WELCOME

01 A retired Commissioner of Police,

he has the following qualifications

02 PhD(Civil Engineering) - UNIBEN

CHUKWUMA KATCHY PhD

MBA, M.Eng., PMP, M.IoD, FNIM, ACArb

03 MBA (Strategic Management) – UNILORIN
MANAGING PARTNER KPT ASSOCIATES LTD.
08033223800 kptassociates@yahoo.com

04 M. Eng - University of Benin PROFESSIONAL

QUALIFICATIONS
05 BSc UNILAG
Holds the following professional qualifications
06 Dip Law Ado-Ekiti
1. Certified PPP Specialist (ip3).
2. Certified PPP Professional (CP3P)
3. Project Management Professional (PMP)
Author of the book 4. COREN Registered Engineer C.Eng
“Public Private Partnership”
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 • The need for a pre-feasibility
study before a feasibility study.
Participants • Learn about the three important
shall features of a PPP project.
Learning understand • Understand the main activities
Objectives required to detail the scope of a
the followings PPP project, design its technical
1
requirements, and assess
technical risks
 • Understand the basic techniques
and good practices required to
Participants produce a series of feasibility
shall assessments of the technical,
Learning understand commercial, economic,
Objectives environmental, social, legal, and
the followings fiscal dimensions of the project
2
etc
 Participants
shall Understand the basic techniques
Learning and good practices required to
understand identify and allocate risks
Objectives the followings
3
 Luke 14:28

For which of you, intending to

build a tower does not sit
down first, and count the cost,
whether he has enough to
finish it?
 Project Cycle
APMG

Contract
Identificati Structuring Tendering Contract Mangeme PROJECT
Appraisal & Award Mangeme nt &
on & & nt Operation
Screening Constructi s
Drafting on
(Pre - Feasibility)
(Feasibility). .
 Project Cycle
ICRC

Developm
Procureme Implementati
PROJEC
Maturity
ent T
nt. on.

(Pre Feasibility &

Feasibility). .
 PRE-FEASIBILITY
An assessment of the basic parameters of a PPP
project used to decide whether to go forward with
more in-depth and expensive studies, such as
feasibility studies and transaction development.
It is based on existing summary information available
about a project Here the following are determined
• the basic scope of the contract,
Requires a multi-disciplinary team and technical requirements.
• Technical
• Financial • Basic Financial Costs
• Legal
• Environmental
 WHY PRE-FEASIBILITY

1 2 3
To avoid the risk of sinking To prevent strong To engender a good
resources into the analysis incentive for a biased working relationship
and structuring of a non- decision. between officials of the
feasible PPP project. procuring entity and TA
 PRE-FEASIBILITY DECISIONS
3
1 2 The project can be made
viable through Govt.
The project appears to be The project is not
support eg OBA or VGF
sound as a PPP and can move suitable as a PPP
on to the next stage i.e.
feasibility study; 4
1

The project is missing relevant information, or

there is a need to clarify some uncertainties. In this
case, the appraiser has to state the project’s
weaknesses and recommend a further analysis by
the procuring authority
 Pre Feasibility

y Aff
li t o
b i rd
it a a bi
s u lit
P P y
P
 PPP SUITABILITY
01.

Are there any significant risks or uncertainties

within the project that are not manageable by a
private partner? Is there a risk of non-availability of
the land/right of way , approvals?

02.

Can the project be accommodated within the legal

framework as a PPP? Have all relevant laws been taken
into consideration?
 PPP SUITABILITY 2
03.

Is the project’s size big enough to justify the implicit costs of the
transaction (to justify structuring and managing a complex tender)? Is it
not too big for the market? Is it too large for local construction companies
to take on, or so costly that it could not be successfully financed?

04.

Would there be investor market appetite? Are there competitors interested

in the bid process? Are there precedent transactions that were already
developed as PPPs for this type of project in the country/region/similar
countries?
 PPP SUITABILITY 3
04.

Does it make sense to bundle construction and operations and/or

maintenance in a single contract? and

Can project performance be measured in clear outputs & KPIs?

05.

Are there clearly identifiable revenue streams (from Govt. or public end-
users) with strong growth prospects?

A destructive competitive market does not & will not exist soon.
 AFFORDABILITY

Will projected user charges and/or long-term call

on the government budget be affordable?
FEASIBILITY

Feasibility Study is conducting a series of

exercises that inform a decision to
approve, cancel, or revisit the project
before committing further scarce public
resources along the project cycle.

Is it sensible, from an economic perspective, to implement the

project?
Is it practical to procure the project as a PPP? How much will it
cost? Is it affordable from the government’s perspective?
FEASIBILITY 2
Is there adequate market interest and capability to deliver this
project?
What are the main obstacles to the project’s implementation?

Can they be overcome and if yes, can they be overcome in a cost

effective manner? How?
 FEASIBILITY 3

Risk identification must be exhaustive during

the feasibility exercise as a failure to thoroughly
identify risks at this time may result in a flawed
appraisal and subsequent project failure. It is
therefore good practice to develop a
comprehensive risk register during the
feasibility study.

Risk assessment includes both quantitative

assessment to develop risk-adjusted costs
& qualitative assessment for the purposes
of the preliminary risk allocation
 3 Important dimensions of a
PPP Project
Technical Requirements
The technical requirements of the project
produced as a part of the technical feasibility
exercise
Financial Model
Spreadsheet which organizes the
financial assumptions and forecasts
relevant financial information, used
for the commercial feasibility exercise
and for some other evaluations
Pre-Contract Structure
Two key aspects
- Financial structure from the government perspective
(revenue regime, contract term, etc) and
- Risk allocation structure.
Elements of a
Feasibility Study
Technical Feasibility
Commercial Feasibility
Economic Feasibility
Fiscal Feasibility

Debt Analysis Feasibility

Environmental
Feasibility
Social Feasibility
Legal Feasibility (Due
Diligence)
Value for Money
Stakeholder
Feasibility Feasibility
Human Resources
 Feasibility Studies

Technical Feasibility Commercial Feasibility

Value for Money

Assessment). Tech Rqm Economic Feasibility
Legal Feasibility
(Due Diligence). FM
Pre Con Fiscal Feasibility
Social (Affordability)
Feasibility

Environmental Debt Analysis

Feasibility
 Financial Assessment
Economic Feasibility
All costs and benefits of the project
to society.

Commercial Feasibility
Private sector cash flows for the project

Fiscal Feasibility /
Affordability
Public sector (User) cash flows for the
project
Value for Money
Cash flows for the project thru PPP
in comparison to Cash flows for the project thru traditional
delivery.
Technical Feasibility 1

Does the infrastructure design meet the

need specified during the pre-feasibility
analysis?
Are the engineering and architectural
requirements of the project achievable? If so,
are they achievable at a price comparable
with similar infrastructure?

Is the proposed technology proven or can

the associated risks be properly managed
or allocated?
Technical Feasibility 2
Is there a complete assessment of geo-
technical conditions (that showed the
technical potential of the required
construction on the site) that can affect the
project, in terms of costs and time?

Is the scope of service viable from a

regulatory perspective?
Is the scope of service viable from a
regulatory perspective?

Can the main technological changes in the

service delivery be satisfactorily
estimated?
 Commercial Feasibility
Analysis conducted to check whether the
project will effectively attract quality bidders,
investors, and lenders, as well as highlight the
main conditions that must be met to do so.
Also includes “financial feasibility”.

Investors
Profitability ratios – IRR, NPV etc

Lenders
Leverage ratios – Debt/Equity
ratio, DSCR etc
 Economic Feasibility

A type of analysis used to compare two or

more options for a project or a decision
based on economic flows duly adjusted,
following some patterns. The CBA is
primarily used to assess the socio-
economic feasibility or value of the
selected project or project under
assessment (regardless of the method of
procurement).
Debt Analysis Feasibility

Confirm if “off balance sheet” or

not and if it can still be
accommodated within the
country’s debt
 Fiscal Feasibility
Direct liabilities (when the project is
partially or fully funded by the
government) or contingent liabilities
Your Title Here (when risks are allocated to the Govt.).

Your Title Here Affordability

(Govt. pays) accommodated
Your Title Here within the government’s current
and future budget constraints.
Your Title Here
(User Pays) – willingness to pay
 Social Feasibility 1
Exercise aimed at identifying and analyzing project’s impact on the lives of people that live
and work in the project’s area of influence in order to understand the scale and reach of
the project’s social impacts

Will the project produce Will the project significantly

any population or alter the economic
demographic movement, structure of the local
such as the change in economy or generate any
size of the communities significant change in relative
affected by the project? prices, such as land value?

Your Title Here

 Social Feasibility 2
Does the background of project staff (for example, urban, educated, skilled, foreign
language-speaking, expatriates, different customs, and so on) differ significantly from local
communities and provide potential for misunderstanding and conflict?

Will an influx of newcomers Will the project increase or

seeking opportunities decrease the demand for
associated with the project public goods or services,
disrupt traditional social such as education or
structures and create health?
undesirable effects, such as
crime, violence, disease, or
conflict due to religious and Your Title Here
ethnic rivalries?
 Environmental feasibility
To ensure that environmental considerations are explicitly addressed and incorporated into
the OBC, that there are no unmanageable environmental obstacles ahead.

A fundamental question that The potential impact of the project

must be addressed during the in terms of contamination or
environmental feasibility pollution (gas emission, noise
analysis: is there any specific pollution during construction, water
aspect of the project that contamination, etc
makes environmental
approvals impossible or
the costs to obtain them
prohibitive? Impact on the natural environment
such as impacts on biodiversity, visual
impact on the landscape
 Stakeholders Feasibility
The purpose of stakeholder management at the project level is to ensure that the
necessary individuals or groups are appropriately lobbied and engaged, thereby ensuring
their ongoing support of the project
Communicate stakeholders early and
transparently to minimize resistance.
Intense public criticism may make the
next govt. renegotiate or even cancel
the project. 2015 250 pds Toll road in
Melbourne Australia cancelled.

Public demonstrations, labour

resistance etc. may lead to delay in
implementation
 3 Groups of Stakeholders

Those who want Those who

Those who are
the Project to want the
neutral
succeed Project to fail
 Stakeholders’ Management
Influence – Interest Matrix

Satisfy Closely
engage

INFLUENCE

Monitor Inform

INTEREST
 Human Resources Feasibility
If a Project involves institutional change there will be an impact on the existing staff.
Therefore, identify nature and number of staff to be affected, formulate a clear and
concise plan for communicating with staff and addressing their needs and issues of
concern in a fair and equitable manner

If there will be
retrenchment,
what are the social
safety needs ?
 Value for Money Assessment
If compared with a public sector procurement option, will the PPP deliver a higher net
economic benefits to society, taking into consideration the whole-life costs of the project

Project Project
N25m N30m delivered
delivered
through PPP through
traditional
Legal Due Diligence 1
A PPP Project is like any other project and so
must comply with relevant laws

Sector Legislations and Regulations

A PPP contract must meet the
requirements of all laws stipulated
in its (project) sector. Eg., an
airport Concession Contract must
be in accordance with Federal
Airport Authority Act, Nigerian
Civil Aviation Authority Act, Civil
Aviation regulations and any other
aviation related regulations.
Legal Due Diligence 2
A PPP Project is like any other project and so
must comply with relevant laws

PPP Legislations and Regulations

Infrastructure Concession
Regulatory Commission Act (ICRC)
2005 and Regulations.
Legal Due Diligence 3
A PPP Project is like any other project and so
must comply with relevant laws

Across the board related

legislations/regulations

Eg., Procurement Act 2007;

Debt Management Office
Regulations; CBN Regulations,
Insurance Act etc.
 1st Important
Dimension
TheTechnical
technical requirements are derived
Requirements
from the technical solution to the
problem

Typically comprises two parts

Project Design and Construction

Requirements

Performance Requirements,
and O & M Requirements
Project Design &
Construction
Minimum Detail Functional
The identification of the key Design
design requirements that will
later be included in the PPP
contract as the specification for
construction of the
Reference
infrastructure, including time
Design
requirements (time limit to
construct and commission); and

Full Design & A reasonably precise estimate

Construction of cost data to feed into the
prescription financial model.
 Performance & O & M 1
This should contain the following as minimum
A very precise description of the
scope and minimum characteristics
of the content of the service to be
delivered by the private sector;

The outputs generated by the

delivery of the service in terms of
effective benefits for users and
the wider community;

The main responsibilities, related

to the service, retained in the
public sector;
 Performance & O & M 2
This should contain the following as minimum
The preliminary requirements for
an effective performance
evaluation system that will create
adequate and effective incentives
during the life of the contract;

The minimum requirements for an

infrastructure maintenance plan,
noting the danger of prescribing the
means and allowing space for
innovation; and

Specific provisions for hand-back at

the end of the contract.
 2nd Important
Dimension
Pre Contract
One important aspect of the
Structure
project, which needs to be
preliminarily defined during
appraisal, is the PPP contract
structure, specifically in terms of
the Financial & Risk Structure:
Since the conclusions of the faesibility
exercises depend on a preliminary PPP
contract structure to achieve meaningful
conclusions, the preliminary PPP contract
structure should be done to a fairly
accurate degree.
 Pre-Contract Structure
Two impotant parts

Financial structure
from the Govt.
perspective Risk allocation
(revenue regime, structure
contract term, etc.
Risk Allocation
Structure
Demand risk, Revenue risks, Project
input or resource risk,
protestation risk, Risk
reputational damage risk,
political risk, Technology risk, Risk
early termination risk ie
capricious termination, Risk
termination for convenience
or public good risk, Force
Majeure risk etc
Early Termination Risk
Private Party’s default
Lender is paid back with a
haircut
Part of Equity may be paid
Govt. default
back
Lender is paid back outstanding
loan in full with interest and
breakage costs
Outstanding Equity is paid back
with estimated profit
Force Majeure

Lender is paid back outstanding loan

in full without interest and breakage
costs
Outstanding Equity is paid back
Change in Law Risk
General change in law
Affects all projects. Private
Party bears the risk

Specific change in law

Affects only projects in that
sector. Government and Private
Party share the risk
Discriminatory change in
law
Affects only the PPP project or all PPP
projects only. Government bears the
risk
 Financial Structure
Financial viability

Investor Lender Govt./Us

DSCR, er
Affordability
IRR, Equity NPV,
Payback &
Project NPV
period, Quality
leverage service
Financial Structure

Govt support
Viability Gap Funding or
Revenue Regime Output Based Aid
User Pays or Govt. pays
Third Party revenues.

Cession Daily
Refinancing
 3rd Important
Dimension
Financial
Financial model is a tool that presentsModel
the financial
characterization of the project over its lifetime. It
incorporates, all the expected private sector investments,
revenues, costs, taxes, analytical parameters e.g. cost of
loans, cost of equity, insurance parameters, and the relative
inflation rate

It is designed to reflect the estimated financial situation of

the project company during the life of the contract and
adjusted later for other modeling purposes such as: The
estimation of the fiscal consequences of the contracts; and
The Public Sector Comparator
Sources of Information for an FM
1.The CBA which can include
financial data that may be used
as the starting point of some
financial values, such as
estimated potential revenue,
total costs, taxes, and others
.
3.The description of benchmark
projects identified in the
Technical Feasibility stage and
the respective historic data
available;
2.The costs estimated in the
process of defining the technical
requirements which should
provide estimated values on
investment, maintenance, and
operations costs;
4.If the infrastructure already
exists, current data on demand,
costs, and revenue; and
Sources of Information for an FM 2
5. Studies already conducted to
assess the need for the project.
For example, in transport
projects there may be existing
traffic and revenue studies.
Outputs of an FM 2
Two important output of an FM
• the free cash flow of the project
• the free cash flow of the investor
The free cash flow of the Project.
Total Capex that has been financed
with money from shareholders &
lenders, and Revenues less O & M
costs.

The free cash flow of the investor

(shareholder).
Capex that has been financed with
money from shareholders (excludes
debt) & money repaid to investors in
the form of dividends or other
equity repayments.
Sensitivity Analysis
technique used to determine how different values of
an independent variable impact a particular dependent
variable under a given set of assumptions.
Effectively used to determine which of the several
inputs may be the most important and the extent to
which each input affects the output
Sensitivity Analysis 2
Generally consider changes in

• Project term
• Construction period
• Inflation rate and discount rate
• Construction costs
• Market demand
• Operating Costs
• Third party revenue
• Residual values
• Financing terms
Sensitivity Analysis 3
Minimum sensitivity analysis should include the
following
1. Increase in investment cost by 10% to 30%;
2. Increase in operating costs by 10% to 30%;
3.Decrease in revenue by 10% to 30%.
 1.

6. 2.
THANK
YOU
5. 3.
4.
 References
APMG Public-Private Partnership Certification Guide Chapters 1
- 7 The World Bank Group, 1818 H Street NW, Washington, DC
20433, USA 2016
Draft PPP Manual from Infrastructure Concession Regulatory
Commission 2017
Cuttaree V. Successes and Failures of PPP Projects. Retrieved
from World Bank website 17/6/2008

Katchy C.C. Public-Private Partnership El Demak Ltd. 76

Robinson Street, Uwani Enugu State Nigeria. 2015