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Ppp in israel 2009
1. PPP projects in Israel
September 2011
Public Private Partnership Division
.Inbal Insurance Company Ltd
Ministry of Finance The Division of PPP Projects
2. Vision
Investments in infrastructure would enable to
sustain Israel’s economy growth
Private sector’s involvement would improve
level of government’s supplied services
Optimizing risk allocation between the public
and the private sectors would contribute to
public wealth
2 Ministry of Finance Ministry of Finance
The Division of PPP Projects
3. Industries under Focus
The government has decided to focus primarily on
the following industries:
Railroads/Mass Transit Systems
Roads
Water desalination and sewage treatment
Construction
Energy (IPP; LNG; Solar)
3 Ministry of Finance Ministry of Finance
The Division of PPP Projects
4. PPP
PPP/PFI – Major issues
PPP/PFI In Israel
4 Ministry of Finance Ministry of Finance
The Division of PPP Projects
5. Authorities Involved Along the Process
Concession Agreement
The Tender Management
Governmental body
WDA, JPTA,
Steering CTA
Committee
Inter-Ministerial
Cross Israel
Tender Committee Designated Highway,
Company Tel Aviv Mass
Transit
Ministry of Finance
Relevant Government Ministries
Inbal – The Division of PPP
External Consultants
5 Ministry of Finance Ministry of Finance
The Division of PPP Projects
6. Contractual Framework
(Limited or Non-Recourse Structure)
Government
Sponsor(s) Project vehicle Lender(s)
Equity
(SPC( Financial Facility
Construction Agr. Operating Agr.
(EPC) (O&M (
6 Ministry of Finance Ministry of Finance
The Division of PPP Projects
7. Project Feasibility Study
Phase 1 - Project is
economic economically
feasible No
feasibility study: Project will not be
Cost/benefit implemented
analysis Yes
Business
environment fits No
PPP/PFI Public sector
Phase 2 - implementation
prior to and Yes using alternative
during tender method
process Project meets
PPP/PFI criteria
No
- Phase 3 Yes Signing a
Analyzing the concession agreement
decision & Yes &
implementation bids compared החלטת
to the PSC Controlling its
ממשלה execution
7 Ministry of Finance Ministry of Finance
The Division of PPP Projects
8. Typical Risk Allocation
Optimal Risk Allocation – each sector is responsible for the risks he can better
mitigate
Risk Public Private Shared
Technology
Land acquisition &
Expropriation
Detailed design
Cost overruns
Completion delay
Archaeological findings
(mainly Public)
O&M costs
Collection risk
Force Majeure
Discriminatory change in
laws and legislation
Political risk
Market/Demand risk
9 Ministry of Finance Ministry of Finance
The Division of PPP Projects
9. Typical PPP/PFI project Time Frame
Excluding legislative related delays
Project stage Time Frame (Months)
• Appointing Tender Committee/Consultants 1
• PQ Documents 3-4
• Bidding the PQ 3
• List/Short List after PQ 1
• Tender documents 2
• Bidding of Tender 4-6
• Tender process 1-2
• Best & Final 1-2
• Sub Total 16-20
• Financial close 8-12
• Total 24-32
10 Ministry of Finance Ministry of Finance
The Division of PPP Projects
10. Improvements in the Tender Rules
Changes and improvements in the Tender Rules in order
to facilitate the implementation of the projects:
Unified accounting principles (based on IASB).
Easing of tax treatment
Interest rate changes protection
Various indexation and protection options in accordance,
to risks at the different project stages
Steps to encourage institutional investors to participate in the
PPP financing :
Indicative Rating to the projects (by Israeli rating co.)
Refinance option after Construction phase
11 Ministry of Finance Ministry of Finance
The Division of PPP Projects
11. Encouraging foreign Participation
Why foreign participation is needed?
• Single borrower limitation (15%)
• Low competition (2 major banks)
– Equity: NIS 54B for the big 5; NIS 37B for the big 2.
– ROE: 13.1% - 22% (9/2006 - big 5)
• 7-8 major groups participating in all government projects
Improvements in order to facilitate the participation of foreign
bidders and foreign Lenders:
Foreign interest rate changes protection.
Foreign currency changes protection.
Various indexation and protection options in accordance,
to risks at the different project stages
Payments to Concessionaire in foreign currency
12 Ministry of Finance Ministry of Finance
The Division of PPP Projects
12. Foreign Entities participation
• Technical Know-How
Bring professional expertise and experience.
Bring advanced technologies.
Bring more efficiency in the planning and
execution of projects.
Improving the capability of Israeli entities.
• Investment
Partnership between Israeli and foreign
entrepreneurs.
Enlargement of foreign investments.
13 Ministry of Finance Ministry of Finance
The Division of PPP Projects
13. Foreign Entities Involvement
• Financing
Israel’s sovereign rating ( A – A+ ) attractive for
international finance entities.
Improvements in Tender Rules encourages
foreign participation : financing in USD / Euro
with interest rate protection, various indexation
protection at the different project stages.
Help to enlarge number of financing entities
(single borrower limits for Israeli banks).
Stimulate competition – reduce financing costs
Offer new financing tools and solutions
14 Ministry of Finance Ministry of Finance
The Division of PPP Projects
14. PPP
PPP/PFI – Major issues
PPP/PFI In Israel
15 Ministry of Finance Ministry of Finance
The Division of PPP Projects
15. Volume of Operation by Sectors
Construction costs
3%
Transport: $ 6.3 billion
20%
Water: $ 2.0 billion
Construction: $ 0.3 billion
14%
Energy : $ 1.4 billion 63%
Total $ 10 billion
Transport Energy
Water Construction
16 Ministry of Finance Ministry of Finance
The Division of PPP Projects
16. Main PPP Projects
in Israel
Cross Israel Highway (H-6)
Carmel Tunnels
LRTs
Railways
Roads No 431 + 531
Fast lane
Desalination facilities
Prison, Police National Academy
Solar Plants, LNG
Army Training Basis City
17 Ministry of Finance Ministry of Finance
The Division of PPP Projects
17. Status of PPP Projects
Transportation Projects Status Foreign Entities
Involvement
Cross-Israel Highway - In operation Both in the
Central Section operation and in
the financng of
the project.
Highway 431 In operation Financing of
construction
phase: HSBC
(together with 3
Israeli banks)
Cross-Israel Highway – Construction – work began in Both In the
Section 18 June 2007 and is expected to operation part
be completed by September and in finance
2009. part
18 Ministry of Finance Ministry of Finance
The Division of PPP Projects
18. Status of PPP Projects
Transportation Projects Status Foreign Entities
Involvement
Tel Aviv and Jerusalem Fast Construction – Construction “Siemens” is a
Lanes work began in August 2007 subcontractor
and is expected to be responsible for the
completed by the first quarter unique toll system
of 2010.
Jerusalem LRT Construction – Construction A French company
work began in August 2006 (“ALSTOM”) holds
and is expected to be 20% share in
completed by the third quarter consortium
of 2010.
Tel Aviv LRT Financial Closing – expected “Siemens” is part of
to be completed in April 2009. the concessionaire.
Financing of
construction phase:
RBS, Bayerische LB,
KFW
19 Ministry of Finance Ministry of Finance
The Division of PPP Projects
19. Status of PPP Projects
Transportation Projects Status Foreign
Entities
Involvement
Carmel Tunnels Construction –work began in A Chinese
November 2006 and is expected company
to be completed by the end of (“CCECC”) is
2010. involved in the
tunneling works
Highway 531 Financial Close –to be
completed in July 2009.
20 Ministry of Finance Ministry of Finance
The Division of PPP Projects
20. Geographic
531 Cross :location
Israel
Highway The ring roads
around the Tel Aviv
metropolitan area :
Ayalon
HW-20 North - 531
Tel Aviv East - Cross Israel
(Hw 6)
South - 431
West - Ayalon
(Hw 20)
431
21 Ministry of Finance Ministry of Finance
The Division of PPP Projects
21. Status of PPP Projects
Desalination Projects Status Foreign Entities
Involvement
Ashkelon (100 m3/year) In operation A French company
(Veolia Water ) is part
of the consortium(50%)
Palmachim (30 m3/year) In operation
Hadera (100 m3/year) Construction - Financing of the project :
construction of the facility Calyon Bank , EIB,
will be completed by the Espirito Santo Bank,
end of 2009. Dexia Bank, KFW.
Sorek (150 m3/year) RFP released in January Foreign companies are
2009. Proposals to be part of bidding groups
submitted in June 2009
22 Ministry of Finance Ministry of Finance
The Division of PPP Projects
22. Development of sea water desalination plants in Israel along the
national system
(100)
Hadera
Construction phase. Production at 12/09
Tendering stage 505
(150)
405
280 305
Full production Sorek
Since 9/07
(30)
Palmachim 100 130 145 160
(100) 36
Tendering stage Ashdod 0
(100)
05
08
10
04
06
07
09
11
12
13
Ashkelon
20
20
20
20
20
20
20
20
20
20
Full production
23
Since 12/05
Ministry of Finance Ministry of Finance
The Division of PPP Projects
23. Status of PPP Projects
Energy Status Foreign Entities
Involvement
Solar Power Plants in the Negev RFP for 2 Thermal Foreign
Desert power plants released companies are
in March 2009 part of bidding
PQ for Photovoltaic groups.
plant expected to be
released in April 2009.
LNG PQ to be released
pending Government
approval.
24 Ministry of Finance Ministry of Finance
The Division of PPP Projects
24. Status of PPP Projects
Construction Status Foreign
Projects Entities
Involvement
Beer Sheva Prison Construction - construction The operational
of the facility will be company is going
completed by June 2009. to be foreign
Courts, Government Center Parking In operation
Lot, Knesset expansion
Training Center for The Israeli Police PQ –bids were submitted in Foreign
June 2008. participant part of
RFP expected to be bidding group.
released in Q3/09
Ashdod Hospital PQ – bids were submitted in
December 08.
RFP expected to be
released in Q2/09
25 Ministry of Finance Ministry of Finance
The Division of PPP Projects
25. Expected additional Projects
Additional Roads & LRT lines (Tel-Aviv) including T/K &
Build/Design projects
Additional Desalination Facilities
Hospitals (Including hotels, parking areas, shopping malls)
International Airport in Megido
Education (school PFI)
An international airport and the Peace Corridor projects
(Coordination with Jordan)
Additional renewable energy projects
Protection of the Environment ( a committee has been appointed
to make a preliminary study of potential projects )
26 Ministry of Finance Ministry of Finance
The Division of PPP Projects
26. Thank you for
your attention
27 Ministry of Finance Ministry of Finance
The Division of PPP Projects
27. Contacts
Mr. Abraham Tenne
Head of Desalination Division and chairman of the WDA
Tel : 972-3-6369688/676
Mobile : 972-50-6221342
E-mail :abrahamt@water.gov.il
28 Ministry of Finance Ministry of Finance
The Division of PPP Projects
Notas del editor
The Gov Interests for getting into PPP world can be summarized in these 3 bullets: Permanent growth, Outsourcing of Gov services & optimization that can be translated into economic efficiency
The reasons are: Best effect on growth, National need, efficiency, Technology
This is the typical model that is used in Israel. The entities and connections between them are based on the UK PPP model. The ceding authority, the SPV/C, the subcontractors/ third party operator for EPC & O&M, Sponsors (Equity and track record) & Lenders. 8-10 big sponsors & 2 major banks
Major pros & cons of PPP as we see it here are listed in this slide. The integration of short-long term concerns, the best mitigation of risks, and the efficiency of private sector hopefully deliver savings v. the tender costs & the extra risk premium of private sector.
Through the 12 years of PPP in Israel we’ve adopted the British model. And till today no record of controversial between what is accustomed by the world bank PPP standards and our projects. We offer local rating and refinance option for provident funds, Insurance companies and other institutional investors
Since we started with these improvements, we had foreign banks in Hadera Desali. And Tel Aviv LRT. we
מנהרות הכרמל טכנולוגיה ייחודית שלא הייתה קיימת בישראל המכרזים מפורסמים תוך ראיה בינלאומית מימון לט"ק זר וט"א ישראלי של גופים מוסדיים
Most projects are in the Transportation sector starting 12 years ago with the Carmel Tunnel and H-6, some 4years before other sectors
כביש 6 מעורבות של קבוצה קנדית ב- 25% מזכיין ו- 50% במפעיל מימון זר של כ- 20% על ידי מספר בנקים זרים
כביש 6 מעורבות של קבוצה קנדית ב- 25% מזכיין ו- 50% במפעיל מימון זר של כ- 20% על ידי מספר בנקים זרים הזכיין מורכב מ- בעלי המניות של החברה הינם: 20% אפריקה ישראל בע"מ. 20% אגד בע"מ. 20% סימנס SIEMENS -. 20% צ'יינה סיביל אינג'נירינג קונסטרקשן קורפוריישן . CCECC - 20% סוארס דה קוסטה SDC -.
Non committed list of future possible projects. The reason foe including these projects in the list the advanced analysis stage.
Non committed list of future possible projects. The reason foe including these projects in the list the advanced analysis stage.