NIGER DELTA DEVELOPMENT COMMISSION NIGERIAN BAR ASSOCIATION

NIGER DELTA DEVELOPMENT COMMISSION & NIGERIAN BAR ASSOCIATION CONFERENCE ON LAW, PEACE & DEVELOPMENT IN THE NIGER DELTA 6 th May 2008, Presidential Hotel, Port Harcourt Public Private Partnership For Infrastructural Development In The NIGER DELTA AYULI JEMIDE

OUTLINE 1. KEY ELEMENTS OF PPP’S 2. 2. CORE PPP PRINCIPLES & THE NIGER DELTA 3. RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S 4. 4. TALKING POINT ON PPP/INFRASTRUCTURE PROJECTS IN THE NIGER DELTA 5. SOME USEFUL CASE STUDIES 6. IMPERATIVES FOR PPP’S IN NIGER DELTA AYULI JEMIDE

Key Elements of Public-Private Partnership • A contractual partnership between a government (public) entity and a private company (or a non-profit private body) that provides a public service to citizens. • A good PPP should improve a service provided by Government at a reasonable cost to the end user. • Typically, the Public Sector is buying a service, and the private sector is investing for Profit. • Flexible contracting: Lease, Manage, Build Operate & Transfer, Joint Ventures, Service Contracts. Anything goes! AYULI JEMIDE

HOW WILL CORE PPP PRINCIPLES PLAY OUT WITH NIGER DELTA PROJECTS? AYULI JEMIDE

RULE NO. 1 PPP’S are ONLY for VIABLE projects • Feasibility: a) Is it possible? b) What will it cost? • Viability: a) Will cash flow maintain service levels? b) Will there be a profit or ROI? Can we identify viable project types in the Niger Delta? AYULI JEMIDE

RULE NO. 2 Allocate RISKS to the party best able to handle them Usual Parties: Govt, Investor, Financier Insurance. Usual Risks: Political, Financial, Operations, etc, and now Security Which party can best handle the peculiar risks in the Niger Delta? How? AYULI JEMIDE

RULE NO. 3 PPP must address STAKEHOLDER concerns NEEDS ANALYSIS: Do they need it? Is the need more pressing then other neglected areas? AFFORDABILITY TEST: Can the public afford the User Charges? Will it be robbing Peter to pay Paul? Which proposed PPP’s in the Niger Delta will ably address these issues? AYULI JEMIDE

RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S AYULI JEMIDE

Question NO. 1 WHO CAN CONTRACT IN PPP’S? 1) Those empowered by the Infrastructure Concession Regulatory Commission Act 2005 Section 1 “Any Federal Govt Ministry, Agency, Corporation, or body involved in the financing, construction, operation or maintenance of infrastructure, by whatever name called, may enter into a contract with or grant concession to any duly prequalified project proponent in the private sector for the financing, construction, operation or maintenance of any infrastructure……in accordance with the provisions of this Act. AYULI JEMIDE

Question WHO CAN CONTRACT IN PPP’S? NO. 1 2) Government Agencies empowered by Law Examples: - Federal Emergency Road Maintenance Act Section 8 - Niger Delta Development Commission Act – Section 7 1 (b), 8 (e) ? AYULI JEMIDE

Question NO. 1 WHO CAN CONTRACT IN PPP’S? STATE GOVERNMENTS: Section 5 (2) ( a) (b) of 1999 Constitution: Vests Executive Powers in Governor: “shall to execute and maintain all Laws made by the House of Assembly and with respect to which the House of Assembly has for the time being power to make laws”. – Everything on the concurrent or residual legislative list? An enabling Law for PPP enacted by each State is advisable for clarity and investor confidence. AYULI JEMIDE

Question WHO CAN CONTRACT IN PPP’S? NO. 1 LOCAL GOVERNMENTS: 4 th Schedule to 1999 Constitution lists functions of LG’S to include: Maintenance of roads, and in conjunction with the State: primary, vocational, and adult education etc Also Local Govt Laws have similar Executive-power provisions for the LGA Chairman as that of the Governor contained in the Constitution Are these sufficient for a serious investor? AYULI JEMIDE

Question NO. 2 WHO CAN LEGISLATIVE? Exclusive Concurrent Residual Federal Roads Maritime Aviation Mines & Minerals Railways Nuclear Energy Electric Power Industrial, Commercial & Agric Dev. Education Urban planning Transportation State Roads Water Housing Health AYULI JEMIDE

Question WHO OWNS THE ASSETS? NO. 3 ROADS FOR EXAMPLE: STATE GOVERNMENT 16% FEDERAL GOVERNMENT 17% LOCAL GOVERNMENT 67% AYULI JEMIDE

TALKING POINTS ON INFRASTRUCTURE AND PPP’S IN NIGER DELTA AYULI JEMIDE

Point PIONEER’S BURDEN NO. 1 Are there successful PPP projects in the Niger Delta? - Educate and Inform - Process to encourage credible investors - Legislation - PPP Unit with qualified project officers - Identify, remove, hindrances and obstacles AYULI JEMIDE

Point NO. 2 BANKABILITY THIS WOULD BE AN ISSUE: 1. Project Finance: Cash flow Lending 2. Infrastructure is not a briefcase project 3. Risk Analysis is high: Project risk, Operational risk, Economic risk, Endangered Asset. AYULI JEMIDE

Point NO. 2 Can we cross the Bankability hurdle? Some Options: - More Govt funding to reduce private sector risk 100% Govt funding with Private Sector as Operators State or Federal Government Bonds Sovereign Guarantees & Indemnities Spread funding into bite size portions Structure collateral rewards i. e shadow tolls, guaranteed income plus @ a minimum IRR (rate of return). AYULI JEMIDE

Point RISKS !!! NO. 3 ALLOCATION OF RISKS WILL BE KEY TO PPP’S IN THE NIGER DELTA • Can we allocate risk to Communities? • How we allocate risk to a non-stakeholder? • High risk demands higher premiums and makes the user charges higher. AYULI JEMIDE

Point WHO TAKES RESPONSIBILITY? NO. 4 WOULD FEDERAL, STATE, AND LOCAL GOVTS TAKE RESPONSIBILITY FOR CERTAIN FORCE MAJEURE EVENTS? E. G. BAIL OUT CLAUSES THAT GIVE INVESTOR A GUARANTEE THAT THEY WILL NEVER LOSE THEIR MONEY AYULI JEMIDE

SOME USEFUL CASE STUDIES AYULI JEMIDE

LEKKI ROAD CONCESSION • State Govt passed the Lagos State Highway, Roads & Bridges Law to support this transaction. • State Government gave adequate Guarantees: Cash Bond, Access to Site, etc • Signed Non-Compete Clauses • Threw in other projects as sweeteners • Set up a Unit to monitor PPP’s • Stamp Duties Exemption from FGN • NAICOM Exemption for Offshore Reinsurance AYULI JEMIDE

TAJIKISTAN POWER PROJECT • ABOUT TAJIKISTAN: • • • Mountain region of Former Soviet Union Civil war just ended Per Capita Income was $160 a year 80% of population lived below poverty line People used wood for heating: the forests went sparse and respiratory disorders were common • 43 % of homes had no electricity • Homes with electricity were used to paying < 1/10 th of current production cost NOT AN INVESTORS HAVEN FOR A POWER PROJECT AYULI JEMIDE

DEAL STRUCTURE WORLD BANK IDA $1 OM @ 0. 75% Tajikistan GOVT On-lending @ 6% As Part Finance PAMIR ENERGY AKFED -70% ($8 m Equity) Tajikistan GOVT 5. 2% Margin $5 m Grant from Swiss Govt IFC – 30% + POOL OF FUNDS AYULI JEMIDE ($3. 5 m Equity) ($4. 5 m Debt)

LESSONS • 25 year Concession on Electric Utility Assets – It’s an interesting PPP! • Must not be a big project - 30, 000 customers initially. • Employment is a major spin off - 595 employees. • Conflict ridden areas should seek funds from right places AYULI JEMIDE

MORE LESSONS Government used its pool of funds to subsidize a “lifeline” Tariff – An ingenious Social Protection Scheme. • • Donor and Funding Agencies are key factors in high risk PPP projects • Think outside the box – This pioneered a new mode of collaboration • Cheaper funding arranged by Govt. gave a fair return on investment AYULI JEMIDE

AFGHANISTAN HEALTH PROJECT BACKGROUND INFORMATION In 2002 Afghanistan had one of the worse basic health indicators in the world: - 25% of children died before their 5 th birthday - 165 of every 1000 children died at birth - 1600 maternal deaths in every 100, 000 - Over 60% of population had no access to any basic health service AYULI JEMIDE

HOW WAS PROJECT STRUCTURED? DONORS LOCAL GOVT NGO’S • MONEY • PROVIDE LAND • OPERATE THE HEALTH CENTRES VIA CONTRACT • LABOUR FOR AFTER BUILDING HEALTH CENTERS COMPETITIVE BIDS WITH SET OPERATIONAL • TRAIN CRITERIA AND COMMUNITY LEVELS: BASED EQUIPMENT, PERSONNEL STAFF, PRICING ETC • SET UP HEALTH COMMITTEES AYULI JEMIDE STATE GOVT • OWNS THE HEALTH CENTRES • REGULATES THE STANDARDS AT HEALTH CENTRES

WAS IT SUCCESSFUL? 2002 2005 Under 40% had access to basic health 77% had access 3 years later Few Community based health Personnel 27 Health Centers manned by Trained indigenes Haphazard approach to health care Standardized classification of health facilities in all the communities Limited local participation in health care delivery (Mostly NGO’s) Ongoing Capacity Building should see more health centers run by locals when Concessions are over. AYULI JEMIDE

IMPERATIVES FOR PPP PROJECTS IN THE NIGER DELTA AYULI JEMIDE

1. Use Low Hanging Fruit Pioneer with projects that: a) b) c) d) Require minimal Govt. involvement Are quick to achieve Generate employment and capacity building Are service oriented For example: Health care schemes or Education. AYULI JEMIDE

2. Start With Parties Who Have Vested Interest • It is easier to work with the oil companies who already have a vested interest and sunken costs than to find “green” investors. • OPCO’S, Govt and NDDC should start a PPP task force immediately to fashion a roadmap AYULI JEMIDE

3. Start With Service-Oriented PPP’s • PPP’S that affect standard of living should be uppermost. • Studies from Post Conflict countries say this is the fastest route to host community buy-in. Service oriented PPP’s are seen for their value NOT as contracts to the oppressors. • E. G – Education, Health, Capacity Building. AYULI JEMIDE

4. Network with International Agencies • MDA’S (Multilateral donor and credit agencies are key) World Bank IDA, MIGA etc • • TO: Give risk guarantees Grants and soft loans Training and capacity building AYULI JEMIDE

CONCLUSION • IT IS NOT ROCKET SCIENCE !! AYULI JEMIDE

• THANK YOU FOR LISTENING AYULI JEMIDE