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Case Study 2Case Study 2
The Concession of a New The Concession of a New Container Terminal in the Container Terminal in the
C ll P t i PC ll P t i PCallao Port in PeruCallao Port in Peru
1Patricio MansillaPatricio Mansilla
Cairo Cairo -- May 25, 2008May 25, 2008
AgendaAgendagg1. Peruvian Port sector and Institutional 1. Peruvian Port sector and Institutional R fR fReformReform
2 Callao’s Port Organizational Structure2 Callao’s Port Organizational Structure2. Callao s Port Organizational Structure2. Callao s Port Organizational Structure
3. New Container Terminal (NCT) Business 3. New Container Terminal (NCT) Business ( )( )Design and Bidding ResultsDesign and Bidding Results
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4. Key elements for the successful NCT 4. Key elements for the successful NCT concession and Multiplier Effectsconcession and Multiplier Effects
1. Peruvian Port Sector and1. Peruvian Port Sector and1. Peruvian Port Sector and 1. Peruvian Port Sector and Institutional ReformInstitutional Reform
3
Peruvian Strategic Location in the South
Pacific Coast
Callao Port
South and Central America moves 20 million TEUs
Brazil
moves 20 million TEUs annually
Country Annual TEUs
B il 6 illiBrazil 6 million
Panama 4 million
Argentina 2 million
Chil 1 9 illi
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Chile 1.9 million
Peru 1.3 millionSource: AAPA
Latinamerican Port RankingLatinamerican Port RankingRanking 2006 Port Country Million TEU`s
1 Santos Brazil 2.9
2 Kingston Jamaica 2.2
3 Colon Panama 2.0
4 Buenos Aires Argentine 1.7
5 Freeport Bahamas 1.4
6 Balboa Panama 1.0
77 CallaoCallao PeruPeru 0.90.98 Manzanillo Mexico 0.9
9 Puerto Cabello Venezuela 0.85
10 Puerto Limón Costa Rica 0.8
11 Rio Grande Brazil 0.7
12 Cartagena Colombia 0.7
13 San Antonio Chile 0.7
14 Itajai Brazil 0.65
15 Veracruz Mexico 0.65
16 Valparaíso Chile 0.6
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17 Paranagua Brazil 0.6
18 Guayaquil Ecuador 0.6
19 Montevideo Uruguay 0.5
20 Puerto Cortés Honduras 0.5
Cranes in the South Pacific LAC
0
1
22
0
1
Paita (Per)
Guayaquil (Ecu)
Buenaventura (Col)
Grúas móvilesGrúaspórtico
Mobile Crane
0
0
0
0
2
1
0
0Arica (Chi)
Matarani (Per)
Callao (Per)
( ) Grúas pórticoGantry Crane
2
0
1
3
1
00
0
Valparaíso, Terminal PacíficoSur (Chi)
Antofagasta (Chi)
Iquique, Puerto Público (Chi)
Iquique, Terminal Internacional (Chi)
0
4
1
2
2
3
1
4
San Antonio, Puerto Público (Chi)
San Antonio, Terminal Internacional (Chi)
Valparaíso, Puerto Público (Chi)
Valparaíso, Terminal Pacífico Sur (Chi)
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0 2
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
San Vicente (Chi)
Callao PortCallao Port
a) Increase in Demand (Port movesmore than 1 million TEU per yearand serves 80% of Peruvian foreigntrade)
b) Cost Inefficiencies, low Productivity and Technological
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changec) Negative externalitiesd) Investments required in peruvian
ports US$800 million
The Cost of Callao Port InefficienciesThe Cost of Callao Port InefficienciesInventory
CostsUS$150Million
Slow rhythm to load d l d W iti ti
ENAPU C t O
Total Annual OverchargeUS$220Million
and unload. Waiting timeTo dock
US$45 million
Costs OverrunsUS$25 million
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Institutional Reform1.1. Before 2003 Ministry of Transport was responsible for the Before 2003 Ministry of Transport was responsible for the
peruvian port infrastructure policy and ENAPU (Ports National peruvian port infrastructure policy and ENAPU (Ports National Company) was responsible for the port operation. Company) was responsible for the port operation.
2.2. New National Port System Law, March 2003. New institutional New National Port System Law, March 2003. New institutional framework to let the private sector to invest in ports.framework to let the private sector to invest in ports.
3.3. The new Law creates the National Port Authority, which is the The new Law creates the National Port Authority, which is the institution planning port development and publicinstitution planning port development and public--private private investmentsinvestments
4.4. National Port Development Plan identify dinamically the National Port Development Plan identify dinamically the investment requirements of each port and allocate resources in investment requirements of each port and allocate resources in ports in a rational way. ports in a rational way.
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Project Cycle and InstitutionsProject Cycle and InstitutionsPlanning Bidding Investment
and Operation Regulation
TRANSPORT MINISTRY AND
NATIONAL PORT AUTHORITY
OSITRANPROINVERSION•ENAPU
•PRIVATE COMPANIES•CONCESSIONAIRIE
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2. Callao2. Callao´́s Port Organizationals Port Organizational2. Callao2. Callao s Port Organizational s Port Organizational StructureStructure
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Joint Production is cheaper thanJoint Production is cheaper thanJoint Production is cheaper than Joint Production is cheaper than by separateby separate MonopolyMonopoly
Economies of ScaleEconomies of ScaleDiminishing Average CostDiminishing Average Cost ¿Regulation?¿Regulation?
Scope EconomiesScope Economies
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Normal Competition in Pier 5Normal Competition in Pier 5
Low Competition between portsLow Competition between ports
EncouragingEncouragingCompetitionCompetition
L I t d l C titiL I t d l C titi
Low Competition between portsLow Competition between ports CompetitionCompetition
Low Intermodal CompetitionLow Intermodal CompetitionTotal Revenues US$100 million
annually
Competition between ENAPU andCompetition between ENAPU andconcessionairieconcessionairie
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Services in Competition Service Competition Tariff
RegulationCompetitors
Pilotage Yes- Private No Pilot station 46%Pilotage Yes Private No Pilot station 46%Tramarsa 26%
Triton 21%T Y P bli N ENAPU 20%Towage Yes-Public-
PrivateNo ENAPU 20%
Sertemar, Tramarsa, Transoceanica and
I 80%Inmarsa 80%Stevedoring Yes-Private No 38 companies
St Y P bli N ENAPU T d
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Storage Yes-Public-Private
No ENAPU, Tramarsa and Neptunia
Regulated Services
Service Competition Tariff Regulation
Competitors
Use of Moor No-Public Yes ENAPU
Use of Pier No-Public yes ENAPUUse of Pier No-Public yes ENAPU
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3.3. New Container Terminal New Container Terminal (NCT) Business Design(NCT) Business Design and and
Bidding ResultsBidding ResultsBidding ResultsBidding Results
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Feasibility StudiesFeasibility Studies
ConcessionBusinessBusinessDesign
Project Costs and Industrial Org.Project Costs andMinimum Technical
Requirements
and EconomicRegulation
Risk Analysis andContract Design
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Investment Requirements •New Southern Container Terminal •600 meters•Container Yard 14 5 Has•Container Yard 14,5 Has•6 Gantry Cranes•Annual capacity 600,000 TEUsTEUs•Sea depth 14 meters•2 Berths•Investment US$ 220 MM$•30 years concession period
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South Breakwater
Option of second
Lima-Peruvian Capital
Container docks -
Option of second phase
ENAPU
To be demolishedTo be demolished
197 ha
PrePre-- qualificacion Requirementsqualificacion Requirements
Operate ports with Technical Be the
exclusiveFinancial net
th f t
Be the exclusive
operator of Financialp p2.500.000 TEUs anually
exclusive operator of a container terminal handling 500K TEU/year
worth of at least $200 million
a container terminal
with at least 600 m of
pier length
Financial
y
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PrePre--qualification of Worldqualification of World--Class Port Class Port OperatorsOperators
• Pre-qualified bidders:
– P&O / Dubai Ports Internacional/ Uniport S A– P&O / Dubai Ports Internacional/ Uniport S.A.– Consortium Dragados- Ransa (from Spain and Peru,
respectively)HC Limited (Hutchinson from Hong Kong )– HC Limited (Hutchinson from Hong Kong )
– International Container Terminal Services (ICTS from the Philippines)
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Competition in the Callao PortCompetition in the Callao Port
• National Port Authority and Ministry of Transport guarantee, inthe first 10 years of the concession, an annual minimumdemand of 300.000 TEUs of exports and imports and 100.000TEU i bTEUs in cabotage.
• OSITRAN the transport investment regulator has the authority tocontrol the economic conditions of the port infrastructure market.
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Selection ProcessSelection ProcessSelection ProcessSelection Process• Criteria 1: The lowest tariff index consisting of the following rates:
– Standard Ship Services: US$ 0.70 per meter of the Ship L th/hLength/hour
– Standard Cargo Services. 20’ container: US$90; 40’ container: US$135
• Criteria 2: Additional Complementary Investments (ACI) in Callao• Criteria 2: Additional Complementary Investments (ACI) in Callao Port common areas
• Winning Bidder: P&O Dover / Dubai Ports International and Uniport S.A.S.A.
• In addition, the concessionarie will pay 3% of the annual gross revenues to the National Port Authority and 1% to the Transport Investments Regulator (OSITRAN).
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Additional ComplementaryAdditional ComplementaryAdditional Complementary Additional Complementary InvestmentsInvestments First Priority
InvestmentsSecond Priority
Investments • P & O Ports committed
to invest US$ 144million in the following
C
Enlargement of the access channel entrance.
System of Protection and safety
Aditional ComplementaryInvestments.
• Trust Fund with BBVAB k
y
Navigation System in common port areas
System of community informationBank areas information
Deepen the access channel and road
Development of Logistics activity
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access to the port zones
Payment Schedule for Additional Payment Schedule for Additional Complementary InvestmentsComplementary Investments
Million of US$ DateMillion of US$ Date
10 90 días after the contract subscription (October/20/06)subscription (October/20/06)
10 US$5 million 6 months after the operation period started and US$5 million 1 year after the samemillion 1 year after the same milestone
15,5 8 semi-annual payments since the second operation year
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second operation year
Summary for Investment PlanSummary for Investment Planyy
US$ millionUS$ million
Civil Works 218
255Equipment
Additional Investments
255
144
Total 617
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Port ServicesType of Tariff/PriceType ofservice
Tariff/Price
S.Standard Services to the ship
• Mooring use, includesmooring and unmooring
Tariff per ship’s length (in meters) per hour.to the ship mooring and unmooring
services(in meters) per hour. (US$0.70)
• Loading/Unloading, includes the use of the
Tariff per container(empty or full)
gantry crane loaded/unloaded fromthe ship
Services • Use of the Terminal. It i l d t f i
Tariff per containerh d t th ’to the
cargoincludes transferring, handling, weighing and cargo storage for 48 hours.
charged to the cargo’sconsigneeUS$90 x 20”TEUUS$135.18 x 40””TEU
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$
S.Special ship/cargo • Services per user’s request
Price (not regulated)
Services Levels and ProductivityServices Levels and Productivity
Mooring time with no
Services d
operation
Time loading/unloading the cargoand
productivity levels
cargo
Time spent with users removing their cargo
Dock’s occupation ratio
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Construction PlanConstruction Plan• NTC Construction started on April 29th 2008 once the Peruvian
Government and Dubai Ports completed contractual requirements:
1. Concession area was transferred by the government to theconcessionairie (October/22/06)
2 N ti l P t A th it d t h i l t di (J /11/08)2. National Port Authority approved technical studies (Jan/11/08)3. Transport Ministry approved environmental studies (March/06/08)4. Ministry of Finance approved dredging cost-benefit analysis
(April/02/08)
• NTC Construction will finish before than April 29th 2011.
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p
Construction PhasesConstruction PhasesConstruction PhasesConstruction Phases
First Phase Second PhaseFirst Phase
Capacity
Second Phase
0.8 M TEU0.8 M TEU
650650
1.2 M TEU1.2 M TEU
960960Dock Length
Total Surface
650m650m
21.5ha21.5ha
960m960m
28ha28ha
Gantry cranes 66 99
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Container Demand EstimationContainer Demand Estimation
2 500 2th Phase
Nueva Terminal de Contenedores
2.000
2.500
s ENAPU DPWC1th Phase
2th Phase
1.000
1.500
'000
TE
Us
0
500
31Fuente: volúmenes 2003 al 2006 ENAPU. 2007 en adelante DPWC
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
4. Key Elements for the Successful4. Key Elements for the Successful4. Key Elements for the Successful 4. Key Elements for the Successful NCT ConcessionNCT Concession and Multiplier and Multiplier
Eff tEff tEffectsEffects
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Key Elements1. USAID Technical Support: through the transaction life cycle2. Credibility and Transparency: in the bidding process3. Public Private Competition: bidders said “it is so attractive”p4. Risk Analysis: Mitigation of unfair public competition (annual
minimum demand guarantee).5. Adequate Risk-Profitability mix: changes in rule of law affecting
the investment, revenues or costs associated to the standardservices or the contract with exception of tariffs. If the impactcalculated as a percentage over the net profits before taxes ishigher than 10% the government will compensate to thehigher than 10% the government will compensate to theconcessionairie or viceversa. (Financial Equilibrium)
6. High Bidding Competition: lagged Investments in the Port, hugepotential growth on demand and net revenues generated strong
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p g g gcompetition in the bidding.
Multiplier Effects
1. ENAPU Investments: Enapu purchased (through a biddingmechanism) two gantry cranes to operate in pier 5 before Januarymechanism) two gantry cranes to operate in pier 5, before January19th of 2009. Bidding was adjudicated to the chinese consortiumZPMC-Energotec.
2. New Regional Port Concessions: PROINVERSION is preparingbidding documents to attract private investment and operation for5 regional ports this year5 regional ports this year
3. New PPP Law: Released on May 13th (last week)
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Port Concession Plan: I t t f US$400 illiInvestments for US$400 million
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New PPP Law New PPP Law –– May 13th May 13th yy
• Classification of PPP projects between “self-financing” and“co-funding” requiring the government financial support
• It includes concepts like value for money, risk allocation andcompetition
• Descentralization of promotion functions through theministries, local and regional government andPROINVERSION
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• Present value of contigent and non contingent liabilities inPPP projects can not exceed 7% of the GDP.
Thank You Thank You
37