national government agency partnership draft - world bank · ebrd european bank for reconstruction...

99
NATIONAL GOVERNMENT AGENCY PUBLIC-PRIVATE PARTNERSHIP MANUAL 4 VOLUME Annexes DRAFT Draft Version as of 4 August 2014

Upload: truongdung

Post on 07-Sep-2018

215 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NATIONAL GOVERNMENT AGENCY PUBLIC-PRIVATE PARTNERSHIP MANUAL

4V

OL

UM

EAnnexesDRAFT

Draft Version as of 4 August 2014

Page 2: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

Acknowledgement

DRAFT

Draft Version as of 4 August 2014

Page 3: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

National Government Agency Public-Private Partnership

Table of Annexes

ANNEX 1 SCOPING THE PROJECT

ANNEX 2 OVERVIEW OF PROJECT FINANCE

ANNEX 3 PHILIPPINE LAW ON THE PROTECTION OF INDIGENOUS PEOPLES’ RIGHTS

ANNEX 4 GUIDELINES FOR GENDER MAINSTREAMING IN PPP PROJECTS

ANNEX 5 GUIDELINES FOR ENVIRONMENTAL ASSESSMENT AND MONITORING OF PPP PROJECTS

ANNEX 6 INSTRUMENTS ISSUED BY DONORS AND BILATERALS IN SUPPORT OF PPP PROJECTS

ANNEX 7 GENERIC PREFERRED RISK ALLOCATION MATRIX ADOPTED BY NEDA FOR PPP PROJECT EVALUATION

ANNEX 8 REFINANCING GAINS

ANNEX 9 COMPENDIUM OF EXTERNAL RESOURCES

4DRAFT

Draft Version as of 4 August 2014

Page 4: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

Boxes, Figures, Tables

Box4.1 DefinitionofProjectFinance Box4.2 CommonFormsofSecurity Box4.3 ProjectfinanceinLargeComplexProjects

Table4.1 ProjectScopingofaRegionalAirportinthePhilippines Table4.2 ChecklistforScreeningPotentialImpactsofPPPProjectsonIPs Table4.3 AnnotatedOutlineofIPPlan Table4.4 FrameworkforMainstreamingGenderinPPPProjectDevelopment Table4.5 GeneralProceduresforMainstreamingGenderinPPPProjects Table4.6 ProjectImpactScreeningMatrix Table4.7 PotentialProjectImpactAssessmentChecklist Table4.8 EnvironmentallyCriticalPPPProjects Table4.9 SelectedNon-ECPPPPProjects Table4.10 OtherEligibleProjectsforPPPthatareNon-EnvironmentallyCriticalProjects

Figure4.1 TypicalBOTProjectStructure Figure4.2 PEISSystemStagesandProjectProponent’sMajorTasks

DRAFT

Draft Version as of 4 August 2014

Page 5: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

Acronyms

ADB AsianDevelopmentBank APSC AirPollutionSourceandControlBLAs BilateralagenciesBOT Build-Operate-and-TransferBR BoardResolutionCCA ClimateChangeAdaptationCNC CertificateofNon-CoverageCOFACE CompagnieFrancaised’Assurancepour laCommerceExterieurDAO DENRAdministrativeOrderDENR DepartmentofEnvironmentand NaturalResourcesDOH DepartmentofHealthDPWH DepartmentofPublicWorksand HighwaysDRR DisasterRiskReductionEBRD EuropeanBankforReconstructionand DevelopmentECAs EnvironmentallyCriticalAreasECC EnvironmentalComplianceCertificateECGD ExportCreditGuaranteeDepartmentECP EnvironmentallyCriticalProjectECRSC EIACoverageandRequirements ScreeningChecklistEGF EnvironmentalGuaranteeFundEGGAR EngineeringGeologicalandGeohazard AssessmentReportEIA EnvironmentalImpactAssessmentEIARC EIAReviewCommitteeEIS EnvironmentalImpactStatementEIARC EIAReviewCommitteeEMB EnvironmentalManagementBureauEMF EnvironmentalMonitoringFundEMP EnvironmentalManagementPlan/ Program

EPC engineeringprocurementand constructionERA EnvironmentalRiskAssessmentESIA EnvironmentandSocialImpact AssessmentEximbank Export-ImportBankFM forcemajeureFS FeasibilityStudyGAD genderanddevelopmentGSIS GovernmentServiceInsuranceSystemGSSR GeologicalSiteScopingReportGTZ GesellschaftfürTechnischeZusammenarbeitIA ImplementingAgencyICC InvestmentCoordinationCommittee ICCs/IPs IndigenousCulturalCommunities/ IndigenousPeoplesIEC InformationEducationand CommunicationIEE InitialEnvironmentalExaminationIFC InternationalFinanceCorporationIP IndigenousPeoplesIPP IndigenousPeoplesPlanIPRA IndigenousPeoplesRightsActIRR ImplementingRulesandRegulationsJBIC JapaneseBankforInternational CooperationKfW KreditanstaltfurWiederaufbauLD LiquidatedDamageLGU LocalGovernmentUnitLLDA LagunaLakeDevelopmentAuthorityM&E Monitoring&EvaluationMC MemorandumCircularMCA Multi-CriteriaAnalysisMGB MinesandGeosciencesBureau

DRAFT

Draft Version as of 4 August 2014

Page 6: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

MIGA MultilateralInvestmentGuarantee AgencyMLAs MultilateralAgenciesMMT MultipartiteMonitoringTeamMOA MemorandumofAgreementMPSS MinimumPerformanceStandardsand SpecificationsNEDA NationalEconomicandDevelopment AuthorityNGA NationalGovernmentAgencyNGO non-governmentalorganizationO&M operationsandmaintenanceOECD OrganizationforEconomicCooperation andDevelopmentP/O PermittoOperatePC PublicConsultationPCG PhilippineCoastGuardPD PresidentialDecreePDMF ProjectDevelopmentandMonitoring FacilityPEIS PhilippineEnvironmentalImpact StatementPEISS PhilippineEnvironmentalImpact StatementSystemPFS prefeasibilitystudyPPP Public-PrivatePartnershipRA RepublicActRAP ResettlementActionPlanROWA Right-of-WayAcquisitionSIA SocialImpactAssessmentSPC SpecialPurposeCompanySPSC Scoping/ProceduralScreeningChecklistSV SiteVisitTOR TermsofReferenceUNFCCC UnitedNationsFrameworkConvention onClimateChangeUSAID UnitedStatesAgencyforInternational DevelopmentVGF ViabilityGapFunding

DRAFT

Draft Version as of 4 August 2014

Page 7: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex1 1

ANNEX 1Scoping the Project

1.0 INTRODUCTION

Theterm,projectscoping,canprovidedifferentmeaningsatdifferentphases inthedevelopmentofacandidatePPP

project. Inthisannex,projectscopingwillbetakentomean:adesktopinvestigationoftheprojectthat issufficiently

deeptobeabletodescribetheprojectqualitatively. Inparticular itssitingoptionsincludingmeritsofeach,minimum

performancestandardsandspecifications(MPSS),probablepaymentmechanism,potentialstructuringoptions, rough

approximationofimplementationandoperatingcosts,andsomeconceptofhowitsrevenuewouldbestructured.

Theapproachdescribedhereisintendedtofocusatahighleveloncertainattributesoftheprojectthataidinunderstanding

theprojectconceptually.

Theanalysis isaidedby theconceptualdescriptionofavery simplefinancialmodel thatcanbedevelopedby the IA

analyst,theultimateobjectiveofwhichistomeasurethelevelofrevenuestheprojectrequiresinordertobebankableto

theprivatesector.Asproposedbelow,thetargetedrevenuescanbeidentifiedbyworkingbackwardsfromdistributable

cashflows,todebtserviceandoperatingexpensestogetanapproximationoftherevenuesneeded.Oncethereisafix

onrevenuerequirements, itmaybeeasiertomakejudgmentsregardingtheabilityoftheprojecttobecommercially

sustainablewithjustuserfees;oralternativelysomecombinationof(a)userfeesandVGF;(b)userfeesandusagefees

suchasshadowtollsandminimumrevenueguarantees;(c)performancebasedfees,or(d)availabilitypayments.

Projectscopingisnotapreciseart;itismerelyonewaytounderstandaprojectanditspotentialrequirements.

ItisrecommendedthatIAsdeveloptheirownapproachtoProjectScopingthatisconsistentwiththeattributesofprojects

intheirsectors.

DRAFT

Draft Version as of 4 August 2014

Page 8: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex1

2.0 EXAMPLE FOR SCOPING A REGIONAL AIRPORT PPP PROJECT

Theexamplebelow(Table4.1)featuresaregionalairport.Whiletheprinciplesofprojectscopingarethesameforevery

sector,theremaybeslightdifferencesinthewaythattheprojectisconceptualizedwithcertainattributestakingonmore

importancethanothers.

ItemProject attributes/

ProceduresLinks to Guidance

1 Purposeoftheproject AtthisstagetheIAshouldhaveatleastabroadideaofwhattheprojectisexpectedtodeliver, i.e. its outputs orminimumperformance standards and specifications(MPSS).The project scoping is “high level”, i.e. overall broad goals, and it isunderstooditwillberefinedwithadditionaldetailduringthedevelopmentoftheproject,particularlythePFSandFSstages.

2 Istherea“dominimum”scenario

Considertherangeofmanagementoradministrativeactionsthatmighttemporarilymeetthedemandfortheservicetheproposedprojectisexpectedtoprovidee.g.,insteadofbuildinganewregionalairport,considertheimprovementoftheroadto a distant regional airport with excess capacity. The alternative, constructingthe road, will involve close coordinationwith DPWH. If the alternative is viable,considerhowfarintothefuturedoesthealternativeresolvedemandfortheservice.Considerwhatotherwayscanthedemandfortheservicebemetthrougha“dotheminimum”scenario.

3 Istheremorethanonetechnicalsolution?

Iftheregionalairportisabsolutelyneeded,determinethedifferencesinprojectcostforthetechnicalsolutions.

Thenextstepbelowprovidesguidanceondeterminingprojectcostineachlocationoreachtechnicalconfiguration.

4 Projectsite • Isthereaproposedsiteorsites?• Arethesitesavailable?• What is the size of the airport? Howmany runways?What length? Size of

aprons?Sizeofpassengerterminal?Numberofgates?Concessionsneeded?• Whatarethemerits/demeritsofeachsite?• Considerthetechnicaldifficultiesofconstructingaregionalairportineachsite.

5 Projectcost Usepastexperiencetoprovidearoughmaximumandminimumestimateofprojectcostforeachtechnicalconfiguration-suchthattheactualisalmostcertaintofallintheselectedrangebutexcludecostforROWAforthispurpose.

Note:Toavoidconfusion,thematerialbelowassumesthereisonlyonetechnicalsolutionandonehighestimateofprojectcostandonelowestimate.Anexcelfilewillbecreatedforeachscenario.

6 Calculateequityforhighandlowprojectcostestimate(useseparateexcelspreadsheetforeachcalculation)

Allocate30%1ofthehighandlowprojectcoststoequityandallocatedisbursementsofequityovertheconstructionperiod(SeeChapter3,Section3.8.5oftheManualondebtandequityratioforthefinancialstructureofPPPs).Equityisnormallydisbursedonaparipassubasiswiththeconstruction“S”curve,seeStep9.Twocalculationsofequityareneeded,oneforthehighestimateofprojectcostononeexcelmodel;oneforthelowestimateofprojectcostonasecondexcelmodel.

Table 4.1 Project Scoping of a Regional Airport in the Philippines

1Theratioofdebttoequitywilldependontheperceivedrisksoftheproject.ForPPPs,debtcancoverasmuchas70-90%ofthetotalfundingrequirementofaproject.Forthisexample,debtisassumed70%whileequityisassumed30%.Forriskierprojects,debtwillbelowerandmaynotexceed60-65%oftotalfundingrequirementofaproject(Source:http://ppp.worldbank.org/public-private-partnership/financing/issues-in-project-financed-transactions)

DRAFT

Draft Version as of 4 August 2014

Page 9: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex1 3

ItemProject attributes/

ProceduresLinks to Guidance

7 Futurevalueofequity Threestepsintheexcelmodel(s):a. Determinewhatconstitutesareasonablerateofreturnfortheproject,or

similarprojectsthatarebeingdeveloped,e.g.assume15%basedontheICCpredeterminedhurdlerateforEIRR;

b. Tocalculatethefuturevalueofequityasoftheendoftheconstruction,eachequitydisbursementmustbecompoundedattherateof15%untiltheendoftheconstructionperiod.Allthecomponentsandtherolledupinterest2arethenaddeduptoarriveatatotalvalueofequityattheendofconstruction;

c. Calculatethefuturevalueofequityforthehighandlowestimatesofprojectcostonseparateexcelmodels.

8 Calculatethelevelofdistributabledividendsneededbytheproject

Theformulainvolvesmultiplyingthereasonablerateofreturnonequity(assume15%)bythevalueofequityattheendoftheconstructionperiod;D=(E)tx0.15WHERE(E)t=thefullvalueofequityattheendofconstruction

Twocalculationsofdistributabledividendsareneeded:oneforthehighestimateofprojectcost;oneforthelowestimateofprojectcostinthesecondmodel.

9 Lengthofconstructionperiod • Shouldfallintherangeof1-3years,preferablylessthanthree• Considerthe“S”Curveofprojectcostexpenditure:• For3-yearconstruction:25%,50%,25%,respectivelyforyears1,2and3• For2-yearconstruction:30%,70%

10 Calculatethedebtservicerequirements

Sinceequityisassumedat30%(seeStep6),theremaining70%ofprojectcostswouldthenhavetobefinancedthroughdebt(SeeChapter3,Section3.8.5oftheManualondebtandequityratioforthefinancialstructureofPPPs).Fivestepsintheexcelmodel(s):a. DeterminewhatisanacceptableestimatefortheLTcostofdebtfundsinthe

market;b. AllocatedisbursementofdebtovertheconstructionperiodaspertheS

curve;c. Calculatetherolledupinterestforeachdisbursementduringtheconstruction

periodusingthereasonableestimateofLTcostoffunds;d. Arriveatthefullvalueofdebtincludingrolledupinterestattheendofthe

constructionperiodandallocatethissuminequalinstallmentsoveratenyearperiodforboth,thehighprojectcostscenarioandthelowprojectcostscenario;

e. Addinterestpaymentsduringtheoperatingperiodonunpaidbalancesinbothmodels,basedonthereasonableestimateofLTcostofdebtfunds;

f. Twocalculationsofdebtservicewillberequired:oneforthehighprojectcostexcelfile;theotherforthelowprojectcostexcelfile.

11 Implicationsforintermodalfacilities

• Thisincludesaccessroadstoairport,linkstomajorarteries;• Estimatedancillarycostsofimprovingtheintermodalfacilitiesservingthe

airport;• CoordinatewithDPWH,LGUs,andotherappropriateagencies.

12 Howwilltheintermodalfacilitiesgetfunded?

• ArethoseagenciesorentitiesmentionedinStep11willingtoparticipateintheirdevelopment?

• Whatplansarethereforcoveringthesecosts?• AnalternativeistoassignthemtotheProjectProponent,butthatmayrender

thewholeprojectunattractive;• AnotheralternativeistouseaVGFapproachandfundtheintermodal

connections.

2Interestthatisnotpaidattheendoftheapplicableinterestperiodbutwhichis,instead,addedtotheoutstandingprincipalamountoftheloan(hencethephrase“rolledup”)

DRAFT

Draft Version as of 4 August 2014

Page 10: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex1

ItemProject attributes/

ProceduresLinks to Guidance

13 Identifyoperatingcosts-fixed-variable

• EstimatesshouldbebasedontheactualexperiencetheIAhasforsimilarundertakings;

• Fixedoperatingcostsareusuallyafixedpercentageofprojectcost,indexedtoinflation;

• Variableoperatingcostsareafunctionofthesizeoftheairportandmaybenegligibleinthecaseofregionalairports.

Addfixedandvariableoperatingcoststotheexcelfilethatcontainsthehighestimateofprojectcostandsimilarestimatesofoperatingcoststotheexcelfilecontainingthelowestimateofprojectcost.

14 Calculatetherequiredrevenuesneededtocoverthecostsofoperatingtheproject(e.g.costsincludedividendstotheprojectsponsorsorshareholders,debtservice,andtheproject’sfixedandvariablecosts)

Additems8,10and13foraroughapproximationofthelevelofrevenuesneededforthefirstyearofoperations.

Calculateahighandlowestimate,basedonhighandlowprojectcostexcelfiles.

Thetwoexcelfiles(highandlowestimates)definetheapproximaterangeinthelevelofrevenuesneededtocommerciallysustaintheproject,withouttakinginflationintoaccount.

Theissuenowistodeterminewhethertheprojectiscapableofgeneratingthislevelofrevenuesimmediately,overtimeandwithwhattimelapse.Thiswillessentiallydependonthetrendsinthevariousfactorsaffectingthedemandfortheproject(seeStep15),theallowableleveloftariffsorfeesfortheservicethattheprojectprovides(seeStep16-17),otherpotentialsourcesofrevenuesfortheproject(seeStep18)andtosomeextent,thepotentialforgovernmentsupport(seeStep19).

15 Demand Checkonthefollowingaspectstodetermineifstatisticsareavailable:• Populationservedbythenewproposedairport?• Economicgrowthforecastsforthearea?• Induceddemand,thatis,demandthatislikelytobecapturedfromother

neighbouringairportsduetocomfortandconvenience?• Businessdemand?• Touristdemand?• Familyorientedtravelto/fromMetroManila?• Cargodemand?• Internationaltraveltoandfromproposedairport?• Anexcellentwaytounderstandthefactorsthatarenormallyusedtoproject

futureairportusageistocontactBoeingandAirBustoseeiftherearerecentupdatesonprojectedairtravelintheregiontodeterminehowtheymightaffecttrafficattheproposedairport.Normally,theseareupdatedonarolling20-yearbasis.

16 Passenger,cargo,landingfees Likelysizeofaircraftneeded• Small• Narrowbody• Widebody

Checkontheregulatorydeterminationsrelatedtouniformpassenger,cargoandlandingfees(checktoseeiftheseareuniformacrossthecountry)

17 Terminalfees Checktoseeiftheseareuniformacrossthecountry.

18 Othersourcesofrevenue Food,drinksandotherconcessions?

DRAFT

Draft Version as of 4 August 2014

Page 11: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex1 5

ItemProject attributes/

ProceduresLinks to Guidance

19 Possiblegovernmentsupport Theapproachisnotdefinitiveasitisjustawaytoestimate(atanearlystage)therangeoflevelsandsourceofrevenuesrequiredtomaketheprojectviable.Therangeofrevenuesmaynotbeachievedimmediately.Insomeinstancestheremayberoomtoincreaseuserfees.Ifincreasesareunlikelytobefeasible(duetoaffordabilityissues,forexample),someformofsupportsuchviabilitygapfundingorsubsidiesmayberequired.

FamiliaritywiththismethodologywouldmaketheprocessofundertakinganMCAScreenmucheasierandmoreeffective.

DRAFT

Draft Version as of 4 August 2014

Page 12: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

DRAFT

Draft Version as of 4 August 2014

Page 13: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 1

ANNEX 2Overview of Project Finance3

1.0 INTRODUCTION

ProjectfinanceisoneofthemostcommonformsoffinancingforPPPprojects.Itisoftenreferredtoas“limited-recourse”as

theprojectlender’ssecurityreliesprimarilyontheperformanceoftheprojectitselfwhichcomprisesoftheproject’scash

flowandsensitivitytorisks,andtheProjectProponent’sequityintheproject.Thismeansthatunderprojectfinance,the

lendersareentitledtorepaymentonlyfromthecashflowrevenuesandassetsoftheprojectthattheloanisfunding,not

fromotherassetsoftheborrower(ProjectProponent).Thisisincontrastwithcorporatefinance-themoreconventional

waybankslendtobusinesses(“full-recourse”)–whereinlenderslendonthebasisoftheborrower’sbalancesheetand

havetherighttotakeanyorallassetsoftheborrowerorevenrecoverfromathirdparty(e.g.thegovernmentorproject’s

customersandsuppliersoftheproject)guarantees.SeeBox4.1onthedefinitionofProjectFinance.

Box 4.1 Definition of Project Finance

Thereisnostrictdefinitionof“projectfinance.”Thetermimpliesafinancingarrangementthatinvolves:• Some element of reliance on project assets and cash flowswithout full recourse to the project

proponentorborrower,• Specialisttechnicalandeconomicevaluationoftheproject,theprojectproponents’oroperators’

businessandthroughon-goingmonitoringbythelender,• Complexloanandsecuritydocumentation,involvinginnovativefinancingstructures;and• Highermarginsandfeestoreflectthelender’sexposuretotheproject–andoftenpolitical–risk

Source: Chance, C. (1991). Project Finance. IFR Publishing, London

Using project finance implies that in a typical Build-Operate-and -Transfer (BOT) project (See Figure 4.1), the special

purposecompanythatisset-upfortheprojectisring-fencedfromtheotherbusinessesoftheProjectProponent.The

PPPprojectrisksanddebtarethereforeisolatedfromtheborrower’sparentcompany,preservingtheparentcompany’s

borrowingcapacityandcreditrating.Suchan“off-balancesheet”treatmentunderprojectfinancingallowsforadditional

borrowingcapacityfornewinvestments.

3ThisannexaimstoprovideabriefgeneralintroductiontoProjectFinance.Itisnotmeanttobeanexhaustivetreatmentofthesubject,foramorecomprehensiveintroduction,readersmayseethevarioussourcescitedinthefootnotesofthisannexandinthelistofreferencesattheendofthisannex.

DRAFT

Draft Version as of 4 August 2014

Page 14: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

Toacertainextent,projectfinanceisusedtokeeptheproject’sdebtandliabilitiesoffthebalancesheetofthegovernment,

thusfreeingupfiscalspacethoughitwouldnotnecessarilyreduceactualliabilities.4

2.0 LENDERS, PROJECT BANKABILITY AND TAKING SECURITY

Giventhe limitedrecourseofthefinancingarrangement, lenderswillbearabigpartoftheprojectrisksbornebythe

projectcompany.Lenderswillthereforepaycarefulattentiontoallpossiblereasonsforprojectfailure,analyzingindetail

theproject’s“bankability,”i.e.whethertheprojectriskallocationsufficientlyprotectstheprojectcompany.5InatypicalPPP

Project(asseeninFigure4.1),lenderswouldwanttoensurethatrisksareallocatedinthemostefficientwaypossibleto

thevarioussubcontractors,whichwillbetaskedtobuildandoperatetheprojectandtoensurethatthesesubcontractors

havethecapability(technicallyandfinancially)toundertaketheproject.

Debtnormallyaccountsforthelargestshareofprojectfinance,i.e.borrowingsnormallyexceedequity.Sincelendersdo

nothavedirectcontroloverthemanagementoftheproject,theywilltrytoprotecttheirinvestmentthroughcollateral

andcontracts,broadlyknownasasecuritypackage,whichcanhelpensurethattheloancanberepaid.

Generally,lenderscannottakesecurityoveraPPPproject’sphysicalassets(e.g.adamorroadcannotbeforeclosedandbe

soldasamatterofpublicpolicy)butwillrelyprimarilyonthecontractbetweentheprojectcompanyandthegovernment

toundertakethePPPprojectandthecashflowsthatcanbederivedfromthePPPproject.Lenderswouldcommonly

requireassurancesthattheprojectwill;(i)becompleted,(ii)generateenoughcashflowtoservicethedebtand(iii)beable

torepaydebteveniftheprojectisinterrupted,suspendedorterminatedforanyreason(includingforcemajeure).With

theseinmind,projectlenderswillbeconcernedwith:6

Project Company

Group of Lenders

Investors

Sub-Contractors- Construction- Operations

Government

UsersCo

nces

sion

Ag

reem

ent

Construction / Operation Costs

DebtRepayment

Debt

Equity

Dividends

Reve

nue

Source: National Economic Development Authority (2000). Advanced Manual on Project Evaluation Volume 2, NEDA, Pasig City.

Figure 4.1 Typical BOT Project Structure

4Delmon,J.(2009)PrivateSectorInvestmentinInfrastructure:ProjectFinance,PPPProjectsandRisk,SecondEdition.KluwerLawInternational,TheNetherlands5Ibid.6AscitedinFarquharsonE.,TorresdeMastle,C.,Yescombe,E.R.andEncinas,J.(2011)HowtoEngagewiththePrivateSectorinPublic-PrivatePartnershipsinEmergingMarkets,WorldBankandPublic-PrivateInfrastructureAdvisoryFacility,WashingtonDC

DRAFT

Draft Version as of 4 August 2014

Page 15: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 3

• BankabilityofPublicSectorobligations

• Soundnessandstabilityofthelegalframework

• EffectivenessandenforceabilityofthePPPcontractandrelatedagreements

• Sectorregulatoryregimewhenapplicable

• Righttostep-inifaprojectfailsandavailabilityofalternativecontractors

• Abilityofcontractorsandqualityofcontractorguarantees

• Risksthatareunderstood,controllable,finite,andappropriatelyallocated

• Reputationimpactoftheproject(environmental,social)

• Availabilityandeffectivenessofinsurancecover,whereneeded

• Protectionoflenderrights

• Politicalrisks

• Expropriation

• Early-terminationpayments

• Residualvalueofprojectassetsupontermination

• Disputeresolutionandenforcement

Lenderswill essentially take various security rights for their lending tomitigate risks and such securitywill vary from

projecttoproject.SomecommonexamplesofsecurityarelistedinBox4.2.

DRAFT

Draft Version as of 4 August 2014

Page 16: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

Box 4.2 Common Forms of Security

Thesecuritypackageutilizedwilldifferacrossprojectsand jurisdictions.Belowaresomeof themorecommonelementsofsecurityinprojectfinance:1. The Trust/EscrowAccount – In a nutshell, escrowaccounts are accounts held in theborrower’s

nameby a bank under the auspices of an escrow account agreement between the lender andborrowerwhereinalloperational revenueorproceeds fromthesaleofassetsof theprojectwillbepaidintothisaccount.Thelenderwillusuallyrequireintheproject’ssecuritypackagethatsuchcollectedfundsbeheldforitsbenefitassecuredcreditorsothatithaspriorityindisbursementsifthecreditorsaretobepaidoffupondefaultofdebtpaymentorfailureoftheproject(afterwhichsubordinateddebtsmaythenbepaid).

2. ChargesoverBorrowerAssets–Thiscouldbedonebyeitherhavingafixedcharge/mortgageorafloatingchargeovertheprojectassets.Afixedchargedoesnotattachtoanassetuntilaspecifiedeventoccursatwhichpointthechargecrystallizesandbecomesafixedchargeovertherelevantassets.

3. Assignment of Implementation Agreements and Other Benefits – This entails the assignmentof rights under the key contracts of the project (the concession, off-take contract, constructioncontracts, etc.) as security for the lender. This typeof security ismore relevant after theprojecthas reachedoperational stage.Theobjective is toprovide the lender step-in rights through thespecialpurposecompany,againstotherstakeholders(e.g.off-takerpurchaserorprojectusers;inputsuppliers,theoperator,constructioncontractorandinsurers)intheeventofdefault.

4. Sponsor (or Project Proponent) Support and Guarantees – Sponsor support may include theestablishmentofafund,normallypledgedorsecured,whichcanbeusedtobridgeanydeficienciesoffundsoranincreaseincostsduringtheperiodoflimitedrecourse.Also,supportcouldalsotakethe formofpriceguarantees (ensuringpricingofofftake),purchaseguarantees (whichensureaminimumquantityoftheproject’soutputwillbe‘purchased’overasetperiod),taxlosspurchases(i.e.ashareholderagreestopurchasecertaintaxlossesfromtheprojectcompany),technicalsupport,extendedwarrantiesandmaintenancearrangements,andcontingentequityorsubordinateddebttocoverconstructionoverruns.

5. Insurance,PoliticalRiskGuaranteesandGuaranteeFunds -A securitypackagemayalso includeinsuring the project against physical damage or loss, pollution, third party liability, businessinterruption(e.g.protectagainstdefinedregulatoryrisks)andevenpoliticalrisks(e.g. lossesduetodefinedpoliticaleventssuchascurrency risks,expropriationorwaror the inactionoractionsofgovernmentresultinginabreachofcontract).,TheinsurancebenefitsoftheProjectProponentareassignedtothelenderorinvestor/shareholder.Somegovernmentsestablishaguaranteefund(suchasinBrazilandIndonesia)tospecificallycovertheriskofthecontractingpublicentity’sfailuretomeetitsobligationunderthePPPcontract.

Sources: Achonwa, Jeremiah. Elements of Security in Project Finance, 2008/2009 Center of Energy, Petroleum, and Mineral Law, and Policy Gateway, Volume 13 (http://www.dundee.ac.uk/cepmlp/gateway/?news=30858); Delmon, J. (2009) Private Sector Investment in Infrastructure: Project Finance, PPP Projects and Risk, Second Edition. Kluwer Law International, The Netherlands; Farquharson E., Torres de Mastle, C., Yescombe, E.R. and Encinas, J. (2011). How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets, World Bank and Public-Private Infrastructure Advisory Facility, Washington, DC

3.0 ADVANTAGES OF PROJECT FINANCE

Essentiallytherearetwoimportantadvantagesofprojectfinanceoverthetraditionalcollateral-basedcorporatefinance:7

a. Increasetheavailabilityoffinance–SincerisksofthePPPprojectwillbeconsideredseparatefromtheProject

Proponent or the project company’s key shareholder’s existing business, the financial integrity of their core

businesseswouldnotbejeopardizedshouldtheprojectfail.ProperstructuringwillprotecttheProjectProponent’s

capitalbaseanddebtcapacity,allowingthePPPprojecttobefinancedwithoutrequiringtoomuchequityasthe

casewillbeiftheprojectisfinancedthroughtraditionalcorporatefinance.ThisenablestheProjectProponentto

increasedebt(whichislessexpensivethanequity)andexpanditsoverallbusiness(SeeBox4.3).

7 IFC (1999).LessonsofExperienceNo.7:ProjectFinance inDevelopingCountries (http://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/by+title/lessonsofexperienceno7)andChance,C.(1991).ProjectFinance.IFRPublishing,London

DRAFT

Draft Version as of 4 August 2014

Page 17: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 5

Box 4.3 Project finance in Large Complex Projects

A project can be funded using corporate finance wherein lenders lend directly to construction andoperations andmaintenance contractors;which in turn funds theproject. Lenders can recover theirloan (full recourse) from all the assets of the contractors or through guarantees (either from directguaranteesorfromthirdparties,suchasthegovernmentortheproject’scustomersorsuppliers).Butprojectcontractorsmayoftenhavelimitedcapacitytotakeondebt,especiallyiftheprojectislargeinrelationtotheirbusiness.Thus,theymayprefertotakeonequityinvestmentinastand-aloneproject.Projectfinanceinthiscaseisamoreefficientwayforlendersandinvestorstofinancemajorinfrastructureinvestmentsby theprivate sector aswell as increase the availabilityof financing. It is normal for thepublicauthoritytoletthebiddersdecidewhetherornottouseprojectfinanceandallowthecompetitiveprocesstodrivethemostefficientfundingstructure.

Source: Farquharson E., Torres de Mastle, C., Yescombe, E.R. and Encinas, J. (2011) How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets, World Bank and Public-Private Infrastructure Advisory Facility, Washington DC

b. Efficientriskallocation,therebyreducingtheoverallriskformajorprojectparticipants-byallocatingprojectrisks

amongtheprojectstakeholders(ProjectProponent,shareholdersoftheprojectcompany,projectsubcontractors,

lenders,etc.),projectfinancemakesitpossibletoundertakeprojectsthatwouldbetoolargeorwouldposetoo

greatariskforonepartyonitsown.Withtherepaymentofloanstiedtotheperformanceorsuccessoftheproject,

lenderswilltakealong-termviewofitsviabilityandensurerisksareappropriatelyallocatedandmonitored.This

drivesmanyofthebenefitsofthePPPprocess.Section4discussesthemajorparticipantsinprojectfinancedeals

whileSection5providesanoverviewoftherisksfacedbyprojectfinanceparticipants.

4.0 PARTICIPANTS IN PROJECT FINANCE DEALS

ThereareanumberofpartiesinvolvedinaprojectfinancedealofatypicalBOTproject:

a. ProjectProponentsandSpecialPurposeCompany(ProjectCompany)–ProjectProponentsareprivatesector

entities(eitheracorporationoraconsortium),whichputtogetherabidforaPPPproject.Onceitisselectedforthe

project,ProjectProponentswillcreateaSpecialPurposeCompany(SPC),whichwillhavecontractualresponsibility

fortheproject.ThecreationofaSPCenablestheProjectProponenttofinancetheprojectonalimitedrecourse

basis.

The SPC is registered in the host country for the purpose of implementing and operating a given project.

Wherea corporate joint ventureor limitedpartnership isused, the rightsandobligations in termsof funding,

administration,profitsharing,transferofinterests,terminationandotherissuesaredefinedinashareholders,or

jointventureagreement.TheSPCwillusuallyincludeshareholderswhichspecializeinoneorseveraltasksneeded

tobeperformed/deliveredundertheBOTcontract.

Project Proponent(s) are required tomake capital investments in the SPC according to the terms of the SPC

agreement. Inalmostallcases, there isusuallyadesignated leadProjectProponent. In thecaseofacorporate

jointventure,theleadProjectProponent(s)istheleaderoftheconsortiumandinthecaseofapartnership;itisthe

dominantpartnerunderthejointventurearrangements.

b. ConstructionContractor–TheSPCwillenterintoaengineeringprocurementandconstruction(EPC)contract

DRAFT

Draft Version as of 4 August 2014

Page 18: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

withacontractortodesign,build,testandcommissiontheproject.Thisisgenerallyundertakenonaturnkeybasis

(i.e.undertaketheprojectfromconcept,designtoconstructionuptocompletion)therebyplacingcompletionand

performanceriskontheconstructioncontractor.Provisionsoncontractualliquidateddamage(LD),performance

bonds,retentionbondsandotherinstrumentsareusuallyimposedontheconstructioncontractor,whichcanbe

calledupontoremedyanybreachofthecontract.Theconstructioncontractorwillgenerallysubcontractsome

oftheconstructionobligationstootherentitiestobeabletosharerisksandrevenues,subjecttoanyrestrictions

undertheconstructioncontractortheBOTcontract.

Lenders usually prefer a single EPC contract because it gives them a single-point responsible party for all

subcontractorsandactivities.Occasionally,however,twoseparatecontractsbytwoaffiliatedpartiesareusedto

definetheconstructionarrangements:aninstallation,erectionandcommissioningcontractwithonecontractorand

asupplyofequipmentcontractwithanother.Toachievethecontractualequivalentofsingle-pointresponsibility,

eachcontractorisrequiredbythelenderstocross-guaranteetheother’sobligations.

c. Lenders–thegroupoflenderswoulddifferfromprojecttoproject.Itmayincludeacombinationofprivate

sectorcommerciallenders,exportcreditagenciesandbilateralandmultilateralfinanceorganizations.Theyfund

projectseitherbysovereignwealthfunds,projectbondsthataresoldonthecapitalmarkets,andotherfinancial

intermediaries.Inanyprojecttheywanttohavecertaintyontheirfinancialexposureandthusmaybeinvolved

in themost importantphasesof theprojectsuchas thedraftingof theprojectdocumentsandcertificationof

completion. They will generally have review powers over the project with the assistance of an independent

engineer.

• MultilateralandBilateralAgencies-MultilateralAgencies(MLAs)representagroupofnations,andareowned

and funded by their members, such as theWorld Bank (including theWorld Bank’s International Finance

Corporation or IFC and theMultilateral InvestmentGuaranteeAgency orMIGA), AsianDevelopment Bank,

Inter-American Development Bank, African Development Bank and European Bank for Reconstruction and

Development(EBRD).MLAsparticipateinprojectfinancethroughequityinvestments(e.g.IFCandEBRD)and

theprovisionofloansandguaranteesindevelopingcountrieswheretheyhaveamandatetosupporteconomic

developmentandalleviatepoverty.CertainMLAsspecializeinprovidingpoliticalriskcoverageforprojects,for

exampleWorldBank’sMIGA.MLAs,giventheyrepresentseveralcountries,willoftenrequire internationally

competitive tender of project contracts to encourage equality of treatment, transparency and free trade

betweenitsmembercountries.Bilateralagencies(BLAs)arealsoquiteactiveinemergingmarketsaswelland

aresimilartoMLAsinpurposebutarefundedbyonlyonenation.BLAsprovidesupportintheformofequity

investmentordebtandaremorepoliticallyorientedastheycarryouttheagendaoftheirdonornation(for

example,requiringprojectsfundedbytheBLAtosourcecontractorsonlyfromthedonornation).WhenMLAs

andBLAsareinvolvedinprojects,theyusuallyplacestrictprojectrequirements,suchasonenvironmentaland

socialsafeguards.

• ExportCreditAgency– is attached toagivengovernmentdepartmentofa country. Its role isgenerally to

supportexportsfromtheircountrythroughtheuseofdirectloanandguaranteemechanisms.Sincethemid-

DRAFT

Draft Version as of 4 August 2014

Page 19: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 7

8Notethat issuingbondsmeansmoreregulatoryworkas thesewouldneedtoberatedbyacredit ratingagencyandthenhavetobeapprovedbytheSecurityandExchangeCommission.

1990s,severalExportCreditAgencieshaveestablishedProjectFinancedivisionsdesignedtoassistexporters

tocompeteinnewinternationalinfrastructureprojects.SixofthemoreimportantoftheseagenciesaretheUS

Eximbank,ExportCreditGuaranteeDepartment(ECGD)oftheUK,JapaneseBankforInternationalCooperation

(JBIC),CompagnieFrancaised’AssurancepourlaCommerceExterieur(COFACE)ofFranceandKreditanstaltfur

Wiederaufbau(KfW)ofGermany.

• Commercial lenders – are commonly private banks, insurance companies, credit corporations and other

financial institutions, based either abroad or in the host country. In higher income emergingmarkets and

industrialized countries, the largestpartof thedebtfinancingmobilized for agivenproject isusually from

commerciallenders.Forlessdevelopedcountries,donorsandExportCreditAgenciesareveryactiveinassisting

withthefinancingofprojectssitedinthesecountries.

• Privateplacementandbondmarket–projectfinancingcanalsoberaisedthroughthecapitalmarket.8Investors

in capitalmarket instrumentsgenerally shyaway fromprojects that arenotable toachievean investment

graderatingorbetter,althoughthisisnotalwaysthecase.EstablishedbondmarketsareinUS,UK,Germany

andJapan.Other,regional,bondmarketsinterestedinfinancinginfrastructureinAsiaareonlynowemerging.

d. InsuranceProviders–ProjectProponent(s)willprocureallinsurancecoveragerequiredbyapplicablelaw.In

addition,thetermsoftheserviceagreementandtherequirementsoflendersoftenresultintheneedtoobtain

abroaderportfolioofinsurancepoliciesandcoverage.Insomecases,ProjectProponent(s)mayseekadditional

insurancecoverage,suchaspolitical-riskinsurancefromtheWorldBank’sMIGA,theAsianDevelopmentBank,or

USAID,toprotecttheirinvestment.

e. Off-Taker–“Off-taker”isthenamegiventotheentitythatisthesinglepurchaserofalloftheprojectoutput

subjecttoaformalcontract.Insomedeals,theremaybemorethanoneoff-taker,butthisisrelativelyuncommon.

Otherprojectsmaynothaveanyoff-takers,oroff-takeagreements,e.g.atollroad,containerportormasstransport

system.Whenanoff-take agreement exists, it generallydefines theminimumamountof revenue thatwill be

generatedbytheprojectbasedonaminimumlevelofproductorservicethatistobesoldatagivenprice(including

annualescalation).Anoff-takeagreementisdesignedfrequentlytopermittheSPCtohedgeagainstcertainother

risks,includinginflationandforeignexchangeparityrisks.Paymentsdueundertheoff-takeagreementconstitute

amajorelementindeterminingthebankabilityoftheproject.

f. Third-PartyOperator-isresponsiblefortheoperationsandmaintenance(O&M)oftheproject.Theoperator

customarily receives a fee, subject to upward or downward adjustments based onperformance results of the

project.Whenathird-partyoperator isnotused inaproject, theProjectProponent(s)mayundertakethis role.

However,iftheoperatorisashareholderoftheSPCatthetimeofcontractnegotiationorlater,aconflictofinterest

arisesinthenegotiationandimplementationoftheO&MagreementbetweentheSPCandtheoperator.Theuse

ofindependentprojectmanagersorexecutivesinthemanagementoftheSPCandtheuseofindependentexperts

toverifydataanddecisionscanbeusedtoaddressthisissue.

DRAFT

Draft Version as of 4 August 2014

Page 20: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

8 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

g. ResourceSupplier-isresponsibleforthedeliverytotheprojectofnecessaryinputs,suchasfuel(forapower

project),bulkwatersupply(forawater-treatmentfacility),orutilityservices(suchaswaterandelectricitywhich

many, ifnotmost,projects require). Forpowerprojectsusing fossil fuels,ProjectProponent(s)and lendersare

concernedwiththeunderlyingeconomicsofthesupplyarrangements(inrelationtoexpectedrevenues)andthe

abilityofsupplierstoperformtheircontracts(includingpaymentofdamagesintheeventofnon-performance).

h. OtherParties-Dependingontheproject,theremaybeotherpartiesinvolved,e.g.thirdpartyequitysources

(straightequityprovidedbypartieswhichareunaffiliatedwiththeProjectProponent(s))ormezzanineinvestors

or lenders (whoseparticipationmaytaketheformofconvertibledebt). InthePhilippines, thesewould include

Government Service Insurance System (GSIS) and Macquarie Group of Companies (Philippines). Mezzanine

investorstendtobepassive,andthustotallyuninvolvedwithoperationsofthefacility.Therearealsopotential

localpartnerswho,unlikeinvestors,doexpecttoparticipateactivelyintheoperationsoftheproject.Finally,there

aretheprojectmanagerswhoaredesignatedbytheactiveProjectProponentstorunthefacilityaswellasother

partieswhoassistduringthedevelopmentoroperationperiods,e.g.financialadvisors,engineeringconsultants,

environmentaladvisorsandlawyers.

i. Government–AtypicalBOTprojectisusuallygrantedbyacontractingauthoritysuchasaGovernmentAgency

orLGU“authorizedbylawortheirrespectivecharterstocontractfororundertakeinfrastructureordevelopment

projects(RevisedIRRoftheBOTLaw).”TheGovernmentwillplayanimportantroleinensuringthattheproject

startsontimeandiscompletedsuccessfullyandalsoduringoperationwithrespecttoregulatoryrequirements.

Itcanalsoprovideindirectcreditsupportbypurchasingaproject’sproductorserviceandactasasupplierofkey

resourceinputs.TheGovernment(throughtheDepartmentofFinance)mayalsoprovidesomefiscalincentivesto

theProjectCompany(e.g.taxholidays,viabilitygapfinancing,etc.)andassistancetoobtainingfinancing,insurance

andguaranteesfromlenderssuchasMLAsandExportCreditAgencies.

5.0 PROJECT RISKS AND PROJECT FINANCE

Theidentification,analysis,mitigationandallocationofriskarecrucialtotheplanningandsuccessofeveryproject.By

structuringriskappropriately,theprojectparticipantscanmaximizethelikelihoodthattheprojectwillbesuccessful.Asa

matterofprinciple,riskshouldbeallocatedtothepartythatisbestabletomitigateorcontrolsuchrisk.

Theappropriate structuringofprojectfinance lies inunderstanding theproject risks.Project lenders take intocareful

considerationallpossibleriskstotheproject’ssuccessfulcompletionandoperation.NGAManualVolume1,Chapter3and

Volume4,Annex7whichcontainsNEDA’sriskallocationmatrix,discussthevariousprojectrisksanditsallocationfrom

theperspectiveofthegovernment.Thediscussioninthisannexfocusesonthetypesofrisksinherentinprojectfinance:

a. Completion risk-Completionrisksarethoseassociatedwith

a) failuretocompletetheprojectatall;

b) aconstructiondelayand/oracostoverrun;

DRAFT

Draft Version as of 4 August 2014

Page 21: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 9

c) failure of the project to perform to technical specifications resulting in shortfalls in expected capacity,

output,efficiency,etc.;

d) shortfalls in expected resources (reserves); (e) occurrence of a force majeure (FM) event leading to a

constructiondelayandcostoverrun;and

e) unavailabilityofqualifiedstaff,managersandreliablesubcontractors.

CompletionriskisthesinglemostimportantriskthatisfacedbytheProjectProponents.Itsmitigationmeasures

include: (a) seekingperformancebondsand/orguarantees from thirdparties covering theperformanceof the

contractor, its suppliers and subcontractors; (b) obtaining adequate levels of commercial insurance; and (c)

negotiatinganadequatelevelofliquidateddamages(LDs)fordelaysandperformanceshortfalls.

b. Credit risk-Theperceivedcreditriskofaprojecthasasignificantimpactontheabilityoftheprojecttoraise

financing.Itistheriskthattheborrowerwillnotbeabletoserviceitsdebttothelenders.Toassessthisriskproperly,

itisnecessarytoexaminetherisksassociatedwiththeproject’ssourcesofrevenue,includinganassessment,for

example,astowhether(a)paymentsfromanoff-takermaybeinterruptedduetoaninabilityoranunwillingness

topay;or(b)usersofthefacilityorservicearewillingtopaytheuserfeesor,fromadifferentperspective,whether

thetotalrevenuederivedfromitscollectiveusagebytheconsumingpublicwillbebelowexpectation.

TheabilityoftheProjectProponent(s)tomitigatetheserisksthroughtheuseofdetailedmarketstudiesbecomes

criticalintherisk-sharingprocess.Insomeinstancescreditenhancementsfromthegovernmentcanbeapplied,

suchasviabilitygapfundingwhereinthegovernmentmaypaypartofthecapitalcost.Anotheroptionistomake

paymentsduringtheoperatingphasedependingontheperformanceoftheproject,whichlessensthedependence

oftheprojectontariffrevenuewhileprovidingincentivesforperformance.Creditguarantees–whereinproject

debtisbeingguaranteedbyanotherentity–mayalsobeusedtoenhancetheproject’sabilitytoraisefinancing

fromthecreditmarket.SomeMLAs(e.g.theWorldBank)offerspartialcreditguarantees,whichcoverthetailend

repaymentsdueona long-termprojectfinanceloan.Also large insurancecompanies(knownalsoasmonoline

insurers)havealsobeenknowntoofferafull-credit(“wrap”)guaranteetocovertheentiredebtoftheproject.9

c. Demand and operating risk-Oncecommissioningoftheprojectisachieved,ProjectProponentsmustaddress

otherrisksassociatedwiththesaleofitsservice/outputs.Forexample,demandriskbecomessignificantforprojects

inthetransportationsectorwhereuserfeesareakeysourceofprojectrevenues.AProjectProponentfacesthe

risksthat(a)actualusageof,ordemandfor,servicesarebelowforecastedamounts;(b)unexpectedcompetition

develops;(c)tariffbarriersarestrongerthancontemplated,affectingcostofinputsorabilitytoexport;(d)physical

access(i.e.transportation)andcommercialaccess(i.e.marketentry)aredeniedduetogovernmentregulationsor

similarfactors;(g)technologybecomesobsolete;and(h)newtechnologiesutilizedbytheprojectfailoutrightor

resultincostoverrunsfromdelays.

9Thistypeofguaranteehoweverisrarelyusedinemergingordevelopingcountries.Source:FarquharsonE.,TorresdeMastle,C.,Yescombe,E.R.andEncinas,J.(2011)HowtoEngagewiththePrivateSectorinPublic-PrivatePartnershipsinEmergingMarkets,WorldBankandPublic-PrivateInfrastructureAdvisoryFacility,WashingtonDC

DRAFT

Draft Version as of 4 August 2014

Page 22: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

10 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

Thereisalsotherelatedriskofperformance,i.e.,whethertheprojectwillperformaccordingtotheexpectationsof

theoff-taker.Foritspart,theProjectProponentcanreducethisriskbyoperatingtheprojectefficientlythroughthe

useofexperiencedmanagersandstaff(oranexperiencedoperator)andtheapplicationofstrongO&Mprograms.

Mitigationmeasurestoaddressdemandrisksincludethenegotiationoflong-term,take-or-paycontracts(power,

resource extraction projects); throughput agreements (oil pipelines); the use of shadow tollmechanisms (toll

roads)orminimumrevenueguarantees(transportationprojects).

d. Financial risk-Thepotential impactoffinancialdevelopmentsoutsidethecontroloftheprojectisasource

ofprojectrisktoboth lendersandtheProjectCompany.These includethevariabilityof (a)exchangerates; (b)

interestrates; (c)worldcommoditypriceswhichinturnaffectenergysuppliesandrawmaterials; (d)decreases

inworldpricesoftheproductproducedbytheproject; (e) inflation;and(f) internationaltrends intrade,tariffs

andprotectionism.Mitigationmeasuresincludeuseof(a)currencyswaps;(b)interestrateswaps;(c)commodity

forwardoroption contracts; (d)hybriddebt instruments; (e) negotiationof tariff indexation andpass-through

mechanisms;and(f)forwardsalesandoptioncontracts.

e. Political risk–Political risk includesseveralcomponents: (a) thereare futurechangestoexisting legislation

relatedtotax,importduties,customsprocedures,ownership,foreignexchangelawsandenvironmentalmitigation,

leading to an adverse impact on the project; (b) a future administration decides to confiscate, expropriate or

nationalizeproject facilities; (c)permits, licensesandotherconsentsfromthegovernmentarenot inplace ina

timelyfashionorarenotgrantedormaintained;(d)restrictionsareplacedonrepatriationofprofitsandinterest

payments;(e)controlsorrestrictionsapplyontherateofdepletionoftheproject’sreserves;(f)war,revolutionor

politicalviolencebreaksoutinthecountry,negativelyaffectingprojectperformance;and(g)devaluationoccursin

thelocalcurrency,leadingtoareducedvalueofthedividendstream.

To mitigate these risks, Project Proponent(s) and lenders obtain; (a) protection against change in law and

similar events through the PPP Contract; (b) political-risk insurance or guarantee as an added cover; and (c)

otherundertakingsfromthegovernmentsuchasensuringlicensesandpermitswillbegrantedontimeandbe

transferableto lenders intheeventofprojectvehicledefault,andthatallwaiverswouldbegrantedfor import

dutiesandsimilarassurances.

f. Legal risk-Thisriskisdefinedasthe(a) inabilitytoenforcesecurityarrangements;(b)absenceofadequate

protectionforintellectualproperty;(c)inabilitytoenforceforeignjudgments;(d)absenceofachoiceoflaw;(e)

inabilitytoreferdisputestoarbitrationortohaveachoicewithregardtoarbitrationrules,venueandlanguage.

Mitigationmeasuresformostoftheserisksarenotalwaysavailableandthecontractualallocationoftheserisksto

thepartiesthataremostabletocontroloraddressthembecomescritical.

g. Environmental and social risk - The preservation of the environment, health and safety, gender and the

protection of the resettlement rights of individuals who are displaced as a result of the implementation of a

projectareincreasinglybecominganimportantconcernamonggovernments,lendersandProjectProponent(s).

DRAFT

Draft Version as of 4 August 2014

Page 23: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2 11

Environmentalriskrelatestothefailureoftheprojecttocomplywithenvironmentalandresettlementstandards

andregulationswhichareamatteroflaw.ItcouldalsorefertoexogenousriskssuchasClimateChange,where

individualprojectscontributetoconditionswhichaccelerateclimaterisk.

Equallyimportant,however,istheopportunitytousepublic-privatepartnershipsasameanstoimprovegender

equalityandeconomicopportunityaswellasthatofotherprojectaffectedpersons.Twolawsthatrecognizethe

roleofwomeninnationbuildingandtheirequalrightswithmenhavebeenenactedbythePhilippineCongress:

RepublicAct7192,an“ActPromotingtheIntegrationofWomenasFullandEqualPartnersofMeninDevelopment

andNationBuildingandforotherPurposes”(February12,1992)andRepublicAct9710ortheMagnaCartafor

Women(enactedJuly2008;itsImplementingRulesandRegulations(IRR)wereapprovedinMarch2010).

Failuretocomplywithenvironment,genderandothersuchlawscouldgenerallyresultinpublicoutcry,project

delay,litigation,and/orimpositionoffinesandpenaltiesthatincreaseprojectliabilitiesandraiselenderconcerns.

Mitigationmeasuresappliedbylendersinclude(a)requirementthatanenvironmentalimpactassessment(EIA)

andresettlementactionplan(RAP)bepreparedontheprojectbyaqualified,internationallyrespectedcompany;

and(b)preparationofasocialplantoimplementopportunityandmitigationmeasureswithregardtogenderand

indigenouspeoples,thecostsofwhichareabsorbedbytheproject.

h. Force Majeure (FM) risk - This risk is createdpotentiallybyeventsoutsideof the reasonablecontrolof the

affectedpartytoacontract,whichitcouldnothavepreventedbygoodindustrypracticesorbytheexerciseof

reasonableskillandjudgment.InatypicalProjectFinancedeal,provisionswithregardtoFMtypicallyexcusethe

affectedpartyfromcontractperformanceduringtheperiodthatitisineffect.Nonetheless,theremaybeadverse

financial effects on theproject.Mitigationmeasures areusually negotiatedbetweenProject Proponent(s) and

lendersorotherthirdparties.

6.0 CAVEAT

Projectfinancehasitsrigorousrequirements.Foraprojecttoreapitsbenefits, itneedstobecarefullystructuredwith

theobligationsofallpartiesinvolvedwellnegotiatedandcontractuallybinding.Lenders,financialandlegaladvisersand

otherexpertswouldlikelyspendconsiderabletimeandeffortonundertakingduediligenceandnegotiatingtheusually

verycomplexprojectagreements.Thesewilladdtothecostofsettinguptheprojectandmaydelayitsimplementation.

Butoverallfinancialcostofprojectfinancemaynotbeashighasundercorporatefinanceiftheproject is (i)carefully

structured, (ii) risksandappropriateriskmitigatingmeasuresare identified,and(iii)financing issourcedappropriately

fromdifferentcategoriesofinvestors.10

10Ibid.

DRAFT

Draft Version as of 4 August 2014

Page 24: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

12 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex2

Useful references and glossaries of project finance terms can be found at;

Buljevich,EstebanC.,andYoonS.Park,1999,ProjectFinancingand the InternationalFinancialMarkets,KluwerAcademicPublishers

(Norwell,MA).

Davis,H.,1996,ProjectFinance:PracticalCaseStudies,EuromoneyBooks(London,UK).

Delmon, J., 2009,Private Sector Investment in Infrastructure: Project Finance, PPP Projects and Risk, Second Edition,Kluwer Law

International,TheNetherlands

DevelopmentBankofSouthernAfrica(DBSA)website:www.dbsa.org/privatesector/project_finance.htm

HarvardBusinessSchoolProjectFinanceGlossary:http://www.people.hbs.edu/besty/projfinportal/glossary.htm

Harvey,C.,HypertextualFinanceGlossary:http://www.duke.edu/~charvey/Classes/wpg/glossary.htm

Hoffman,ScottL.,1998,TheLawandBusinessofInternationalProjectFinance,(KluwerLawInternational,London,U.K.).

InternationalFinanceCorporation,1999,ProjectFinanceinDevelopingCountries,LessonsofExperience,number7,Washington,D.C.

Khan,M.F.K.,andR.J.Parra,2002,FinancingLargeProjects:UsingProjectFinanceTechniquesandPractices,bookmanuscript.

MZProjectFinancewebsite(ProducedbyMauroZajec):www.mzprojectfinance.com/project_finance/glossary.htm

Nevitt,P.K.,andF.J.Fabozzi,2000,ProjectFinancing,7thedition,EuromoneyBooks(London,U.K.).

Pollio,G.,1999,InternationalProjectAnalysisandFinancing,UniversityofMichiganPress(AnnArbor,MI).

Razavi,H.,1996,FinancingEnergyProjectsinEmergingEconomies,PennWellBooks(Tulsa,OK).

Rhodes,T.,2000,SyndicatedLending:PracticeandDocumentation,3rdedition,EuromoneyBooks(London,UK).

Yescombe,E.R.,2002,PrinciplesofProjectFinance,AcademicPress—animprintofElsevierScience(London,UK).

DRAFT

Draft Version as of 4 August 2014

Page 25: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3 1

ANNEX 3Philippine Law on the Protection of Indigenous People’s Rights

Legislation was enacted in 1997 by the Philippine legislature that recognizes, protects and promotes the rights of

IndigenousPeoples.ThislawisotherwiseknownastheIndigenousPeoplesRightsAct(IPRA)orRepublicAct8371.

UndertheIPRA,IndigenousCulturalCommunities/IndigenousPeoples(ICCs/IPs)refersto“agroupofpeopleorhomogenous

societiesidentifiedbyself-ascriptionandascriptionbyothers,whohavecontinuouslylivedasanorganizedcommunity

on communally bounded and defined territory, and who have, under claims of ownership since time immemorial,

occupied,possessedcustoms,traditionandotherdistinctiveculturaltraits,orwhohave,throughresistancetopolitical,

socialandculturalinroadsofcolonization,non-indigenousreligionsandculture,becamehistoricallydifferentiatedfrom

themajorityofFilipinos.ICCs/IPslikewiseincludepeopleswhoareregardedasindigenousonaccountoftheirdescent

fromthepopulationswhichinhabitedthecountryatthetimeofconquestorcolonization,oratthetimeofinroadsof

non-indigenousreligionsandcultures,ortheestablishmentofpresentstateboundaries,whoretainsomeoralloftheir

ownsocial,economic,culturalandpoliticalinstitutions,butwhomayhavebeendisplacedfromtheirtraditionaldomains

orwhomayhaveresettledoutsidetheirancestraldomains.”

TherightsoftheIndigenousPeoplesasdefinedintherelevantprovisionsoftheIPRAlawservesastheframeworkfor

thisIPguidelineforPPPprojects.TheguidelinesareintendedtoprovidethebasicprocedurestoNGAprojectpreparers

inexaminingthepotentialpositiveandadverseimpactsoftheirproposedPPPprojectsonthecultureandoverallquality

oflifeoftheIPsasavulnerablegroup.TECHNICALNOTE1(following)providesthelistanddescriptionoftherightsofIPs

undertheIPRAlaw.

1.0 SCREENING OF PPP PROJECTS

PPPprojectsthataffectIPsshouldbethoroughlyscreenedandevaluatedbytheProjectProponentandIPleaderswith

technicalassistanceorguidancefromanthropologyexpertsorconsultantsinordertosafeguardIPsinterestandvarious

DRAFT

Draft Version as of 4 August 2014

Page 26: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3

rights. Examples of these projects are the construction of multi-purpose dams, major roads and highways, airports

andseaports,uplandorchardsand tree farms,and tourismresortdevelopment,amongothers.Physical infrastructure

constructionandoperationwithinorneartheirancestrallandsandwaterdomainssuchaslakes,riversandcoastalwaters

maypossiblyaffecttheircultureandlivelihoodactivities.Hence,developmentprojectsshouldbedesignedinsuchaway

thatissupportiveoftheirculture,livelihoodsystems,andpropertyrights.Assuch,proposedPPPprojectdevelopmentand

implementationmustcomplywiththerelevantprovisionsoftheIPRAlaw.

VariousinternationallendinginstitutionsalsopromotetheprotectionandenhancementofIndigenousPeoples’cultural

rightsandqualityoflifesuchastheSafeguardPoliciesofADBandtheWorldBank,andthePerformanceStandardssetby

internationalprivatebanks.

When IPs culture, dignity, human rights, livelihood systems, cultural resources or ancestral lands are threatened and

directlyorindirectlyaffectedbytheproposedproject,athoroughsocialimpactassessmentisrequired.Themeasuresto

avoidorminimizethenegativeimpactsofPPPprojectsonIPsshouldbeincludedintheIndigenousPeoplesPlan(IPP)that

mustbepreparedaspartofthedocumentaryrequirementofthePPPprojectproposal.

MainstreamingIndigenousPeoplesinprojectdevelopmentandimplementationinvolves:a)theirparticipationinplanning

anddecisionmaking;b)makingsurethattheybenefitfromtheproject;andc)thattheyarenot inanywayadversely

affectedbytheproject.Hence,PPPprojectsthatwillaffectIPsareclassifiedbyADB(2009)intothefollowingtypes:

1) Category A. These are projects thatwouldmost likely have significant impacts on Indigenous Peoples. An

IndigenousPeoplesplan(IPP),includingassessmentofsocialimpacts,isrequired.

2) Category B.TheseprojectsarelikelytohavelimitedimpactsonIndigenousPeoples.AnIPP,includingassessment

ofsocialimpacts,isrequired.

3) Category C.TheseprojectsarenotexpectedtohaveadverseimpactsonIndigenousPeoples.Nofurtheraction

isrequired.

2.0 ASSESSMENT OF A PPP PROJECT’S IMPACTS ON INDIGENOUS PEOPLES

ThegeneralproceduresfortheassessmentofthepotentialimpactsofaPPPprojectonIPsincludethefollowing:

1) IdentifythepresenceofIPsintheprojectsite.

2) Determinewhether theprojectoperationswilldirectlyor indirectlyaffect the IPs in thesiteorneighboring

areas.

3) InformtheIPsontheproposedPPPproject.

4) ConductscopingofissueswithIPleadersandrepresentatives.

5) IdentifythepotentialadverseimpactsoftheprojectontheIPsusinganimpactassessmentchecklist.

6) Gatherbaselinedataforfurtheranalysisofimpactsonthesocioeconomic,culturalandenvironmentalconcerns

ofIPs.

7) Determinethesignificantimpactsoftheproposedproject.

DRAFT

Draft Version as of 4 August 2014

Page 27: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3 3

8) CategorizetheprojectusingtheADBcategoryforIPs.

9) DeterminewhethertheprojectwouldrequireanEIA,IEEorPD.

10)Proposemeasurestoavoidormitigatethesignificantimpactsoftheproject.

11)PreparetheIPPPlanforCategoryAandBprojects.

12)IntegratetheIPPlanintheEIAorIEEdocument.

13)ConsulttheIPleadersontheproposedIPplan.

14)ObtainproofsontheacceptabilityoftheprojecttoIPsowningtitledancestrallands.

15)SecureconsentandagreementordocumentedcovenantswiththeIPsfortheimplementationoftheproject

thatwillaffecttheirpropertiesandcustomaryrights.

16)Involve the IP representatives inmonitoringof theproject’scompliance to theagreement/covenantand IP

Plan.

17)PrepareimplementationarrangementsfortheIPPlan.

18)PrepareaMonitoringandEvaluationSystem.

19)Estimatebudgetrequirements.

20)MonitorandevaluatethebenefitsoftheprojecttoIPs.

Checklist for Identifying Potential Impacts of PPP Projects on IPs:

ProposedPPPprojectsshouldbescreenedfortheirsignificantimpactsonIPsintermsofthefollowing(Table4.2):

Socioeconomic, environmental and cultural factors

Type of impacts Magnitude of impactsNegative Positive None Low Medium High Unknown

Culturalpropertiesandancestrallands

Accesstonaturalresources

Settlementsandhousing

Entryofmigrants

Safeandcleanairandwater

Localinstitutionsanddecisionmaking

Religious,culturalsitesandceremonies

Archeologicalsitesandartifacts

Culturalheritage

Indigenousknowledge

Healthandsanitation

Water

Education

EmploymentandLivelihoods

Transportation

Foodsecurity

Peaceandsecurity

Table 4.2 Checklist for Screening Potential Impacts of PPP Projects on IPs

DRAFT

Draft Version as of 4 August 2014

Page 28: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3

Examples of Potential Significant Impacts from Development Projects on IPs that would require the preparation of an

IP Plan (IPP):

1) Intrusionorencroachmentonancestrallandsandcustomaryresources

2) Threatstolanguages,cultures,religions,spiritualbeliefs,andinstitutions.

3) Lossofnaturalresource-basedlivelihoods

4) Lossofaccesstonaturalresources

5) Severedegradationordestructionofculturalheritage

6) Defacement,removalordestructionofartifacts

7) Declineorlossinfoodproduction

8) Displacementandrelocationofcommunities

9) Pollutionofwatersources(lakes,rivers,coastalwaters)andambientair

3.0 OUTLINE OF AN INDIGENOUS PEOPLES PLAN (IPP)

AnIPPisrequiredforPPPprojectswithsignificantimpactsonIndigenousPeoplestoensurethatpropersafeguardsare

designedandimplementedtogetherwiththeimplementationoftheproject.

TheproposedoutlineforaprototypeIPPisasfollows(WorldBank,2005,2011;ADB,2009):

1) Legalandinstitutionalframework

2) IndigenousPeoplesprofile(culture,demographicstructure,genderandintergenerationalrelationsandsocial

organization,institutions,productionsystems,religiousbeliefs,andresourceusepatterns)

3) Descriptionoftheproject

4) AssessmentofPotentialImpactsoftheProjecttoIPs

5) AvoidanceandMitigationMeasures

6) ConsultationandAgreementorcovenantswithIPs

7) ImplementationPlanforanIPP

8) GrievanceRedressMechanism

9) MonitoringandEvaluationSystem

10)FinancialRequirements

AbriefdescriptionoftheforegoingIPPoutlineisprovidedinTECHNICALNOTE2(following).

TheotherimportantcomponentsoftheIPplanarethefollowing(WorldBank,2005):

1) Summaryofsocialassessment.

2) Summaryofresultsofthefree,prior,andinformedconsultation.

3) ActionplanofmeasurestoensurethattheIndigenousPeoplesreceivesocialandeconomicbenefitsthatare

culturallyappropriate.

4) Actionplanonavoidanceandmitigationmeasuresonadverseaffectsoftheproject.

DRAFT

Draft Version as of 4 August 2014

Page 29: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3 5

5) CostestimatesandfinancingplanfortheIPP.

6) AccessibleproceduresappropriatetotheprojecttoaddressgrievancesbytheaffectedIndigenousPeoples’

communitiesarisingfromprojectimplementation.

7) Mechanisms and benchmarks appropriate to the project formonitoring, evaluating, and reporting on the

implementationoftheIPP.

4.0 CONSULTATION AND INFORMED PARTICIPATION

TheIPsaffectedbytheprojectshouldbeinvolvedinaprocessof“free,priorandinformedconsultation”inaccordance

withtheIPRAlaw.Theyshouldbegiventhenecessaryinformationandbriefingabouttheprojecttosolicittheircomments

andknowtheirapprehensionsothatfactscanbegiventothemaboutprojectbenefitsandpotentialadverseimpacts,

andproposedmitigationoravoidancemeasures.TheIPshavetherighttomakedecisionsonprojectsaffectingthem.The

resultsoftheconsultationshallbedocumentedthroughasignedcovenantbetweentheIPsandtheProjectProponentor

implementingagenciesandprivatepartners.ThePPPCentermayalsoattesttothesigningofthecovenant.

Expertsonanthropology,ancestrallands,environmentandnaturalresources,etc.fromtheacademe,reputableresearch

institutionsandNGOsshouldbeengagedintheprocessbytheImplementingAgencytoexplainproperlytotheIPsthe

issuesandconcernsthattheyraisedandtheresultsoftheimpactassessment.

TheIPsshouldalsobeinformedoftheirrightsunderIPRAsothattheycanknowledgeablyandconfidentlyparticipateand

makebetterdecisionsconcerningthesocioculturalandenvironmentalsoundnessoftheproposedproject.

5.0 CONSENT OF AFFECTED IPs AND AGREEMENTS ON PROPOSED PROJECT

Someprojectsmayhaveunintendedadverseeffectson the IPsculturalpractices,property rights,andsocioeconomic

conditions. Thus, thepotential impactsofproposedprojectsneed tobe thoroughly examined togetherwith the IPs.

Participationof IPswill facilitate communicationandunderstandingof thepotential adverse impactsof theprojects,

howtomitigateoravoidtheseimpactsandthebenefitsthattheywillderivefromtheproject.Throughtheinvolvement

oftheIPsintheprojectdevelopmentcycle,theywillbeinabetterpositiontojudgeandmakedecisionsonwhetherto

giveorwithholdtheirconsentandagreementintheimplementationoftheproject.Incaseofdisagreementoncertain

termsoftheprojectsuchasthedesign,location,ortheIPPitself,furthernegotiationswiththeIPsmaybeundertaken

bytheProjectProponent.Asmuchaspossible,theProjectProponentshouldavoidthephysicaldisplacementofIPsby

exploringalternativeprojectdesigns.Whenavoidanceisimpossible,aresettlementpackagethatisacceptableandmeets

therequirementsoftheIPsmustbeprovidedandproperlyexecuted.Ifpossible,theplanwillalsoallowtherelocatedIPs

toreturntotheirancestrallandwhenthereasonsfortheirrelocationceasetoexist.Theconsentandagreementbetween

theProjectProponentandtheIPsshallbedocumentedinasignedcovenant.

Theclientshouldthenpreparethedocumentationthatprovidesthedetailsoftheprocessandoutcomesofconsultations

withIPs.Anagreementdocumentmayalsohavetobesignedbyconcernedpartiesasproofoftheacceptabilityofthe

projecttotheIPs.ThePPPCenterandthefinancinginstitutioncanthenverifythesedocumentsaspartofthevalidation

process.

DRAFT

Draft Version as of 4 August 2014

Page 30: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3

6.0 GRIEVANCE REDRESS MECHANISM

The Project Proponent should establish amechanismwhereby IPs complaints and grievances can be discussed and

resolved.Themechanismshouldbeeasilyaccessibleandsensitive to thecultureandtraditionsof the IPs to facilitate

resolutionof issues.AGrievanceRedresscommittee shouldbecreatedby theProjectProponent. Itsmainpurpose is

to resolve and settle amicably conflicts in interest andother undesirable impacts of theproject on the stakeholders.

Nonetheless,theoptionfortheIPsandothersaffectedtoseekremediesincourtshouldremainopenifthecomplaints

cannotberesolvedthroughamicablesettlementbytheGrievanceFacility.Theexistenceofthemechanismshouldbe

communicatedwelltotheIPsincludingtheprotocolsfortheiraccessandresolutionofcases.

7.0 MONITORING, EVALUATION AND REPORTING

ItistheresponsibilityoftheProjectProponentwiththeoversightofthePPPCentertoestablishamonitoring,evaluation

and reporting systemwherein IP representatives canparticipate. The systemshouldbeable tomonitor, capture and

measuretheprogressoftheimplementationoftheIPPandthecomplaintsorsatisfactionoftheIPsonthewaytheproject

isconstructedandoperated.

ThesystemshouldbeabletomonitorthecomplianceoftheprojecttotheIPPandtheactualimpactsoftheprojectonIPs

culturalandsocioeconomicwelfare.Amulti-partitemonitoringteamconsistingofrepresentativesfromtheimplementing

agency,IPgroup,andNGOsshouldbeprovidedlogisticalandfinancialsupporttoconductthemonitoringandreporting.

PeriodicreportsshouldbesubmittedtothePPPCenterandconcernedNGA/LGU.

DRAFT

Draft Version as of 4 August 2014

Page 31: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3 7

TECHNICAL NOTE 1- RIGHTS OF INDIGENOUS PEOPLES UNDER THE IPRA LAW

TheIndigenousPeoples(IP)RightsprotectedundertheIPRAlawcanserveastheframeworkforassessingtheimpactsof

proposedPPPprojects.Theserightsincludethefollowing:

1) RightstoAncestralDomains-TherightsofownershipandpossessionofICCs/IPstotheirancestraldomainsshallbe

recognizedandprotected.Suchrightsshallinclude:

a) Rights of Ownership – The right to claim ownership over lands, bodies of water traditionally and actually

occupiedbyICCs/IPs,sacredplaces,traditionalhuntingandfishinggrounds,andallimprovementsmadebythem

atanytimewithinthedomains;

b) Right toDevelopLandsandNaturalResources–Theright todevelop,controlanduse landsandterritories

traditionallyoccupied,owned,orused;tomanageandconservenaturalresourceswithintheterritoriesanduphold

theresponsibilitiesforfuturegenerations;tobenefitandsharetheprofitsfromallocationandutilizationofthe

natural resources found therein; the right tonegotiate the termsandconditions for theexplorationofnatural

resources in the areas for the purpose of ensuring ecological, environmental protection and the conservation

measures, pursuant to national and customary laws; the right to an informed and intelligent participation in

theformulationand implementationofanyproject,governmentorprivate, thatwillaffector impactuponthe

ancestraldomainsandtoreceivejustandfaircompensationforanydamageswhichtheysustainasaresultofthe

project;andtherighttoeffectivemeasuresbythegovernmenttopreventanyinterferencewith,alienationofand/

orencroachmentupontheserights;

c) RighttoStayintheTerritories–Therighttostayintheterritoryandnotberemovedtherefrom.NoICCs/IPswill

berelocatedwithouttheirfreeandpriorinformedconsent,northroughanymeansotherthaneminentdomain.

Whererelocationisconsiderednecessaryasanexceptionalmeasure,suchrelocationshalltakeplaceonlywiththe

freeandpriorinformedconsentoftheICCs/IPsconcernedandwheneverpossible,theyshallbeguaranteedthe

righttoreturntotheirancestraldomainsassoonasthegroundsforrelocationceasetoexist.Whensuchreturn

isnotpossible,asdeterminedbyagreementorthroughappropriateprocedures,ICCs/IPsshallbeprovidedinall

possiblecaseswithlandsofqualityandlegalstatusatleastequaltothatofthelandpreviouslyoccupiedbythem,

suitabletoprovidefortheirpresentneedsandfuturedevelopment.Personsthusrelocatedshalllikewisebefully

compensatedforanyresultinglossorinjury;

d) RightinCaseofDisplacement–Incasedisplacementoccursasaresultofnaturalcatastrophes,theStateshall

endeavortoresettlethedisplacedICCs/IPsinsuitableareaswheretheycanhaveaccesstoatemporarylifesupport

system:Provided,ThatthedisplacedICCs/IPsshallhavetherighttoreturntotheirabandonedlandsuntilsuch

timethatthenormalcyandsafetyofsuchlandsshallbedetermined:Provided,further,Thatshouldtheirancestral

domainceasetoexistandnormalcyandsafetyoftheprevioussettlementsarenotpossible,displacedICCs/IPsshall

enjoysecurityoftenureoverlandstowhichtheyhavebeenresettled:Provided,furthermore,Thatbasicservices

andlivelihoodshallbeprovidedtothemtoensurethattheirneedsareadequatelyaddressed;

e) RighttoRegulateEntryofMigrants–Righttoregulatetheentryofmigrantsettlersandorganizationsintothe

domains;

DRAFT

Draft Version as of 4 August 2014

Page 32: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

8 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3

f) RighttoSafeandCleanAirandWater–Forthispurpose,theICCs/IPsshallhaveaccesstointegratedsystems

forthemanagementoftheirinlandwatersandairspace;

g) RighttoClaimPartsofReservations–Therighttoclaimpartsoftheancestraldomainswhichhavebeenreserved

forvariouspurposes,exceptthosereservedandintendedforcommonandpublicwelfareandservice;and

h) RighttoResolveConflict–Righttoresolvelandconflictsinaccordancewithcustomarylawsoftheareawhere

thelandislocated,andonlyindefaultthereofshallthecomplaintsbesubmittedtoamicablesettlementandtothe

CourtsofJusticewhenevernecessary.

2) Rights toAncestralLands -The rightofownershipandpossessionof the ICCs/IPs, to theirancestral landsshallbe

recognizedandprotected.

a) Righttotransferland/property–Suchrightshallincludetherighttotransferlandorpropertyrightsto/among

membersofthesameICCs/IPs,subjecttocustomarylawsandtraditionsofthecommunityconcerned;and

b) Right toRedemption– Incaseswhere it is shownthat the transferof land/property rightsbyvirtueofany

agreementordevice,toanon-memberoftheconcernedICCs/IPsistaintedbythevitiatedconsentoftheICCs/IPs,

oristransferredforanunconscionableconsiderationorprice,thetransferorICC/IPshallhavetherighttoredeem

thesamewithinaperiodnotexceedingfifteen(15)yearsfromthedateoftransfer.

3) RighttoParticipateinDecision–Making–ICCs/IPshavetherighttoparticipatefully,iftheysochoose,atalllevelsof

decision-makinginmatterswhichmayaffecttheirrights,livesanddestiniesthroughproceduresdeterminedbythemas

wellastomaintainanddeveloptheirownindigenouspoliticalstructures.Consequently,theStateshallensurethatthe

ICCs/IPsshallbegivenmandatoryrepresentationinpolicy-makingbodiesandotherlocallegislativecouncils.

4) RighttoDetermineandDecidePrioritiesforDevelopment–TheICCs/IPsshallhavetherighttodetermineanddecide

theirownprioritiesfordevelopmentaffectingtheirlives,beliefs,institutions,spiritualwell-being,andthelandstheyown,

occupyoruse.Theyshallparticipateintheformulation,implementationandevaluationofpolicies,plansandprograms

fornational,regionalandlocaldevelopmentwhichmaydirectlyaffectthem.

The [indigenouspeoples] shall,within their communities, determine for themselvespolicies, developmentprograms,

projectsandplanstomeettheiridentifiedpriorityneedsandconcerns.The[indigenouspeoples]shallhavetherightto

acceptorrejectacertaindevelopmentinterventionintheirparticularcommunities.Theindigenouspeoples’decisionto

acceptorrejectaproposedpolicy,program,orplanshallbeassessedinaccordancewiththeirdevelopmentframework

andtheirvaluesystemsfortheprotectionoflandandresources.

5) RightstoReligious,CulturalSitesandCeremonies–ICCs/IPsshallhavetherighttomanifest,practice,developand

teachtheirspiritualandreligioustraditionsandcustomsandceremonies;therighttomaintain,protectandhaveaccess

totheir religiousandculturalsites; theright touseandcontrolofceremonialobjects;andtheright to repatriationof

humanremains.Accordingly,theStateshalltakeeffectivemeasures,incooperationwiththeburialsites,suchthatthey

arepreserved,respectedandprotected.Toachievethispurpose,itshallbeunlawfulto:

a) Explore,excavateormakediggingsonarcheologicalsitesoftheICCs/IPsforthepurposeofobtainingmaterials

ofculturalvalueswithoutthefreeandpriorinformedconsentofthecommunityconcerned;and

b) Deface,removeorotherwisedestroyartifactswhichareofgreat importancetotheICCs/IPsforthepreservation

DRAFT

Draft Version as of 4 August 2014

Page 33: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3 9

oftheirculturalheritage.

6) Right to Indigenous Knowledge Systems and Practices and to Develop own Sciences and Technology – ICCs/IPs

areentitledtotherecognitionofthefullownershipandcontrolandprotectionoftheirculturalandintellectualrights.

Theyshallhavetherighttospecialmeasurestocontrol,developandprotecttheirsciences,technologiesandcultural

manifestations,includinghumanandothergeneticresources,seeds,includingderivativesoftheseresources,traditional

medicinesandhealthpractices,vitalmedicinalplants,animalsandminerals,indigenousknowledgesystemsandpractices,

knowledgeofthepropertiesoffaunaandflora,oraltraditions,literature,designs,andvisualandperformingarts.

7) AccesstoBiologicalandGeneticResources–Accesstobiologicalandgeneticresourcesandtoindigenousknowledge

relatedtotheconservation,utilizationandenhancementoftheseresources,shallbeallowedwithinancestrallandsand

domainsoftheICCs/IPsonlywithafreeandpriorinformedconsentofsuchcommunities,obtainedinaccordancewith

customarylawsoftheconcernedcommunity.

DRAFT

Draft Version as of 4 August 2014

Page 34: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

10 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex3

TECHNICAL NOTE 2- ANNOTATED OUTLINE OF IP PLAN

TheproposedoutlineforIPPisasfollows(ADB,2009,WB,2005,2011)(Table4.3):

Main Chapter Brief Description of Contents

1. Legalandinstitutionalframework

DescribesthelegalandinstitutionalframeworkoftheIPRAlawasthebasisforassessingtheimpactsoftheprojectsontheIPs.

2. IndigenousPeoplesprofile Provides baseline information on the demographic, social, cultural, and political characteristicsof the affected IP communities; the land and territories that they have traditionally owned orcustomarilyusedoroccupied;andthenaturalresourcesonwhichtheydepend.

3. Descriptionoftheproject Discussesprojectcomponentsandactivitiesthatmaybring impactsonIndigenousPeoples.Theprojectarea’slocation,physicalandnaturalcharacteristicsandlandusearedescribed.

4. AssessmentofPotentialImpactsoftheProjecttoIPs

AnalyzesandpresentsthepotentialsignificantimpactsoftheprojecttotheIPs.Themethodsforassessmentarepresentedaswellastheresults.AlsodescribesthepotentialbenefitsthatcanbereceivedbytheIPsfromtheproject.

5. AvoidanceandMitigationMeasures

Providesthevariousmeasurestoavoidand/ormitigatetheadverseimpactsoftheprojectonIPs.Whentheavoidanceisnotpossible,themeasurestominimizeandcompensatetheIPsforidentifiedunavoidableadverseimpactsareidentified.

6. ConsultationandAgreementwithIPs

Identifies key project stakeholders and elaborates a culturally appropriate and gender-sensitiveprocessformeaningfulconsultationwithIPsateachstageofprojectpreparationandimplementation,takingthereviewandbaselineinformationintoaccount.DocumentstheagreementsconcerningtheacceptabilityoftheprojectandinformedconsentofaffectedIPs.AlsodescribestheprocedurestoredressgrievancesbyaffectedIPcommunities.Italsoexplainstheproceduresandprotocolsforthegrievancesystem.

7. ImplementationPlanforIPP

Specifies the organizational arrangements, strategies and actions that will be undertakento implement the IPP. Also provides the capacity building needed by NGAs/LGUs and IPs tomeaningfullyparticipateinprojectdevelopmentandoperation.

8. MonitoringandEvaluationSystem

Describesthemonitoringsystem,indicatorsandevaluationmethodfortheimpactsoftheprojectandcompliancewiththeIPP.TheparticipationofIPs,LGUsandimplementinggovernmentagencyisalsodescribed.

9. Financialrequirements ProvidestheitemizedbudgetfortheactivitiesincludedintheIPP.Thecostscheduleisalsoprovidedincludingthesourcesoffunds.

Table 4.3 Annotated Outline of IP Plan

REFERENCES

ADB.2009.SafeguardPolicyStatement.

ADB.OperationsManual.BankPolicies.March2010.

IndigenousPeoplesRightsAct(IPRA)orRepublicAct8371.October,1997.

WorldBank.2011.ImplementationoftheWorldBank’sIndigenousPeoplesPolicy.

WorldBank.2005.IndigenousPeoplesPolicy.

DRAFT

Draft Version as of 4 August 2014

Page 35: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4 1

ANNEX 4Guidelines for Gender Mainstreaming in PPP Projects

1.0 CONCEPTS AND DEFINITIONS

TheGADguidelines(NEDA,2007)describesGenderasashortenedformofthephrase“socialrelationsofgender”,which

seekstomakeevidentandtoexplaintheglobalsymmetrythatappearsinmale-femalerelationsintermsofpowersharing,

decisionmaking,divisionoflabor,andreturntolaborbothwithinthehouseholdandinsociety.GenderAnalysisisdefined

intheguidelinesasanexaminationofaproblemorsituationinordertoidentifygenderissueswithinthecontextofa

project,andtheobstaclestotheattainmentofgenderequalityorsimilargoals.Genderanalysisisaformofsocialanalysis

thatrequiresthecollection,analysis,andapplicationofsex-disaggregatedinformation. It istheprocessofconsidering

thedifferentimpactsthatadevelopmentprojectorprogramhasonwomenandmen,andontheeconomicandsocial

relationshipsbetweenthem(ADB,undatedandGTZ,2007).

Genderanalysiscanalsobedescribedasasystematicmethodofexaminingthepresentandfuturesituationwithand

without theprojectwith respect to gender equality andwomen’s empowerment. Analysis of thepresent issues and

potentialissues“withtheproject”isdonetodeterminethepotentialpositiveandnegativeimpactsofthePPPprojecton

genderconcernsandGADobjectives.Basedontheresultsofgenderanalysis,theissuesaredefinedandthecorresponding

strategiesandmeasuresareformulatedtoaddressthem.Thestrategiesandmeasuresarevalidatedwithstakeholdersand

arethenintegratedinthedesignofthePPPproject.Whenevernecessary,aGADplanispreparedtoenhancethegender

responsivenessofthePPPproject.

2.0 POLICY AND LEGAL FRAMEWORK

Twolawsthatrecognizetheroleofwomeninnationbuildingandtheirequalrightswithmenhavebeenenactedby

thePhilippineCongress.ThesearetheRepublicAct7192,an“ActPromotingtheIntegrationofWomenasFullandEqual

PartnersofMeninDevelopmentandNationBuildingandforotherPurposes”thatwasapprovedinFebruary12,1992;

DRAFT

Draft Version as of 4 August 2014

Page 36: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4

andRepublicAct9710ortheMagnaCartaforWomenthatwasenactedinJuly2008whileitsImplementingRulesand

Regulations(IRR)wasapprovedinMarch2010.GendermainstreamingwasadoptedbytheMagnaCartaforWomenasits

strategyforimplementation.

There is a specific provision in the Magna Carta for Women that requires project funds from official development

assistancetoallotasubstantialportion (5-30%) togenderanddevelopment (GAD)programs for the improvementof

women’swelfare.Moreover,thelawalsomandatesthatthecostofimplementingGADprogramsshallbechargedtothe

governmentagency’sorthelocalgovernmentunit’sGADbudgetwhichshouldbeatleastfivepercent(5%)oftheirtotal

budgetappropriations.

PursuanttoRA7192,theNEDAandtheNationalCommissionontheRoleofFilipinoWomen(NCRFW)preparedtheGAD

guidelinesin2007forthemainpurposeofprovidinggovernmentagenciesatoolwithwhichtointegrategenderand

developmentintheirplanning,budgetingandprogramandprojectimplementationactivities.TheNEDAguidelineisa

harmonizedversionthatconsidered,initsdevelopment,theGenderguidelinesofotherinternationalinstitutionssuchas

theADBandtheWorldBank.

BoththeaforementionedGenderlawspromoteempowermentofwomenandupholdtheirequalrightsandopportunities

withmen.Theselawsdonotonlyrecognizetheequalrightsofwomenbutalsoensurethattheybenefitfromgovernment’s

developmentprojectsandparticipatemeaningfullyinthedecision-making,planning,implementationandmanagement

oftheseprojects.Furthermore,theyalsoensurethatthereisanadequatebudgetavailabletoimplementGADprograms.

The Philippine Gender laws serve as the foundation and legal framework for mainstreaming GAD policies into the

development, implementation andmonitoring and evaluation of PPP projects. Hence, the design of PPP projects is

expectedtobegenderresponsiveandensurethattheyimplementacomponentonGAD.

3.0 MAINSTREAMING FRAMEWORK

Mainstreaminggenderinthedevelopment,implementationandmonitoringandevaluationofPPPprojectswillensure

thattheseprojectsaregenderresponsiveandsupportiveofthegoalsofgenderequalityandwomen’sempowermentin

development.

TheguidelinesandproceduresformainstreamingGenderinPPPprojectcyclesareconsistentwiththeharmonizedNEDA

GADguidelines(2007)andtheGender integrationstrategiesandguidelinesofother international lendinginstitutions

suchastheADBandtheWorldBank.Themainstreamingguidelinesprescribedhereinarepatternedaftertheapproach

adopted for the Environment and Social Impact Assessment (ESIA) to facilitate linkage and to establish clearly the

connectionamongtheserelatedguidelinesinformulatingandimplementingPPPprojects.

DRAFT

Draft Version as of 4 August 2014

Page 37: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4 3

Thetablebelow(Table4.4)illustratesgendermainstreamingintheprojectdevelopmentcycleofPPPprojects.Itshowsthe

genderresponsiveelementsormeasuresthatshouldbeintegratedinthegivenphasesoftheprojectcycle.Specifically,

thegenderresponsivemeasuresprovidedaretheproceduresthatmustbeundertakentoensurethatgenderconcerns

are sufficiently considered and integrated throughout the stages of project development and operation. Themain

proceduresinmainstreaminggenderconcernsinthePPPprojectsarebrieflysummarizedinTable4.5.

PPP Project Phases Proposed Procedures for Gender Mainstreaming

Project Identification • Prepareaprojectconceptnoteorinitialprojectprofile• Collectsexdisaggregateddata• Conductstakeholderanalysisandgenderanalysis• Screenprojectimpactsongender• Identifyissuesconcerninggenderequality,benefitsandwomenempowerment• FormulatestrategiestoaddressgenderissuesthatcouldpossiblybespawnedbyaPPPproject

Preliminary Design • PrepareaprojectdesignintegratingGADconcerns• PrepareaGenderresponsivenesschecklistforsectorPPPprojects• AssessPPPprojectdesignusingcheckliststodetermineitsresponsivenesstoGAD

Feasibility Study • IncorporateGenderresponsivenessintheTORsoftheconsultingfirmspreparingFeasibilityStudies(FS)andtheDesignandMonitoringFrameworkforthePPPproject

• Assesspotentialimpactsoftheproject’sdesignusingaProjectimpactchecklistforgender• PrepareaseparatechapteronGADintheFS• PrepareabudgetforGAD:calculateprojectcostincludingGADcostanditsimpactonthetariff• Formulate strategies and measures to safeguard women’s rights and enhance equal

opportunitieswithmenusingtheresultsofprojectevaluation• DevelopsexdisaggregatedmonitoringandperformanceindicatorsforGender• DevelopaM&EsystemincludingareportingsystemforGender

Tendering • IncludeGenderdatacollectionaspartoftheTORforthecontractmanager• ConductbriefingandseminarsfortheprivatesectorontheGADcomponentofPPPprojects• PrepareaGADplanforsectorPPPprojects(PrepareadetailedGADplanforProjectCategories

AandB,andasimpleGADplanforProjectC)withthefollowingminimumcontents:a. explicitgenderequalitygoals,objectivesandoutcomes;b. issuesandstrategies;c. programsandprojects;d. budgetestimates;ande. monitoringandevaluationplans

Construction and Supervision • Createacommitteewithwomenmembershiptodiscussissuesandcomplaintsonconstruction• Prepareperiodicreportsbytheprivatesponsoronstatisticsneededtobetracked(e.g.,number

ofwomenemployedandbenefittedbytheproject)• MonitorcomplianceofcontractorswithperformancestandardsestablishedforGAD

Operation • OperationalizeGADM&E• MonitorcomplianceoftheprojectorbusinessoperatortoGADplan• MonitorGenderimpactsoftheprojectandevaluateperformanceperiodically• GenerateregularlyperformancereportsonGAD

Table 4.4 Framework for Mainstreaming Gender in PPP Project Development

DRAFT

Draft Version as of 4 August 2014

Page 38: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4

1. Gather gender disaggregated data of the population located in the project site and those that will be potentially affected(benefittedanddisadvantaged)bytheproject.

2. ScreenthepositiveandnegativeimpactsofthePPPproject’sdesignonwomen’srights,equalopportunitiesandaccesstobenefitsthroughtheuseofGenderanalysismethodsandanimpactscreeningchecklist.

3. Inform and engage participation of localwomen’s organizations andmandated government agencies (NEDA and PhilippineCommissiononWomen)ontheproposedPPPprojectandintheevaluationofitsGenderresponsivenessusingGADchecklists.

4. Conductscopingofissueswithlocalwomenleadersandgovernmentagencyrepresentatives(NEDAandPhilippineCommissiononWomen)andconfirmresultsofinitialprojectscreeningandGADchecklist.

5. Determineandvalidatethesignificantadverseimpactsongenderoftheproposedprojectwithlocalstakeholdersandconcernedagenciesandinstitutions.

6. Integrateintheprojectdesigntheproposedstrategiesandmeasurestoavoidormitigatethesignificantpotentialimpactsoftheprojectonwomen,childrenandthedisabled.

7. PreparetheGADPlanforCategoryAandBprojects.

8. Involvethelocalwomenleadersandconcernedgovernmentagencies(Implementingagencyandprivatesectorpartner,NEDAandPhilippineCommissiononWomen)inthepreparationoftheGADplan.

9. Secureconsentandagreementorcovenantwiththeselectedlocalwomen’sorganizationandgovernmentagencies(Implementingagencyandprivatesectorpartner,NEDAandPhilippineCommissiononWomen)fortheimplementationoftheproject.

10. PrepareaGADMonitoringandEvaluationSystemandreportingsystem;andbuildupsex-disaggregateddatabase.

11. PrepareimplementationarrangementsfortheGADPlan.

12. EstimatebudgetrequirementsforimplementingGADprogramsandprojects.

13. ImplementtheGADplanwithparticipationofwomenstakeholders.

14. Involve the localwomen’s organization inmonitoringof theproject’s compliance to the agreement andGADPlan. Create amonitoring teamconsistingof the Implementingagencyandprivatesectorpartner,and representatives from localWomen’sorganizations.

15. MonitorandevaluatethebenefitsofthePPPprojecttowomen,childrenandthedisabledwiththeparticipationoflocalwomen’sorganizationrepresentatives.MonitorthecomplianceofthePPPprojecttoGenderlawsandGADguidelinesandtheirimpactsongender.

16. SustaintheimplementationoftheGADplanbyconcernedorganizations(implementinggovernmentagencyandprivatesector)byallottingaregularbudgettoGADprogramsandprojectsandinstitutionalizingtheimplementationprocess.

Table 4.5 General Procedures for Mainstreaming Gender in PPP Projects

4.0 OPERATIONALIZATION OF GENDER MAINSTREAMING

Thefollowingactions,notnecessarilyinorder,needtobeundertakeninmainstreamingGenderinPPPprojects:

• IncludeaseparatesectiononGendermainstreamingguidelinesinthePPPmanual;

• BriefingofPPPCenterstaffandImplementingagencycasehandlersonGendermainstreamingandGAD;

• HiringofGenderaspecialist(s)byPPPCentertooverseemainstreamingcomplianceandGADplanimplementation

byImplementingAgency;

• EngagementofGenderspecialistbyImplementingAgencytoconductgenderanalysisandGADplanpreparation;

• IncluderesponsibilitiesonGADplanimplementationintheTORoftransactionadvisers;

• CollectionofsexdisaggregateddataforgenderanalysisbyImplementingagency’sGenderspecialistandtrained

supportstaff;

• PreparestrategiesandmechanismstoimplementGADbudgetbyImplementingagency;

• Establishlinkagewithlocalwomen’s’organizations;

DRAFT

Draft Version as of 4 August 2014

Page 39: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4 5

• Conductconsultationandencourageparticipationoflocalwomen’sorganizationsinprojectidentification,gender

analysisandGADplanning;

• Conductworkshoporientationforbiddersonguidelinesongender;

• Multi-mediacampaignonPPPandgenderimpacts;

• IncludewomenGADexpertasmembersoftheexternalmonitoringteamforPPPprojects;

• Buildacadreofgenderspecialists(offertrainingcoursesthrougheducationalinstitutions);

• IncludeaGADcomponentinthePDMFforeveryoneofitsFeasibilityStudies;

• Establisharegistryofgenderspecialists;

• Conduct a special study on evaluating the impacts of Gender mainstreaming on financial and economic

performanceofthePPPprojectandtheprofitabilityoftheprivateinvestor;and

• DevelopGendermainstreamingguidelinesspecificforthePPPsectors.

5.0 PROJECT IDENTIFICATION

Candidate PPP projects are selected and prioritized from the list of projects provided in the NGA’s investment plan

consistentwithidentifiedeligibleprojectsforPPPforNGAs. Theprocessofselectionandprioritizationshouldalready

consider gender criteria and concernsparticularly equal rights andopportunities betweenmen andwomen and the

promotionofwomen’sempowermentthroughparticipationinallstagesofprojectdevelopment.Briefprojectprofileor

conceptnoteispreparedfortheselectedprojectforPPPfunding.

It is in this phase that a stakeholder analysis is undertaken, with focus on gender analysis. Sex disaggregated data

are collected and gender analysis is conducted to determine the present situation on gender equality andwomen’s

empowerment. Thepotential future scenarioswith thePPPproject are also examined so that thenecessarygender

measures are incorporated in thedesignof the selected andprioritizedproject.Gender issues are identifiedand the

strategiesandmeasurestoaddressthemareformulatedwithinthelocalcontext.

To enable a comprehensive assessment of the project’s potential impacts on gender, an impact screening matrix

isemployed inTable4.6,below.Thematrix initially identifieswhether thePPPprojectwillcausepositive,negativeor

uncertainimpactsongenderelementssuchasequalrightsandaccess,benefitsandimprovedwelfare,representation

andparticipation,ownershipofassets,protectionandsecurity,andsafetyfromman-inducedandnaturaldisasters.The

impactsare thencharacterizedaccording to theirpotentialmagnitude, i.e., low,mediumandhigh.The resultsof the

impactassessmentwilldeterminewhetherthePPPprojecthasthepotentialtocreatesignificantadverseimpacts.

Table 4.6provides the checklistmatrix for screening thepotential impacts of the PPPproject ongender, particularly

women’srights,equalopportunitiesandaccesstothepotentialbenefitsoftheproject.DRAFT

Draft Version as of 4 August 2014

Page 40: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4

Project Phase

Checklist for ScreeningGender Concerns Potential impacts of PPP Project Magnitude of impacts

Project will affect: Positive Negative Uncertain Low Medium High

Project Identification Equal rights and access of women to:

• Health

• Housing

• Land

• Naturalresources

• Food

• Decentwork

• Livelihood,credit,capitalandtechnology

• Ownershipofassets

• Educationandtraining

• Information

• Socialprotection/socialsecurity

• Recognition and preservation of cultural identity and integrity

• Safety from natural and human-induced disasters

Floods

Earthquake

Volcaniceruption

Toxicandhazardoussubstances

Chemicalpollution

Otherhazardsandrisks

Table 4.6 Project Impact Screening Matrix

5.1 Classification of PPP Projects according to Gender Responsiveness

PPPprojectscanbecategorizedintothreetypesaccordingtothelevelofsignificanceoftheirimpactsonGender:

1) Category A.TheseareprojectsthatwouldmostlikelyhavesignificantadverseimpactsonGenderconcerns.A

GADanalysisandplanshouldbeprepared.

2) Category B.TheseprojectsarelikelytohavemoderateadverseimpactsonGenderconcerns.Theprojectdesign

shouldbeable toaddress theadverse impacts throughavoidanceormitigationmeasures. Theprojectdesign

shouldintegrategenderresponsivemeasures.AsimplifiedGADplanisprepared.

3) Category C. These projects are inherently gender neutral projects and are expected to have positive and

enhancingimpactsonGenderconcerns.PreparationofaGADplanisoptional.

DRAFT

Draft Version as of 4 August 2014

Page 41: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4 7

NEDA’sharmonizedGADguidelines(2007)containchecklistsforscoringtheresponsivenessoftheprojectinitsdifferent

stagesoftheprojectcycle.TheNGAprojectpreparerscanusethesecheckliststodeterminethegenderresponsivenessof

itsproposedprojectunderdifferentprojectcyclestages.TheseGADchecklistsforeverystageoftheprojectcyclecanbe

downloadedfromtheNEDAwebsite.

6.0 PROJECT DESIGN

After the initialprojectdesign is laidout, theNEDAGADresponsivenesschecklist isappliedtodeterminetheGender

weaknessesoftheinitialdesign.Genderconcernslackinginthedesignarethenincorporated.Likewise,theresultsof

projectscreeningundertheProjectidentificationstagewouldfurtherfirmupthefindingsoftheNEDAresponsiveness

checklist.

ForthePPPprojecttohaveagenderresponsivedesign,itmustbeabletodetermineandaddresstwoimportantagenda

items:1)genderissuesarisingfromgenderanalysisofproposedPPPprojects;and2)strategiesandmeasuresthatmust

beincorporatedinthePPPprojectdesigntoresolveissuestobepotentiallygeneratedbytheproposedprojectduring

itsconstructionandoperationphases.Hence,thefulldesignformulationoftheproposedprojectwouldbeguidedby

properlyaccountingfortheproject’spredictedimpactsduringitsconstructionandoperationphases.Byprojectingthe

project’sadverseimpactsongenderconcerns,thenecessarystrategiesandmeasurescanbeintegratedintheproject’s

design.

Anotherimportantcomponentofthedesignisthecapacitybuildingandcommunicationmechanismstoensureinformed

choicesaremadebytheaffectedvulnerablesectors.

7.0 PROJECT FEASIBILITY STUDY

Thisprojectdevelopmentstageinvolvestheconductoftechnical,financial,economic,socialandinstitutionalfeasibilityor

viabilityoftheproposedproject.Thisstageisundertakenafterthefullprojectdesignhasbeenformulated.Itisadvisable,

wheneverpossible,fortheprojectevaluationteamtointegrategenderconcernsinthefeasibilityanalysistoolsthatwill

beemployedforprojectevaluation.

In project evaluation, it is important todetermine thepotential benefits thatwomenwouldderive from theproject.

Likewise,gapsandconstraints related togender integration thatareanticipated in theproject implementationstage

shouldbeaddressedinthefinaldesignformulationoftheprojectpriortoitsimplementation.Theuseofsexdisaggregated

monitoringandperformanceindicatorsaredevelopedandappliedduringtheprojectevaluationstage.

Table4.7providesthematrixtoolforassessingthepotentialimpactsoftheproposedprojectduringitsoperationstageon

genderindicatorsandforformulatingthestrategiesandmeasurestomitigateoravoidnegativeimpacts.

AGADplanispreparedasaseparatechapteroftheFS.ThecontentoftheGADplanisasfollows:

DRAFT

Draft Version as of 4 August 2014

Page 42: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

8 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4

a) Explicitgenderequalitygoals,objectivesandoutcomes;

b) Issuesandstrategies;

c) Programsandprojects;

d) Budgetestimates;and

e) Monitoringandevaluation.

Thisdevelopmentstagealsoinvolvestheestimationofappropriateamountoffundsforthepurposeofbudgetingand

programmingtheimplementationoftheGADprograminaccordancewithrelevantprovisionsofRA9710andRA7192.

The implicationsof implementing theGADprogramon tariffs aredetermined since thismight affect the investment

decisionoftheprivatesectorpartner.

Sex disaggregatedmonitoring and performance indicators for Gender as well as theM&E and reporting system are

developedduringtheFSstage.

Checklist indicators Yes No Strategies / Measures

Will the project:

Improve physical welfare of women and girls in terms of:

Lowerincidenceofmalnutrition,morbidity,andmortalityamonggirlsandboys

Improvedfunctionalliteracyofvariousgroupsofwomen,particularlyamongtheolderagegroupsinruralareasandamongindigenouspeoplesgroups

Improvedschoolparticipationofgirlsandboysatvariouslevels

Promote equal access of women and men to development opportunities in terms of:

Employmentgeneratedbytheproject

Resourcesandbenefitswhichimpliestheremovalofconstraints,barriersandvariousformsofgender-baseddiscriminationwithrespecttowomen’saccess

Greater understanding of women’s human rights among women and men in terms of:

CommitmentoftheStatetorecognizing,protecting,andfulfillinghumanrights,particularlyofwomenandgirls

Changesinattitudesandbeliefsconcerninggenderrelations,asindicatedbyareductionintheincidenceofviolenceagainstwomenandamoreequalgenderdivisionoflabor

Equal participation of women in bodies or organizations created by development programs or projects

Equal control of women and men over resources and processes and outcomes of development

Sources:NEDA2007;RA9710(MagnaCartaforWomen).

Table 4.7 Potential Project Impact Assessment Checklist

DRAFT

Draft Version as of 4 August 2014

Page 43: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4 9

8.0 TENDERING

DuringtheTenderingandContractingstage,GenderdatacollectionismadeapartoftheTORforthecontractmanager.

ItisalsoimportantatthisstagethatthoseinvolvedinPPPprojects,particularlytheprivatesectorpartners,areprovided

briefingsandseminarsonGAD.

TheGADplanforsectoralPPPprojects(DetailedGADplanforProjectCategoriesAandBandsimpleGADplanforProject

C)isincludedinthecontractofPPPprojectcontractors

9.0 CONSTRUCTION AND SUPERVISION

AcommitteewithwomenmembershipiscreatedtoreceivecomplaintsduringconstructionandoperationofPPPprojects.

TheotherimportantroleofthecommitteeistoensurethattheGADplanisproperlyimplementedaspartoftheproject.

Periodic reporting by the contractor on statistics needed to track Gender concerns such as the number of women

employedandbenefittedbytheprojectissystematicallyandperiodicallyundertakenduringtheconstructionstage.The

complianceofthecontractorinimplementingtheGADplanismonitoredduringconstructionbyadesignatedmonitoring

committeethatincludesrepresentativesfromthelocalwomen’sorganizations.

10.0 OPERATION AND SUPERVISION

Support by top management of the implementing agency is critical to the success of GAD mainstreaming during

implementationofPPPprojects.Anequally important factortoconsider issustainingthe implementationoftheGAD

planorprojectcomponentinthePPPproject.Forthispurpose,aregularbudgethastobeallottedbytheImplementing

agencytobeabletosustaintheimplementationoftheGADcomponentofthePPPproject.

Localwomen’sorganizations,NGOs,andconcernedgovernmentagenciesshouldbeharnessedtoensurethesustainable

implementationoftheGADprogramasaninherentpartofthePPPproject.Theseorganizationshavethecompetence

andcommitmenttosuccessfullysustaintheimplementationoftheGADprogram.

ItisinthisstagethattheGADM&Eisfullyoperationalized.MonitoringandevaluationoftheGADprogramandproject

includestwodimensions:1)monitoringcompliancetotheGADplan;and2)evaluatingtheactualimpactsoftheproject

onGenderasmeasuredthroughitsperformanceindicators.

TheNEDAGADguidelinescontainpulloutsofsector-specificGADmonitoringindicatorsthatcanbeappliedformonitoring

thegenderresponsivenessofPPPprojects.ThesectorscoveredbyGADmonitoringindicatorsinclude:1)Agricultureand

AgrarianReform,2)NaturalResourceManagement,3)SocialSector:Education,Health,HousingandSettlement,Women

inAreasunderArmedConflict,4)Justice,5)InformationandCommunicationTechnologies,and6)Microfinance.

DRAFT

Draft Version as of 4 August 2014

Page 44: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

10 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex4

REFERENCES

GuidebookonPublic-PrivatePartnershipinInfrastructure.UNESCAP.Bangkok,Thailand.January2011;

GTZ.GenderandUrbanTransport.FashionableandAffordable.March2007;

Public-Private Partnership Center. Developing Public-Private Partnerships in Local Infrastructure and Development

Projects:DraftPPPManualforLGUs.Volume1.2012.QuezonCity;

MillenniumChallengeCorporation.FactSheet.MCC’sCommitmenttoGenderEquality.September16,2010.USA;

MillenniumChallengeCorporation.GenderIntegrationGuidelines.March2010.USA;

MillenniumChallengeCorporation.Gender Integration throughout the Stages of a Compact.May2011.USA;

Moser,Annlise.GenderandIndicators.BridgeDevelopmentandGender–InstituteofDevelopmentstudies-UNDP.July

2007;

NationalEconomicandDevelopmentAuthorityandNationalCommissionontheRoleofFilipinoWomen.Harmonized

Gender and Development Guidelines for Project Development, implementation, Monitoring and Evaluation. Second

Edition.November2007;

National Economic andDevelopment Authority andNational Commission on the Role of FilipinoWomen. TRAINING

MANUAL.HarmonizedGenderandDevelopmentGuidelinesforProjectDevelopment,implementation,Monitoringand

Evaluation.SecondEdition.November2007;

NEDA.2007.GADchecklistforProjectImplementationandManagement,andMonitoringandEvaluation;

Reyes,SocorroPolicyNote.GENDERINPUBLIC-PRIVATEPARTNERSHIPS:APUBLICSECTORPERSPECTIVE.January,2012.

Unpublished;

RepublicAct7192.AnActPromotingtheIntegrationofWomenasFullandEqualPartnersofMeninDevelopmentand

NationBuildingandforotherPurposes.February12,1992;

RepublicAct9710.MagnaCartaforWomen.July2008;

RepublicAct9710.MagnaCarta(RA9710).ImplementingRulesandRegulations.March2010;

Sanghi,Apuruvaet.al.NoteNo.27.Gridlines.PPIAF,September2007;

WorldBankInstitute.Public-PrivatePartnership,GenderandPovertyinInfrastructure.2004.

DRAFT

Draft Version as of 4 August 2014

Page 45: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 1

ANNEX 5Guidelines for Environmental Assessment and Monitoring of PPP Projects

1.0 INTRODUCTION

EnvironmentalassessmentandmanagementofprojectseligibleunderthePublic-PrivatePartnership(PPP)Programisa

majorrequirement.ThePPPProgramadherestotheconceptofsustainabledevelopment,andthus,theImplementing

Agency (IA) should undertake environmental assessment of projects at the early stage of project preparation and

environmentalmonitoringduringprojectimplementation.Environmentalimpactassessment(EIA)isamajorcomponent

ofawell-preparedPPPProject.

TherearevariousPhilippineenvironmentalandnaturalresourceslaws,rules,andregulationsthatprogramsandprojects

have to adhere to and complywith. However, forpurposesof thePPPprojects, thisAnnexprovides anoverviewof

the requirements, processes andprocedures thatgenerally covermost PPPprojects,mostparticularly, thePhilippine

EnvironmentalImpactStatement(PEIS)System.

ThisAnnexprovidesinformationthatshouldenabletheIAtogainbasicknowledgeandunderstandingoftheenvironmental

impactassessment(EIA)processandcorrespondingenvironmentalmonitoringandreportingrequirementsforvarious

PPPprojects.

2.0 POLICY AND LEGAL FRAMEWORK

Environment and natural resources (ENR) management in the country is guided by two major laws, the Philippine

EnvironmentalPolicyandthePhilippineEnvironmentCode,PresidentialDecree(PD)1151and1152respectively. The

PhilippineEnvironmentalPolicydeclares“acontinuingpolicyoftheState(a)tocreate,develop,maintain,andimprove

DRAFT

Draft Version as of 4 August 2014

Page 46: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

conditionsunderwhichmanandnaturecanthriveinproductiveandenjoyableharmonywitheachother,(b)tofulfillthe

social,economic,andotherrequirementsofpresentandfuturegenerationsofFilipinos,(c)toensuretheattainmentofan

environmentalqualitythatisconducivetoalifeofdignityandwell-being.”ThePhilippineEnvironmentCodeontheother

hand,setsforthmanagementpoliciesandprescribedqualitystandardsfortheenvironmentinitstotality.

Bothlawstookeffectinthe1970’s,togetherwithothermajorenvironmentallaws,includingthePhilippineEnvironmental

ImpactStatement(PEIS)System,whichisPD1586.Othermajorenvironmentallawsweredevelopedandimplemented

inthelastfourdecades.

Depending on the project’s circumstances, the requirements and obligations under the environment and natural

resourceslawswillneedtobecompliedwithforspecificPPPprojects.Duringprojectpreparation,itisessentialthatthe

IAsareawareoftheselawsandregulationssothatanyspecificrequirementsmaybecompliedwith,andthecostsforsuch

requirementsincludedintheprojectbudget.

2.1 Philippine EIS System

ThePhilippineEISSystem(PD1586)requiresallprojectstoundergoenvironmentalimpactassessment(EIA)priortoany

development.ThePEISSystemcoversprojectsdeclaredasEnvironmentallyCriticalProjects(ECPs)orprojectslocatedin

EnvironmentallyCriticalAreas(ECAs)presumedtohavepotentialsignificantimpactsonthequalityoftheenvironment.

Section4ofPD1586providesthatnoperson,partnershiporcorporationshallundertakeoroperatesuchdeclaredECP

andthoseprojectslocatedinECAswithoutfirstsecuringanEnvironmentalComplianceCertificate(ECC).

TheDepartmentofEnvironmentandNaturalResources(DENR),throughtheEnvironmentalManagementBureau(EMB),

implements this law. Under this law and consistent with the principles of sustainable development, the Philippine

governmentdeclaresitapolicytoimplementasystems-orientedandintegratedapproachtotheEISsystemtoensure

arationalbalancebetweensocio-economicdevelopmentandenvironmentalprotectionforthebenefitofpresentand

futuregenerations.TheEISSystemisconcernedprimarilywithassessingthedirectandindirectimpactsofaprojecton

thebiophysicalandhumanenvironmentandensuringthattheseimpactsareaddressedbyappropriateenvironmental

protectionandenhancementmeasures.

WiththePhilippinecommitmenttotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC),assessment

ofclimatechangeadaptation(CCA)anddisasterriskreduction(DRR)concernsofprojectshavebeenintegratedintothe

PEISSystem.

AllthePEIS-relatedregulationsaredownloadablefromtheEMBwebsite.DRAFT

Draft Version as of 4 August 2014

Page 47: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 3

3.0 ENVIRONMENTAL CLASSIFICATION OF PPP PROJECTS

TheDENR/EMBRevisedProceduralManualforDENRAdministrativeOrderNo.30,seriesof2003(DAO03-30)provides

a comprehensive listingofprojects thatarecoveredby thePEISSystem.The listprovides informationon theproject

classificationor grouping, and the correspondingproject sizeparameters, EIA report type required, and thedecision

documenttobeissuedbytheDENR/EMB.

Table 4.8 is a list of PPP-eligible projects taken from the PEIS Revised Procedural Manual that are categorized as

environmentallycritical.Byvirtueoftheirprojectsizeandcapacitiesandtheirpotentialtocausesignificantenvironmental

impacts,thesePPP-eligibleprojectsarerequiredtoundergocomprehensiveEIAandsubmitdetailedEISreporttoDENR/

EMBtosecureanECC.

Table 4.8 Environmentally Critical PPP Projects

Project Type Project Size Parameter for PEIS Coverage

1. MAJOR DAMS ReservoirfloodedareaORWaterstoragecapacity

≥25,000OR≥20millioncum

2. MAJOR RECLAMATION PROJECTS Areareclaimed ≥50hectares

3. MAJOR ROADS & BRIDGES

a. Bridgesandviaducts,newconstruction Length ≥10.0kilometers(km)

b. On-graderailwaysystem,new Regardlessoflengthandwidth

c. Roads,newconstruction,widening(includingRO-ROfacilities)

Lengthwithnocriticalslopeorlengthwithcriticalslope

≥20.0kmOR≥10.0km

d. Tunnelsandsub-graderoadsandrailways

Length ≥1.0km

4. MAJOR POWER PLANTS (Under PP 2146: fossil-fueled, nuclear fueled, hydroelectric or geothermal)

a. FuelCell Totalpowerproductioncapacity ≥100MW

b. Gas-firedthermalpowerplants Totalpowerproductioncapacity ≥50MW

c. Geothermalfacilities Totalpowerproductioncapacity ≥50MW

d. Hydropowerfacilities Waterimpoundingcapacity ≥20millioncum

e. Otherthermalpowerplants(e.g.diesel,bunker,coal,etc)

Totalpowerproductioncapacity ≥30MW

5. OTHER POWER PLANTS NOT LISTED IN PP 2146

a. Renewableenergyprojectssuchasocean,solar,wind,tidalpowerexceptwastetoenergyandbiogasproject

Totalpowerproductioncapacity ≥100MW

b. Substations/switchyard Poweroutput ≥50.0MW

c. Wastetoenergyprojectsincludingbiogasprojects

Totalpowerproductioncapacity ≥50.0MW

TakenfromAnnex2-1boftheRevisedProceduralManualforDENRAdministrativeOrderNo.30,seriesof2003(DAO03-30);Aug2007

DRAFT

Draft Version as of 4 August 2014

Page 48: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

Table4.9,ontheotherhand,listssomePPP-eligibleprojectsthatarecategorizedasnon-ECPsbasedontheircapacities

as listedinthePEISRevisedProceduralManual. Theseprojectsareexpectedtocauseenvironmental impactsthatare

relativelyminimal.WhentheseprojectsaretobelocatedinECAs,thesewillberequiredtoundergoanEIAandsecurean

ECC.

Project Type Project Size Parameter for PEIS Coverage

1. MINOR DAMS ReservoirfloodedareaANDwaterstoragecapacity

<25hectaresand<20millioncum

2. MINOR RECLAMATION PROJECTS Areareclaimed <50hectares

3. MINOR ROADS & BRIDGES

a. Bridgesandviaducts,newconstruction Length ≥80mbut<10.0km

b. Roads,newconstruction,widening(includingRO-ROfacilities)

Lengthwithnocriticalslope,ORlengthwithcriticalslope

≥2kmbut<20.0km,OR≥2kmbut<10.0km

c. Elevatedroads,flyover,interchanges Regardlessoflengthandwidth

d. Tunnelsandsub-graderoadsandrailways

Length <1.0km

4. MINOR POWER PLANTS (Under PP 2146: fossil-fueled, nuclear-fueled, hydroelectric or geothermal)

a. FuelCell Totalpowerproductioncapacity ≥5MWbut<100MW

b. Gas-firedthermalpowerplants Totalpowerproductioncapacity ≥10.0MWbut<50.0MW

c. Geothermalfacilities Totalpowerproductioncapacity ≥1.0MWbut<50.0MW

d. Hydropowerfacilities Waterimpoundingcapacity <20millioncubicmeters

e. Otherthermalpowerplants(e.g.diesel,bunker,coal,etc.)

Totalpowerproductioncapacity ≥5.0MWbut<30.0MW

5. OTHER POWER PLANTS NOT LISTED IN PP 2146

a. Powerbarge Totalpowerproductioncapacity >1MWbut<10MW

b. Powertransmissionlines Powercarryingcapacity ≥138KV

c. Renewableenergyprojectssuchasocean,solar,wind,tidalpowerexceptwastetoenergyandbiogasproject

Totalpowerproductioncapacity ≥5MWbut<100MW

d. Substations/switchyard Poweroutput >1MWbut<50MW

e. Wastetoenergyprojectsincludingbiogasprojects

Totalpowerproductioncapacity >1MWbut<50MW

e. Windfarms/windprojects Totalpowerproductioncapacity ≥5MWbut<100MW

Table 4.9 Selected Non-ECP PPP Projects11

11Thecompletetypesofprojectsthatmaybeconsideredasnon-ECPsarefoundinAnnex2-1bofthePEISSystemRevisedProceduralManual

DRAFT

Draft Version as of 4 August 2014

Page 49: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 5

Table4.10showstheDENRnon-ECPProjectgroupingwhereotherPPP-eligibleprojectsmayfallunder.ThesetypesofPPP

projectswhenlocatedinECAswillberequiredtoundergoanEIAandsecureECCdependingontheirprojectcapacities.

Table 4.10 Other Eligible Projects for PPP that are Non-Environmentally Critical Projects

Selected Additional Non-ECP Project Groups

(from PEIS Revised Procedural Manual)

Other PPP Projects Types (from the Revised IRR of the BOT Law)

1. Buildings,storagefacilitiesandotherstructures

• Telecommunications,backbonenetwork,terrestrialandsatellitefacilitiesandrelatedservicefacilities;

• Educationandhealthinfrastructure;• Governmentbuildings,housingprojects;• Markets,slaughterhouses,andrelatedfacilities;• Warehousesandpost-harvestfacilities

2. Tourismindustry • Tourismestatesortownships,includingecotourismprojects,suchasterrestrialandcoastal/marinenatureparks,amongothersandrelatedinfrastructurefacilitiesandutilities

3. Transportterminalfacilities • Portinfrastructureslikepiers,wharves,quays,storage,handling,ferryservicesandrelatedfacilities;

• Airport,airnavigation,andrelatedfacilities

4. Wastemanagementprojects • Environmentalandsolidwastemanagementrelatedfacilitiessuchasbutnotlimitedtocollectionequipment,compostingplants,landfillandtidalbarriers,amongothers

5. Watersupply,irrigationorfloodcontrolprojects

• Irrigationandrelatedfacilities;• Watersupply,sewerage,drainage,andrelatedfacilities

TheIAsareencouragedtocheckthePEISSystemRevisedProceduralManualanddiscusswithDENR/EMBonthefinal

categorizationandrequirementsoftheirPPPprojects.

4.0 MAJOR ENVIRONMENTAL ASSESSMENTS AND STUDIES REQUIRED

The PEIS system requires some major assessments and studies to complete the requirements for the issuance of

Environmental Compliance Certificate (ECC). Aside from the EIA, other major assessments and studies include

Environmental Risk Assessment (ERA), Social Impact Assessment (SIA), and Engineering Geological and Geohazard

Assessment Report (EGGAR). Conduct of these assessments and studies are also the responsibilities of the Project

Proponent.Theseassessmentsandstudiesarebrieflydiscussedbelow.

4.1 Environmental Impact Assessment (EIA)

Environmental ImpactAssessment (EIA)ofprojects is themain requirementunder thePEIS System. All PPPprojects

thatarecoveredbythePEISSystemsshallundergoenvironmentalimpactassessment(EIA).TheEIAinvolvesevaluating

andpredictingthelikely impactsofaproject(includingcumulativeimpacts)ontheenvironmentduringconstruction,

commissioning,operationandabandonment.TheEIAalsocoversnaturalhazardsandrelatedriskaswellastheanticipated

DRAFT

Draft Version as of 4 August 2014

Page 50: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

riseinthefrequencyandintensityofclimatologicalhazardsassociatedwithclimatechange.Systematicanalysisofthe

potentialdisaster/climaterisk-relatedconsequencesofaprojectviaitsimpactontheenvironmentisincludedasacentral

componentoftheenvironmentalassessmentprocessespeciallyinhazard-proneareas.

The EIA includes designing appropriate preventive, mitigating and enhancement measures, including disaster risk

reduction (DRR) and climate change adaptation (CCA) measures that will address the consequences to protect the

environmentandthecommunity’swelfare.

Environmental Risk Assessment (ERA)

Anenvironmentalriskassessment(ERA)coverstheriskthatcanbebroughtaboutbycertainactivitiestoallecosystems,

includinghumans,exposedvia,orimpactedthroughvariousmedia.DENR/EMBdoesnotspecifytheoutlineoftheERA

report.TheIAmayusethebasickeystagesofenvironmentalriskassessmentasfollows:

a. Hazardidentification

b. Identificationofconsequencesifthehazardwastooccur

c. Estimationofthemagnitudeoftheconsequences

d. Estimationoftheprobabilityoftheconsequences(alsocalledexposureassessment)

e. Evaluatingthesignificanceofarisk(alsocalledriskcharacterization)

Attheendoftheriskassessmentprocess,existingcontrolsandfurthermeasuresneededtoreduceoreliminatetherisks

areidentified.TheERAisconductedasamajorpartoftheEIAanditsresultsareincludedintheEISdocumentasamajor

section.

Social Impact Assessment (SIA)

Aninherentpartofenvironmentalassessmentisthesocialimpactassessment,whichfocusesontheeffectsoftheproject

tothesociety.ForthePEISSystemrequirement,socialassessmentstartsfromthedeterminationoftheimpactedareas,

particularlythecommunitiesandstakeholdersthatmaybeaffectedbytheproject.Socialaspectsoftheprojectthatare

assessedincludesocio-economic,healthandsafety,relocation,indigenouspeoples,andgendermainstreaming.Annexes

3and4ofthisVolumediscussinmoredetailtheguidelinesandregulatoryrequirementsconcerningindigenouspeoples

andgendermainstreaminginprojects,whicharealsousedinthePEISSystem.

Theresultsofthevarioussocio-economicstudiesconductedfortheprojectareintegratedintotheEIS,particularlyinthe

SocialDevelopmentPlan,whichformspartoftheEISReport.

DRAFT

Draft Version as of 4 August 2014

Page 51: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 7

Geological Studies

Subdivision,housingandotherlanddevelopmentandinfrastructureprojectsarealsorequiredtoundergoengineering

geological andgeohazardassessment. Thepurposeof this typeofassessment is toadequatelyandcomprehensively

addressandmitigatethepossibleeffects/impactsofgeologichazards.

TheIAsshouldcoordinatewiththeDENRMinesandGeosciencesBureau(DENR-MGB),whichconductsapreliminarysite

geologicalinspectionoftheproposedprojectareaorlanddevelopmentareatocomeupwithaGeologicalSiteScoping

Report(GSSR).ThereportrecommendsthescopeofworktobeundertakenbytheProjectProponentintermsofdetailed

engineeringgeological,structuralgeologicalandgeohazardassessmentandgeotechnicalengineeringtests, including

specializedstudies,ifnecessary.TheresultofthisstudyistheEngineeringGeologicalandGeohazardAssessmentReport

(EGGAR),whichissubmittedtoDENR-EMB,throughtheDENR-MGB,aspartoftheEISreport.

5.0 TYPES OF ENVIRONMENTAL IMPACT ASSESSMENT (EIA) REPORTS

The environmental impact assessment (EIA) report is a vital requirement of the DENR/EMB for the issuance of an

EnvironmentalComplianceCertificate(ECC).

ThefollowingarethetypesofEIAReportthatarepreparedbytheProjectProponentdependingontheprojectcategory

ofthePPPProjectandbasedontheagreedscopingchecklist:

a. Environmental Impact Statement (EIS): requiredformajorECPsandforsomenon-ECPslocatedinECAsthathave

projectsizeorthresholdthatareconsideredtoresultinsignificantenvironmentalimpacts.Thereportdocuments

thecomprehensiveEIAstudyconductedforthespecificproject.Thedocumentcontainsthedetailsofthestudy

andincludesanEnvironmentalManagementPlan/ProgramthattheProjectProponentwillfundandimplementto

protecttheenvironment.Thecompletedocumentincludesallotherrelatedstudiesthatwererequiredduringthe

scopingstage.TheDENRprovidesanEISOutlinefoundinDENRMCNo.2010-14.

b. Initial Environmental Examination (IEE) Report or Checklist Report: required forminor ECPs and for some

non-ECPs located inECAsthathaveprojectsizeor thresholdthatareconsideredtoresult in relativelyminimal

environmentalimpacts.ThesereportsarebothsimilartoanEIS,butwithreduceddetailsanddepthofassessment

anddiscussion.

ThefollowingtypesofPPP-eligibleprojectshaveIEEChecklistReportFormswithDRR/CCAsectionsthatareavailablefrom

EMB.Theseprojectsinclude:

• BuildingProjects(Commercial,Institutional,LandTransportationTerminal,andStorageFacilities)

• ResortsandotherTourism/LeisureProjects

• RoadsandBridges

DRAFT

Draft Version as of 4 August 2014

Page 52: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

8 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

• WaterSupplyProjects

• IrrigationandFloodControlProjects

• WasteManagementProjects

c. Project Description (PD)isthedocumentrequiredfornon-ECPsthathaveminimalenvironmentalimpactsand

arenotlocatedinECAs.ThisdocumentissubmittedfortheissuanceofCertificateofNon-Coverage(CNC).

TypicalEIAReportscontainthefollowing:12

i. ProjectDescription,includingitslocation,scaleandduration,rationale,alternatives,phasesandcomponents,

resource requirements, manpower complement, estimate of waste generation from the most critical project

activitiesandenvironmentalaspects,projectcost;

ii. BaselineEnvironmentalDescription(oftheland,water,airandpeople),focusedonthesectorsandresources

mostsignificantlyaffectedbytheproposedaction;

iii. ImpactAssessment,focusedonsignificantenvironmentalimpacts(inrelationtopre-construction,construction/

development,operationanddecommissioningstages),takingintoaccountcumulative,unavoidableandresidual

impacts;and

iv. Environmental Management Plan, specifying the impacts’ mitigation plan, areas of public information,

education and communication, social development program proposal, environmentalmonitoring plans (with

multi-sectoral public participation for EIS-based projects) and the corresponding institutional and financial

requirements/arrangements.

6.0 ENVIRONMENTAL COMPLIANCE CERTIFICATE (ECC)

TheEnvironmentalComplianceCertificate(ECC)isissuedbytheDENR/EMBbasedonitspositivereviewofthedocuments

submittedby theProjectProponent. TheECCcertifies theProjectProponenthascompliedwith the requirementsof

thePEISSystemandappropriatemeasuresareorwillbetakenbytheProjectProponenttoensurethattheproposed

projectwillnotcausesignificantnegativeenvironmentalimpacts.ItcertifiesthattheProjectProponenthascommittedto

implementitsapprovedEnvironmentalManagementPlan/Program.TheECCcontainsspecificmeasuresandconditions

thattheProjectProponenthastoundertakebeforeandduringtheoperationofaproject,andinsomecases,duringthe

project’sabandonmentphasetomitigateidentifiedenvironmentalimpacts.

TheECChasthreemajorparts:

• Part1:Thecertificateofenvironmentalcompliancecommitment,whichdefinesthescopeandlimitsoftheproject

intermsofcapacity,area,technologyorprocess.ThispartoftheECCissigned-offbyboththeendorsingandthe

issuingauthorities.ThispartoftheECCcomeswithacoveringlettertransmittingtheECCtotheProjectProponent,

signedoffbythedecidingandsigningauthority(eithertheDENRSecretary,EMBDirectororEMBRegionalDirector);

11Section1,RevisedProceduralManualforDENRAdministrativeOrderNo.2003-30

DRAFT

Draft Version as of 4 August 2014

Page 53: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 9

• Part2:AnnexAoftheECCliststheconditionsoftheECCthatarewithinthemandateoftheEMB.Non-compliance

toanyoftheconditionsmayimposeacorrespondingpenaltyontheProjectProponent.TheProjectProponent

commits to fully comply with the ECC through its Sworn Statement of Full Responsibility to implement the

mitigationmeasures;and

• Part3:AnnexBoftheECCliststheEIAReviewCommittee’srecommendationstotheProjectProponent,aswell

as suggestions toothergovernmentagenciesandLGUs thathavemandatesover theproject so that theycan

integrate theEIAfindings into theirdecision-makingprocess.TheEIARCChair, theEMBEIAChiefandtheEMB

Director/RegionalDirectorsignthisportionoftheECC.ThislastpartoftheECCisformallytransmittedbytheDENR-

EMBtotheconcernedgovernmentagenciesandLGUs.

Onceaprojectisstarted,theECCremainsvalidandactiveforthelifeoftheproject.TheECCautomaticallyexpiresifthe

projectisnotimplementedwithinfiveyearsfromECCissuance.

TheIAanditsprivatepartnermustunderstandallthetermsandconditionsoftheECC,asthesewillbemonitoredduring

projectimplementation,frompre-constructiontoprojectoperation,andevenuptoabandonmentasmaybeapplicable.

7.0 EIA PROCESS AND PROCEDURES

ThePEISSystemprocesshassix(6)majorstages,namely:a)screening;b)scoping;c)EIAstudyandreportpreparation;d)

EIAreviewandevaluation;e)DENRdecision-making;andf)Post-ECCmonitoring,validation,andevaluation.Thefirstthree

stagesaretheresponsibilityoftheProjectProponent,which,forPPPprojectscaneitherbetheImplementingAgency(IA)

oritsprivatepartner,orbothdependingontheiragreement.

Figure4.1presentsthePEISsystemstagesandthemajoractivitiesoftheProjectProponentduringeachstage.Theseare

furtherdiscussedinthefollowingsub-sections.

TheRevisedProceduralManualforDENRAdministrativeOrder(DAO)No.30Seriesof2003—ImplementingRulesand

Regulations(IRR)ofPD1586(www.emb.gov.ph)containsverydetailedsteps,requirements,andpro-formadocuments.

TheIAsandtheirprivatepartnersareencouragedtorefertothisRevisedManualformoredetails.

7.1 Stage 1: Screening

Asafirststep,theProjectProponentshoulddeterminewhetherornottheprojectiscoveredbythePEISSystem.The

ProjectProponentmayusetheEIACoverageandRequirementsScreeningChecklist(ECRSC)13todoaself-screeningof

theproject.ThesamedocumentisalsousedbyEMBasascreeningvalidationform,whichtheywillsigntovalidatethat

theprojectandsub-projectcategorizationiscorrect.ItisatthisstagewhereateamofexpertsisformedbytheProject

Proponenttoundertakethedetailedassessmentcoveringallenvironmentalsectorsandaspectsoftheprojects,including

biological,physical,socio-economic,climatechange,anddisasterriskconsiderations.

13Annex2-1aofthePEISRevisedProceduralManual

DRAFT

Draft Version as of 4 August 2014

Page 54: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

10 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

IAs thatarequite familiarwith thePEISSystemand thecategorizationof theirprojectsmay skip thisprocessandgo

directlytoProjectScoping.

EISScreeningFormsthatintegrateDRRandCCAareavailableforsomeprojectsthatarePPP-eligible,suchashydropower/

dam,sanitarylandfill,andthermalpowerplants(seeDRR-CCAEIATechnicalGuidelines;www.emb.gov.ph).

EIA Study and ReportPreparation

Scoping

Post ECC Monitoring, Validation, and Evaluation

DENR Decision (Issuance or Denial of ECC)

• Determine if project is covered by PEIS System

• Form EIA team

• Conduct EIA and other required studies • Produce required EIA Report including

other requirement

RESULT: EIA Report accepted by EMB

• Provide additional information • Assist in organizing Site Visits, and Public

Consultation, or Public Hearing

• Conduct required monitoring • Submit required reports

• Sign commitment to comply with ECC conditions

• Form Multipartite Monitoring team • Establish Environmental Guarantee Fund /

Environmental Monitoring Fund

PEIS System Stages Proponent’s Major Tasks

• Determine tentative impact areas • Determine stakeholders • Conduct IEC of LGUs • Conduct three-level scoping

RESULT: Final TOR of the EIA study

EMB Review and Evaluation

Screening

Figure 4.2 PEIS System Stages and Project Proponent’s Major Tasks

DRAFT

Draft Version as of 4 August 2014

Page 55: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 11

7.2 Stage 2: Scoping

Scoping is a required activity under the PEIS System. The Project Proponent initiates the process through formal

communicationswiththeDENR/EMB.ThePEISRevisedProceduralManualprovidesthe listandpro-formadocuments

thatshouldbesubmittedbytheProjectProponent.

Depending on the type of the proposed project, DENR/EMB forms an EIA Review Committee (EIARC), whose main

responsibilityistomakesubstantivereviewsoftheEIAreportandproviderecommendationstotheDENR/EMBonthe

decisiontobemadeontheECCapplication.TheEIARCconsistsofanEMBCaseHandler,thirdpartyEIARCmembersand/

orResourcePerson/s.

DENR/EMB requires a Three-Level ScopingActivity,which ispreferablydoneone-timeon siteor in the regionof the

projectlocation.TheProjectProponent,inconsultationwiththeEIARC,organizesthescopingactivity.

Thescopingactivityincludes:

a) ProjectBriefingwith theReviewTeam,duringwhich ProjectProponentpresents theprojectoverview,key

issuesandproposedTORoftheEIAStudy.

b) PublicScopingwithprojectstakeholders,duringwhichcommunitysectorsraisetheirissuestobeaddressedin

theEIAStudy.Publicscopingisnotrequiredforprojectsinnationalwatersoutsideofanylocalgovernmentunit

(LGU)jurisdiction.

c) TechnicalScopingwiththeReviewTeam,duringthefullscopeoftheEIA,includingalltechnicalanddocument

requirementsarediscussedandagreedbetweentheProjectProponentandtheReviewTeam.TheEIAScoping/

ProceduralScreeningChecklist(SPSC)14documentstheseagreements.

Attheendofthescopingactivity,thecoverage,details,typesofdocumentstobeproduced,andotherrequirementsfor

theEIAstudyshouldbeclearlyagreeduponbetweentheProjectProponentandtheEIARC.

7.3 Stage 3: EIA Study and Report Preparation

Themainbulkof theactivitiesareundertakenhere. TheEIATeamconducts thecomprehensiveEIA study. The study

assesses theexisting siteandconditionsandevaluates theanticipated impactson thenatural resource (flora, fauna),

environment (air, water, land), economy, historical, climate change, disaster risks, and social factors of the proposed

projectandprovidesspecificactionstobeundertakensothattheimpactsarereducedifnoteliminated.

Detailedmitigationmeasuresandmanagementplanwithcostestimatesandinstitutionalarrangementsareincludedin

thereport.

TheEIATeampreparesthereportbasedonearlieragreementswiththeEIARC.

14Annex2-7aofthePEISRevisedProceduralManual

DRAFT

Draft Version as of 4 August 2014

Page 56: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

12 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

7.4 Stage 4: EIA Review and Evaluation

EIAreviewandevaluationmaybedoneatEMBcentralorregionalofficedependingontheprojectcategory.EISreports

ofECPsareprocessedatEMBCentralOffice,whilethoseofnon-ECPsareprocessedattheEMBregionalofficehaving

jurisdictionintheprojectarea.

PartofthereviewprocessistheconductofSiteVisit(SV),andPublicConsultation(PC)orPublicHearing(PH)byEMB,

withtheEIARCmembersinthepresenceoftheProjectProponentand/oritsEIAConsultantTeam.TheProjectProponent

usuallyorganizestheseactivitiesuponrequestoftheEMB.

Basedontheresultsofthesubstantivereview,theEIARCmakesrecommendationstoEMBonwhethertheECCmaybe

issuedortheapplicationisdenied.TheseEIARCactionsandrecommendationsarefullydocumented.

7.5 Stage 5: Issuance or Denial of Environmental Compliance Certificate

TheDENRSecretaryortheEMBDirectorissuesanECCordeniestheapplicationbasedontheresultsoftheEIARCreview.

ForECPs,theDENRSecretaryupontherecommendationoftheEMBDirector,signstheECC.OtherECCsaresignedbythe

EMBDirectoruponrecommendationoftheEIADivisionChief.

ItisimportantthattheIAanditsprivatepartnerunderstandalltheconditionalitiesoftheECC,asthesewillbemonitored

duringproject implementation, frompre-construction toprojectoperation,andevenup toabandonmentasmaybe

applicable.

Partof theECCconditions forECPsare thecreationofaMultipartiteMonitoringTeam (MMT),and theestablishment

ofanEnvironmentalGuaranteeFund(EGF)andEnvironmentalMonitoringFund(EMF).Theserequirementsarebriefly

discussedbelow.

7.5.1 Creation of Multipartite Monitoring Team (MMT)

ECPsarerequiredtoformproject-specificMMT.ForNon-ECPsinECAs,theEMBRegionalOfficeshavetheoptiontorequire

theformationofMMTs.

TheMMThas theprimary responsibilityof validating theProjectProponent’s environmentalperformance. TheMMTs

are composedof representativesof theProjectProponentandof stakeholdergroups, including representatives from

concerned LGUs, locally accreditedNGOs/POs, the community, concernedEMBRegionalOffice, relevantgovernment

agencies,andothersectorsthathavebeenidentifiedduringtheEIAStudyaspotentiallyaffectedbythevariousphases

oftheproject.

DRAFT

Draft Version as of 4 August 2014

Page 57: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 13

Forprojectswithsignificantenvironmentalimpactsthatdonotpersistaftertheconstructionphase,theexistenceofthe

MMTisonlyduringtheconstructionphase.Otherprojectswithimpactsthatcouldbeaddressedthroughthemandatesof

othergovernmentagencies(e.g.,DepartmentofHealth(DOH)forhealthprojects,LGUforbuilding/structuralsafety,MGB

forgeologicalaspects),theMMTwillhaveaspecificterm,whichisnotofthesametimeframeastheprojectlife.Theseare

agreedandcontainedintheMemorandumofAgreement(MOA)signedamongthemembersoftheMMTandtheProject

Proponent,inthepresenceofEMB.TheMOAcontainsallagreements,includingreportingresponsibilitiesandfundsfor

theoperationoftheMMT.TheMOAandallrequiredreportshavepro-formas,whicharefoundinthePEISSystemRevised

ProceduralManualandtheDRR/CCATechnicalManual.

TheMMTrequirementisnotapplicableforEIS-basedprojectsthathavenoresidentcommunitieswithinthedirectimpact

areasandwhichareoutsideanyLGUjurisdiction.Forthesetypesofprojects,concernsonenvironmentalimpacts/risks

showntopotentiallyaffectthenearestislandsmaybereferredbytheDENR-EMBtotheappropriategovernmentagency

withmandateandpermittingauthorityoverthemanagementofsuchconcerns(e.g.PhilippineCoastGuard(PCG)for

projectsentirelyinnationalwaters).

7.5.2 Establishment of Environmental Guarantee Fund (EGF) and Environmental Monitoring Fund (EMF)

TheProjectProponentestablishesthesefundsfortwodifferentpurposes.

TheEMFisestablishedforprojectswithMMTtowhichthefundswillbeusedtosupporttheMMTactivities.Itmaybe

time-bounddependingontheexistenceoftheMMTandcanbeeasilyplannedandbudgeted.

The EGF is required for projects that have been determined by DENR to pose a significant public risk or where the

project requires rehabilitation or restoration. EGF is established to be used to fund community-based environment-

relatedprograms,compensatepartiesandcommunitiesaffectedbythenegativeenvironmentalimpactsoftheproject,

and for clean-up and rehabilitation of areas affected by damage to the environment and the resulting deterioration

ofenvironmentalqualityasadirectconsequenceofaproject’sconstruction,operationorabandonment.TheEGFhas

different components including IEC, community training, community environmental programs, and emergency and

disasterpreparedness.

DetailedguidelinesonthesettingupofbothfundsarealsoavailableinthePEISSystemRevisedGuidelines.

7.6 Stage 6: Post-ECC Monitoring, Validation and Evaluation/Audit

Therearethreegroupsresponsibleforconductingpost-ECCmonitoring,validationandevaluationactivities,namelythe

ProjectProponent,theMultipartiteMonitoringTeam(MMT),andtheEMB.

Themonitoring,validation,andevaluationorauditschemesarediscussedfully inthePEISSystemRevisedProcedural

Manual.

DRAFT

Draft Version as of 4 August 2014

Page 58: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

14 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

For PPP projects, themonitoring responsibility rests on the private sector partner who won the bid to operate the

project. Thus, it is important that this responsibility is included in the Termsof Reference (TOR) of theproject being

tendered.Regardless,theIAshallhavethecontinuingresponsibilitytomonitorcomplianceoftheprivatepartneronthe

environmentalperformanceoftheproject.

8.0 OTHER ENVIRONMENTAL PERMITS AND CLEARANCES

TheIAoritsprivatepartnershouldalsoensurethatothermajorenvironmentalpermitsandclearancesaresecuredforPPP

Projectsdependingonthetypeoftheprojectandthestatusofitsimplementation.Thesemayinclude:

i. WastewaterDischargePermit-requiredunderCleanWaterAct(RA9275)forallland-basedsourcesofwater

pollution

ii. PermittoOperate(P/O)AirPollutionSourceandControl(APSC)Facilities-requiredundertheCleanAirAct(RA

8749)forallstationarysourcesofairpollution

iii. WaterPermit-RequiredunderWaterCodeofthePhilippines(PD1067)foruseofgroundandsurfacewatersfor

domestic,irrigation,power,fisheries,industrial,livestock,recreationalandcommercialpurposes

iv. LLDAClearance-RequiredunderLLDABoardResolution(BR)408,seriesof2011,amendingBR223,s2004and

BR286,s2006asauthorizedunderRA4850asamendedfordevelopmentplan/program/projectintheLaguna

deBayRegion(resourceextraction,agriculture,manufacturing,service,wastemanagement,otherdevelopment

projectsdefinedunderBR408

TheIAshouldcheckwiththeDENRandEMBwhichandwhenamongthesepermitsandclearancesshallbesecuredfor

specificprojects.

DRAFT

Draft Version as of 4 August 2014

Page 59: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 15

GLOSSARY OF TERMS

(ThefollowingdefinitionsofwordsandtermsaretakenfromrelevantPhilippineenvironmentallaws,particularlyPD1586

andRA9729)

1. Adaptation–istheadjustmentinnaturalorhumansystemsinresponsetoactualorexpectedclimaticstimuliortheir

effects,whichmoderatesharmorexploitsbeneficialopportunities

2. Adaptivecapacity–istheabilityofecological,socialoreconomicsystemstoadjusttoclimatechangeincludingclimate

variabilityandextremes,tomoderateoroffsetpotentialdamagesandtotakeadvantageofassociatedopportunitieswith

changesinclimateortocopewiththeconsequencesthereof.

3. Certificate of Non-Coverage – a certification issued by the EMB certifying that, based on the submitted project

description,theprojectisnotcoveredbytheEISSystemandisnotrequiredtosecureanECC.

4. ClimateChange–achangeinclimatethatcanbeidentifiedbychangesinthemeanand/orvariabilityofitsproperties

andthatpersistsforanextendedperiodtypicallydecadesorlonger,whetherduetonaturalvariabilityorasaresultof

humanactivity

5. Co-locatedprojects–projects,orseriesofsimilarprojectsoraprojectsubdividedtoseveralphasesand/orstagesby

thesameProjectProponent,locatedincontiguousareas.

6. DisasterRisk–isthepotentialdisasterlossesinlives,healthstatus,livelihood,assetsandservices,whichcouldoccur

toaparticularcommunityoraSocietyoversomespecifiedfuturetimeperiod.

7. Environment–surroundingair,water(bothgroundandsurface),land,flora,fauna,humansandtheirinterrelations.

8. Disasterriskreduction–istheconceptandpracticeofreducingdisasterrisksthroughsystematiceffortstoanalyzeand

managethecausalfactorsofdisasters,includingthroughreducedexposuretohazards,lessenedvulnerabilityofpeople

andproperty,wisemanagementoflandandtheenvironment,andimprovedpreparednessforadverseevents.

9. EnvironmentalComplianceCertificate(ECC)–acertificateofenvironmentalcompliancecommitmenttowhichthe

ProjectProponentconformswith,afterDENR-EMBexplainstheECCconditions,bysigningtheswornundertakingoffull

responsibilityover implementationof specifiedmeasureswhicharenecessary tocomplywithexistingenvironmental

regulations or to operatewithin best environmental practices that are not currently covered by existing laws. It is a

documentissuedbytheDENR/EMBafterapositivereviewofanECCapplication,certifyingthattheProjectProponent

hascompliedwithalltherequirementsoftheEISSystemandhascommittedtoimplementitsapprovedEnvironmental

ManagementPlan.TheECCalsoprovidesguidancetootheragenciesandtoLGUsonEIAfindingsandrecommendations,

whichneedtobeconsideredintheirrespectivedecision-makingprocess.

DRAFT

Draft Version as of 4 August 2014

Page 60: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

16 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

10.EnvironmentallyCriticalArea(ECA)–anenvironmentallysensitiveareadeclaredthroughProclamation2146wherein

significantenvironmentalimpactsareexpectedifcertaintypes/thresholdsofproposedprojectsarelocated,developedor

implementedinit.UpdatingoftechnicaldescriptionsofECAsisvestedontheDENR-EMBthroughSection2-DofAO42

(2002).

11.EnvironmentallyCriticalProject(ECP)–projectsbelongingtoprojecttypesdeclaredthroughProclamationNo.2146

andProclamationNo.803,whichmayposesignificantnegativeenvironmentalimpactatcertainthresholdsofoperation

regardlessoflocation.UpdatingoftechnicaldescriptionsofECPsisvestedontheDENR-EMBthroughSection2-DofAO

42(2002),incoordinationwiththeDTIasprovidedforinSection3-AofAO42.

12.EnvironmentalGuaranteeFund(EGF)–fundtobesetupbyaProjectProponentwhichshallbereadilyaccessibleand

disbursablefortheimmediateclean-uporrehabilitationofareasaffectedbydamagesintheenvironmentandtheresulting

deteriorationofenvironmentalqualityasadirectconsequenceofaproject’sconstruction,operationorabandonment.

Itshall likewisebeusedtocompensatepartiesandcommunitiesaffectedbythenegative impactsoftheproject,and

to fundcommunity-basedenvironment relatedprojects including,butnot limited to, informationandeducationand

emergencypreparednessprograms.

13.EnvironmentalImpactAssessment(EIA)–processthatinvolvesevaluatingandpredictingthelikelyimpactsofaproject

(includingcumulativeimpacts)ontheenvironmentduringconstruction,commissioning,operationandabandonment.It

alsoincludesdesigningappropriatepreventive,mitigatingandenhancementmeasuresaddressingtheseconsequences

toprotecttheenvironmentandthecommunity’swelfare.

14.Environmental Impact Assessment Review Committee (EIARC) – a body of independent technical experts and

professionalsofknownprobityfromvariousfieldsorganizedbytheEMBtoevaluatetheEISandotherrelateddocuments

andtomakeappropriaterecommendationsregardingtheissuanceornon-issuanceofanECC.

15.Environmental ImpactStatement (EIS)–document,preparedand submittedby theProjectProponentand/orEIA

ConsultantthatservesasanapplicationforanECC. It isacomprehensivestudyofthesignificant impactsofaproject

ontheenvironment.ItincludesanEnvironmentalManagementPlan/ProgramthattheProjectProponentwillfundand

implementtoprotecttheenvironment.

16.Environmental Management Plan/Program (EMP) – section in the EIS that details the prevention, mitigation,

compensation,contingencyandmonitoringmeasurestoenhancepositiveimpactsandminimizenegativeimpactsand

risksofaproposedprojectorundertaking.Foroperatingprojects,theEMPcanalsobederivedfromanEMS.

17.EnvironmentalMonitoringFund(EMF)–fundthataProjectProponentshallsetupafteranECCisissuedforitsproject

orundertaking,tobeusedtosupporttheactivitiesofthemulti-partitemonitoringteam.Itshallbeimmediatelyaccessible

andeasilydisbursable.

18.EnvironmentalRiskAssessment(ERA)–assessment,throughtheuseofuniversallyacceptedandscientificmethods,of

DRAFT

Draft Version as of 4 August 2014

Page 61: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5 17

risksassociatedwithaproject.Itfocusesondeterminingtheprobabilityofoccurrenceofaccidentsandtheirmagnitude

(e.g.failureofcontainmentorexposuretohazardousmaterialsorsituations).

19.InitialEnvironmentalExamination(IEE)Report–documentsimilartoanEIS,butwithreduceddetailsanddepthof

assessmentanddiscussion.

20.Initial Environmental Examination (IEE) Checklist Report – simplified checklist versionof an IEE Report, prescribed

by theDENR, tobefilledupbyaProjectProponent to identifyandassessaproject’senvironmental impactsand the

mitigation/enhancementmeasurestoaddresssuchimpacts.

21.MultipartiteMonitoringTeam(MMT)–community-basedmulti-sectoralteamorganizedforthepurposeofmonitoring

theProjectProponent’scompliancewithECCconditions,EMPandapplicablelaws,rulesandregulations.

22.PhilippineEnvironmentalImpactStatementSystem(PEISS)–PresidentialDecree(PD)1586issuedinJune1978,isthe

Philippinelawwhichdeclaresitapolicyofthegovernmenttoattainandmaintainarationalandorderlybalancebetween

socio-economicgrowthandenvironmentalprotection.ThelawestablishedaEnvironmentalImpactStatementSystem

foundedandbasedontheenvironmentalimpactstatementrequired,underSection4ofPresidentialDecreeNo.1151,of

allagenciesandinstrumentalitiesofthenationalgovernment,includinggovernment-ownedorcontrolledcorporations,

aswellasprivatecorporations,firmsandentitiesforeveryproposedprojectandundertaking,whichsignificantlyaffects

thequalityoftheenvironment.

23.ProjectDescription(PD)–document,whichmayalsobeachapterinanEIS,thatdescribesthenature,configuration,

useofrawmaterialsandnaturalresources,productionsystem,wasteorpollutiongenerationandcontrolandtheactivities

ofaproposedproject.Itincludesadescriptionoftheuseofhumanresourcesaswellasactivitytimelines,duringthepre-

construction,construction,operationandabandonmentphases.

24.Project–anyactivitywhichmayhavevaryinglevelsofsignificanceofimpactontheenvironment,e.g.fromhighto

moderatetonilsignificance,implyingdifferentintensitiesofpreventiveormitigatinginterventions

25.ProjectProponent–anynaturalorjuridicalpersonintendingtoimplementaprojectorundertaking.

26.Public Participation – open, transparent, gender-sensitive, and community-based public involvement in the EIA

process,aimedatensuringthesocialacceptabilityofaprojectorundertaking,involvingthebroadestrangeofstakeholders,

commencing at the earliest possible stageof projectdesign anddevelopment and continuinguntil post-assessment

monitoring.

27.Scoping – the stage in the EIS Systemwhere information andproject impact assessment requirements aremore

definitelyestablishedandfocusedtoprovidetheProjectProponentandthestakeholdersthefinalscopeofworkand

termsofreferencefortheEIS.

DRAFT

Draft Version as of 4 August 2014

Page 62: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

18 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex5

28.SignificantImpacts–impactswhichdamagetheenvironmenttothepointthattheenvironmentalresourcelosesits

capacitytosustainlifeortocontinuefunctioningwithinbaselinelevelsandefficiency;impactswhichneedactionthrough

prevention,(e.g.changeinprojectsitingordesign)ormitigation(reduce,repair,rehabilitate)orotherinterventionsto

protecttheenvironmentfrombeingharmedatlevelsthatreduceitsfunctionalityforitsusersordependentbiota.

REFERENCES

RevisedProceduralManualforDENRAdministrativeOrderNo.30,seriesof2003(DAO03-30)(ImplementingRulesand

Regulations of Presidential Decree No. 1586, Establishing the Philippine Environmental Impact Statement System);

EnvironmentalManagementBureau;August2007

EMBMemorandumCircularNo.2011-005,IncorporatingDisasterRiskReduction(DRR)andClimateChangeAdaptation

(CCA)concernsinthePhilippineEISSystem,EnvironmentalManagementBureau,QuezonCity,November2011

DENR Memorandum No. 2000-28, Implementing Guidelines on Engineering Geological and Geohazard Assessment

as Additional Requirement for ECC Applications covering Subdivision, Housing and other Land Development and

InfrastructureProjects;DepartmentofEnvironmentandNaturalResources;March2000

ProclamationNo.2146,ProclaimingCertainAreasandTypesofProjectsasEnvironmentallyCriticalandwithintheScope

oftheEnvironmentalImpactStatementSystemEstablishedunderPresidentialDecreeNo.1586;OfficeofthePresident,

Philippines,December1981

ThePhilippineAmendedBOTLaw,R.A.7718,anditsRevisedImplementingRulesandRegulations,2012Revisionofthe

IRR;PublicPrivatePartnershipCenter;QuezonCity,2012

DRAFT

Draft Version as of 4 August 2014

Page 63: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex6 1

ANNEX 6Instruments Issued by Donors and Bilaterals in Support of PPP Projects

1.0 INSTRUMENTS PROVIDED BY DONORS

Besidescreditenhancementsandperformanceundertakingsextendedby theGovernment, theremaybeguarantees

issuedbydonors.Suchguaranteesusuallyprotecttheprojectcompanyagainstcertainpolitical risks,butundersome

circumstancestheymayalsocoverbreachoftheProjectAgreementbytheContractingAuthority,forinstance,wherethe

projectcompanydefaultsonitsloansasaresultofthebreachofanobligationbygovernment.

Inadditionto lendingtogovernmentsandpublicauthorities,theWorldBank,ADBandotherdonorshavedeveloped

programstosupportPPPs.Forexample,theyprovideguaranteesthatareassignabletocommerciallendersforqualifying

projects.Insomecases,guaranteesprovidedbytheseinstitutionsrequireacounter-guaranteefromtheGovernment.The

instrumentsusedaredesignedtomitigatetherisksofdefaultonsovereigncontractualobligationsorlong-maturityloans

thatprivatelendersarenotpreparedtobearandarenotequippedtoevaluate.Forinstance,guaranteesprovidedbythe

WorldBankandADBmaytypicallycoverspecifiedrisks(thepartialriskguarantee)orallcreditrisksduringaspecifiedpart

ofthefinancingterm(thepartialcreditguarantee),assummarizedbelow:15

(i) Partial risk guarantees.Apartialriskguaranteecoversspecifiedrisksarisingfromnon-performanceofsovereign

contractualobligationsorcertainpoliticalforcemajeureevents.Suchguaranteesensurepaymentinthecaseof

debtservicedefaultresultingfromthenon-performanceofcontractualobligationsundertakenbygovernmentsor

theiragencies.Theymaycovervarioustypesofnon-performance,suchasfailuretomaintaintheagreedregulatory

framework,includingpriceformulas;failuretodeliverinputs,suchasfuelsuppliedtoaprivatepowercompany;

failuretopayforoutputs,suchaspowerpurchasedbyagovernmentutilityfromapowercompanyorbulkwater

purchasedbyalocalpublicdistributioncompany;failuretocompensateforprojectdelaysorinterruptionscaused

bygovernmentactionsorpoliticalevents;proceduraldelaysofanykindincludingissuanceoflicensestooperate;

andadversechangesinexchangecontrollawsorregulations.

15NOTEthatADBprovidesguaranteesundertermssimilartothoseoftheWorldBank.MaterialinthisAppendixisdrawnfromWorldBankandBerneUnionwebsites.

DRAFT

Draft Version as of 4 August 2014

Page 64: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex6

(ii) Partial credit guarantees.Partialcreditguaranteesareprovidedtoprivatesectorborrowerswithagovernment

counter-guarantee.Theyaredesignedtocovertheportionoffinancingthatfallsduebeyondthenormaltenureof

loansprovidedbycommerciallenders.TheseguaranteesaregenerallyusedforPPPprojectsthatneedlong-term

fundstobefinanciallyviable.Apartialcreditguaranteetypicallyextendsmaturitiesofloansandcoversallevents

ofnon-paymentforadesignatedpartofthedebtservice.

The Multilateral Investment Guarantee Agency (MIGA) offers long-term political risk insurance coverage to new

investmentsoriginatinginanymembercountryanddestinedforanydevelopingmembercountryotherthanthecountry

fromwhich the investment originates. New investment contributions associated with the expansion,modernization

orfinancial restructuringofexistingprojectsarealsoeligible,asareacquisitionsthat involvetheprivatizationofstate

enterprises.Eligibleformsofforeigninvestmentincludeequity,shareholderloansandloanguaranteesissuedbyequity

holders,providedtheloansandloanguaranteeshavetermsofatleast3years.Loanstounrelatedborrowerscanalsobe

insured,aslongasashareholderinvestmentintheprojectisconcurrentlyinsured.Othereligibleformsofinvestmentare

technicalassistance,managementcontractsandfranchisingandlicensingagreements,providedtheyhavetermsofat

least3yearsandtheremunerationoftheinvestoristiedtotheoperatingresultsoftheproject.MIGAinsuresagainstthe

followingrisks:

(i) Transfer restrictions.Thepurposeofguaranteesof foreigncurrencytransferextendedbyMIGAissimilarto

thatofsovereignforeignexchangeguaranteesthatmaybeprovidedbytheGovernment.Thisguaranteeprotects

againstlossesarisingfromaninvestor’sinabilitytoconvertlocalcurrency(capital,interest,principal,profits,royalties

andotherremittances)intoforeignexchangefortransferoutsidethehostcountry.Thecoverageinsuresagainst

excessivedelaysinacquiringforeignexchangecausedbyactionorfailuretoactbytheGovernment,byadverse

changesinexchangecontrollawsorregulationsandbydeteriorationinconditionsgoverningtheconversionand

transferoflocalcurrency.Currencydevaluationisnotcovered.Onreceiptoftheblockedlocalcurrencyfroman

investor,MIGApayscompensationinthecurrencyofitscontractofguarantee;

(ii) Expropriation. This guarantee protects against loss of the insured investment as a result of acts by the

Government thatmay reduce or eliminate ownership of, control over or rights to the insured investment. In

addition tooutrightnationalizationandconfiscation, “creeping”expropriation–aseriesofacts that,over time,

resultsinanexpropriation–isalsocovered.Coverageisprovidedonalimitedbasisforpartialexpropriation(for

example,confiscationoffundsortangibleassets).Actionstakenbygovernmentwhicharenon-discriminatory(i.e.,

applytoallfirms)andaretakenthroughtheexerciseoflegitimateregulatoryauthorityarenotcovered.Fortotal

expropriationofequityinvestments,MIGApaysthenetbookvalueoftheinsuredinvestment.Forexpropriation

offunds,MIGApaystheinsuredportionoftheblockedfunds.For loansandloanguarantees,MIGAinsuresthe

outstandingprincipalandanyaccruedandunpaidinterest.Compensationispaiduponassignmentoftheinvestor’s

interestintheexpropriatedinvestment(forexample,equitysharesorinterestinaloanagreement)toMIGA;

(iii)Breach of contract. ThisguaranteeprotectsagainstlossesarisingfromtheGovernment’sbreachorrepudiation

ofacontractwiththeinvestor.Intheeventofanallegedbreachorrepudiation,theinvestormustbeabletoinvoke

DRAFT

Draft Version as of 4 August 2014

Page 65: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex6 3

adisputeresolutionmechanism(forexample,arbitration)undertheunderlyingcontractandobtainanawardfor

damages. If,afteraspecifiedperiodoftime,the investorhasnotreceivedpaymentor if thedisputeresolution

mechanismfailstofunctionbecauseofactionstakenbytheGovernment,MIGAwillpaycompensation;

(iv) War and civil disturbance. This guarantee protects against loss from damage to, or the destruction or

disappearanceof,tangibleassetscausedbypoliticallymotivatedactsofwarorcivildisturbanceinthehostcountry,

includingrevolution,insurrection,coupd’état,sabotageandterrorism.Forequityinvestments,MIGAwillpaythe

investor’sshareoftheleastofthebookvalueoftheassets,theirreplacementcostorthecostofrepairofdamaged

assets.Forloansandloanguarantees,MIGAwillpaytheinsuredportionoftheprincipalandinterestpayments

indefaultasadirectresultofdamagetotheassetsoftheprojectcausedbywarandcivildisturbance.Warand

civildisturbancecoveragealsoextendstoeventsthat,foraperiodofoneyear,resultinaninterruptionofproject

operationsessentialtooverallfinancialviability.Thistypeofbusinessinterruptioniseffectivewhentheinvestment

isconsideredatotalloss;atthatpoint,MIGAwillpaythebookvalueofthetotalinsuredequityinvestment.

2.0 INSTRUMENTS PROVIDED BY EXPORT CREDIT AND INVESTMENT PROMOTION AGENCIES

Insuranceagainstcertainpolitical,commercialandfinancialrisks,aswellasdirectlending,maybeobtainedfromexport

creditandinvestmentpromotionagencies.Suchagencieshavetypicallybeenestablishedinanumberofcountriesto

assistintheexportofgoodsorservicesoriginatingfromthosecountries.Theyactonbehalfofthegovernmentsofthe

countriessupplyinggoodsandservicesfortheproject.MostofthemaremembersoftheInternationalUnionofCreditand

InvestmentInsurers(BerneUnion),whosemainobjectivesincludepromotinginternationalcooperationandfosteringa

favourableinvestmentclimate;developingandmaintainingsoundprinciplesofexportcreditinsurance;andestablishing

andsustainingdisciplineinthetermsofcreditforinternationaltrade.

Whilethesupportavailablediffersfromcountrytocountry,exportcreditandinvestmentpromotionagenciestypically

offertwolinesofcoverage:

(i) Export credit insurance. In the context of the financing of PPP projects, the essential purpose of export

creditinsuranceistoguaranteepaymenttothesellerwheneveraforeignbuyerofexportedgoodsorservicesis

extendedcreditbytheseller.Exportcreditinsurancemaytaketheformofsuppliercreditorbuyercreditinsurance

arrangements.Underthesuppliercreditarrangements,theexporterandtheimporteragreeoncommercialterms

thatcallfordeferredpaymentevidencedbynegotiableinstruments(forexample,billsofexchangeorpromissory

notes) issuedbythebuyer.Subjecttoproofofcreditworthiness,theexporterobtainsinsurancefromanexport

creditagencyin itshomecountry.Underthebuyercreditmodality,thebuyer’spaymentobligationisfinanced

bytheexporter’sbank,whichinturnobtainsinsurancecoveragefromanexportcreditagency.Exportcreditsare

generally classifiedas short-term (repayment termsofusuallyunder2 years),medium-term (usually2-5 years)

andlong-term(over5years).Officialsupportbyexportcreditagenciesmaytaketheformofpurecover,bywhich

ismeant insuranceorguaranteesgiven toexportersor lending institutionswithoutfinancing support.Official

supportmayalsobegiven in the formoffinancingsupport,which isdefinedas includingdirectcredits to the

overseasbuyer,refinancingandallformsofinterestratesupport;

DRAFT

Draft Version as of 4 August 2014

Page 66: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex6

(ii) Investment insurance. Export credit agencies may offer insurance coverage either directly to a borrower

or to theexporter for certainpolitical andcommercial risks. Typicalpolitical andcommercial risks includewar,

insurrectionorrevolution;expropriation,nationalizationorrequisitionofassets;non-conversionofcurrency;and

lackofavailabilityofforeignexchange.Investmentinsuranceprovidedbyexportcreditagenciestypicallyprotects

theinvestorsinaprojectcompanyestablishedabroadagainsttheinsuredrisks,butnottheprojectcompanyitself.

Inotherwords,theequityinvestorsarecoveredbytheinsurancebutnotthecreditorsoftheprojectcompanyorits

suppliers.Investmentinsurancecovertendstobeextendedtoawiderangeofpoliticalrisks.Exportcreditagencies

preparedtocoversuchriskstypicallyrequiresufficientinformationonthelegalsystemofthehostcountry.

TheconditionsunderwhichexportcreditagenciesandinvestmentpromotionofmembercountriesoftheOrganization

forEconomicCooperationandDevelopment(OECD)offersupporttobothsupplierandbuyercredittransactionshave

tobeinconformitywiththeOECDArrangementonGuidelinesforOfficiallySupportedExportCredits(alsoreferredtoas

theOECDConsensus).Themainpurposeofthearrangementistoprovideasuitableinstitutionalframeworktoprevent

unfaircompetitionbymeansofofficialsupportforexportcredits.Inordertoavoidmarket-distortingsubsidies,theOECD

Consensusregulatestheconditionsoftermsofinsurances,guaranteesordirectlendingsupportedbygovernments.

DRAFT

Draft Version as of 4 August 2014

Page 67: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 1

ANNEX 7Generic Preferred Risk Allocation Matrix Adopted by NEDA for PPP Project Evaluation

DRAFT

Draft Version as of 4 August 2014

Page 68: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

GENE

RIC

PREF

ERRE

D RI

SK A

LLOC

ATIO

N M

ATRI

X AD

OPTE

D BY

NED

A FO

R PP

P PR

OJEC

T EV

ALUA

TION

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Pre-

cont

ract

risk

s

Exist

ingstru

ctur

e(re

furb

ishm

ent/

ex

tens

ion)

•Risk

thatth

epr

ocur

emen

tpr

oces

swill

expe

rienc

ean

yof

th

efo

llowing:(a

)failu

reto

attract

suffi

cien

tqua

lified

bidd

ersa

nd/o

rre

spon

siveoff

ers;

(b)p

rolong

ed

andex

pens

ive

nego

tiatio

ns;o

r(c)c

ollaps

eof

ne

gotia

tions

.

•Gov

ernm

ent

•Gov

ernm

entd

oesn

othav

ea

partne

ryet

att

hiss

tage

,soitha

sno

opt

ionbu

ttobe

arth

isris

k.

•Ca

refu

lpre

paratio

nan

dm

anag

emen

tof

thepr

ocur

emen

tpr

oces

s.•

Ensu

reth

atth

eag

ency

’spr

ocur

emen

tte

amis

exp

erienc

ed

andco

mpe

tent

.•

Establish

a

proc

urem

ents

ched

ule

com

men

surate

with

pr

ojec

tcom

plex

ity.

•Th

ereis

noagr

eem

ent

yets

igne

dwith

any

ot

herp

arty,the

reis

no

spec

ificalloca

tion

instru

men

tbut

lack

of

reco

urse

toany

sortof

com

pens

ation.

Site

Ris

k

Exist

ingstru

ctur

e(re

furb

ishm

ent/

ex

tens

ion)

•Risk

thatexisting

stru

ctur

esare

inad

equa

teto

su

ppor

tnew

im

prov

emen

ts,

resu

lting

in

additio

nal

cons

truc

tiontim

ean

dco

st.

•Pr

ivate

•Pr

ivatese

ctor

can

man

ageco

st-

effec

tivelyifpr

oper

due

dilige

nce

ofexistingstru

ctur

eis

cond

ucte

d.

•Pr

ivatefir

mw

illpas

sto

builder

which

relie

son

exp

ertt

estin

gan

ddu

e-dilig

ence

.•

Givepr

ivatefir

m

enou

ghtim

eto

dosit

estud

ies.

•Co

ntractclaus

ere

quiring

priv

ate

partne

rtopr

ovide

perfo

rman

cebon

d.

Site

con

ditio

ns•

Risk

that

unan

ticipated

ad

versege

olog

ical

cond

ition

s(g

eote

chnica

lrisk

)aredisc

over

ed

which

cau

se

cons

truc

tionco

st

toin

crea

seand

/or

caus

eco

nstruc

tion

delays

.

•Pr

ivate-

exce

pt

whe

nco

mplex

ge

olog

ical

cond

ition

sarepr

esen

tAN

Dpro

jectis

go

vern

men

tso

licite

d;priv

ate

toabs

orbon

ly

upto

asp

ecific

costam

ount

,afte

rwhich

go

vern

men

tas

sum

es

•Pr

ivatese

ctor

can

man

ageco

st

effec

tivelyifsit

estud

yeff

ortis

mod

eratean

den

ough

tim

eis

prov

ided

tobidde

rs.

•Co

mplex

stru

ctur

esonlin

ear

infra

stru

ctur

e(ro

ad,rail,pipe

line)

may

requ

irem

oreth

orou

ghand

de

taile

dge

o-te

chnica

lstu

dies

(for

ex

ample,lo

ngtu

nneland

long

sp

anbrid

gesi

nun

stab

lete

rrain)

,th

atm

aynot

bere

ason

ably

com

plet

edw

ithinth

ebidd

ing

perio

dof

may

beto

oex

pens

ivefo

rbidd

erst

oco

nduc

tatt

hebidding

stag

ewith

outc

ost-sh

aring.

•Pr

ivatefir

mw

illpas

sto

builder

which

relie

son

exp

ertt

estin

gan

ddu

e-dilig

ence

.•

Givepr

ivatefir

m

enou

ghtim

eto

dosit

estud

ies.

•Re

imbu

rsepa

rtof

thebidd

ingco

stto

en

cour

agebidd

erst

opr

epareth

eiro

wnsit

estud

ies.

•Co

ntractclaus

ere

quiring

priv

ate

partne

rtopr

ovide

perfo

rman

cebon

d.•

Cont

ractclaus

estipulatingth

eco

ndition

sand

m

echa

nism

to

com

pens

atepr

ivate

sector

fora

gree

dup

onpor

tionof

co

stove

rrun

son

tech

nica

llycom

plex

stru

ctur

es(for

ex

ample,tu

nnelcos

tov

erru

ngu

aran

tee).

DRAFT

Draft Version as of 4 August 2014

Page 69: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 3

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Perm

itsand

ap

prov

als

•Risk

thatnec

essa

ry

appr

ovals

(fore

xam

ple,

enviro

nmen

tal

licen

se,

enviro

nmen

tal

man

agem

ent

plan

,con

stru

ction

perm

it)m

aybe

obtained

orm

ay

beobt

aine

don

lysu

bjec

tto

unan

ticipated

co

ndition

swhich

ha

veadv

erse

cos

tco

nseq

uenc

esor

caus

epr

olon

ged

delay.

•Pr

ivateifan

dwhe

n:-

Perm

itsand

ap

prov

als

have

bee

nob

tained

pr

iort

oth

esu

bmiss

ion

ofpro

posa

lsby

pot

entia

lbidd

ers,

andlate

rm

odified

at

there

ques

tof

thesu

cces

sful

bidd

er.

•Gov

ernm

entif

andwhe

n:-

Perm

itsand

ap

prov

als

have

not

bee

nob

tained

prio

rto

bidde

rpr

opos

al

subm

ission—

privateis

resp

onsib

le

tom

anag

eth

epr

oces

s,th

ough

.

•W

henPr

ivate:

-Pr

ivateis

better

info

rmed

abo

ut

theratio

nalefo

ritsre

ques

t.

•W

henGov

ernm

ent:

-Gov

ernm

entisb

ette

rinf

orm

ed

andpo

sitione

dto

influ

ence

the

spee

dof

theap

prov

alpro

cess,

particularlyin

situ

ations

thatare

co

mplex

ors

ensit

ive.

•Gov

ernm

entt

oob

tainin

adv

ance

of

thebidd

erpro

posa

lsu

bmiss

ionstag

eth

ere

quisi

teper

mits

an

dap

prov

als,

which

wou

ldallo

wth

epr

ivatefir

mto

ach

ieve

am

easu

reofp

re-

cont

ractua

lcer

tainly

andan

earlyst

arto

fth

eap

prov

alpro

cess.

•Co

ntractclaus

estipulatingth

esc

hedu

leto

obt

ain

perm

itsand

app

rova

lan

dstipulating

liquida

tedda

mag

es

paya

bleto

priv

ate

partne

rinca

seof

delay.

DRAFT

Draft Version as of 4 August 2014

Page 70: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Enviro

nmen

tal

liabilitiese

xisting

priort

opr

ojec

t

•Risk

that

projec

tsite

is

cont

aminated

re

quiring

sig

nific

ant

rem

ediatio

nex

pens

es.

•Pr

ivate,exc

ept

whe

n:-

Projec

twas

so

licite

dby

the

gove

rnm

ent;

and

-Co

stand

tim

ere

quire

dto

co

nduc

tafu

lldu

e-dilig

ence

(site

stud

y)fo

rea

chbidde

raresu

chth

at

thepr

ojec

twou

ldbe

signific

antly

de

laye

dor

wou

lddet

er

pote

ntial

serio

us

bidd

ers—

in

such

cas

e,

som

eris

ksh

aringalon

gth

elin

esof

geot

echn

ical

siteris

kco

uld

beaso

lutio

n.

•W

henPr

ivate:

-Pr

ivatese

ctor

can

man

ageco

st-

effec

tivelyifsit

estud

yeff

ortis

mod

eratean

den

ough

tim

eis

prov

ided

tobidde

rs.

•W

hensh

ared

:-

Site

swhe

resi

test

udyeff

ortm

ay

notb

ere

ason

ablycom

plet

ed

with

inth

ebidd

ingpe

riod

orm

aybeto

oex

pens

ivefo

rbidd

erst

oco

nduc

tatt

he

bidd

ingstag

ewith

outc

ost-

sharing.

•Pr

ivatefir

mw

illpas

sto

builder

which

relie

son

eex

pertte

stingan

ddu

edilig

ence

.•

Givepr

ivatefir

m

enou

ghtim

eto

dosit

estud

ies.

•Re

imbu

rsepa

rtof

bidd

ingco

stto

en

cour

agebidd

erst

opr

epareth

eiro

wnsit

estud

ies.

•Co

ntractclaus

ere

quiring

priv

ate

partne

rtopr

ovide

perfo

rman

cebon

d.•

Cont

ractclaus

estipulatingth

eco

ndition

sand

m

echa

nism

to

com

pens

atepr

ivate

sector

fora

gree

d-up

onpor

tion

ofre

med

iatio

nex

pens

es.

DRAFT

Draft Version as of 4 August 2014

Page 71: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 5

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Enviro

nmen

tal

liabilitiesc

reated

du

ringop

eration

•Risk

thatth

eus

eof

thepr

ojec

tsite

ov

erth

eco

ntract

term

has

resu

lted

insi

gnifica

nt

enviro

nmen

tal

liabilities(

clea

nup

or

reha

bilitation

requ

iredto

mak

eth

esit

efit

for

futu

reant

icipated

us

e).

•Pr

ivate,ifand

whe

n:-

Enviro

nmen

tal

licen

seand

en

viro

nmen

tal

man

agem

ent

plan

has

bee

nap

prov

edprio

rto

subm

ission

ofpro

posa

ls.-

Enviro

nmen

tal

licen

seand

m

anag

emen

tplan

hav

eno

tbee

nap

prov

edprio

rto

subm

ission

ofpro

posa

ls—lia

bilityis

limite

dto

am

ount

es

timated

in

thepr

opos

al.

•Gov

ernm

ent,if

andwhe

n:-

Enviro

nmen

tal

licen

seand

m

anag

emen

tplan

hav

eno

tbee

nap

prov

edprio

rto

subm

ission

ofpro

posa

ls—lia

bilityfo

ran

yex

cess

over

inve

stor

’spr

opos

ed

estim

ate.

•Priv

atepa

rtne

risa

bleto

man

age

theus

eof

theas

seta

ndatten

dto

its

maint

enan

ceand

refu

rbish

men

tac

cord

ingto

theen

viro

nmen

tal

requ

irem

entskno

wnatth

epr

opos

alst

age.

•Gov

ernm

entisb

ette

rable

tom

anag

een

viro

nmen

tal

requ

irem

entsnot

kno

wnto

bidde

rs

atth

epr

opos

alst

age.

•Dur

ingpr

ocur

emen

tpr

ivatepa

rtne

rmus

tde

mon

strate

fina

ncial

capa

cityors

uppo

rtto

de

liver

thesit

einth

estatere

quire

dby

the

gove

rnm

enta

tthe

end

of

theco

ntract.

•Gov

ernm

entt

ore

quire

sin

king

fund

sifitist

ore

sum

eth

esit

ean

dits

us

eis

liableto

resu

ltin

signific

antc

lean

-up/

re

habilitationco

st.

•Co

ntractclaus

ede

finingwha

tco

nstit

utes

en

viro

nmen

talliability

andth

em

echa

nism

to

estim

ateth

epr

ivate

partne

r’sliab

ilityand

pu

rsue

pay

men

t.•

Cont

ractclaus

ere

quiring

the

establish

men

tof

clean

-up/

re

habilitationsin

king

fu

nd.

DRAFT

Draft Version as of 4 August 2014

Page 72: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Cultu

ralh

erita

ge•

Risk

ofc

osts

andde

lays

as

sociated

with

arch

aeolog

icaland

cu

lturalh

erita

ge

disc

over

ies.

•Gov

ernm

entt

oas

sum

eris

kon

go

vern

men

tpr

efer

redsit

e.•

Privatepa

rtne

rto

assu

meris

kon

pr

ivatepa

rtne

rpr

efer

redsit

e.

•Gov

ernm

entg

ener

allyhas

abet

ter

unde

rstand

ingof

pro

cedu

res,

andis

usua

llyin

bes

tpos

ition

to

man

ageth

isris

k.

•Re

search

cad

astral

reco

rdsa

ndobt

ain

expe

rtadv

ice.

•Con

trac

tclaus

ede

finingris

kan

dstipulatingsit

eav

ailabilitysc

hedu

le

andliq

uida

ted

dam

ages

pay

ablein

ca

seofd

elay

s.

Availabilityof

site

•Risk

thatte

nure

/ac

cessto

ase

lected

sit

ewhich

isnot

pr

esen

tlyowne

dby

gov

ernm

ent

orpriv

atepa

rtne

rca

nnot

be

nego

tiate

d.•

Risk

ofc

osts

andde

lays

in

nego

tiatin

gland

ac

quisi

tion.

•Gov

ernm

entt

oas

sum

eris

kon

go

vern

men

tpr

efer

redsit

e—pr

ivatepa

rtne

rm

ayre

main

resp

onsib

lefo

rm

anag

ingth

epr

oces

s.•

Privateto

assum

eris

kon

priv

ate

partne

rpre

ferred

sit

e.

•Ifgo

vern

men

tpre

ferred

site

:-

Gov

ernm

enth

asabet

ter

unde

rstand

ingof

pro

cedu

res,

hass

pecialpow

erso

fac

quisi

tionan

dus

eof

land

for

infra

stru

ctur

ean

dits

usu

allyin

be

stpos

ition

tom

anag

e.-

Gov

ernm

entisi

nbe

tter

pos

ition

to

neg

otiate

whe

repolicy

disc

ourage

suse

ofc

ompu

lsory

acqu

isitio

npo

wer

.

•Ifpr

ivatepr

efer

redsit

e:-

Privatepa

rtne

risi

nco

ntro

lof

sitese

lection.

•Re

search

cad

astral

reco

rdsa

ndobt

ain

expe

rtadv

ice.

•Ifgo

vern

men

tpr

efer

redsit

e:

com

plet

eland

ac

quisi

tionpr

iort

opr

opos

alst

age.

•Ifpr

ivatepr

efer

red

site:obligebidd

erst

ose

cure

acc

essp

riort

oco

ntractsi

gning.

•Co

ntractclaus

estipulatingsit

eav

ailabilitysc

hedu

le

andliq

uida

ted

dam

ages

pay

ablein

ca

seofd

elay

s.

DRAFT

Draft Version as of 4 August 2014

Page 73: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Desi

gn, c

onst

ruct

ion

and

com

mis

sion

ing

risk

Des

ign

•Risk

thatth

ede

sign

ofth

efacilityis

subs

tand

ard,

unsa

fe,o

rinca

pableof

de

liver

ingth

ese

rvices

att

he

antic

ipated

cos

tan

dsp

ecified

leve

lof

service(o

ften

resu

lting

inlo

ng

term

increa

sein

re

curren

tcos

ts

andlong

-ter

m

inad

equa

cyof

service).

•Pr

ivate-

priv

ate

partne

rwillbe

resp

onsib

le

exce

ptw

here

an

exp

ress

gove

rnm

ent

man

date

dch

ange

has

ca

used

the

desig

neff

ect.

•Pr

ivatepa

rtne

rhas

mor

eex

perie

nce,kno

wledg

ean

dco

ntro

lov

erth

eva

riables

thatdet

erm

ine

thequ

ality

oft

hedes

ign(i.e.,

expe

rienc

e,com

pete

ntst

aff,e

tc.).

•En

sure

thatth

efeas

ibilityst

udy

isav

ailablewell

inadv

ance

oft

he

proc

urem

entp

roce

ss

toade

quatelyinfo

rm

thede

signpr

oces

s.•

Inco

rpor

atestric

tex

perie

ncean

dco

mpe

tenc

yre

quire

men

tsin

the

proc

urem

entp

roce

ss.

•Pr

ivatepa

rtne

rmay

tran

sfer

risk

tobuilder

/arch

itectsa

ndoth

er

subc

ontrac

torsw

hile

maint

aining

prim

ary

liability;gov

ernm

ent

hast

herigh

tto

abatese

rvicech

arge

pa

ymen

tsw

here

the

prob

lem

can

notb

esu

itablyre

med

ied

•Co

ntractclaus

ere

quiring

pe

rform

ance

bon

d.•

Cont

ractclaus

estipulatingliq

uida

ted

dam

ages

.

DRAFT

Draft Version as of 4 August 2014

Page 74: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

8 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Cons

truc

tion

•Risk

thateve

nts

occu

rdur

ing

cons

truc

tionwhich

pr

even

tthe

facility

beingde

liver

edon

timean

don

cos

t.

•Pr

ivateex

cept

whe

n:-

Theev

entis

onefo

rwhich

re

liefa

sto

timeor

cos

tor

bot

hare

spec

ifica

lly

grou

nded

un

dert

he

cont

ract,

such

asf

orce

m

ajeu

reor

gove

rnm

ent

inte

rven

tion.

-Insi

tuations

whe

nth

ete

chnica

lor

geolog

ical

com

plex

ity

(fore

xam

ple,

tunn

els)

prev

ents

from

hav

ing

suffi

cien

tan

dre

liable

info

rmation

tom

easu

re

risk,th

ego

vern

men

tm

ayassum

epa

rtoft

herisk

.

•Pr

ivatepa

rtne

rhas

mor

eex

perie

nce,kno

wledg

ean

dco

ntro

lov

erth

eva

riables

thatin

fluen

ce

cons

truc

tionco

stand

con

trol

over

con

stru

ctionpr

oces

s(i.e

.,sc

hedu

le,e

quipm

ent,m

ater

ials

andte

chno

logy

,etc.)-th

isas

sum

es

thatpriv

atepa

rtne

rhas

eno

ugh

info

rmationto

estim

ateco

stsa

nd

starto

peratio

nsonsc

hedu

leand

as

plan

ned.

•A

possibleexc

eptio

nis

in

cont

ractua

llyagr

eedup

on

situa

tions

thatclassify

as

forcem

ajeu

reorg

over

nmen

tinte

rven

tion.

•Inco

rpor

atestric

tex

perie

ncean

dco

mpe

tenc

yre

quire

men

tsin

the

proc

urem

entp

roce

ss.

•En

sure

thatfe

asibility

stud

yis

availablewell

inadv

ance

oft

he

proc

urem

entp

roce

ss.

•Pr

ivatefir

mgen

erally

willent

erin

toafixe

dte

rm,fi

xedpr

ice

build

ingco

ntract

topas

sthe

risk

to

abu

ilder

with

the

expe

rienc

ean

dre

sour

cest

oco

nstruc

tso

ast

osa

tisfy

thepr

ivatefir

m’s

oblig

ations

und

erth

eco

ntract.

•Co

ntractclaus

ere

quiring

pe

rform

ance

bon

d.•

Cont

ractclaus

estipulatingliq

uida

ted

dam

ages

.•

Cont

ractcos

tove

rrun

gu

aran

teefo

rco

mplex

stru

ctur

es.

Com

miss

ioning

•Risk

thateith

er

theph

ysicalor

theop

erationa

lco

mm

issioning

te

stsw

hich

are

re

quire

dto

be

com

plet

edfo

rth

epr

ovisi

on

ofse

rvices

to

com

men

ce,c

anno

tbe

succ

essfully

com

plet

ed.

•Pr

ivate-

alth

ough

go

vern

men

twillassum

ean

ob

ligationto

co

oper

atean

dfacilitatepr

ompt

pu

blicse

ctor

atte

ndan

ceon

com

miss

ioning

te

sts.

•Pr

ivatepa

rtne

risi

nco

ntro

loft

he

desig

nan

dco

nstruc

tionpr

oces

san

dits

inpu

ts,a

ndth

erefor

ebe

tter

po

sitione

dto

man

ageth

eris

k.

•Inco

rpor

atestric

tex

perie

ncean

dco

mpe

tenc

yre

quire

men

tsin

the

proc

urem

entp

roce

ss.

•Co

ntractclaus

ere

quiring

a

perfo

rman

cebon

d.•

Cont

ractclaus

estipulating

liquida

tedda

mag

es

(unt

ilallp

hysic

al

andop

erationa

lco

mm

issioning

tests

passed

).

DRAFT

Draft Version as of 4 August 2014

Page 75: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 9

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Spon

sor a

nd F

inan

cial

Ris

k

Inte

restra

tesp

re-

com

plet

ion

•Risk

thatprio

rto

com

plet

ionloca

lcu

rren

cyin

tere

st

rate

smay

mov

ead

versely.

•Gov

ernm

ent

•Gov

ernm

enth

asm

oreex

perie

nce

andinfo

rmationre

gard

ingth

efactor

sinfl

uenc

ingloca

lcur

renc

yinte

restra

tesa

ndis

inbet

ter

posit

ionto

man

ageris

k.

•Co

nstruc

tionloan

inte

restra

tehed

ging

instru

men

t(ifan

dwhe

nav

ailable).

•Co

ntractclaus

ede

finingm

echa

nism

to

com

pens

ate

privatefo

rint

eres

trate

cha

nges

dur

ing

cons

truc

tion.

Inte

restra

tesp

ost

com

plet

ion

•Risk

thatafte

rco

mplet

ioninte

rest

rate

smay

mov

ead

versely.

•Pr

ivate

•Pr

ivatepa

rtne

rinco

ntro

lof

selectingan

darrang

inglong

-ter

m

finan

cing

.

•Inte

restra

tehed

ging

instru

men

ts(for

ex

ample,in

tere

stra

te

swap

from

(IFC

).•

Arrang

efin

ancing

us

ingam

ixoffor

eign

an

dloca

lcur

renc

y.

•Co

ntractclaus

eho

ldinggo

vern

men

tha

rmless.

Exch

ange

rate

•Risk

thatdur

ing

oper

ation,

exch

ange

rate

sm

aym

ove

adve

rsely,affe

cting

thepr

ivate

partne

r’sability

tose

rvicefo

reign

deno

minated

deb

tan

dob

tainits

expe

cted

pro

fit.

•Sh

ared

Gov

ernm

entt

oas

sum

epa

rtof

itby

allo

wing

totalo

rpartia

linde

xing

of

paym

entsto

ex

chan

gera

te.

•Pr

ivateto

assum

ere

maind

er.

•Pr

ivatepa

rtne

risi

nco

ntro

lof

selectingan

darrang

ingloca

land

fo

reigncu

rren

cym

ixfo

rlon

g-te

rm

finan

cing

.•

Gov

ernm

enth

asm

oreex

perie

nce

andinfo

rmationre

gard

ingth

efactor

stha

tinfl

uenc

eex

chan

ge

rate

s.

•Pr

ivateto

partia

lly

mitiga

tebyfin

ancing

pa

rtoft

hepro

jectin

loca

lcur

renc

y.•

Privateto

estab

lish

Fore

ignEx

chan

ge

Liqu

idity

Fac

ilityto

co

verp

arto

fthe

po

tent

ialm

ismatch

be

twee

npr

ojec

t’slo

cal

curren

cyand

fore

ign

curren

cydeb

t.•

Gov

ernm

entt

opa

rtly

tran

sfer

risk

touse

rs

byallo

wingpa

ymen

tinde

xing

toexc

hang

erate

.

•Co

ntractclaus

ere

quiring

es

tablish

men

tofa

Fo

reignEx

chan

ge

Liqu

idity

Fac

ility.

•Ta

rifforf

acility

paym

enta

djus

tmen

tco

ntractclaus

e.

Curren

cy

conv

ertib

ilityand

pr

ofitr

epatria

tion

•Risk

thatlo

cal

curren

cycan

not

becon

verted

into

fo

reigncu

rren

cy

asare

sultof

go

vern

men

tre

stric

tions

.

•Gov

ernm

ent

•Gov

ernm

enth

asm

oreex

perie

nce

andinfo

rmationre

gard

ingth

efactor

stha

tinfl

uenc

ecu

rren

cy

conv

ertib

ility.

•Pu

rcha

separtia

lrisk

gu

aran

teefro

man

Inte

rnationa

lFinan

cing

Institu

tion.

•Co

ntractclaus

estipulatingth

at

privatepa

rtne

rca

nbe

nefit

from

th

egu

aran

teeto

co

mpe

nsatefo

rlos

ses

relate

dto

cur

renc

yco

nver

tibilityand

re

patriatio

nof

pro

fits.

DRAFT

Draft Version as of 4 August 2014

Page 76: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

10 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Infla

tion

•Risk

thatvalue

of

paym

entsre

ceived

du

ringth

ete

rmis

er

oded

byinfla

tion.

•Sh

ared

-Gov

ernm

ent

toassum

epa

rtofitb

yallowingto

tal

orpartia

linde

xing

of

paym

entsto

infla

tion.

-Pr

ivateto

as

sum

ere

maind

errisk

th

roug

hth

em

etho

dology

ad

opte

dto

m

aint

ain

value.

•Gov

ernm

enth

asm

oreex

perie

nce

andinfo

rmationre

gard

ingth

efactor

stha

tinfl

uenc

einfla

tion.

•Gov

ernm

entt

otran

sfer

pa

rtofitt

ous

ersb

yallowingto

talo

rpartia

linde

xing

ofp

aym

ents

toin

flatio

nrate

.•

Gov

ernm

entt

oen

sure

its

pay

men

tsdono

tov

erco

mpe

nsate

forinfl

ationan

dto

av

oidan

ydo

uble

paym

entf

orafte

rco

stsa

djus

tmen

ts(for

ex

ample,cha

nges

in

exch

ange

rate

).

•Co

ntractclaus

ede

finingpa

ymen

tad

justm

ent

mec

hanism

s.

Fina

ncingun

available

•Risk

thatw

hen

debt

and

/ore

quity

is

requ

iredby

the

privatefir

mfo

rthe

pr

ojec

titisn

ot

availableth

enand

inth

eam

ount

sand

on

theco

ndition

san

ticipated

.

•Pr

ivate

•Pr

ivatepa

rtne

risr

espo

nsiblefo

rarrang

ingfin

ance

.•

Gov

ernm

entr

equire

sallb

idst

oha

vefu

lly

docu

men

tedfin

ancial

com

mitm

ents

with

minim

aland

ea

silyac

hiev

able

cond

ition

ality

.

•Co

ntractclaus

ere

quiring

firm

letter

sofc

reditf

rom

re

putablefin

ancial

institu

tions

.

Spon

sorr

isk•

Risk

thatth

epr

ivate

partne

risu

nable

topro

vide

the

requ

iredse

rvices

or

beco

mes

inso

lven

t.•

Risk

thatth

epr

ivate

partne

risl

ater

fo

undto

bean

im

prop

erper

son

forinv

olve

men

tinth

epr

ovisi

onof

thes

ese

rvices

.•

Risk

thatfina

ncial

dem

ands

onth

epr

ivatepa

rtne

rex

ceed

itsfi

nanc

ial

capa

citycau

sing

corp

oratefailu

re.

•Gov

ernm

ent

•Ifth

isris

km

ater

ializ

es,the

reis

no

privatepa

rtne

rtotran

sfer

theris

kto

.

•En

sure

pro

jectis

fin

anciallyre

mot

efro

mexter

nalfi

nanc

ial

liabilities.

•En

sure

ade

quac

yof

fin

ance

sund

erlo

an

facilitieso

rspo

nsor

co

mm

itmen

ts

supp

orte

dby

pe

rform

ance

bon

d.•

Ensu

reade

quac

yof

fin

ance

sthr

ough

the

useof

non

-fina

ncial

evalua

tioncrite

ria

anddu

edilig

ence

on

privatepa

rtne

r.

•Co

ntractclaus

ere

quiring

a

perfo

rman

cebon

dan

dletter

sofc

redit.

•Co

ntractclaus

ere

quiring

minim

um

liquidityand

deb

tratio

s.

DRAFT

Draft Version as of 4 August 2014

Page 77: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 11

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Furthe

rfina

nce

requ

ireddu

eto

go

vern

men

taction

•Risk

thatbyre

ason

of

acha

ngeinla

w,

polic

yor

oth

er

even

tadd

ition

al

fund

ingis

need

ed

tore

build

,alte

r,re

-equ

ipetc.,t

he

facilitywhich

ca

nnot

beob

tained

by

thepr

ivatefir

m

(resu

lting

inno

fund

ingav

ailable

tocom

plet

efu

rthe

rwor

ksre

quire

dby

go

vern

men

t).

•Gov

ernm

ent

take

srisk

that

privatefin

ance

is

unav

ailable-

ho

wev

er,

privatepa

rtne

rto

assum

ebe

st

ende

avor

sob

ligationto

fu

ndata

gree

drate

ofr

etur

nwith

opt

ionon

go

vern

men

tto

pay

viaan

increa

sein

fees

ov

erth

eba

lanc

eof

thete

rmviaa

sepa

rate

cap

ital

cont

ribut

ion.

•Gov

ernm

enth

asm

oreinfo

rmation

andis

better

pos

ition

edto

man

age

risk.

•Gov

ernm

entt

osa

tisfy

itselfa

stolik

elihoo

dof

nee

darisi

ng,

likelycritica

lityifit

does

aris

e,and

ast

ofin

ancialcap

acity

of

privateto

fina

nce

and(ifapp

ropr

iate

)bu

dget

allo

catio

nifgo

vern

men

tis

requ

iredto

fund

it.

•Co

ntractclaus

eof

be

stend

eavo

rs

oblig

ationby

priv

ate

tofu

ndw

ithopt

ion

ongov

ernm

entt

oco

mpe

nsateviafee

increa

seorc

apita

lco

ntrib

ution.

•Co

ntractclaus

epr

ovidingabu

y-ou

t(pu

t)op

tionor

te

rminationwith

co

mpe

nsationfo

rpr

ivate,sh

ould

finan

cenot

be

obtained

and

facility

cann

otbefu

rthe

rop

erated

.

Chan

gein

owne

rship

•Risk

thatacha

nge

inowne

rshipor

co

ntro

loft

he

privatefir

mre

sults

inaw

eake

ning

initsfi

nanc

ial

stan

ding

or

supp

orto

roth

er

detrim

entt

oth

epr

ojec

t.

•Sh

ared

-Gov

ernm

ent

riskas

to

thead

verse

cons

eque

nce

ofacha

ngeif

itoc

curs.

-Pr

ivatefir

m

riskth

atits

com

mer

cial

objectives

may

be

inhibite

dby

are

stric

tive

requ

irem

ent

for

gove

rnm

ent

cons

entt

och

ange

.

•Ifch

ange

occ

urs,

theab

ilityof

privatepa

rtne

rtom

anag

eris

kis

dim

inish

ed.

•Pr

ivatepa

rtne

rwou

ldhav

eto

ac

cept

requ

irem

entt

osig

nag

reem

ent,he

nceifco

ndition

is

nota

ccep

table,itw

ouldw

alkaw

ay

from

thepr

ojec

t.

•Gov

ernm

ent

requ

irem

entf

orits

cons

entp

riort

oan

ych

ange

incon

trol.

•Pr

ivatefir

mw

illse

ek

tolim

itth

isco

ntro

lto

circum

stan

cesw

here

su

bstant

iveiss

uesa

re

ofcon

cern

such

as

finan

cialcap

acity

and

pr

obity

.

•Co

ntractclaus

ere

quiring

gov

ernm

ent

cons

entp

riort

oan

ych

ange

incon

trol,

andpr

oviding

abilityto

influ

ence

or

pre

vent

cha

nge

onlyin

spec

ific

circum

stan

ces.

DRAFT

Draft Version as of 4 August 2014

Page 78: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

12 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Refin

ancing

ben

efit

•Risk

(ups

ide)th

at

atcom

plet

ion

oroth

erst

age

inpro

ject

deve

lopm

entt

he

projec

tfina

nces

ca

nbe

restru

ctur

ed

tom

ater

ially

re

duce

the

projec

t’sfina

nce

cost.

•Pr

ivatepa

rtne

rto

bene

fit.

•Gov

ernm

entt

osh

areinlim

ited

circum

stan

ces

(i.e.,s

ymm

etric

al

riskalloca

tion

andsu

per

profi

ts).

•Sim

ilart

ointe

restra

terisk

-priv

ate

partne

rhas

con

trolove

rits

choice

oflon

gte

rmfina

ncing-

if

downs

idebu

rden

isplace

don

pr

ivatepa

rtne

r,sa

mepr

inciple

appliest

oup

side(sym

met

ricalrisk

alloca

tion)

.

•Gov

ernm

entt

oas

sure

its

elft

hatlikelybe

nefit

ha

sbee

nfactor

ed

into

com

petit

ivebids

to

avo

idth

eris

kth

at

thepr

ivatefir

mw

ill

beallo

wed

toearn

supe

rpro

fitsf

rom

the

projec

t.

•Co

ntractclaus

es

spellin

gou

tcircum

stan

cesw

here

go

vern

men

tist

osh

arean

datw

hat

rate

.

Taxch

ange

s•

Risk

thatbefor

eor

afte

rcom

plet

ion

thetaxim

poston

thepr

ivatefir

m,

itsasset

soro

nth

epr

ojec

t,will

chan

ge.

•Pr

ivateifan

dwhe

n:-

Taxincrea

ses

ornew

taxe

sarisi

ngfr

om

gene

ral

chan

gesi

ntax

law.

•Gov

ernm

ent,if

andwhe

n:-

Taxincrea

ses

ornew

taxe

sarisi

ngfr

om

disc

riminator

ych

ange

sintax

law.

•Gen

eralcha

nges

inta

xlawaffe

ctall

busin

esse

sinth

eco

untry.

•Th

ego

vern

men

tisi

nbe

tter

po

sitionto

influ

ence

spec

ific

disc

riminator

ytaxlawcha

nges

aff

ectin

gth

epr

ojec

t.

•Pr

ivatepa

rtne

rto

inco

rpor

ateinpro

ject

due-

dilig

ence

-fin

ancialre

turn

soft

he

privatepa

rtne

rsho

uld

besu

fficien

ttowith

stan

dge

neraltax

law

chan

ges.

•Co

ntractclaus

epr

oviding

com

pens

ationte

rms

ford

iscrim

inator

ych

ange

sintaxlaw.

•Co

ntractclaus

epr

ovidingabu

y-ou

t(pu

t)op

tionor

te

rminationwith

co

mpe

nsationfo

rpr

ivatepa

rtne

rwhe

nno

oth

er

com

pens

ation

mec

hanism

is

available.

Ope

ratin

g Ri

sk

Inpu

ts•

Risk

thatre

quire

dinpu

tscos

tmor

eth

anant

icipate,

areof

inad

equa

te

quality

ora

re

unav

ailablein

requ

iredqu

antit

ies.

•Pr

ivateex

cept

whe

n:-

Gov

ernm

ent

cont

rols

inpu

ts

(fore

xam

ple,

water

ca

tchm

ent).

•Pr

ivatepa

rtne

risi

nco

ntro

loft

he

selectionof

inpu

ts.

•Pr

ivatepa

rtne

rmay

m

anag

eth

roug

hlong

te

rmsu

pplycon

trac

ts

whe

requa

lity/

quan

tity

canbe

assur

ed.

•Pr

ivatepa

rtne

rcan

ad

dres

stoso

me

exte

ntin

itsf

acility

desig

n.

•Co

ntractclaus

eim

posin

gpe

nalties

fo

rbre

achof

spec

ific

andwell-d

efine

dpe

rform

ance

and

qu

ality

spec

ifica

tions

.•

Cont

ractclaus

eon

co

mpe

nsationto

pr

ivatefo

rissue

sattribut

ableto

go

vern

men

t-su

pplie

dinpu

ts.

DRAFT

Draft Version as of 4 August 2014

Page 79: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 13

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Maint

enan

ceand

re

furb

ishm

ent

•Risk

that

desig

nan

d/or

con

stru

ction

quality

is

inad

equa

te

resu

lting

inhighe

rth

anant

icipated

m

aint

enan

ceand

re

furb

ishm

entc

ost.

•Pr

ivate

•Pr

ivatepa

rtne

risi

nco

ntro

lof

desig

nan

dco

nstruc

tionpr

oces

ses.

•Priv

atefir

mto

man

age

thro

ughlong

-ter

m

subc

ontrac

tsw

ith

suita

blyqu

alified

an

dre

sour

cedsu

b-co

ntractor

s.

•Co

ntractclaus

eim

posin

gpe

nalties

(and

pos

sible

term

ination)

forn

ot

mee

tingsp

ecific

andwelld

efine

dpe

rform

ance

,lev

elof

service,and

qua

lity

spec

ifica

tions

.•

Cont

ractclaus

ere

quiring

pe

rform

ance

bon

dfro

mpriv

ate.

Chan

gesi

nou

tput

sp

ecifica

tionou

tside

agre

edsp

ecifica

tion

rang

e

•Risk

that

gove

rnm

ent’s

ou

tput

re

quire

men

ts

arech

ange

dafte

rcon

trac

tsig

ning

whe

ther

pr

eor

pos

tco

mm

issioning

.•

Chan

geprio

rto

com

miss

ioning

m

ayre

quire

a

desig

nch

ange

with

cap

italc

ost

cons

eque

nces

on

thesig

nific

ance

of

thech

ange

and

its

pro

xim

ityto

co

mplet

ion.

•Ch

ange

afte

rco

mplet

ionm

ay

have

acap

italc

ost

cons

eque

nceor

a

chan

gein

recu

rren

tco

stonly(fo

rex

ample,w

here

an

increa

sein

out

put

requ

irem

entscan

be

acc

omm

odated

with

inexisting

facilityca

pacity).

•Gov

ernm

ent

•Gov

ernm

entisi

nbe

tter

pos

ition

to

man

agean

dm

itiga

teth

eoc

curren

ceoft

herisk

.

•Gov

ernm

entt

om

inim

izeth

ech

ance

of

itss

pecific

ations

ch

anging

and

,toth

eex

tent

they

muc

hch

ange

,itw

illens

ure

thede

signis

likelyto

ac

com

mod

ateitat

leas

texp

ense

;thisw

ill

invo

lveco

nsider

able

timean

deff

ort

insp

ecify

ingth

eou

tput

supfro

ntand

plan

ning

like

lyout

put

requ

irem

entsove

rthe

te

rm.

•Co

ntractclaus

eof

be

stend

eavo

rs

oblig

ationby

priv

ate

tofu

ndw

ithopt

ion

ongov

ernm

entt

oco

mpe

nsateviafee

increa

seorc

apita

lco

ntrib

ution.

•Co

ntractclaus

epr

ovidingabu

y-ou

t(pu

t)op

tionor

te

rminationwith

co

mpe

nsationfo

rpr

ivate,sh

ould

finan

cenot

be

obtained

and

cha

nge

mak

espro

ject

unviab

le.

DRAFT

Draft Version as of 4 August 2014

Page 80: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

14 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Ope

rato

rfailure

•Risk

thata

subc

ontrac

top

erator

may

fail

finan

ciallyorm

ay

failto

pro

vide

dco

ntracted

service

tosp

ecifica

tion

(failu

rem

ay

lead

tose

rvice

unav

ailabilityan

dane

edto

mak

ealte

rnatede

liver

yarrang

emen

tsw

ith

corres

pond

ingco

st

cons

eque

nce).

•Pr

ivate

•Pr

ivatepa

rtne

risf

ullyand

pr

imarily

liab

lefo

rallob

ligations

to

gov

ernm

entirres

pectiveof

whe

ther

ithas

pas

sedth

eris

kto

a

subc

ontrac

tor.

•Gov

ernm

entt

oca

rry

outd

uedilige

nce

onprin

cipa

lsu

bcon

trac

tors

forp

robityand

fin

ancialcap

acity

an

dco

mm

issiona

lega

lrev

iewoft

he

major

subc

ontrac

tors

includ

ingth

egu

aran

tees

oro

ther

as

suranc

esta

kenby

th

epr

ivatepa

rtne

r;if

failu

redoe

socc

urth

epr

ivatepa

rtne

rmay

re

plac

eth

eop

erator

or

gov

ernm

entm

ay

requ

ireope

rato

rre

plac

emen

t.

•Co

ntractclaus

eim

posin

gpe

nalties

(and

pos

sible

term

ination)

forn

ot

mee

tingsp

ecific

andwelld

efine

dpe

rform

ance

,lev

elof

service,and

qua

lity

spec

ifica

tions

.•

Cont

ractclaus

ere

quiring

pe

rform

ance

bon

dfro

mpriv

atepa

rtne

r.

DRAFT

Draft Version as of 4 August 2014

Page 81: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 15

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Tech

nica

lob

solesc

ence

or

inno

vatio

n

•Risk

oft

he

cont

racted

service

andits

met

hod

ofdeliver

yno

tke

epingpa

ce,fro

m

ate

chno

logica

lpe

rspe

ctive,w

ith

com

petit

ion

and/

orpub

lic

requ

irem

ents

-Pr

ivatepa

rtne

r’s

reve

nuem

ay

fallbe

low

projec

tions

eith

ervialo

ss

ofdem

and

(use

rpay

sm

odel)p

aym

ent

abatem

ent

(ava

ilability

mod

el)a

nd/o

rop

eratingco

st

increa

sing;

-Gov

ernm

ent

may

not

rece

ive

cont

racted

se

rviceat

appr

opria

te

quan

tity/

quality

.

•Pr

ivate-

-ex

cept

whe

re

cont

inge

ncyis

antic

ipated

and

go

vern

men

tag

rees

tosh

are

riskpo

ssiblyby

fund

ingare

serve.

•Pr

ivatepa

rtne

risa

bleto

use

its

exp

ertis

ean

dkn

ow-h

owto

m

inim

izeth

eris

k.

•Gov

ernm

entt

ode

velopde

taile

d,w

ell-

rese

arch

edout

put

spec

ifica

tions

.•

Privatepa

rtne

rto

deve

lopde

taile

d,

well-r

esea

rche

dde

sign

solutio

n.•

Privatepa

rtne

rmay

ha

vere

cour

seto

de

signe

r,bu

ilder

or

theirins

urer

s.•

Privatepa

rtne

rto

arrang

eco

ntinge

ncy/

re

servefu

ndto

mee

tup

grad

eco

stss

ubject

togov

ernm

ent

agre

emen

tast

ofu

ndingth

ere

serve

andco

ntro

lofr

eser

ve

fund

supo

nde

fault.

•Bo

thpartn

erst

om

onito

robligations

in

theco

ntract.

•Co

ntractclaus

eim

posin

gpe

nalties

(and

pos

sible

term

ination)

forn

ot

mee

tingsp

ecific

andwell-d

efine

dpe

rform

ance

,lev

elof

service,and

qua

lity

spec

ifica

tions

.•

Cont

ractclaus

ede

finingth

eco

ndition

re

quire

dof

thefacility

atth

een

dof

thete

rm•

Cont

ractclaus

ere

quiring

pe

rform

ance

bon

dfro

mpriv

ate.

•Con

trac

tclaus

esp

ecify

ingm

echa

nism

to

estab

lishare

serve

fund

(priv

ate,pub

lic-

private,pub

lic).

DRAFT

Draft Version as of 4 August 2014

Page 82: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

16 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Dem

and

risk

Dem

andris

k•

Risk

thatope

ratin

gre

venu

esfa

llbe

low

fore

castasa

resu

ltof

dec

reas

eof

se

rvicevo

lum

e(i.e.,traffi

cvo

lum

e,

water

orp

ower

co

nsum

ption)

attribut

ableto

an

eco

nom

ic

downt

urn,ta

riff

increa

seorc

hang

eincon

sum

erhab

its.

•Pr

ivateex

cept

whe

n:-

Unc

ertainty

indem

and

fore

castis

su

chth

at

prov

idingan

av

ailability

paym

ent

elem

enta

nd/

oram

inim

um

reve

nue

guaran

teeis

nece

ssaryto

attrac

tpriv

ate

inve

stm

ent

(fore

xam

ple,

gree

nfieldto

llro

ad),inw

hich

ca

se,the

go

vern

men

twillsh

are

inth

eris

kth

roug

han

av

ailability

paym

ento

ram

inim

um

reve

nue

guaran

tee.

•W

hende

man

dca

nbe

estim

ated

with

relativ

ece

rtaint

y,th

epr

ivate

partne

risi

nbe

tter

pos

ition

to

mitiga

terisk

thro

ughco

mm

ercial

man

agem

entp

ractices

.•

Whe

regov

ernm

entist

heprim

ary

off-tak

eitha

sbet

terinf

orm

ationto

m

anag

eris

k.

•Gov

ernm

enta

nd

privateto

per

form

inde

pend

entm

arke

tde

man

dan

alys

es

com

men

surate

with

pr

ojec

tsca

leand

ch

arac

teris

tics.

•W

here

use

rspay

pr

ivatepa

rtne

rwill

ensu

rero

bustfina

ncial

stru

ctur

ean

dfin

ancier

su

ppor

t.-

Adeq

uate

deb

tco

verage

-Ad

equa

tere

serves

-Cr

edit

enha

ncem

ent

insu

ranc

e

•Co

ntractclaus

estipulatingth

eav

ailabilitypa

ymen

tor

mec

hanism

to

establish

minim

um

reve

nuepa

ymen

ts.

Non

-tec

hnicallo

sses

(ta

riffavo

idan

ce)

•Risk

ofa

por

tionof

us

erso

rcus

tom

ers

notp

ayingor

ev

adingpa

ymen

tfo

rser

vice

,lea

ding

to

ash

ortfa

llin

cash

flow

s.

•Pr

ivate,exc

ept

whe

n:-

Ther

eis

limite

dsc

ope

forp

rivateto

stop

service

orpur

sue

paym

ent(

for

exam

ple,

service

deliv

eryor

pa

ymen

tco

llectionis

cont

rolle

dby

go

vern

men

t).

•Pr

ivatese

ctor

has

bet

tera

cces

sto

info

rmationne

eded

toid

entif

yno

n-pa

ying

use

rsand

stop

/co

ntinue

serviceto

them

.

•Pr

ivatefir

mto

inco

rpor

atem

easu

res

(tech

nologica

l,bu

sines

spro

cesses

,an

dot

herw

ise)t

oiden

tifyno

n-pa

ying

cu

stom

ersa

ndpre

vent

an

dde

tern

on-

paym

ent.

•Co

ntractclaus

egiving

theab

ilityto

pr

ivatepa

rtne

rto

stop

serviceto

non

-pa

ying

cus

tom

ers

andstipulatingth

em

echa

nism

sava

ilable

tocollectpay

men

t.

DRAFT

Draft Version as of 4 August 2014

Page 83: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 17

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Net

wor

k an

d in

terf

ace

risk

With

draw

alof

supp

ortn

etwor

k•

Risk

that,w

here

the

facilityre

lieso

na

com

plem

entary

gove

rnm

ent

netw

ork,th

at

supp

ortis

with

draw

nor

va

riedad

versely

affec

tingth

epr

ojec

t.

•Gov

ernm

ent,

whe

reth

ech

ange

disc

riminates

ag

ains

tthe

pr

ojec

t.

•Gov

ernm

entisi

nco

ntro

lof

com

plem

entarynet

wor

km

anag

emen

t.

•Gov

ernm

entt

oco

nduc

ttho

roug

hne

twor

kplan

ning

pr

oces

swhe

nde

veloping

pro

ject

conc

ept.

•Co

ntractclaus

ede

finingwha

tco

nstit

utes

unf

air

disc

rimination

agains

tthe

pro

ject

andsp

ecify

ing

mec

hanism

sto

com

pens

atepr

ivate

(fore

xam

ple,

liquida

tedda

mag

es).

Chan

gein

co

mpe

titivene

twor

k•

Risk

thatan

exist

ingne

twor

kis

exte

nded

/ch

ange

d/re

-pric

ed

soast

oincrea

se

com

petit

ionfo

rthe

facility.

•Pr

ivateex

cept

whe

n:-

Chan

gesa

re

disc

riminator

yag

ains

tthe

pr

ojec

t.-

Com

petit

ionis

gove

rnm

ent-

subs

idized

(fo

rexa

mple,

aco

mpe

ting

toll-fre

ero

ad

onth

esa

me

corridor

).

•Gov

ernm

entm

anag

esnet

wor

kallowingitto

influ

ence

the

mater

ializ

ationof

net

wor

kris

kan

dits

con

sequ

ence

s.

•Gov

ernm

entt

oco

nduc

ttho

roug

hne

twor

kplan

ning

whe

nde

veloping

pr

ojec

tcon

cept

.•

Privatefir

mto

review

lik

elyco

mpe

titionfo

rse

rvicean

dba

rriersto

en

trypr

iort

oen

terin

gag

reem

ent.

•Pr

ivatefir

mw

ill

seek

com

pens

ation

agains

tcha

ngewhich

un

fairlydisc

riminates

ag

ains

tthe

pro

ject

bygov

ernm

ent

subs

idizing

com

petit

ion(existing

ornew

).

•Co

ntractclaus

eto

pr

ovidepr

ivate

partne

rwith

non

-co

mpe

tepro

tections

an

dco

mpe

nsation

mec

hanism

s.

DRAFT

Draft Version as of 4 August 2014

Page 84: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 18

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Inte

rface

(1)

•Risk

thatth

ede

liver

yof

cor

ese

rvices

ina

way

which

is

nots

pecifie

d/

antic

ipated

inth

eco

ntractadv

erse

ly

affec

tsth

ede

liver

yof

con

trac

ted

services

.

•Pr

ivateex

cept

whe

n:-

Chan

ges

invo

lve

disc

riminator

yto

the

projec

t—go

vern

men

tto

pro

vide

co

mpe

nsation.

•Gov

ernm

entm

anag

escor

ese

rvice

activ

ities

allo

wingitto

influ

ence

th

em

ater

ializ

ationof

inte

r-face

risk

an

dits

con

sequ

ence

s.

•Gov

ernm

entt

oco

nduc

ttho

roug

hsy

stem

plann

ingwhe

nde

veloping

pro

ject

conc

ept.

•Upf

ront

asses

smen

t(b

ybo

thgov

ernm

ent

andpr

ivatepa

rtne

r)of

lik

elyinte

rface

issu

es.

•Co

ntinuo

usre

view

an

dm

onito

ring

deve

lopm

entsof

aco

mm

unications

strate

gyin

resp

ecto

fde

liver

yof

thetw

ore

late

dse

rvices

.

•Co

ntractclaus

eto

sp

ecify

theex

tent

of

core

services

and

the

way

inw

hich

they

willbede

liver

edso

th

atonlym

anife

st

andad

versech

ange

san

dde

ficienc

iesc

an

trigge

rthisr

isk.

•Co

ntractclaus

ede

fining

com

pens

ation

mec

hanism

forp

rivate

partne

r.

Inte

rface

(2)

•Risk

thatth

ede

liver

yof

co

ntracted

services

ad

verselyaff

ects

thede

liver

yof

co

rese

rvices

inam

anne

rno

tspe

cifie

d/an

ticipated

inth

eco

ntract.

•Pr

ivate

•Pr

ivatefir

mm

anag

escon

trac

ted

serviceac

tivities

.•

Upf

ront

asses

smen

t(by

bo

thgov

ernm

enta

nd

thepr

ivatepa

rtne

r)of

lik

elyinte

rface

issu

es.

•Co

ntinuo

usre

view

an

dm

onito

ringan

dde

velopm

ento

fa

com

mun

ications

strate

gyin

resp

ecto

fde

liver

yof

thetw

ore

late

dse

rvices

.

•Co

ntractclaus

ere

quiring

a

perfo

rman

cebon

dan

dsp

ecify

ing

liquida

tedda

mag

es.

Indu

stria

l rel

atio

ns ri

sk

Indu

stria

lrelations

•Risk

ofs

trikes

or

indu

stria

laction

caus

ingde

layan

dco

stto

thepr

ojec

t.

•Pr

ivate

•Pr

ivatepa

rtne

rhas

bet

ter

info

rmationab

outa

ndcon

trolove

rth

eca

uses

ofind

ustriala

ction.

•Pr

ivatepa

rtne

r(or

its

sub-

cont

ractor

s)

man

ages

pro

ject

deliv

eryan

dop

erations

.

•Co

ntractclaus

ere

quire

men

tpay

men

tof

liqu

idated

dam

ages

to

gov

ernm

ent.

Legi

slat

ive

and

gove

rnm

ent p

olic

y ris

k

Appr

ovals

•Risk

thatadd

ition

al

appr

ovals

requ

ireddu

ring

theco

urse

oft

he

projec

tcan

notb

eob

tained

.

•Pr

ivate,exc

ept

whe

n:-

Gov

ernm

ent

hasi

nitia

ted

thech

ange

re

quiring

ap

prov

al.

•Gov

ernm

entisi

nbe

tter

pos

ition

to

man

agean

dm

itiga

teth

eoc

curren

ceoft

herisk

.

•Priv

ateto

ant

icipate

requ

irem

ents

•Co

ntractclaus

eto

spec

ifypriv

ate

partne

rcom

pens

ation

mec

hanism

(for

ex

ampleliq

uida

ted

dam

ages

).

DRAFT

Draft Version as of 4 August 2014

Page 85: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 19

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Chan

gesi

nlaw/

polic

y•

Risk

ofa

cha

nge

inla

w/p

olicyof

go

vern

men

tonly,

which

cou

ldnot

be

ant

icipated

at

cont

ractsi

gning

andwhich

has

ad

verseca

pital

expe

nditu

reor

oper

atingco

st

cons

eque

nces

for

thepr

ivatefir

m.

•Pr

ivateifan

dwhe

n:-

Chan

geso

ccur

ingen

eral

lawand

are

no

tpro

ject

orse

rvice

spec

ific.

•Gov

ernm

entif

andwhe

n:-

Chan

gesa

re

disc

riminator

yan

ddire

cted

sp

ecially

and

ex

clus

ivelyat

thepr

ojec

tor

these

rvices

.

•Gen

eralcha

nges

inla

waffe

ctall

busin

esse

sinth

eco

untry.

•Gov

ernm

entisi

nbe

tter

pos

ition

to

influ

ence

spec

ificdisc

riminator

ytaxlawcha

nges

affe

ctingth

epr

ojec

t.

•Pr

ivatepa

rtne

rto

inco

rpor

ateinpro

ject

due-

dilig

ence

-fin

ancialre

turn

sof

thepr

ivatepa

rtne

rsh

ouldbesu

fficien

tto

with

stan

dge

nerallaw

/po

licych

ange

s.•

Gov

ernm

entt

om

onito

rand

lim

it(w

here

and

pos

sible)

chan

gesw

hich

may

ha

veth

eseeff

ectsor

cons

eque

nces

onth

epr

ojec

t.•

Gov

ernm

entt

ore

quire

th

epr

ivatefir

mto

eff

ectt

hecha

ngeina

way

thatth

efin

ancial

effec

tongo

vern

men

tinm

inim

ized

(for

ex

ample,pay

ona

prog

ressivesc

ale);

•Gov

ernm

entt

opa

ss

thro

ughto

end

use

rs

•Co

ntractclaus

eallowing

com

pens

ationto

pr

ivateinapre

-sp

ecified

form

ula.

•Co

ntractclaus

eto

allowpas

sthr

ough

to

endus

ers.

Regu

latio

n•

Risk

thatw

here

th

ereis

astatut

ory

regu

lato

rinv

olve

dth

erearepr

icing

oroth

ercha

rges

im

pose

don

the

privatefir

mw

hich

do

not

refle

ct

itsin

vestm

ent

expe

ctations

.

•Pr

ivateex

cept

whe

n:-

Tariff

sand

pa

ymen

tsare

pr

e-sp

ecified

inth

eco

ntract.

•Th

epr

ivatepa

rtne

rhas

theab

ility

tound

ertake

itso

wnas

sessm

ento

fth

ere

gulato

rysy

stem

.

•Pr

ivatefir

mto

asses

sre

gulato

rysy

stem

and

m

aym

akeap

prop

riate

re

pres

entatio

ns.

•Co

ntractclaus

eto

sp

ecify

whe

ther

pa

ymen

twillbe

subjec

ttore

gulato

ror

not,an

difno

t,sp

ecify

m

echa

nism

tose

tand

ad

justta

riffs

DRAFT

Draft Version as of 4 August 2014

Page 86: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 20

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Forc

e m

ajeu

re ri

sk

Forcem

ajeu

re•

Risk

thatin

ability

tom

eetc

ontrac

ted

servicede

liver

y(p

reorp

ost

com

plet

ion)

is

caus

edbyre

ason

of

forcem

ajeu

re

even

ts.

•Priv

atetake

sris

kof

lossor

dam

ageto

the

asse

tand

lossof

reve

nuewhe

nris

kis

insu

rable

(fore

xam

ple,

earthq

uake

,flo

ods,

firean

ddr

ough

t).•

Gov

ernm

ent

take

som

eris

kof

service

disc

ontin

uity

both

ast

oco

ntracted

se

rvicean

dco

rese

rvice

whe

nris

ksare

un

insu

rable(i.e.,

terror

ismacts,

war,c

ivilun

rest,

etc.).

•Pr

ivatepa

rtne

rcan

buy

insu

ranc

efro

mth

em

arke

tplace

—co

mm

ercial.

•Gov

ernm

entisb

ette

rpos

ition

edto

m

anag

eun

insu

rableris

ks.

•Pr

ivateto

pur

chas

einsu

ranc

efo

rins

urab

le

risks

.•

Ifun

insu

rable,priv

ate

firm

may

self-

insu

reby

establish

ingre

serve

fund

ing.

•Ifun

insu

rable,

gove

rnm

entt

oes

tablish

con

tinge

ncy

fora

ltern

atese

rvice

deliv

ery.

•Co

ntractclaus

eto

ex

pres

slydefi

ne

even

tsth

atw

ill

cons

titut

eac

tsofG

od

andpo

liticalfo

rce

majeu

reeve

nts.

•Co

ntractclaus

eto

re

lieve

priv

atefro

m

cons

eque

nces

of

servicedisc

ontin

uity.

•Co

ntractclaus

eto

requ

ireth

atif

insu

rable,priv

ate

mus

tens

ure

availabilityof

insu

ranc

epr

ocee

ds

towards

asset

re

pairan

dse

rvice

resu

mpt

ionan

dgo

vern

men

tist

obe

give

nth

ebe

nefit

of

insu

ranc

efo

rser

vice

disrup

tionco

sts.

DRAFT

Draft Version as of 4 August 2014

Page 87: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 21

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Asse

t ow

ners

hip

risk

Defau

ltan

dte

rmination

•Risk

oflos

soft

he

facilityor

oth

er

asse

tsupo

nth

epr

ematur

ete

rminationof

leas

eor

oth

er

projec

tcon

trac

ts

upon

bre

achby

the

privatefir

mand

with

outa

dequ

ate

paym

ent.

•Pr

ivatefir

mw

ill

take

theris

kof

lossofv

alue

on

term

ination.

•Pr

ivatefir

mhas

mor

ekn

owledg

eof

theun

derly

ingca

uses

ofd

efau

ltan

dca

niden

tifyris

kea

rlier

than

go

vern

men

t.

•Onlyse

rious

bre

ache

sby

thepr

ivatefir

mto

lead

tote

rmination.

•Pr

ivatepa

rtne

rto

begiven

tim

ean

dop

portun

ityto

rem

edy

defaultsbyth

epr

ivate

partne

rwhich

may

lead

tote

rmination.

•Ifte

rminationoc

curs

pre-

com

plet

ion

gove

rnm

entm

ay(b

ut

need

not

to)m

ake

paym

entf

orvalue

in

thepr

ojec

tonaco

stto

co

mplet

eba

sis.

•Ifte

rminationoc

curs

postcom

plet

ionth

epr

ivatepa

rtne

rmay

re

ceivefairm

arke

tva

luelessallam

ount

sdu

eto

gov

ernm

ent.

•Gov

ernm

entt

ore

quire

step

inrigh

ts

toens

ureac

cessand

se

rviceco

ntinuityunt

ilow

nership/

cont

rol

issue

sare

reso

lved

.

•Co

ntractclaus

eto

defi

neopt

ions

fo

rrem

ediatio

nof

de

fault.

•Ifan

dwhe

nne

cessary,con

trac

tclau

seto

defi

ne

met

hodto

estab

lish

com

pens

ationto

pr

ivateincas

eof

te

rmination(p

reand

po

stcom

plet

ion)

.

DRAFT

Draft Version as of 4 August 2014

Page 88: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex7 22

Risk

Defi

nitio

nPr

efer

red

Allo

catio

nRa

tiona

lePo

ssib

le M

itiga

tion

Stra

tegi

esAl

loca

tion

Inst

rum

ent

Resid

ualv

alue

on

tran

sfer

to

gove

rnm

ent

•Risk

thaton

expiryore

arlie

rte

rminationof

the

services

con

trac

tth

eas

setd

oes

noth

aveth

eva

lueor

iginally

estim

ated

by

gove

rnm

enta

twhich

thepr

ivate

partne

ragr

eedto

tran

sfer

itto

the

gove

rnm

ent.

•Pr

ivate

•Pa

rtne

rcan

inco

rpor

atelifecy

cle

maint

enan

ce,refur

bish

men

t,an

dpe

rform

ance

requ

irem

entsin

to

thede

signfacility,and

can

man

age

thes

epr

oces

sdur

ingth

ete

rmof

theco

ntract.

•Gov

ernm

entt

oim

pose

onth

epr

ivatem

aint

enan

ce

andre

furb

ishm

ent

oblig

ations

.•

Gov

ernm

entt

oen

sure

anac

cept

able

maint

enan

ce

cont

ractor

is

resp

onsib

lefo

rthe

wor

k,com

miss

ion

regu

lars

urve

ysand

insp

ectio

ns.

•Gov

ernm

entm

ay

requ

irepriv

ateto

es

tablish

aded

icated

sin

king

fund

to

accu

mulatefu

nds

suffi

cien

ttobr

ing

theas

sett

oag

reed

co

ndition

and

/or

(ifre

quire

d)obt

ain

perfo

rman

cebon

dsto

en

sure

thelia

bilityis

satis

fied.

•Co

ntractclaus

esp

ecify

ingth

eco

ndition

sinwhich

as

setsare

tobe

tran

sfer

redto

the

gove

rnm

enta

tthe

en

dof

thete

rm.

•Co

ntractclaus

es

stipulatingth

epe

rform

ance

indica

torsand

fre

quen

cyof

mon

itorin

gof

thes

eindica

tors.

•Co

ntractclaus

ere

quiring

thecrea

tion

ofasi

nkingfu

nd

tocov

erth

eco

stof

bringing

thefacility

upto

thede

sired

stan

dard

.

Sour

ce:N

ationa

lEco

nom

icand

Dev

elop

men

tAut

horit

y.

DRAFT

Draft Version as of 4 August 2014

Page 89: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8 1

ANNEX 8Refinancing Gains

1.0 INTRODUCTION

Sharingthegainsarisingfromarefinancingoperationisanimportantissueforthedesignandimplementationofthe

PPPcontractthathasbecomeincreasinglyrelevantoverthepastdecade.Refinancingisunderstoodasthereplacement

orrenegotiationoftheoriginalcapitalstructure,debtand/orequityoftheProjectCompanyonmorefavorableterms.

RefinancingisattractivetotheProjectCompanywheninterestratesfall(iftheProjectCompanycanbenefitfromsucha

fallunderitshedgingpolicy)orwhentheriskprofileoftheProjectCompanyhasimproved.Refinancingcantakedifferent

forms,suchas:

• Areductioninthedebtpricing;

• Extensionofthedebtmaturity;

• An increase in thegearing (i.e. theamountofdebt relative toequity).This ispossiblewhen lendersare

preparedtorelinquishsomeoftheircontractualprotectionastheperceivedprojectrisksarereduced;

• Lighterreserveaccountrequirements;or

• ThereleaseofguaranteesprovidedbytheshareholdersoftheProjectCompany,orProjectProponents,or

bythirdparties.

Refinancingwilloftenresult infinancialgainsfortheshareholdersoftheProjectCompany.Someofthegainsmaybe

justifiedby thegoodperformanceof theProjectCompany,butsomemayalsoarise frommacro-economic factorsor

lenders’greaterconfidence inaspecificPPPmarket (i.e. factorsnotattributabletotheProjectCompany). Inthiscase,

financialgainsfortheshareholdersmayappearundeservedandgiverisetopoliticaldifficulties.Asaresult,sharingthe

financialgainsfromarefinancingoperationbetweentheProjectCompanyshareholdersandtheImplementingAgency

isoftenconsideredappropriate.

CurrentpracticeistoincludedetailedprovisionsinthePPPcontractsettingoutamethodfordeterminingandsharing

thegainsfromfuturerefinancing–ratherthantorelyonbroadprinciplesandfullrenegotiationofthecontractwhen

refinancingtakesplace.TheUKstartedthetrendin2002withitsstandardizedcontractprovisionsforrefinancing.

DRAFT

Draft Version as of 4 August 2014

Page 90: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8

Othercountrieshavefollowedasimilarapproach.

Refinancingmechanismsarecomplexandtheirassessmentrequiresthesupportoffinancialandlegaladvisers.ThePPP

contractprovisionsrequirespecificdraftingthatneedstoaddressseveralstepsthatinvolve:

• CalculatingtheexpectedrefinancinggaintotheProjectCompanyshareholders(e.g.usingnetpresentvalue

techniques);determiningtheportionofthegainthatshouldbeallocatedtoeachparty(e.g.50:50split,the

ImplementingAgency’sshareincreasing,ifspecifiedtestsaremet,asintheUK,wherethemarginalrate

attains70%);and

• Decidinghowthegainsshouldbeshared(e.g.lumpsumpaymenttotheImplementingAgency,reduction

intheservicefeepayabletotheProjectCompany).

Manydetails(e.g.thediscountandinterestratestobeusedinthecalculations,andtreatmentofthepossibleimpactof

arefinancingoperationontheterminationpaymentthattheImplementingAgencymighthavetomakeinthefuture)

needtobeaddressedinthePPPcontracttoavoidsubsequentdiscussionanddisagreements.Aswithmanyotheraspects

ofPPPs,itisimportanttoanticipatetheissuesasmuchaspossibleandtosetoutdetailedprovisionsinthePPPcontract.

2.0 SAMPLE CLAUSE – REFINANCING GAINS16

2.1 REFINANCING

2.1.1 IMPLEMENTINGAGENCYmayrequesttheProjectCompanytoproceedwithaQualifyingRefinancingatany

timeaftertheEffectiveDateanduponreceiptofsuchrequestfromIMPLEMENTINGAGENCYinwriting,theProject

CompanyshallpromptlyproceedwithaQualifyingRefinancinginaccordancewiththetermsandconditionsset

outinthisclause. SPCwillhavenoobligationtoincurexternalcostsinundertakingthepreliminaryanalysisof

refinancingopportunities.

2.1.2 In the event the Project Companywishes to proceedwith a Qualifying Refinancing, the Project Company

shallobtainIMPLEMENTINGAGENCY’swrittenconsentpriortoproceedingwithanyQualifyingRefinancing,such

consentnottobeunreasonablywithheldordelayed,providedthat,theProjectCompanyhascompliedwithits

obligationsunderClauses1.1.3and[]17.IMPLEMENTINGAGENCY’sconsentinrelationtoaQualifyingRefinancing

shallbedeemedrejectedif IMPLEMENTINGAGENCYhasnotexpresslyconsentedorobjectedtotheQualifying

Refinancingwithin30daysofthedateuponwhichtheProjectCompanyhasprovidedtheinformationsetoutin

Clause[].

2.1.3 BothIMPLEMENTINGAGENCYandtheProjectCompanyshallatalltimesactingoodfaithintheperformance

oftheirobligationsunderthisclause.

2.1.4 The Project Company shall promptly provide IMPLEMENTING AGENCY with full details of any proposed

QualifyingRefinancing,includingtermsheetorotherdocumentationsettingoutthetermsandconditionsupon16ThematerialonRefinancingGainscomesfromaprojectintheMiddleEastwhichcloselymirrorstheUKapproach17Clause[]beinghypotheticaldependingoncircumstances

DRAFT

Draft Version as of 4 August 2014

Page 91: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8 3

whichanyFinancier(s)haveagreedtoprovidefundinginconnectionwiththeproposedQualifyingRefinancing,

a copy of the financialmodel (if any) relating to such proposed Qualifying Refinancing and the basis for the

assumptionsusedinthefinancialmodelandanestimateoftheexternalcoststheProjectCompanyanticipatesit

willincurinconnectionwiththeproposedQualifyingRefinancing.

2.1.5 IMPLEMENTING AGENCY shall, before, during and at any time after the implementation of the Qualifying

Refinancing, have rights of audit over any financialmodel and documentation related thereto (including any

aspectofthecalculationoftheRefinancingGain)whichisusedinconnectionwiththatQualifyingRefinancing.

2.2 DETERMINATION OF AMOUNT OF REFINANCING GAIN

2.2.1 TheRefinancingGainarisingfromaQualifyingRefinancingshallbetheamountthatisequaltothegreaterof

zeroand(A-B),

Where:

A = theNetPresentValueoftheDistributionsprojectedimmediatelypriortotheQualifyingRefinancing

(takingintoaccounttheeffectoftheQualifyingRefinancing,theamountandtimingofcostsincurredin

accordancewithClause[]andusingtheFinancialModelasupdated(includingastotheperformanceof

theProject)soastobecurrentimmediatelypriortotheQualifyingRefinancing)tobemadetotheProject

Proponents(withoutdoublecounting)overtheremainingtermofthisAgreementfollowingtheQualifying

Refinancing;

B = theNetPresentValueoftheDistributionsprojectedimmediatelypriortotheQualifyingRefinancing

(butwithout taking intoaccount theeffectof theQualifyingRefinancingandusingtheFinancialModel

asupdated(includingastotheperformanceattheProject)soastobecurrent immediatelypriortothe

QualifyingRefinancing)tobemadetotheProjectProponents(withoutdoublecounting)overtheremaining

termofthisAgreementfollowingtheQualifyingRefinancing.

2.2.2 IMPLEMENTINGAGENCYandtheProjectCompanywillnegotiateingoodfaithtoagreetheestimatedamount

of the Refinancing Gain and the consequential adjustment to the Treatment Charge prior to any Qualifying

Refinancingbeingimplemented.

2.2.3 Fortheavoidanceofdoubt,theconsequencesofaChangeinStatutoryRequirementsshallbedealtwithin

accordancewithArticle[]oftheAgreement.

2.3 IMPLEMENTING AGENCY’S ENTITLEMENT TO SHARE OF REFINANCING GAIN

2.3.1. Subject to Clause 1.3.2, IMPLEMENTING AGENCY’s entitlement pursuant to Clause 1.2.2 to a share of any

RefinancingGainshallbeasfollows:

DRAFT

Draft Version as of 4 August 2014

Page 92: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

4 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8

a) inrelationtotheamountofanyRefinancingGainwhichisuptobutnotexceedingUS$1million,IMPLEMENTING

AGENCYshallbeentitledtopaymentoffiftypercent(50%)ofthevalueofsuchRefinancingGain;

b) in relation to theamountofanyRefinancingGainwhich is inexcessofUS$1millionbutnotgreater than

US$2million, IMPLEMENTINGAGENCYshallbeentitledtopaymentofsixtypercent(60%)ofthevalueofsuch

RefinancingGaininexcessofUS$1million;and

c) inrelationtotheamountofanyRefinancingGainwhichisinexcessofUS$2million,IMPLEMENTINGAGENCY

shallbeentitledtopaymentofseventypercent(70%)ofthevalueofsuchRefinancingGaininexcessofUAS$2

million.

2.3.2 IntheeventofaQualifyingRefinancingthatincludesareductionoftheProjectProponents’equityparticipation

intheProjectand/oraDistributiontotheProjectProponents,ineithercasearisingdirectlyfromsuchQualifying

Refinancing,thefollowingwillprevailinrelationtoIMPLEMENTINGAGENCY’sentitlementpursuanttoClauseX:

a) intheeventthattheQualifyingRefinancingiseither(i)agreedpriortotheExpansionCommercialOperation

Dateor(ii)implementedwithinoneyearaftertheExpansionCommercialOperationDate,IMPLEMENTINGAGENCY

willbenefitfrom100%oftheRefinancingGains.

b) inthecaseofotherQualifyingRefinancingstheprovisionsofclauses1.3.1willapplysubjecttoIMPLEMENTING

AGENCYandtheProjectCompanyagreeingonanadditionalcompensationtoIMPLEMENTINGAGENCYtotake

intoaccountthebenefittotheProjectProponentsofanyreducedProjectProponents’equityparticipationinthe

ProjectCompanyand/orthereductioninexposureofProjectProponentsinrespectoftheProject.Intheeventthat

nosuchcompensationisagreedupon,noRefinancingwillbeauthorized.

2.4 METHOD OF PAYMENT OF IMPLEMENTING AGENCY’S SHARE OF REFINANCING GAIN

IMPLEMENTINGAGENCY shall receive its share of any RefinancingGain arising from aQualifying Refinancing agreed

pursuanttoClause[]asareductionintheTreatmentChargespayableovertheremainingContractPeriod.

2.5 DISPUTES

IfthePartiesfailwithin90daysfromthedateoffinancialcloseoftheQualifyingRefinancingtoagreeanyofthematters

referredtoinClause[],suchdisputeshallberesolvedinaccordancewithArticle[](savethat,inconnectionwithany

appointmentofanExpertinaccordancewithArticle[]todetermineanymatterrelatingtoorinconnectionwiththis

clause,thefirstsentenceofArticle[]shallnotapplyandinsteadsuchExpertshallbeanexpertinthefieldoffinancewith

notlessthanfifteen(15)yearsofrelevantexperience).

2.6 COSTS

UponfinancialcloseofaQualifyingRefinancing,theProjectProponentswillbeentitledtoreimbursementofonehundred

percent(100%)ofsubstantiatedandapproved(withsupportingdocumentation)externalcoststheProjectProponents

DRAFT

Draft Version as of 4 August 2014

Page 93: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8 5

incur inconnectionwithaQualifyingRefinancingplusanothertwentyfivepercent (25%)ofthetotalamountofsuch

external costs to account for any internal costs incurred by the Project Proponents in connection with a Qualifying

Refinancing.TheProjectProponentsshallbeentitledtoreimbursementofsuchcostspriortoeffectinganyreductionin

theTreatmentChargesinaccordancewithClause[].

3.0 DEFINITIONS

“Distribution”means,whetherincashorinkind,any:

a) dividendby,orotherdistributioninrespectofsharecapitalof,theProjectCompany;

b) reductionofcapital, redemptionorpurchaseof sharesoranyother reorganizationorvariation toshare

capitaloftheProjectCompany;

c) paymentsundertheProjectProponentLoans(whetherofprincipal,interest,breakagecostsorotherwise);

d) payment,loan,contractualarrangementortransferofassetsorrightstotheextent(ineachcase)itwasput

inplaceafterFinancialCloseandwasneitherintheordinarycourseofbusinessnoronreasonablecommercial

terms;or

e) receipt by the Project Proponents of any other benefitwhich is not received in the ordinary course of

businessandonreasonablecommercialterms.

“ExemptRefinancing”means:

a) anyRefinancingthatwasfullytakenintoaccountinthecalculationoftheTreatmentChargesornecessary

tofinancetheperformanceofobligationsoftheProjectCompanypursuanttoagreementstowhichtheProject

Companyisaparty;

b) achangeintaxationorchangeinaccountingtreatment;

c) theexerciseof rights,waivers,consentsorsimilaractionswhich relate today todayadministrativeand

supervisorymatters,andwhichareinrespectof:

d) breachofrepresentationsandwarrantiesorundertakings;

e) themovementofmoniesbetweenorinvestmentsmadefrommoniesin,orsecuritypostedinconnection

withmoniesintheProjectAccountsinaccordancewiththetermsoftheFinancingDocumentsasatFinancial

Close,includingpursuanttotheexerciseofrights,waivers,consentsorsimilaractionsinaccordancewithsuch

terms;

f) lateornon-provisionofinformation,consentsorlicenses;

g) amendments to contracts entered into between the Project Company and the Project Company’s

Contractors;

h) approvalofrevisedtechnicalandeconomicassumptionsforfinancialmodelruns(totheextentrequiredfor

forecastsundertheFinancingDocuments);

i) failure of the Project Company to obtain any consent by statutory bodies required by the Financing

Documents;or

j) votingbytheFinanciersundertheFacilityAgreementandthevotingarrangementsbetweentheFinanciers

inrespectofthelevelsofapprovalrequiredbythemundertheFinancingDocuments;

DRAFT

Draft Version as of 4 August 2014

Page 94: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

6 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8

k) anyamendment,variation,modification,supplementoforwaiverinrespectofanyagreement(otherthan

theProjectProponentLoans)approvedbyIMPLEMENTINGAGENCYunderthisAgreement;

l) anysaleofsharesintheProjectCompanybytheshareholdersorsecuritizationoftheexistingrightsand/or

interestsattachingtosharesintheProjectCompany;

m)anysaleortransferoftheProjectProponents’existingrightsand/orinterestsundertheProjectProponent

LoansorsecuritizationoftheProjectProponents’existingrightsand/orinterestsundertheProjectProponent

Loans;or

n) anyQualifyingBankTransaction.

“NetPresentValue”means theaggregateof thediscountedvalues, calculatedasof theestimateddateof the

Refinancing,ofeachoftherelevantprojectedDistributionstobemadetoeachoftheProjectProponents,ineach

casediscountedusingtheThresholdEquityIRR.

“ProjectAccounts”meansaccountsreferredtoinandrequiredtobeestablishedundertheFinancingAgreements.

“QualifyingBankTransaction”means:

a) thesyndicationbyaFinancierofanyofitsrightsorinterestsintheFinancingDocuments;and/or

b) thegrantbyaFinancierofanyrightsofparticipation,orthetransferordispositionbyaFinancierofanyof

itsrightsorinterests(otherthanasspecifiedinparagraph(a)above),inrespectoftheFinancingDocuments

infavorof(i)anyotherFinancier(ii)anyinstitutionwhichisrecognizedorpermittedinanyjurisdictiontocarry

onthebusinessofacreditinstitutionorwhichisotherwisepermittedtoacceptdeposits(iii)alocal,publicor

governmentalauthorityoragency(iv)anyinstitutionwhichisrecognizedorpermittedinanyjurisdictionto

carryonthebusinessofinsurance(v)anyunittrustscheme,pensionfund,providentfundorsimilarrecognized

or permitted in any jurisdiction (vi) any other institution in respect of which the prior written consent of

IMPLEMENTINGAGENCYhasbeengiven.

“QualifyingRefinancing”meansanyRefinancingthatwillgiverisetoaRefinancingGaingreaterthanzerothatis

notanExemptRefinancing.

“Refinancing”means:

a) anyamendment,variation,novation,supplementorreplacementofanyFinancingDocument(otherthan

anyProjectProponentLoan);

b) thegrantofanywaiverorconsent,undertheFinancingDocument(otherthananyProjectProponentLoan);

c) thedispositionofanyrightsorinterestsin,orthecreationofanyrightsofparticipationinrespectof,the

FinancingDocuments(otherthantheProjectProponentLoans)orthecreationorgrantingofanyotherform

ofbenefit(suchasareductioninthefees,expenses,marginsorcostoffundstotheProjectCompanyand/

or an increase in the tenoror averageweighted lifeof theOutstandingDebt) or interest inor fromeither

theFinancingDocuments(otherthantheProjectProponentLoans)ortherevenuesorassetsoftheProject

Company;or

d) anyotherarrangementputinplacebytheProjectCompanyoranotherpersonwhichhasaneffectwhichis

DRAFT

Draft Version as of 4 August 2014

Page 95: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex8 7

similartoanyof(a)-(c)aboveorwhichhastheeffectoflimitingtheProjectCompany’sabilitytocarryoutany

of(a)-(c)above

ineachcase, savewhereanEventofDefault (asdefined in theFacilityAgreement)andanaccelerationof the

repaymentoftheLoanAmount(asdefinedintheFacilityAgreement)hasoccurred.

“RefinancingGain”hasthemeaninggiventoitinClause0.

“ThresholdEquityIRR”means[]%\

DRAFT

Draft Version as of 4 August 2014

Page 96: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

DRAFT

Draft Version as of 4 August 2014

Page 97: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex9 1

ANNEX 9Compendium of External Resources

I. APPENDIXES RELATED TO TOOLKITS AND THEIR WEB ADDRESSES

Appendix1 ToolkitforPublicPrivatePartnershipsinRoadsandHighwayshttp://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/highwaystoolkit/index.html

Appendix2 RailwayReform:AtoolkitforImprovingRailSectorPerformancehttp://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/railways_toolkit/index.html

Appendix3 PortReformToolkithttp://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/Portoolkit/toolkit.html

Appendix4 LegalToolsforPortReformhttp://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/Portoolkit/Toolkit/module4/annex.html

Appendix5 GuidebookforDevelopingandLeasingAirportPropertyhttp://onlinepubs.trb.org/onlinepubs/acrp/acrp_rpt_047.pdf

Appendix6 BuildingRegionalPowerPoolshttp://siteresources.worldbank.org/EXTENERGY2/Resources/toolkit_book_final.pdf?resourceurlname=toolkit_book_final.pdf

Appendix7 DevelopingBestPracticeforPromotingPrivateSectorInvestmentinPowerhttp://www.adb.org/publications/developing-best-practices-promoting-private-sector-investment-infrastructure-power

Appendix8 EmergencyPowerProcurementToolkithttp://ppp.worldbank.org/public-private-partnership/sector/energy/laws-regulations/toolkits/emergency-power-procurement

Appendix9 ConcessionforInfrastructure–AGuidebooktotheirDesignhttp://rru.worldbank.org/Documents/Toolkits/concessions_fulltoolkit.pdf

Appendix10 PrivateSectorParticipationinMunicipalSolidWasteManagementhttp://www.worldbank.org/urban/solid_wm/erm/CWG%20folder/Guidance%20Pack%20TOC.pdfDRAFT

Draft Version as of 4 August 2014

Page 98: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

2 NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex9

Appendix11 GuidebooktoMunicipalSolidWasteManagementinIndiahttp://www.urbanindia.nic.in/programme/uwss/pp_partnership.htm

Appendix12 ApproachestoPrivateSectorParticipationinWaterServiceshttp://siteresources.worldbank.org/INTINFNETWORK/Resources/ApproachestoPrivateParticipationWaterServices.pdf

Appendix13 ADBDevelopingBestPracticesforPromotingPrivateSectorParticipationinInfrastructure:WaterSupplyhttp://www.adb.org/publications/developing-best-practices-promoting-private-sector-investment-infrastructure-water-supp

Appendix14 PublicPrivatePartnerships–ImprovingPerformanceofIrrigationServicesProvision[ane-learningcourse]http://einstitute.worldbank.org/ei/course/public-private-partnerships-ppp-improving-performance-irrigation-services-provision

Appendix15 PublicPrivatePartnershipine-GovernmentKnowledgeMaphttp://www.infodev.org/en/Publication.821.html

Appendix16 AlternateDisputeResolutionManual:ImplementingCommercialMediationhttp://rru.worldbank.org/Documents/Toolkits/adr/adr_fulltoolkit.pdf

Appendix17 ResourceManualforAirportInTerminalConcessionshttp://onlinepubs.trb.org/onlinepubs/acrp/acrp_rpt_054.pdf

DRAFT

Draft Version as of 4 August 2014

Page 99: NATIONAL GOVERNMENT AGENCY PARTNERSHIP DRAFT - World Bank · EBRD European Bank for Reconstruction and Development ... • What are the merits/demerits of each site? ... National

NationalGovernmentAgencyPublic-PrivatePartnershipMANUALVolume4Annex9 3

II. APPENDIXES RELATED TO LEGAL AGREEMENTS AND THEIR WEB ADDRESSES

Appendix1 WindPowerEnergyPurchaseAgreement(DevelopedforPakistan)http://ppp.worldbank.org/public-private-partnership/library/power-purchase-agreement-ppa-produced-pakistan

Appendix2 ImplementationAgreement(fourexamplesforpowerplant)http://ppp.worldbank.org/public-private-partnership/ppp-sector/energy-power/energy-power-agreements/implementation-agreement

Appendix3 FuelSupplyAgreementsforPowerPlant(twoexamples)http://ppp.worldbank.org/public-private-partnership/sector/energy/laws-regulations/bulk-fuel-supply-agreements

Appendix4 PowerPurchaseAgreements[SeveralExamples,differentfuels]http://ppp.worldbank.org/public-private-partnership/ppp-sector/energy-power/energy-power-agreements/power-purchase-agreements

Appendix5 PerformanceBasedContractsintheRoadSector–BrazilExperiencehttp://siteresources.worldbank.org/INTTRANSPORT/Resources/336291-1227561426235/5611053-1229359963828/TP-31_PBC_Brazil.pdf

Appendix6 SampleBiddingDocumentandAgreementforPerformanceBasedContractsinRoadshttp://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/PROCUREMENT/0,,contentMDK:20646773~isCURL:Y~menuPK:84284~pagePK:84269~piPK:60001558~theSitePK:84266,00.html

Appendix7 RoadConcessionAgreements(fourexamples)http://ppp.worldbank.org/public-private-partnership/sector/transportation/roads-tolls-bridges/road-concessions

Appendix8 SkukuzaAirportPublicPrivatePartnershipAgreement(SouthAfrica)http://ppp.worldbank.org/public-private-partnership/library/skukuza-airport-public-private-partnership-agreement-south-africa

Appendix9 Operations,ManagementandDevelopmentAgreementforAirports(India)http://www.airportsindia.org.in/righttoinformation/OMDA_DIAL.pdf

Appendix10 SampleConcessionAgreementsforPorts(SeveralExamples)http://ppp.worldbank.org/public-privatepartnership/sector/transportation/ports

Appendix11 SampleConcessionAgreementsforRail,LightRailTramsandMetro(SeveralExamples)http://ppp.worldbank.org/public-private-partnership/sector/transportation/railway-trains

Appendix12 Examples,SolidWasteManagementAgreementshttp://ppp.worldbank.org/public-private-partnership/sector/solid-waste/sample-agreements

Appendix13 AgreementsforBulkSupplyofWater,O&Mofwaterutility,Lease/Affermage,Concessionshttp://ppp.worldbank.org/public-private-partnership/ppp-sector/water-sanitation/water-agreements

DRAFT

Draft Version as of 4 August 2014