Parties may be nervous about relying on the courts, or indeed on ICC (Interstate Commerce Commission) arbitration.
Bibliography
(1) AKA Concession Company (1995), the M5 Toll Motorway Project, Unpublished Information Memorandum, Budapest, pp. 1-62.
(2) BODIE, Z., KANE, A., and MARCUS, A. J. (1999): Investments, The McGraw-Hill Companies, Inc., USA.
(3) BONAR, M. and FUSS, S. (1997), the Use of Private Finance for Infrastructure Investment in Western Europe, London, pp. 1-20.
(4) BREALEY, R., MYERS, S., and KRISHNAN, V. S. (2000): Principals of Corporate Finance, The University Press, Cambridge, UK.
(5) BURKE, R. (2001): Project Management (Planning & Control Techniques), John Wiley & Sons Ltd, England etc.
(6) CHAPMAN, C. B., and COOPER, D. F. (1987): Risk Analysis for Large Projects (Models, Methods & Cases), John Wiley & Sons Ltd., UK., pp 1-260.
(7) CHONG, Y. Y., and BROWN, E. M. (2000): Managing Project Risk (Business Risk Management for Project Leaders), Pearson Education Limited, UK.
(8) Commission of the European Communities (1995): Towards Fair and Efficient Pricing in Transport (In: Green Paper), Brussels.
(9) CORNELIS, E., and TOINT, P. L. (1998): PACSIM: A New Dynamic Behavioral Model for Multi-Modal Traffic Assignment (In: Operations Research and Decision Aid Methodologies in Traffic and Transportation Management edited by LABBÉ et al.), Springer-Verlag, Germany.
(10) Department of Transport (1989): National Road Traffic Forecasts, Department of Transport, UK.
(11) ESPADA, I. C., IEDA, H., and SHIBASAKI, R. (2001): Theoretical Optimization of Public/Private Partnership (PPP) Contract Design for Transportation Projects (In: 9th World Conference on Transport Research Proceedings), Seoul.
(12) FISHER, G., BABBAR, S., Private Financing of Toll Roads, RMC Discussion Paper Series 117
(13) FLYNN, R. (1994): Principal Organization (In: Projects Procured by Privately Financed Concession Contracts edited by MERNA, T., SMITH, N.), UMIST, Manchester.
(14) French Study for the DERD/WERD (1998): Analysis of Highway Concessions in Europe.
(15) GAZAL, D., and SIPOSS, A. G. (1997): M5 Motorway Concession Project (In:
Paper for the PIARC Committee on Financing and Economic Evaluation), World Road Association, PP. 31-43.
(16) Halcrow Fox (1996): Hungary M5 Motorway Traffic and Revenue Study, Unpublished Report, pp. 1-46.
(17) HARMATH, L. (2001): Case Study on M5, Unpublished Note, Budapest.
(18) HENSHER, D. A. (1995): Stated Preference Analysis of Travel Choices: The State of Practice (In: Transport Economics: Selected Readings), Korea Research Foundation for the 21st Century, Seoul.
(19) HINOJOSA, S. A.: New Issues in Natural Monopolies Regulation (The Financial Side in Infrastructure Projects in Infrastructure Projects through Public Private Partnership, the World Bank Tool Kit, http://test.triel.com
(20) HOFFMAN, S. L. (1998): The Law and Business of International Project Finance, Kluwer Law International, the Netherlands.
(21) HOOK, W. (1999): The Political Economy of Post-Transition Transportation policy in Hungary, Transport Policy, Elsevier Science Ltd.
(22) HULETT, D. T. (2002): Project Cost Risk Analysis Using Crystal Ball, Crystal Ball Article, USA.
(23) KONG, G. S. (2000): Toll Roads in Selected Asian Countries (In: Scientific Conference of Students), Budapest University of Technology and Economics.
(24) Korea Research Institute for Human Settlements (1999): A Study on the Methodologies for Road Project Appraisal, South Korea.
(25) MARK, A. L. (1995): The BOT Contract Method-A Legal Perspective (In: A Korea U.K Joint Seminar Proceedings on Competition in the Transport Industry), The Korea Transport Institute, Seoul, pp. 71-110.
(26) M.-A.U. Abdul-Malak (1998): Parameters for an integrated life-cycle analysis of transportation projects (In: Urban transport IV), Computational Mechanics Publications/WIT Press, UK, pp.159-167.
(27) MCLANEY, E. J. (1997): Business Finance Theory & Practice, Financial Times Pitman Publishing, UK.
(28) MERNA, T., and ADAMS, C. (1994): Appraisal of Risks in Concession Projects (In: Projects Procured by Privately Financed Concession Contracts edited by MERNA, T. et al.), UMIST, Manchester.
(29) METHLEY, M. (1994): Insurance (In: Projects Procured by Privately Financed Concession Contracts edited by MERNA, T. et al.), UMIST, Manchester.
(30) MILLER, J. B. (2000): Principals of Public and Private Infrastructure Delivery, Kluwer Academic Publishers, Massachusetts, USA., pp. 1-280.
(31) Ministry of Construction & Transportation (2001): Pamphlet (Book Explaining Ministry Activities and Infrastructure Development Status etc.), Myung Shin Printing House, South Korea.
(32) MUNRO, A. (1991): Private Financing of Roads (In: Proceedings of the 14th World Road Congress), PIARC, Marrakech, pp. 51-61.
(33) MURANYI, M. (1999): Motorway Financing in Hungary Experience of The Last 10 Years (In: Seminar Proceedings on Asian Toll Road Development in an Era of Financial Crisis), The World Bank and Ministry of Construction (Japan), Tokyo.
(34) NASH, C. A. (1995): Cost-Benefit Analysis of Transport Projects (In: Transport Economics: Selected Readings edited by Oum, T. H. et al.), Korea Research Foundation For the 21st Century, Seoul, pp.627-651.
(35) OROSZ, C. (1998): The Effect of Toll Road in Hungary (In: Conference Proceedings), PTRC, Laughborough.
(36) OROSZ, C., PÁSTI, B. (2001): Toll Road Characteristics in the World (In: 8th International Scientific Conference Proceedings), Bratislava.
(37) Padeco Co. Ltd (1999): Study prepared by Padeco Ltd. for the World Bank and Ministry of Construction of Japan (MOCJ) as part of the Asian Toll Road Development Program.
(38) Palisade Corporation (2000): Guide to Using @Risk (Risk Analysis and Simulation Add-In for Microsoft Excel), USA.
(39) PENA, F. –Mora and TAMAKI, T. (2001): Effect of Delivery Systems on Collaborative Negotiations for Large-Scale Infrastructure Projects (In: Journal of Management in Engineering, American Society of Civil Engineers, USA.
(40) PEREZ, B. (1999): Private Finance and the Expansion of the European Motorway Network, The Diebold Institute for Public Policy Studies.
(41) Permanent International Association of Road Congresses (1987): 18th World Road Congress, Committee Report No 9, Brussels, pp. 79-83.
(42) Private Finance Panel (1995): Private Opportunity, Public Benefit – Progressing the Private Finance Initiative, London, HM Treasury.
(43) Private Infrastructure Investment Center of Korea (2001): 2001 Annual Plan for Private Participation in Infrastructure, South Korea.
(44) ROTHENGATTER, W. (2001): Greening the Transport in Europe: External Costs of Transport and Strategies for Internalization, Unpublished Report, Germany.
(45) SAMUEL, P. (2001): Tolling: is the Revolution Complete? (In: Years: now the Future), World Highways, Route One Publishing Ltd., UK.
(46) SAPTE, W. (1997): Project Finance (The guide to financing build-operate-transfer projects uses in PPP), Euromoney Publications PLC, Hong Kong, pp. 17-26.
(47) SCHARLE, P. (2002): Public-Private Partnership (PPP) in Transport Infrastructure Development as a Social Game, Széchenyi István College, Hungary.
(48) SCHARLE, P. and PETHTEL, R. (2001): Partnership in the Infrastructure Development-A Challenge for the Graduate Education (In: 8th International Scientific Conference Proceedings), Bratislava, pp. 451-456.
(49) SHOJI, Y. (2001): Optimal Risk Allocation and Contract Mechanism in PFI/PPP Transport Projects (In: 9th World Conference on Transport Research Proceedings), Seoul.
(50) SIMON, P. (1997): Project Risk Analysis and Management, The AIM Group Ltd.
ISDN 0 9531590 00.
(51) SIPOSS, A. G. (2000): Hungary (In: the PIARC Proceedings on Guide for New Methods of Financing and Public/Private Partnership), World Road Association, Kuala Lumpur, pp. 121-125.
(52) SMALL, K. A. and JOSÉ, A. Gomez-Ibanez (1995): Road Pricing for Congestion Management: The Transition from Theory to Policy (In: Transport Economics: Selected Readings edited by Oum, T. H. et al), Korea Research Foundation for the 21st Century, Seoul.
(53) TÁNCZOS, K. (1998): Multi-criteria Evaluation Methods and Group Decision Systems for Transport Infrastructure Development Projects (In: Operations Research and Decision Aid Methodologies in Traffic and Transportation Management edited by LABBÉ et al.), Springer, Germany, pp. 164-181.
(54) TÁNCZOS, K., and BÉKEFI, Z. (1997): INNOFIN-A new Methodology and Programme Package for Supporting Decisions of Financing Projects (In: 7th EURO Conference Proceedings), Brugge.
(55) TÁNCZOS, K. and KONG, G. S. (2001): Experiences of Using Toll Road and Possibility for Public/Private Partnership with Special Respect to Eastern Europe and Some Asian Countries (In: European Transport Conference Proceedings), Association for European Transport, Cambridge.
(56) TÁNCZOS, K., and KONG, G. S. (2001): The Experience and Government Policy Direction to Facilitate Private Participation in Toll Road Infrastructure in South Koreas (In: 8th International Scientific Conference Proceedings), Bratislava.
pp. 113-118
(57) TÁNCZOS, K., and KONG, G. S. (2001): Government policy to Facilitate Private Participation in Toll Road Infrastructure through the Investment Risk Mitigation Measures focused on Eastern Europe and some Asian Countries (In: South East European Transport Research Forum Proceedings), Budapest.
(58) TÁNCZOS, K., and KONG, G. S. (2002): A Review of Appraisal Methodologies of Feasibility Studies Done by Public Private Partnership in Road Project Development (In Press: Periodica Polytechnica Magazine), Budapest University of Technology and Economics, 2002.
(59) TÁNCZOS, K., MURÁNYI, M., OROSZ, C., and GEDEON, A. (1998/9):
Large Size Transport Infrastructure Investments (in Hungary), Scientific Review of Communication XVIII, pp.332-340.
(60) The Asian Development Bank (2000): Developing Best Practices for Promoting Private Sector Investment in Infrastructure (Roads), Manila, pp. 1-60.
(61) The Chartered Institute of Transport (1993): Transport Infrastructure Mobilising Private Investment, UK.
(62) The Department of Transport (1995): Roads DBFO Projects (Information and Prequalification Requirements), UK., pp. 1-58.
(63) The European Commission (1999): Final Report on Estimating Transport Costs, High Level Group on Transport Infrastructure Charging.
(64) The Korea Transport Institute et al (2000): SOC Investment Appraisal Manual, South Korea.
(65) The United Nations (1998): Public/Private Partnership (A New Concept for Infrastructure Development), New York and Geneva.
(66) The World Bank and the Korea Development Bank (1998): Proceedings on Fundamentals of Risk Management and Project Selection in Infrastructure Finance, Seoul.
(67) THOBANI, M. (1999): Private Infrastructure, Public Risk, Finance &
Development (A Quarterly Magazine of the IMF), Volume 36, Number 1.
(68) TIMÁR, A. (1994): Appraising and Awarding Concessions (In: Projects Procured by Privately Financed Concession Contracts edited by MERNA, T. et al.), UMIST, Manchester, pp. 102-117.
(69) TIMÁR, A. (1999/2000): Road projects in transition Europe, Transportation Infrastructure Review, UK.
(70) TIMÁR, A. (2001): Financing Development, Maintenance, and Operation in the Road Infrastructure, Scientific Review of Communications.
(71) TIMÁR, A. (2002): Increasing Efficiency of Road Management in Hungary (In:
International Scientific Symposium Proceedings on Transportation Infrastructure in South-East Europe Countries), Sarajevo.
(72) TIMÁR, A. (2002): Economics of Transport Infrastructure, Publishing House of Budapest University of Technology and Economics, Budapest, pp. 1-143.
(73) Transport Infrastructure Needs Assessment (1999): Report on Socio-Economic Cost Benefit Analysis, TINA 015 final/1999.
(74) Transport Tutorial Association (1990): Transport Economics, Transport Tutorial Association Ltd, UK., pp. 1-152.
(75) TSAMBOULAS, D. A. (2000): Methodology for Implementing Private Public Partnerships for TEN-T (In: ASECAP Conference), Various Presentations, Rome.
(76) UNIDO (1996): UNIDO BOT Guidelines – Guidelines for Infrastructure Development through Build-Operate-Transfer (BOT) Projects, Vienna, United Nations Industrial Development Organization.
(77) VIVES, A. (1997): Private Infrastructure: Ten Commandments for Sustainability (In: the Journal of Project Finance), A Publication of Institutional Investors, INC.
pp. 20-30
(78) VOGELAAR, H. (1997): Proceedings on “What Type of Finance, Most Particularly in CEECs?” (In: 14th International Symposium on Theory and Practice in Transport Economics for European Conference of Ministers of Transport), Innsbruck, Austria.
(79) VOSE, D. (2001): Risk Analysis a Quantitative Guide, John Wiley & Sons Ltd., UK.
(80) World Highways (September 2001): Spanish Roads (Maintenance takes center stage), Route One Publishing Ltd., UK.
(81) World Highways (November/December 2001): Years: now the Future (In: Special Anniversary Edition Celebrating 10 Years of World Highways: 1991-2001), Route One Publishing Ltd., UK.
(82) World Road Association (1999): Cost Recovery and Dedication of Road User Fees, USA.
(83) World Road Association (2000): Guide for new methods of financing and Public/Private Partnership, Kuala Lumpur.
Internet Site
http://picko.krihs.re.kr: The Private Infrastructure Investment Center of Korea Homepage.
http://test.triel.com: The World Bank Tool Kit.
http://www.adb.org: The Asian Development Bank Homepage.
http://www.kama.or.kr/2/wc9.htm: World Automatic Statistics 1999.
http://www.worldbank.org: The World Bank Homepage.
http://www1.oecd.org/std/gdpperca.htm: National accounts of OECD countries, main aggregates, Volume 1.
Appendix 1 Potential Advantages of Private Sector Participation in Infrastructure (PPI)
Construction Efficiency
Incentives
Operation Efficiency Incentives
Complementary Funding
Capacity
Government Control
Traditional Method (Public Procurement of Works – Operation by Road Administration)
Weak Weak None Direct
Contracting Out Of Operation
N.A. Weak or
Average
None Direct
Public “Concession”
(State Owned
Concession Company, User’s Toll)
Weak Average Average Direct
Private Concession (Shadow Toll or Lease)
Strong Strong Weak Indirect
Private Concession (User’s Toll)
Strong Strong Average Indirect
Source: Financing of Road Infrastructures Guide for New Methods of Financing and Public Private Partnership (PIAR Committee on Financing and Economic Evaluation, 2000)
* Private sector involvement in the construction, operation, management and financing of road infrastructures offers in general certain potential advantages for the community.
It is not possible to draw any general conclusions from this classification: the potential benefits will depends upon the circumstances of the particular case.
Shadow toll does not generate new funding sources. The final cost must be borne by the taxpayer (“delayed” budgetary funding), and not the user. Private concession (user’s toll) is more attractive than shadow toll for complementary funding capacity.
My own development is the next scheme (appendix 2).
Appendix 2 Models of PPI Road Project Implementation Procedure and Risk Management
Implementation of Feasibility Study
· Comparison of Economic analysis and Financial Analysis by Special Research Institute etc.
Government Financing Project
Potential Private Investment Project
· Design of Risk Allocation
· Prepare Draft Contract
Public Notification Of Instruction For Proposal
Yes No
Submission of Project Proposal
· Concessionaire Designation Procedure and the Government Support etc.
· Key Elements are to be summarized and announced in English.
Examination & Evaluation of Project
(Technical and Financial Bid Evaluation, Risk Accepting Level Evaluation etc.)
Risk Analysis (Government)
· Selects Most Advantageous Proposal on basis of Technical and Financial Merits including Risk Allocation Level etc.
· PQ and/or 2-step Evaluation are necessary.
· 2-5 Potential Concessionaire are to be selected.
· Evaluation Task Force Team is to be organized and operated.
· Result of Feasibility Study
Select
Winning Bidder.
Negotiates / Signs Concession Agreement with Winning Bidder.
(Government)
Approval of Detailed Engineering and Design Plan for Implementation
(Government).
Confirmation of Completion of Construction (Government)
Monitors Operation and Maintenance Activities
(Government) Operation and Maintenance of
Road during the Concession Period (Concessionaire)
Transfer of Road Operation Right to the Government (The End of the Concession)
· Determination of the Project Implementation Conditions including Total Project Cost, Concession Period, Tariff, etc.
· Including Government Support and Risks in Project Implementation, Management of Safety and Environment, etc.
Monitors Construction Activity (Government)
Implementation of
Construction (Concessionaire)
Appendix 3 Country Credit Risk Rating and Interest Rate in PPI Road Project
* LIBOR: the London Inter-Bank Offered Rate, the rate at which banks lent to each other in the London inter-bank money market
Credit Ratings and Credit Rating Agencies
Standard & Poors Moody’s Comments
AAA Aaa Best Quality Bonds, Capacity to Pay Interest
and Principal is extremely strong AA+, AA, AA- Aa1, Aa2, Aa3 Very Strong Capacity for Repayment A+, A, A- A1, A2, A3 Strong Capacity for Repayment
BBB+, BBB, BBB- Baa1, Baa2, Baa3 Protection of Interest and Principal is Moderate
BB+, BB, BB- Ba1, Ba2, Ba3 Speculative Grade
B+, B, B- B1, B2, B3 Highly Vulnerable to Adverse Business Conditions
CCC+, CCC, CCC- Caa Identifiable Vulnerability to Default
CC Ca Highly Speculative. Often in Default
Sample of PPI Road Projects (Standard & Poor’s rating, G. Fisher, S. Babbar) China (BBB, 1992), Guanzhou-Shenzhen Superhighway (Banks, LIBOR + 1.4%, 8 Years) Hungary (BB, 1992), M1/M15 Motorway (EBRD A-Loan, LIBOR + 3%, 15.5 Years)
Colombia (BBB-, 1994), Buga-Tuluá Highway (Senior Loan, LIBOR + 5.5%, 5 Years) Cost of Capital
(Interest Rate)
Lower Rating Higher Rating
Country Risk (as measured by country rating) LIBOR + α
Appendix 4 Types of Government Support
● Contractual Obligations of the Public Sector - Guarantee of Off-Take in Power Projects
● Policy/ Political Risk
- Guarantee of Currency Convertibility and Transferability - Guarantee in case of changes of law or regulatory regime
● Financial Market Disruption/ Fluctuations
- Equity Guarantees (San Juan Lagoon Bridge, Puerto Rico) - Debt Guarantee (Guangzhou-Shenzhen Superhighway, China)
- Guarantee of Exchange rate (Incheon International Airport Expressway, South Korea;
Spain’s Toll Road Program)
- Grants and Subordinated Loans (South Access to Concepción, Chile)
● Market Risk
- Guarantee of Tariff Rate (Don Muang Tollway, Tailand; Western Harbour Tunnel, Hong Kong; Buga-Tulua Highway, Colombia; Mexico Toll Roads; Incheon International Airport Expressway, South Korea; M5 Motorway, Hungary)
- Minimum Revenue Guarantee (South Access to Concepción, Chile; Incheon International Airport Expressway, South Korea; M5 Motorway, Hungary)
- Minimum Traffic Guarantee (Colombia’s Buga-Tuluá Highway)
● Concession Extensions and Revenue Enhancements - Concession Extensions (Toluca Toll Road, Mexico City)
- Revenue Enhancements: Limitation on the government’s right to construct or expand competing facilities, and the concessionaire receives rights for ancillary real estate development (SR-91, USA)
Source: the World Bank and the Korea Development Bank, 1998
G. Fisher, S. Babbar, Private Financing of Toll Roads, RMC Discussion Paper Series 117)
Appendix 5 Contractual Structure of the M5 Motorway Project (Hungary)
Source: (AKA Concession Company, 1995)
* D & C Contract: Design & Construction Contract O & M Contract: Operation & Maintenance Contract
Shareholders Bouygues S.A (35%) Screg S.A (15%) Bau Holding AG (35%) Magyar Aszfalt Kft (15%)
Concession Company (AKA) Minister of
Transport, Communication and
Water Management
Minister of Finance
Concession Contract
Operational Subsidy Agreeme
Lenders Guarantee
Agreement
Credit Agreements
General Contractor [JV between Bouygues (50%) and Bau Holding AG (50%)]
Operator (Magyar Intertoll Rt)
Independent Engineer (Association between Ove Arup and UTIBER) D & C
Contract
O & M Contract
Independent Engineer Agreement
Appendix 6-1 Cash-Flow Schedule Analysis (INNO-FINance Program)