NADZEMNY EXPRESS JSC

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NADZEMNY EXPRESS JSC
NADZEMNY EXPRESS PROJECT Proposed tender
structure and selected risk allocation
Iain Menzies / Cledan Mandri-Perrott
WORLD BANK
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Overall Project Scope

• Purpose to bring in Private Sector expertise
  through a Public Private Partnership
• Design, Build, Operate, Maintain Transfer
  single contract
• Contract duration 30 years
• Legal status first time use of the St Petersburg
  PPP Law (other PPP projects using Federal
  Concession law)
• PPP law allows greater flexibility for bid
  design, bid process and award

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Main risk allocation

• The City of St Petersburg will be responsible to
• Provide Reference Engineering Design
• Ensure timely delivery of land at its own cost
• Secure removal of public utilities at its own
  cost
• Take most revenue and ridership risk
• Provide reasonable support to the Private Partner
  in obtaining the permits and licenses
• Pay the Availability Fee
• Pay the Capital Grant

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Main risk allocation (continued)

• The Private Partner will
• Take all risks associated with the detailed
  design, construction and operation
• Take all risks related to raising the private
  financing necessary to complete the Project

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Bid evaluation

• Philosophy based on best international practice
  but within the confines of the St Petersburg PPP
  Law and Russian Law
• Separate evaluation of technical and financial
  proposals including a financing proposal (ie how
  contract will be financed by Developer)
• Possibility to comment on the PPP Agreement
  during bid stage
• Bids must include a Compliant Bid and at the
  Developers discretion a Variant Bid
• Compliant Bid means broadly compliant with
  Reference Engineering design

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Bid evaluation (continued)

• Variant Bid must fulfill minimum requirements to
  be admissible (minimum standards on pass / fail
  basis eg length, horizontal alignment, number of
  stations etc)
• Financial proposal to be based on level of
  support required by Developers
• Level of capital grant (Rubles)
• Level of availability payment (Rubles)
• Technical proposal to be evaluated based on
  expert panel scoring on key criteria

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Allocation of financial / macro economic risk

• Inflation risk to be shared with City, in
  particular through indexation of Capital Grant
  and Availability Payment
• Construction price, operating cost and forex risk
  to be borne by Developer
• Limited cover will likely be provided for
• Risk of fluctuation of foreign exchange rate
  between bid submission and financial close (as
  related to foreign exchange denominated portion
  of costs)
• Indexation
• Capital grant Likely to be linked to Official
  inflation rates
• Availability payment Likely to be linked to
  inflation

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Structure of Availability Payment

• Full risk of St Petersburg Government (ie no
  support from Russian Federation)
• Likely to be equal quarterly payments of
  availability payment and indexed to yearly
  inflation
• Payment subject to achievement of Key Performance
  Indicators and associated with deductions/penaltie
  s
• Deductions linked to non-achievement of
  performance standards
• Availability payment likely to be subject to
  independent verification

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Other key risk allocation - 1

• Capital grant likely to be broken down in
  installments to reflect construction progress
  against predefined milestones
• Maximum construction period to be specified
  contractually
• Performance bond to cover development of the
  detailed design
• Approval / permitting risk with Developer
  subject to reasonable support from the City
• Land plots have been allocated by the City and
  will be provided free of encumbrances
• City to relocate utilities as appropriate (work
  being undertaken by City since late 2006)

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Other key risk allocation - 2

• No revenue risk Fare policy to be set by City
  opportunity for developer to act as agent for
  the City to collect fare revenue
• No upside or downside risk in demand/ridership
  however will be a contractual mechanism for
  adjustment due to long-term variations

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THANK YOU!