Indonesia Infrastructure Development

Financing (IIDF) 2019

Thematic Panel Discussion I

“Public Private Partnership”

Jakarta International Expo

6 November 2019
 Discussion Agenda

1. Main challenges to implement PPPs in Indonesia?

a) Planning, Preparation, and Financing of PPP projects
b) Complex stakeholders require intensive coordination

2. How the MDBs are playing a role in PPP implementation?

3. Key strategies to enhance the quality of PPP implementation

process and application

4. ADB experiences in preparing PPP projects

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 1.a Main challenges to implement PPPs in Indonesia
- By stages of project development

PPP Planning PPP Preparation PPP Financing/Structuring

•No clear methodology to •Immature local transaction •Most PPP projects incur
determine the project advisory market (especially revenue in local currency
modality between public technical) that is required whose financial availability is
procurement and PPP in the to support GOI to identify very limited in the market in
planning stage. and structure a robust PPP terms of tenor, size,
•To identify potentially project. competitive interest rate,
commercially viable PPP •Limited (only MOF PDF) liquidity of swap market (e.g.
projects that would benefit and protracted process to Thailand, Malaysia).
from further project procure MDBs as • Misalignment of the
preparation, there should be transaction advisors even if government interests
a standardized screening assigned. (Municipality vs. Off takers
process by sector. •Lack of central authority (PLN, PDAM) impedes
•PPP often considered a with legal mandate and collaboration in conclusion of
panacea to solve government supporting capabilities to concession and financing
problems instead of facilitate throughout agreement.
appropriate master planning lifecycle of PPP projects • Absence of sophisticated and
that identifies how PPP (Identification through to appropriate risk allocation in
modality can support the Termination). terms of government force
overall delivery solution (e.g. majeure, misconduct of GOI,
WTE PPP can solve waste or change in laws prolongs the
mgt. needs). financial negotiation process.

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 1.b Main challenges to implement the PPP in Indonesia
- Complex stakeholders require intensive coordination

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 2. How ADB can play a role in PPP implementation
- Strategy 2030: Seven Operational Priorities

Addressing remaining poverty Making cities more livable

and reducing inequalities integrated solutions, funding for cities, inclusive
human development and social inclusion, quality and participatory urban planning, climate
jobs, education and training, better health, social resilience and disaster management
protection

Promoting rural development

Accelerating progress in gender and food security
market connectivity and agricultural value chain
equality linkages, agricultural productivity and food
scaled-up support for gender equality; women's security, food safety
economic empowerment; gender equality in
human development, decision-making, and
leadership; reducing time poverty for women;
strengthening women's resilience to shocks Strengthening governance and
institutional capacity
public management reforms and financial
sustainability, service delivery, capacity and
Tackling climate change, standards
building climate and disaster
resilience, and enhancing
environmental sustainability Fostering regional cooperation
low greenhouse gas emissions development, and integration
approach to building climate and disaster connectivity and competitiveness, regional public
resilience, environmental sustainability, water– goods, cooperation in finance sector,
food–energy security nexus subregional initiatives

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 2. How ADB can play a role in PPP implementation
- Strategy 2030: Additional Focus

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 2. How ADB can play a role in PPP implementation
- ADB’s value in implementing PPP projects

Pillar 1 Pillar 2 Pillar 3 Pillar 4

Advocacy and capacity Enabling

Project development Project financing
development environment

• Create awareness • Develop policy, legal, • Assist in the development • Provide long-term debt
• Invoke leadership regulatory and of pathfinder projects financing including local
• Identify PPP potential in institutional framework to • Provide support (including currency
sector planning and the facilitate, guide and advisory support) • Catalyze commercial
private sector manage the development throughout the process financing by equity, debt
development agenda of PPPs (country and from structuring to bid and guarantees.
• Develop capacity of sector specific) management and • Provide public sector
Government contract award/financial financial support through
• Enhance external close. schemes to ensure
knowledge management viability and cash flow
links sustainability.

ADB is unique in having comprehensive operational modalities to support PPP

Knowledge PPP Act; Streamlined
Feasibility studies Sovereign financing
dissemination, training PPP regulation
PPP units; Planning Non-sovereign
Preparation support
and coordination financing
Transaction Advisory
*Details of ADB’s transaction advisory services Services*
provided in next slide
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 2. How ADB can play a role in PPP implementation
- Scope of ADB’s Public Sector Transaction Advisory Services
• Target clients are public sector entities in ADB’s Developing Member Countries
• OPPP assists clients during the whole project cycle, from concept to developing
a bankable structure and until a private investor is selected
Management of Supporting
Project Preparation and Placement and
the bidding financial close
conceptualization marketing contractual close
process
• Defining project • Market scan & due • Project Information • Assist in bid • Assist in
scope diligence Memorandum evaluation negotiation of
• Definition of project • Commercial, • Pre-Qualification • Evaluation of Direct Agreement
objectives financial and consortium structure with Lenders
• Preparation of bid
• Project contractual documents (draft • Identification of key • Review financing
organization & structuring RfP, Concession issues for agreements
structuring • Risk analyses contract, & other negotiation • Oversee the
• Analysis of project • Proposed contract • Support negotiation financial close
framework implementation documents) with preferred process
conditions structure • Assist with bidders’ bidder • Advice regarding
• PPP options • Investor sounding: meetings & • Final contract compliance of all
analysis Project teaser consultations agreement CP (conditions
• Preparation of data precedent)
• Financial modelling • Contractual close provisions
room

OPPP’s Transaction Advisory Services Delivery extendable

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 2. How ADB can play a role in PPP implementation
- One ADB approach: Triangle of Advisory, Sovereign and Non-sovereign Support

Office of Public-Private
Partnership
Transaction Advisory Services
Technical Assistance through
AP3F
Regional Department Private Sector
Sovereign Operations Department
- MOF guaranteed Non-Sovereign
senior/subordinated debt - Loan guarantee not
PPP
and/or equity injection at required
Project Delivered
project or implementation - Corporate/project debt
agency level - Equity investment

- Technical Assistance - Guarantee products

- Capacity building - Syndication
- Sector/ Policy Reform

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 3. Key strategies to enhance the quality of PPP
implementation process and application

Clear project scope and Early confirmation of what outcomes

1 specification of outputs required are required of the private sector

Optimal risk Understand ability of private sector to deliver

2 allocation against risks from a VfM perspective

Good management of PPP Project owners (GCA) must allocate

3 contract and full monitoring of sufficient, capable resources to
the project implementation deliver and learn

Central & Regional Governments Early commitment to share

4 to share funding of PPPs funding of PPPs

Adjustment of value for Monitor achievement of VfM across full

5 money (VfM) assessment lifecycle of PPP Project – not just in OBC

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 4. ADB experiences in preparing PPP projects - Urban PPP projects
New Clark City National Government Administrative Center (PHI)
Background OPPP’s Transaction Advisory Mandate
► Tagged as “The Future City” and “The Green ► Evaluation of the master plan of NCC
City”, the New Clark City (“NCC”) is designed
and envisioned to be the first smart, ► Screening and assessing the viability of the
environmentally sustainable and climate Project: Review and evaluation of the
resilient metropolis, developed by the Bases Unsolicited Proposal received by the
Conversion and Development Authority Client, including:
(“BCDA”) of the Philippines • Assessment of submitted feasibility
► Situated about 100 km north of Manila in study
Tarlac province near Clark International • Evaluation of technical, economic and
Airport, NCC is an estimated $14 billion financial merits of the proposal
project and will cover an area of 9.450 ha
with buildable area of 3,250 ha • Mapping of proposal’s offering vs. the
Client’s requirements NGAC Phase 1 Layout Plan
The Project
► Structuring and tendering the Project:
► The National Government Administrative
Center (“NGAC” or “Project”) is one of the • Review and evaluation of the Unsolicited
pioneer developments in NCC Proposal
► Estimated project cost of $252 million to be • Financial analysis, transaction structure
invested by 2019 to develop Phase 1A. and negotiation
Capital is funded through a joint venture • Legal due diligence
between BCDA and its selected private
sector partner • Preparation of bid documents

► Development of a “one-stop shop” for • Running the “Swiss Challenge” process

government transactions to help decongest under BCDA JV Guidelines
the capital. The Project is also planned as a • Ad-hoc support for financial close
disaster recovery zone in event of any
calamities
► Innovative structure through combining
revenue and non-revenue components to
deliver desired project features and cost
optimization
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 4. ADB experiences in preparing PPP projects - Urban PPP projects
New Clark City Water and Wastewater Infrastructure (PHI)
Background OPPP’s Transaction Advisory Mandate

● Tagged as “The Future City” and “The Green ● Evaluation of the master plan of NCC
City”, the New Clark City (“NCC”) is designed
● Screening and assessing the viability of the
and envisioned to be the first smart,
Project: Produce a business case containing
environmentally sustainable and climate
a commercial assessment and PPP/JV
resilient metropolis, developed by the Bases
options analysis based on the proposed
Conversion and Development Authority
water infrastructure including
(“BCDA”) of the Philippines
− Demand analysis and phasing plan
● Situated about 100 km north of Manila in
Tarlac province near Clark International − Risk and benefits
Airport, NCC is an estimated $14 billion − Procurement plan to identify an
project and will cover an area of 9.450 ha optimal structure for the Project which
with buildable area of 3,250 ha is bankable and capable of achieving
development goals
● The New Clark City Water and Wastewater
Infrastructure Project (“Project”) is the − Smart, green and resilient options
development of environmentally ● Structuring and tendering the Project:
sustainable, smart and disaster-resilient
− Legal due diligence
water and wastewater infrastructure and
services in NCC − Preparation of bid documents
● The estimated project cost is $200 million − Market sounding
($114m for water and $86m for sewerage) − Financial analysis and transaction Total Projected Population*
to be funded by a private partner as a joint structure 1.2 Million 800,000
venture (“JV”) partner with BCDA − Running the 2-stage tender process Residents Workers
● Smart features including advanced water under BCDA JV Guidelines
*Upon Full Development
and wastewater treatment, AMI, SCADA,
effluent reuse, centralized control, and
others
● The project employed an innovative tariff
setting structure ideal for greenfield city or
existing network where asset inventory is
difficult to measure
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 ADB’s project preparation experiences in urban PPP projects
Dhaka By-Pass PPP –Project and Mandate Overview (BAN)

Background OPPP’s Support

● Dhaka is one of the world’s most densely ● Joint support from transaction advisory and
populated cities with population over 17 million. Asia Pacific Project Preparation Facility
● National GDP growth has been strong, growing at (AP3F)
6% per year over last 10 years. Road traffic has ● Drafting of bidding documents
increased 130% over last 10 years and accounts − Key commercial terms
for 80% of national passenger traffic
− Request for Proposals
− PPP contract
The Project
● Tender support: Support during the tender
● The Dhaka Bypass (DBP) is the 4-laning of the process including
N105 highway (shown), which will provide a much − Answering to questions from bidders
needed connection between the industrial zone − Amending bidding documents
in the north and east, and the major national
highways to the rest of the country. − Legal review of technical and financial
proposals
● DBP is a 48-km at-grade access controlled road,
including 4-lane tolled section and 2-lane service ● Structuring support: Review commercial
and financial structure of the project Technical Data
road. Project capex is ~$350 million includes one
bridge focusing on: 10,000 Vehicles
● Structure allocates market risk to private sector − Currency risk analysis and mitigation
strategy 48 km long, 4
but provides a minimum revenue guarantee lanes + service
(MRG) from government − Demand risk analysis road
● Project owner is RHD, with PPP Authority tasked − Payment risk analysis
$350 million direct
to implement the project as a PPP ● Support during post-bid negotiations investment
● The Project is the first road PPP to be including:
implemented under Bangladesh’s PPP Law and − Negotiations with winning bidder
the first to be implemented using new ADB
− Support commercial award
developed templates which reflect international
best practices

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 ADB’s project preparation experiences in urban PPP projects
Guangxi Elderly Care Facility (PRC)

Background OPPP’s Support

● The Project is the development of an ● Joint support from the ADB’s Regional
elderly care facility in Hezhou City of Development team, which is
Guangxi Zhuang Autonomous Region proposing to provide a sovereign loan
(GZAR), which will be procured as a to support delivery of this project
PPP. The Project will be the first case ● Project Preparation
to be supported by international
financial institutions for GZAR to: − Feasibility Study
i. address development − Project Structuring
challenges in adapting to its − Project Approvals
aging population; and ● Tender support: Support during the
ii. promote a PPP model for its tender process including
social infrastructure. − Preparation of tender documents
− Preparation of bid evaluation
The Project criteria
− Answering to questions from
● Transition Care bidders
● Facility design and construction − Review of technical and financial
● O&M – including provision of core proposals
services:
● Support during post-bid negotiations
− Key focus areas for elderly care including:
− Staffing − Negotiations with winning bidder
− Coordination of referrals from − Finalization of contracts
Guangxi-Guidong People’s
− Support commercial award
Hospital and other hospitals

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 ADB Contact Details for PPP in Indonesia

Takeo KOIKE Winfried WICKLEIN

Director Country Director
Advisory Service Division 1 Indonesia Resident Mission
Office of Public-Private Partnership +62 21 2992-7388
+63-2-8632-6438 [email protected]
[email protected]

Kin Wai CHAN

PPP Specialist
Advisory Service Division 1
Office of Public-Private Partnership
+63-2-8632-5624
[email protected]

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