Project Documentation

1
Project Documentation

• A presentation for the HK Efficiency Unit
• PPP Project Financing Seminar
• John Maxwell/Christopher Bradley
• 30 September 2005

2
Introduction

• Project Documentation Overview
• Project Agreement Key Terms
• Recent Developments in maturing PPP markets

3
Project Documentation Structure
Sponsors/ Shareholders
Government
Project Agreement
OM Contractor Guarantor
Construction Contractor Guarantor
Project Company
OM Agreement
Construction Contract
Operations Contractor
Construction Contractor
Interface Agreement
Architect
Sub-contractors
4
Project Documents

• Project Agreement
• Construction Contract
• Operating Contracts
• Ancillary Contracts

5
Financing Overlay
6
Project Agreement

• Term
• Land
• Design, Construction and Completion
• Operations and Maintenance
• Payment
• Time and cost issues
• Termination
• Termination compensation

7
Term

• Usually fixed number of years
• Factors to take into consideration
• Must be long enough to earn back debt and costs

8
Land

• Who will have responsibility to obtain?
• Is a particular site key to the Project?
• Appropriate form of land grant
• Responsibility for planning permission

9
Design, Construction and Completion

• Design
• Concessionaire risk/responsibility but within
  specified output criteria
• Construction
• Will be agreed construction schedule
• Concessionaire will warrant quality and rectify
  defects
• Completion
• Completion will be signed off by Government, and
  lenders will also be involved
• Protections against late service commencement

10
Operation and Maintenance

• Agreed operation and maintenance regime
• Availability
• Performance Monitoring
• Handback

11
Payment Mechanisms

• Can be structured many ways
• demand based (shadow or real)
• availability based
• hybrid based

12
Time and Cost Issues

• How delay and increased cost will be dealt with
  will depend on project and how payments will flow
• Time
• Time and money
• Force Majeure

13
Termination

• Rights to terminate
• Concessionaire will be concerned to protect
  investment by limiting rights to terminate
• Lenders also will be concerned to protect their
  loans to the Concessionaire
• Will depend upon compensation regime - where
  protected will be less concerned

14
Termination Compensation

• If it DOES all go wrong, how much will the
  Government pay, if anything?
• Competing Interests, but usually
• lenders are protected and kept whole
• Concessionaire is protected where not at fault
• rationale for payment even where at fault is that
  Government acquires asset

15
Developments in maturing PPP markets

• Standardisation of documentation
• Improved risk allocation/value for money
• Monoline wrapped bonds/Credit Guarantee Facility
• Support/Experience for public sector
• Flexibility and partnership
• Confidentiality and freedom of information
• Refinancing controls
• Winning over public opinion/political issues
• Treatment of employees