Odessa May 2013 Odessa Maritime Days 2 Transactions PreCrisis Ports Facts amp Trends Crisis May 2013 Odessa Maritime Days 3 20082009 Global economic crisis impacted the global trade flows ID: 798784
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Slide1
Odessa Maritime Days
24 May 2013
–
Odessa
Slide2May 2013
Odessa Maritime Days
2
Transactions: Pre-Crisis
Ports: Facts & Trends
Slide3Crisis
May 2013
Odessa Maritime Days
3
2008-2009
Global economic crisis
impacted the global trade flowsTrade flows start to decrease and number of containers go down
Sea freight rates have gone down dramatically
Companies are in financial distress and are forced to sell stakes in port assets
Operators have difficulties closing a financial loan
Less appetite for port
concessions
Even African projects slow down: syndication
Ports: Facts & Trends
Slide4Project Bankabilitya viable project is not yet a bankable one
May 2013
Odessa Maritime Days
4
Economic & Financial Balance
Financial Viability
Bankability
IRR
NPV
Secu-rities
DSCR
Determined
over a
period
of > 20
years
Includes future project phases
Determined
over a
period
of < 20
years
Depending
of project start-up
phase
Slide5Project Bankabilitya viable project is not yet a bankable one
Debt service
Revenue protection (tariff and competition)
CAPEX/ OPEX aligned with revenues
Value Engineering and port planning aligned with business demands
SecuritiesProper structuring
Proper risk engineeringQuantification (value) of impact of different structures and risk allocations: create valueSafeguarding in the mean time authorities interest to retain discretion over policyNew era of contract engineeringMay 2013Odessa Maritime Days
5
Slide6Value engineeringA viable project may not yet be bankable
May 2013
Odessa Maritime Days
6
This
project
has a project IRR of
19% and a positive NPV
.
However, the first year of
positive Free Cash Flow
is in year 6
The
pay-back period is 10 years
from initial investment.
Vale created after the expansion investments in year 15 are not of interest for the lenders!
So, how bankable is this project for project financing?
Slide7Basic Port Management models
May 2013
Odessa Maritime Days
7
Type
Nautical Access
Infrastructure
Superstructure
Labour
Nautical services
Antwerp
Public, by Regional Government (100% subsidy)
Public, partly PA partly Reg. Government
Mostly Private
Some public cranes at daily rent fee
Private via regulated dock labor pool
River towage: open thru 7-yr concession
Harbour
towage: by PA
Bunkering: open
Rotterdam
Public by National Government (100% subsidy)
Port Authority*
Private
Private incl. subcontract.
Towage: open
Bunkering: open
Pilotage: private, closed
Felixstowe
(HPH)
Harwich Haven Authority responsible dredging &
maintenance navigation channel
Private
Private
Private
Pilotage: Harwich Haven Authority
Other: Private, Open
Port Models
Slide8Financial Structure Business Case Model
May 2013
Odessa Maritime Days
8
Terminal Operator
Handling
fees
Storage fees
Assets
Equity
Concession
fees
Commercial
loans
Opex
Port Authority
Port dues
Concession
fees
Assets
Soft loans
Subsidy
Opex
Commercial
loans
Surplus profit is transferred back to PA
Operator
Port Authority
Cash Flows PA/TO
Slide9Financial Structure Business Case Model
May 2013
Odessa Maritime Days
9
Port dues
Concession fees
BC TO
BC PA
Minimal rate of
return PA
Cash Flows PA/TO
Revenue
Handling fees
Surplus profit
Minimal rate of
return TO
X%
Y%
Create market appetite
Secure revenues operator
Concession contract (bankability)
Competitive tendering for concession
Maximise value to Port
Align concession fees with surplus profit (time and amount)
Slide10Contract Award Criteria
Selection
and awarding (give substance to objectives of
Ministry/PA)
Value:
throughput guarantees
productivity
r
isk absorption
Money:
upfront fee
fixed fee
Royalty/ revenue shareMay 2013Odessa Maritime Days
10
Tender Process
Slide11transaction costs
preparation
pre-qualification
proposal
time
5 Candidates
1 Preferred
Candidate
negotiation
€
public
private
High transaction costs at the tail of the tender procedure for both public and private sector
Time consuming negotiations as contract/critical topics are brought in the process (too) late
Draft Contract
Final Contract
Transaction Costs – Classical Approach
May 2013
Odessa Maritime Days
11
Tender Process
Slide12transaction costs
transaction costs
preparation + market consultation
pre-qualification
5-10 Candidates
3-6 Candidates
contract “dialogue”
3-6 Candidates
public
private
Draft Contract
proposal
Final Contract
time
€
BAFO
Proposal
Transaction Costs – Competitive Dialogue
Significant transaction costs at the beginning of the tender procedure for both public and private sector
No time consuming negotiations as contract/critical topics are brought in the process early and under competition
May 2013
Odessa Maritime Days
12
Tender Process
Potential to deal with sensitive topics
Slide13