In texas, concession agreements and designbuild agreements are referred to as comprehensive development agreements cdas. Concession agreement publicprivate partnership loans. Project finance, project agreement, offtake agreement and concession agreement. A form of financing projects, primarily based on claims against the financed asset or project rather than on the sponsor of the project. Financing secured by project assets and revenueproducing contracts, not sponsors. Usually, a project financing structure involves a number of equity investors, known as sponsors, and a syndicate of banks or other lending institutions that. This article will study and compare these concession forms and will draw conclusions for infrastructure projects. However, project financing is a specialised funding structure that relies on the future cash flow of a project as primary source of repayment, and holds the project s assets, rights and interests as collateral. The details regarding the mcas for different sectors and its overview can be accessed here.
The concessionaire charges the private organization fees, as mentioned in the contract. Concession assets means all assets of the port included in the perimeter and on which a right of concession is granted to the company under this agreement and which are described in annex 1 and 12. Planning commission developed the first version of the model concession agreement mca. Key issues for lenders in project finance agreements. Concession agreements public private partnerships in india. This is central to the bot build, operate, transfer model which sees the project company build the asset, operate it for a. Concession agreements for executed ppp projects concession agreements for executed. Concession agreement a contract between a publicsector body and a project company, which allows the project company to carry out the project e. Design build finance operate maintain dbfom toll concessions. Project structures, procurement and planning process 12 5. Between project authority, concessionaire and infrastructure debt fund this tripartite agreement1 2is made at new delhi on the day of. This document has been prepared for the purposes of the ppp. This practical twoday course, financing agreements in project finance, examines the role of project documents, taking into account the perspectives of the lender, sponsor and offtaker, before moving on to a more detailed overview of the power purchase agreementconcession agreement, the turnkey construction contract, and operation and.
Concession fees means the fees to be paid by the company to the conceding. Project finance is the longterm financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Mar 25, 2016 in a ppp project in which the authors handled, the government side expressly stated in the bid invitation documents that where the investor in the concession project that has been selected by. This guidance booklet booklet is designed to set out the concept and principles of more balanced concessions for the airport industry balanced concession for decisionmakers in government institutions, airports and airlines who. Draft ppp manual for nigeria ppp in nigeria is regulated. The hambantota port project is a project to develop a regional hub with its. A concession agreement under which a project will be constructed to provide a service to the general public normally provided by the public sector e. The financing for the concession is the first project financing for the concessionbased project in japan as well as the largest project financing to date in japan.
Summary and status of concession agreements cdadb in. The concession business is one of the key focus areas of the. Some concession agreements may not fix the user charges in advance, but rely on competition to ensure that they remain reasonable. Concession agreement basic purpose a concession is a bundle of rights conferred on the private entity in return of certain specified obligations to be undertaken risks that are transferred broadly, the ppp contract concession agreement is designed to identify and set out the rights and obligations of both the procuring authority and the. Publicprivate partnership ppp project finance transactions. Elizabeth river tunnels downtown midtown tunnel comprehensive agreement cities of norfolk.
This chapter will outline what project finance is, the key features which distinguish it from other methods of financing, the motivations and circumstances for utilising it and. Public and private infrastructure investment management. However, project financing is a specialised funding structure that relies on the future cash flow of a project as primary source of repayment, and holds the projects assets, rights and interests as collateral. Tariff revenue is expected to be built up over the life of concession. This practical twoday course, financing agreements in project finance, examines the role of project documents, taking into account the perspectives of the lender, sponsor and offtaker, before moving on to a more detailed overview of the power purchase agreement concession agreement, the turnkey construction contract, and operation and. The purpose of this chapter is to provide an overview of project finance. Financing agreements in project finance euromoney learning. Government of andhra pradesh concession agreement the.
This is an important bidding parameter, if applicable. Draft ppp manual for nigeria ppp in nigeria is regulated by. The authority had accordingly invited proposals by its notice no. Highlights of efsi the european fund for strategic investments 10 4. Why is project finance typically used to finance large capital intensive. In project finance, several longterm contracts such as construction, supply, offtake and concession agreements, along with a variety of jointownership. Clews, in project finance for the international petroleum industry, 2016 concessionary systems and licensing the concept of a concession is that one party usually a government but the term also applies to private entities has monopoly rights including but not limited to rights of ownership over some resource or activity. This is central to the bot build, operate, transfer model which sees. Hipg, the sole and exclusive right to plan, finance, develop, operate, maintain and manage the hambantota port. Concession agreement shall commence on the concession agreement effective. Ppp in infrastructure resource center for contracts, laws and regulations pppirc website.
Cdas were first authorized in 2003 with the passage of house bill 3588, which defines a cda as an agreement with a private entity that, at a minimum. Concession agreement the contract document for the project, specifying every element of the project in detail, to be signed between the. Apr 29, 2019 a concession agreement is a contract between a company and a government, or other property owner, to operate a business in a particular location. A concession agreement differs from those aforementioned when it comes to the rights being assigned to the private entity which is similar to a representation agreement. This document has been prepared for the purposes of the. A concession period and price determination model for ppp projects. In a ppp project in which the authors handled, the government side expressly stated in the bid invitation documents that where the investor in the concession project that has been selected by. Project finance is the process of financing a specific economic unit that the sponsors create, in which creditors share much of the ventures business risk and funding is obtained strictly for the.
Public and private entities are often involved in business agreements. Standard concession agreement form for bto projects dec. The model concession agreements for various sectors like national highways, state highways, urban rail transit system and ports are available. The two bookrunners are leading project finance banks with significant track records in the sector. A concession is in essence a license granted by the relevant public authority to a private party to. Publicprivate partnership concessions for highway projects.
Usually, a project financing structure involves a number of equity investors, known as sponsors, and a syndicate of banks or other lending institutions that provide loans to the operation. A concession agreement is one where a private organization or concessionaire seeks a concession from a government organization for operating a specific business within the governments jurisdiction. Feasibility study of the project risk analysis optimum economic, legal and tax structure other sponsor research legal structure coordination between different participants project presentation in the capital markets negotiation with the financial institutions advisory seccion i project finance. What is the relationship between ppp and concessions. Overview of the bank loan and project bond markets 7 3. Government of andhra pradesh 2 concessionaire contents part i preliminary recitals 4 1 definitions and interpretation 6 1. Identifying and allocating risks in international energy and infrastructure. The private party makes a large upfront payment for the concession, thereby providing cash for the state or local government that can be used to pay. For a discussion of the documents typically entered into in a project finance transaction, see practice note, project finance.
Capital beltway high occupancy toll hot lanes i495 fairfax county, virginia comprehensive agreement cities of norfolk and portsmouth, virginia. Dulles greenway comprehensive agreement loudoun county, virginia. Pdf from concessions to project finance and the private finance. Project finance is a method of raising longterm debt financing for major projects through financial engineering, based on lending against the cash flow generated by the project alone. A contract agreement between these entities include lease agreements, management agreements and concession agreements. Concession commencement date means the date specified as such in the certificate of. Pdf chapter 12 project finance allan mmbando academia. Concession, infrastructure, private project finance, procurement. However, there are also concession agreements, which are usually agreements between the government and corporations which give the corporations the right to operate within the governments jurisdiction. A concession agreement is a contract between a company and a government, or other property owner, to operate a business in a particular location.
In addition to the concession agreement with the host government, loan agreements with the banks, shareholder agreements with investors. Compare and contrast offtake agreements and concession. Revitalization project, the purpose of this agreement is to grant to the company the exclusive right to finance, rehabilitate, operate, manage. Project economics and the country and concession environment are key factors that influence the level of govern ment support required for a toll road to attract financing. Funding for private toll roads is primarily in the form of commercial bank loans and sponsor equityfew facilities. Concession agreements for executed ppp projects concession agreements for executed ppp projects. Normally at the centre will be a joint venture or project company legally constituted in the host country. The key characteristics of project financing structures a number of typical characteristics of project financing structures are designed to handle the risks illustrated above.
Project finance the term project finance is often interpreted incorrectly as the generic financing of a project. It may also be possible to structure the project finance document around any problems caused by insurance gaps. Concession agreement means this agreement including schedules 1 to 12 inclusive hereto. Financing of private parties to concessions ebrd procurement. Mechanics of issuance of debt parties, roles and tasks. Concession agreement the contract document for the project, specifying every element of the project in detail, to be signed between the concessionaire and the sponsoring authority concession period the duration of the ppp contract concessionaire the private partner awarded the tender for the. Concession agreement templates 9 free word, pdf format. Then, the draft standard concession agreement for bto projects for 2009 was published by reflecting the revised basic plan for ppps public notice no. Repayment is based on the future cash flows of the project. The research methods adopted in this study include qualitative comparative methods and the comparison and contrast between agreements are performed through extensive study of the relevant literature. The private party makes a large upfront payment for the concession, thereby providing cash for the state or local government that can be used to pay off debt, fund other programs and create reserves. Authority under a ppp project, if the project is profitable. However, there are varying degrees of recourse possible.
The concession agreement runs long enough for the contractor to recover its costs and earn a return. Obviously there has to be real competition for this to work, as could be the case, for example, where there is a parallel free road of reasonable quality, or another seaport. A concession is in essence a license granted by the relevant public authority to a. Ppp glossary directorate of institutional finance, govt. The optimum position for the lenders in respect of the project agreement itself is as follows. Public agencies may use p3 project finance concessions to construct new facilities or to expand or rehabilitate existing facilities, such as highways, bridges, or tunnels, that a state dot, local government, or other project sponsor would otherwise have undertaken through traditional project development. The project company will need to establish contractual relationships in the length of the concession. Model tripartite agreement for road projects between project authority, concessionaire and infrastructure debt fund this tripartite agreement1 2is made at new delhi on the day of, 201 by and between i the national highways authority of india, established under the national highways authority of india. Fhwa center for innovative finance support p3 projects. This is a repository of concession agreements of executed ppp projects which have been collected from project authorities. The concession agreement is, therefore, the agreement wherein the publicsector entity grants the private sector entity the right to implement an infrastructure project. Summary and status of concession agreements cdadb in texas. As per the national policy on publicprivate partnership of the federal government of nigeria, a ppp is defined as a contract, whereby the private sector is engaged by the public.
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