutional
Investors
Multilateral
Finance
Institutions
 Short –term focus due to asset liability mismatch; inadequate access to long-term capital;
need to build human capacity; high interest rates
 Cyclical – fickle appetite; introduces currency risk
 Lack access to long-term investment opportunities; underdeveloped corporate bond
market
 Little local knowledge; lack access; require quick exit
 Slow cumbersome processes; country limits; many strings attached
12
12
Public Sector F inancing - C hallenges
Slow implementation of
the
National Integrated
Infrastructure
Master Plan
Limited Budgetary
Allocation to Transport
Infrastructure
Appropriate Macro/Micro
Economic Conditions
 The National Integrated Infrastructure Master Plan (“NIIMP”) (covering 2014 to
2043) envisages a total investment outlay of USD 2.9 trillion to bring Nigeria’s
infrastructure stock to the international benchmark of 70% of GDP by 2043.
 The budgetary allocation to the Ministry of Works st ood at 2.26% of t he 2014
budget with road infrastructure being allocated a paltry 0.3%
 Encourage stable exchange rates, low inflation, low interest rates; build out yield
curve; pensions reform; regulate effectively; sanct it y of contract; t ax incent ives,
capital markets reforms
13
13
F inancing Needs & Challenges
The Domestic NGN Yield Curve
Maturity (Years)
Yield
0.81
1.85
2.59
4.30
8.38
14.74
18.73
10.70%
12.74%
13.02%
13.32%
13.41%
15.52%
13.95%
Federal Government of Nigeria Yield Curve
16.00
Yield
14.00
12.00
Yield (%)
10.00
8.00
0.81
1.85
2.59
4.30
8.38
14.74
18.73
Years to Maturity
Source: FMDQ OTC as at 26/10/15
14
14
C apital M ar ket Solutions
Institutional Investors
Matching institu ti on a l
investor s with
infr astr uctur e pr ojects
Enhancing the
mar ketabili t y/ li qu i di t y of
infr astr uctur e pr ojects





Cash rich
Long-term I nvestment horizons
Relativ ely stable returns
Low risk tolerance
Includes Pension Funds, Other
Fund Managers and Insurance
Companies
(USD 108 bn)
(USD 78.1 bn)
Nigeria‟s
infrastructure
investment
requirement
over the next
four years
(USD 23.9 bn)
Pension Funds
available for
investment
Aggregate
Market Cap of
listed Debt and
Equity
securities on
THE NSE
 Enhance the projects through:
o Financial Guarantees
o Political Risk Insurance
o Liquidity Facilities
o Financial Engineering/Transaction Structuring
 Securitisation (converting the projects into tradable securities)
Reducing the cost of
pr oject r elated financi ng
Percentage
18
16
14
12
FGN 10yr
10
Bank Loans
Source: Bloomberg, United Capital Research
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
8
Month
15
15
Exper ience f r om other C ountr ies
T his se ct ion fo cus es on m ea sur es
development by t he privat e sect or
t aken
by
ot her
count ries
to
fa ci lit at e in fra st ruct ure
A
Legal
Framework
H
Appropriate Risk
Allocation
Sources of
Finance
Infrastructure
Financing
Institutions
Project
Development
G
F
B
Sector-Specific
Initiatives
Government
Support
Incentives and
Reliefs
C
D
E
16
16
Exper ience f r om other C ountr ies
A
Legal and Regulatory Framework
S/N
1.
2.
3.
Initiative
Precedent
Clear regulatory framework. A mendment of regulatory framew orks and
issuance of regulat ions and clarity of procurement requirements is
necessary t o ensure a robust framework t hat attracts financing.
Japan/
Unit ed Kingdom
Standardised Framework. T he development of st andardized law s,
documents, guidelines and manuals aid t he process of project
development and assure part icipants of uniformity and predict ability on
projects.
Institutional Capacity Building. MDA s should be t rained on private
part icipation in infrast ructure financing t o enable t hem st ructure bankable
projects and regulate appropriately.
I ndia/
Unit ed Kingdom
Unit ed
Kingdom/India
T he PPP Resource Centre could be enhanced t o pool expert ise and
resources for ut ilisation across MDA s.
17
17
Exper ience f r om other C ountr ies
B
Sources of Finance
S/N
Initiative
Precedent
1.
Infrastructure
Banks/Specialised
Developm ent
Banks.
Government
est ablished/supported financial institutions w ith a mandate to fund
development of infrastructure. It could involve grant of t ax-exempt status
t o debentures issued by infrast ructure banks.
Unit ed St ates/
Financial Guarantee Institutions/Monoline Insurers. Established financial
guarantee institutions can raise credit rating of bonds that would normally
be below invest ment grade by lending t heir ow n rat ings t o bond issues.
Malaysia/
Emphasis on Early Stage Funding . Establishment of a fund to cater for early
st age development funding would improve access to capital and
ult imately t he probability of project financing success.
Unit ed Kingdom/
Infraco/
A frica
50
2.
3.
Malaysia/IndiaI I FCL/ Brazil
Chile/Brazil
Government also can play a role in the development stage of projects and
t ake projects t o bankability.
4.
Long-term Credit Banks. Privat e-sector owned institutions backed by
government w ith a specific mandat e t o fund infrastructure projects.
Japan
5.
Growth of Non-interest (Islamic) Finance Market. Issuance of sukuks used to
fund infrastructure projects and encouragement of Islamic finance
instruments through favorable tax treatments (no tax on profits) opens up a
significant financing avenue.
Malaysia/
I ndonesia/UAE
18
18
Exper ience f r om other C ountr ies
D
Government Support
S/N
Initiative
Precedent
1.
Federal Government Grants. Provision of grants and credit assistance
to state and local governments through loans, loan guarant ees and
t ax preferences.
Unit ed
States/
I ndia ( VGF)
Viability Gap Funding: The Indian government provides up to 20% of
the total capital cost for PPP projects undertaken by government
ent ities.
2.
Federal Capital Assistance Program s. FGN credit assistance to projects
through loan guarantees and lines of credit including loan guarantees
for majority of const ruction costs for qualifying projects.
Unit ed
States
T I FIA program.
3.
Guarantees. Government commitment towards providing guarantees
to cover risks which t he private sector is not prepared to t ake w ill
galvanise internal sources of funding w ithin the country as w ell as
encourage external financiers.
Unit ed Kingdom
–
Note how ever that Government must be able to monitor the
guarantees it provides to keep t rack of cont ingent liabilities.
19
19
Exper ience f r om other C ountr ies
E
Incentives and Initiatives
S/N
Initiative
Precedent
1.
Specific tax incentives.
-5% tax rate for dividend income from investments up to a cap, and 14%
above the cap.
-0% tax rate for VAT for construction services of revertible infrastructure
facilities
-Separate tax rate is applied to dividends from infrastructure bonds
investments.
South Korea
2.
Specific Tax Incentives for financial Institutions
- FIs are allowed to deduct 40 per cent of the profit arising from long-term
lending to infrastructure from their total income
India
3..
Expansion of Pioneer Status List. Grant of extended tax holidays for companies
operating in certain infrastructure sectors.
Indonesia
4..
Tax incentives for project companies. Provisions allowing PPP projects to enjoy
certain tax rebates/deduction therefore projects enjoy lower tax burdens.
Malaysia/India
20
20
Exper ience f r om other C ountr ies
G
Project Development
S/N
Initiative
Precedent
1.
Encouragem ent of Unsolicited Proposals. Promotion of solicited as w ell as
unsolicited projects in line w ith government infrastructure plans and
priorities. Government agencies could be mandated to consider
unsolicited proposals.
South Korea
Japan
2.
IIPDF: GOI has also set up a revolving fund with a corpus of USD 20 million
titled, „India Infrastructure Project Development Fund‟ (IIPDF), to support
project development expenses.
I ndia
3.
Adequate Institutional Planning . Successful projects are t he product of an
elaborate planning framework w hich ranks all infrast ructure projects in
t he order of import ance t o t he economy. I mportant projects can be
prioritized in t erms of government support and funding .
- Nat ional Highway Development Programme in I ndia is an example in
t his regard.
Unit ed Kingdom/
I ndia
4.
Marketing. Selling specific project s further t o t he Nat ional I nfrastructure
Plan in a coordinated manner w ould increase int ernational int erest in
Nigerian projects.
South Korea
21
21
Exper ience f r om other C ountr ies
G
Project Development
S/N
Initiative
Precedent
5.
Minimum Revenue Guarantee. Provision of operational period subsidy in
the form of minimum revenue guarantees w hich guarantee a portion of
projected revenues for a fixed number of years.
Alternate structure: government assumes a part of the investment risk and
makes payment to the privat e sector for the shortfall in actual operational
revenue in comparison t o shared investment risk of government .
South Korea
6.
Early Termination Payment. Provision of clear methodology for determining
payments in case of early t ermination which must be stipulated in
concession agreements.
South
Korea/India
7.
Exchange Rate Guarantee. Provision of guarantee of exchange rat e
guarantees ( up t o a cap) for a limit ed period for project s.
Chile
8.
Standard Risk Allocation Template. Development of a t emplate regulates
w hich risks Government must t ake on t o increase bankability of project s.
- I ndia has model concessions documents
I ndia
22
22
Exper ience f r om other C ountr ies
F
Sector Specific Initiatives
S/N
Initiative
Precedent
1.
Highway projects. For selected highway projects, Government provides
subsidy on int erest cost incurred by companies or ext ends soft loans to
projects.
Malaysia/
Chile
2.
Road Fund. Establishment of a dedicated fund such as the Central Road
Fund through fees, levies and fines. The fund could be used as a viability
gap fund.
I ndia
23
23
Heavy Rail –Str uctur ing Options f or Niger ia
Main Components of a Rail Business
 Infrastructure Construction
 Components
of the rail
business
include the
rail network
infrastructure
, the rolling
stock and
the services
to be
rendered to
end users.
- Track, terminals, signal, control and communication system
 Infrastructure operations and maintenance
Rail
Infrastructure
- O&M of support systems for rolling stock
- Scheduling and control of trains
- Preventive maintenance of civil infrastructure, track and
command & control systems
- Renewals
Rolling Stock
Rail Services
 Provision and maintenance of rolling stock
 Freight/Logistics services to end users
 Passenger services
24
24
Heavy Rail – Str uctur ing Options f or Niger ia
Public Vertical
Integration
Horizontal Integration
Public
1
Infra Co
Private Vertical Integration
Private
Service Co
2
4
Govt. Body
Franchise
Govt. Body
Infra Co.
(Govt.)
Govt. Rail Co
Public Vertical
Integration
Horizontal
Integration
(Hybrid)
Pvt. Service Co.
Govt. Body
Private Vertical
Integration (BOT
Concession)
Management contract
for Infra O & M
BOT
Concession
Pvt. Rail Operator
3
5
Regulator
Govt. Body
DBFOM
Concession
Franchise
Infra Co
Pvt. Service Co
Privatized Vertical
Integration
License
Pvt. Investor
Horizontal Integration
(DBFOM)
E.g- Nigeria, Russia, India
E.g. UK
E.g. US
25
25
Heavy Rail – Str uctur ing Options f or Niger ia
 Financial analysis will
determine whether the
Project is
economically viable
or whether subsidies
will be required. A
passenger service will
typically require
subsidies.
Revenue
Demand
Tariffs
Feasibility Report
Must be competitive
against road
transport costs
Infrastructure
Capital and
Operating
Costs
Rolling Stock
Provided by the
technical consultant
Services
Debt
Financial
Structure
Equity
Assumptions and
scenarios
Grant/Annual
Subsidies
Project returns
and key
financial
indicators
Project and Equity
Project Returns
IRR
Debt Service
Coverage
Ratios
DSCR and LLCR
26
26
Exam ple C as hf low Pr of ile f or an I nf r aco
AED bn
Year – on – Year Cash Flow Profile
AED bn
4
3.0
2
Without Grant
4.0
2.0
1.0
0.0
-1.0
-2.0
0
(2)
(4)
(6)
(8)
(10)
-3.0
(12)
-4.0
(14)
-5.0
AED bn
3.0
(16)
Year – on – Year Cash Flow Profile
AED bn
10
8
1.0
6
0.0
4
-2.0
With Grant
2.0
-1.0
Cumulative Cash Flow Profile
2
0
(2)
-3.0
(4)
-4.0
(6)
-5.0
Cumulative Cash Flow Profile
(8)
27
27
Exam ple of C as h F low Pr of iles of an Opco
AED bn
3.0





Free Cash Flows
Debt Serv ice
Total Maint. Cost
Operating Cost
Inv estment
1.0
35
Without Charge
2.0
AED bn
Year – on – Year Cash Flow Profile
0.0
Cumulative Cash Flow Profile
30
25
20
15
10
5
0
-1.0
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
(5)
AED bn
3.0
1.0
0.0
AED bn
6
With Charge
2.0
Year – on – Year Cash Flow Profile
Cumulative Cash Flow Profile
5
4
3
2
1
0
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
(1)
(2)
-1.0
(3)
28
28
Global L ight Rail
Comparison of fare revenues and operating costs, USA (24 States) 2004
Amount (U S$'000s)
120,000
100,000
Fare rev enue
Operat ing expenses
80,000
60,000
40,000
20,000
% of farebox revenue to operating
costs (2005)
0
%
London Underground
Fare Revenue as a percentage of Operating costs, USA (24 States) 2004
70%
129
New York Underground
77
Paris Underground
63
60%
50%
40%
Source: United Capital Research
30%
20%
10%
0%
Source: Federal Transit Administration National Transit Database
29
29
Global L ight Rail – Key Str uctur ing I s s ues
PROJECT
APPROACH
COMMENTARY
 Funded via a contribution of government upfront grant and
Croydon Tramlink, UK
Gov ernment Subsidies
Madrid Metro, Spain
Specialized Gov ernment
agencies w ith borrowing
pow ers
Hong Kong
Railway
Mass
Transit
priv ate farebox revenues
London Underground
Administration
 Shares in the Hong Kong Mass Transit Railw ay are publicly
Priv atization
traded on the stock exchange, follow ing privatisation in 2000
Nottingham Express Transit, Vertical
Integration
UK
Separation
Florence Light Rail, Italy
 Creation of company to act as financing agent for the
or
and construction contracts
 First public transport PPP in I taly
 Line 1 w as state-funded: Lines 2&3 put out to tender to private
Authority Guarantees
Complex
Public
Partnerships
 This project encountered problems due to separate operating
Private
A variety of North American
schemes use this financing Dedicated Transport Taxes
technique

consortia
Government transferred all operations and maintenance to
priv ate sector. The PPP w as eventually cancelled
 Government set up taxes that were dedicated to funding
transport infrastructure
 Key to an integrated transport policy in Manchester is receiving
Manchester, UK
access to the Transport I nnovation Fund (TI F)
I ntegrated Transport System
 Funding is likely to be increased if applicants demonstrate
commitment to an innov ativ e congestion charging scheme
30
30
Key Succes s F actor s
Project
realism
Bidder
expertise
10
9
8
7
6
5
Legal
framework
Project
preparation
Regulatory
environment
Strength of
financial market
31
31
Key Succes s F actor s
Project Realism
Project
Preparation
Regulatory
Environment
Financial
Markets
Legal
Framework
Bidders
Expertise





Strong link between cost and affordability





Good feasibility studies are essential
Problem for “prestige” projects
Unrealistic traffic projections can cause project failure
Grants/guarantees can help project financial viability
Tolls must be set at the right level
Planning risks should be shared
Stakeholders buy-in is crucial
Beware technically complex projects
A programme of projects helps build capacity and develop expertise
 Effective and unambiguous regulatory framework is vital
 Regulation may be through contracts or via an independent regulator
 Must facilitate long-term lending in local currency
 Innovative and competitive products reduce cost of funds
 Sanctity of contract is key
 Internationally acceptable procurement practice helps
 Credible bidders increase competition and value for money
 Confidence in the process will encourage bidders to invest in developing expertise
32
32
C as e Studies – Hungar y M 5
Project
realism
Bidder
expertise
9
8
7
6
5
4
3
2
1
0
Legal
framework
Project
preparation
Regulatory
environment
Strength of
financial market
Project realism
3 
Low usage; tolls too
expensive
Project
Preparation
6 
Inaccurate traffic forecasts;
local opposition
Regulatory
environment
5 
Brief history of concessions
Financial
markets
4 
Under-developed in
immediate post-communist
era
Legal framework
7 
Concession legislation in
place
Bidder expertise
8 
Phase 1 completed on time
and within budget
33
33
C as e Studies – Nether lands High Speed Rail
Project
realism
Bidder
expertise
10
9
8
7
6
5
4
3
2
1
0
Project
preparatio
n
Regulatory
environme
nt
Legal
framework
Strength of
financial
market
Project realism
7 
No demand risk transfer,
availability-based payment;
Project
Preparation
7 
Complex project; well
promoted
Regulatory
environment
7 
Well established
Financial
markets
7 
Strong and broad based
Legal framework
9 
Very well established
Bidder expertise
10 
International experienced
bidders
34
34
C as e Studies – C hannel Tunnel Rail L ink
Project realism
4 
Revenue short fall result ing in
renegot iat ion and
government guarantee
Project
7 
Significant t echnical planning
Regulatory
environment
9 
Well est ablished
Project
realism
Bidder
expertise
10
9
8
7
6
5
4
3
2
1
0
Project
Preparation
preparation
Financial
Legal
framework
Regulatory markets
environment
Strength of
financial market
10 
Deep, strong and innovative
Legal framework
9 
Well est ablished
Bidder expertise
4 
Weak; original financing
structure was unstable
35
35
Key Next Steps
Begin Implementation
Create an
Implementation
Plan
Step 4
Determine Optimal
Funding Mix
Step 3
Identify Funding
Gap
Step 2
Assess Current State
Of Infrastructure
Step 1
The NI I MP identifies the
funding gap in
Nigeria’s infrastructure
An optimal
funding mix w ill
be determined
around bridging
this gap
A holistic and
well-thought of
plan w ill be
formulated to
guide
implementation
across v arious
infrastructure
projects
Step 5
The implementation of
this plan w ill begin to
mov e Nigeria’s transport
infrastructure from
current state to the level
of its peers
A current state
assessment has been
conducted by the
National Planning
Commission and other
related MDAs
36
36
Wale Shonibare
Managing Director – Investment Banking
Office: +234-1-280 8669
Mob: + 234-703-414-5045
Email: [email protected]