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Korea ’ s Case of Public -
Korea’s Case of Public-Private Partnerships
for Infrastructure Development
April.ȱ2010
Yoo, Sung Kull
Deputy Minister of Strategy and Finance
Republic of Korea
Table of Contents
p
Overview of PPP in Korea
pp
Performance Highlights
ppp Financial Crisis & Gov’t Responses
ญ
PPP Prospects in Korea
X
p. Overview of PPP in Korea
Y
History of PPP in Legislation
Enactment
Aug. 1994 The Private Capital Inducement
Promotion Actૹ
Revision
Dec. 1998
The Act on Public-Private Partnerships
in Infrastructure ૹ
· Risk Sharing, Minimum Revenue Guarantee
Amendment
Jan. 2005
The Act on Public-Private Partnerships in
Infrastructure ૹ
· Expansion of Facility Types
· Introduction of BTL Scheme
· Diversification of Investor Profile (Infra. Fund)
* PPP Guideline is issued to provide PPP policy direction and implementation guidance
Z
Implementation Scheme
z Build - Transfer - Operate
-
ྙ Construction by the private sector
ྚ Ownership transferred to government
ྛ Operation by the private sector
z IRR is determined through negotiation(8~15%)
BTO
z Build - Transfer - Lease
-
ྙ Construction by the private sector
ྚ Ownership transferred to government
ྛ Lease and payment by the government
BTL
z IRR = Reference rate (government bond) + Ȼ(80~100bp)
Othersȱ:ȱBOT,ȱBOO,ȱetc.
PrivateȱParticipant
PrivateȱParticipant
(SPC)
(SPC)
Grants
operating rights
delivers Service
Transfers Ownership
Pays usage fee Transfers Ownership
User
Government
BTO
Lease payments
delivers Service
User
Government
Fees(If necessary)
BTL
[
Available Facility Types
Thereȱareȱ48ȱtypesȱofȱinfrastructureȱfacilitiesȱinȱ15ȱȱ
sectorsȱȱspecifiedȱbyȱtheȱPPPȱActȱ
Rail
Road
(4)
Port
Welfare
(3)
(4)
(3)
Public
Housing
(1)
Airport
Forestry
(1)
(2)
15 Categories
Communication
Education
(5)
(1)
Water
Resources
(3)
* Positive listing
Military Housing
(1)
Culture & Tourism
Energy
(4)
(9)
Environment Logistics
(5)
(2)
\
pp ډwGo
]
Signed PPP Projects in Korea
(As of Dec 2009, Nationally-Managed Projects only)
TOTAL
(# of projects)
Project Cost
(USD)
%
(414)
61.7 bn
(100%)
100%
(188)
23.9 bn
(163)
24.9 bn
(63)
12.9 bn
Central
Government
(116)
38.1 bn
(28.0%)
61.7%
(40)
16.9 bn
(42)
10.5 bn
(34)
10.7 bn
Local
Government
(298)
23.6 bn
(72.0%)
38.3%
(148)
6.8 bn
(121)
14.6 bn
(29)
2.2 bn
BTO
(75)
44.8 bn
(18.1%)
72.7%
(33)
18.9 bn
(30)
17.3 bn
(12)
8.6 bn
BTL
(339)
16.8 bn
(81.9%)
27.2%
(155)
5.0 bn
(133)
7.6 bn
(51)
4.2 bn
TOTAL
Competent
Authority
Completed In construction In preparation
Project
Type
^
Sector Analysis :
BTL
BTO
Totalȱprojectȱcostsȱofȱsignedȱ
BTOȱasȱofȱȱDecȱ2009ȱamountȱ
toȱ44.8ȱbillionȱUS$
Others (3.4bn us$)
7.9%
Port (5.4bn)
11.9%
Road (25.8bn)
Rail (10.2bn)
22.7%
57.5%
Totalȱprojectȱcostsȱofȱsignedȱ
BTLȱasȱofȱDecȱ2009ȱamountȱ
toȱ16.8ȱbillionȱUS$
Cultural, Welfare, etc.(1.3bn us$)
Military (2.4bn) 7.6%
Educational
facilities(6.2bn)
37%
Environmental
facilities(4.7bn)
28.1%
14.3%
Railway (2.2bn)
13%
_
Major Projects: BTO
¾ IncheonȱInternationalȱAirportȱExpressway
TotalȱProjectȱCost:ȱȱUSDȱȱ1.2ȱbillion
IRRȱ=ȱ9.7%(Aftertaxȱrealȱrateȱofȱreturn)
Length:ȱ40.2ȱkm,ȱ8ȱlanes
CompetentȱAuthority:ȱMinistryȱofȱLand,ȱTransportȱandȱMaritimeȱAffairs
ConstructionȱPeriod:ȱ1995Ȭ2000
OperationȱPeriod:ȱ30ȱyears
¾ IncheonȱBridge
TotalȱProjectȱCost:ȱUSDȱ1ȱbillion
IRRȱ=ȱ8.48%(Aftertaxȱrealȱrateȱofȱreturn)
Length:ȱ12.3ȱkm,ȱ6ȱlanesȱ(21.4ȱkmȱincludingȱgov’tȬfinancedȱaccessȱroad)ȱ
CompetentȱAuthority:ȱMinistryȱofȱLand,ȱTransportȱandȱMaritimeȱAffairs
ConstructionȱPeriod:ȱ2005Ȭ2009
OperationȱPeriod:ȱ30ȱyears
¾ BusanȱNewȱPortȱPhaseȱ1
TotalȱProjectȱCost:ȱUSDȱ1.4ȱbillion
IRRȱ=ȱ9.5%(Aftertaxȱrealȱrateȱofȱreturn)
WorkȱScope:ȱ9ȱberthsȱ(50,000ȱt),ȱ3.2ȱkm
CompetentȱAuthority:ȱMinistryȱofȱLand,ȱTransportȱandȱMaritimeȱAffairs
ConstructionȱPeriod:ȱ2001Ȭ2009ȱ
OperationȱPeriod:ȱ50ȱyears
`
Major Projects: BTL
¾ ChungjuȱMilitaryȱApartmentȱHousingȱ
TotalȱProjectȱCost:ȱUSDȱ16.3ȱmillion
WorkȱScope:ȱ200ȱhouseholdsȱandȱconvenienceȱfacilitiesȱ
CompetentȱAuthority:ȱMinistryȱofȱDefense
ConstructionȱPeriod:ȱ2005Ȭ2007ȱ
OperationȱPeriod:ȱ20ȱyears
¾ UlsanȱNationalȱInstituteȱofȱScienceȱandȱTechnologyȱ
TotalȱProjectȱCost:ȱUSDȱ219ȱmillion
WorkȱScope:ȱSiteȱ1,028,200້,ȱTotalȱFloorȱAreaȱ153,691້
CompetentȱAuthority:ȱMinistryȱofȱEducation,ȱScienceȱandȱTechnology
ConstructionȱPeriod:ȱ2007Ȭ2010ȱ
OperationȱPeriod:ȱ20ȱyears
¾ AnhwaȱHighȱSchoolȱ
TotalȱProjectȱCost:ȱUSDȱ0.8ȱmillion
WorkȱScope:ȱSiteȱ13,264.03້,ȱ5ȱstoriesȱ
CompetentȱAuthority:ȱGyeonggiȱProvinceȱOfficeȱofȱEducation
ConstructionȱPeriod:ȱ2006Ȭ2007ȱ
OperationȱPeriod:ȱ20ȱyears
XW
pppU Financial Crisis &
Government Responses
XX
Impact of Financial Crisis on PPP
DecreaseȱinȱBTLȱInternalȱRateȱofȱReturn
- Funding
cost : 90 ~ 200 bp up in the second half of 2008
- Reference rate (government bond) : 50 ~ ¨ 60 bp up(or down)
in the second half of 2008
BTL IRR < Funding cost
IncreaseȱinȱBTO InvestmentȱRisk
- Tend to avoid large scale, long-term investment due to uncertain
economic prospects
- Higher premium and/or more risk-sharing by government is required
Failure in financial closure of projects in preparation and
decline in initiation of new PPP projects
XY
Trends of Funding Cost and
the Rate of Return on PPP Projects
BTL Rate of Return < funding cost
%
ͪ
ͩ
Rate of Return on BTO: 8~15%
(No MRG since 2006)
ͨ
ΘΠΧ͘Υ͑ΓΠΟΕΤ
ΓΒΟΜ͑ΕΖΓΖΟΥΦΣΖ
ΔΠΣΡΠΣΒΥΖ͑ΓΠΟΕΤ
ͳ΅ͽ͑ΣΒΥΖ͑ΠΗ͑ΣΖΥΦΣΟ
ͧ
ͦ
ͥ
ͤ
͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ ͢ ͣ ͤ ͥ
ͣͤ͡͡
ͣͥ͡͡
ͣͦ͡͡
ͣͧ͡͡
ͣͨ͡͡
ͣͩ͡͡
ͣͪ͡͡
Year(quarter)
XZ
Government Response (1)
Theȱ1stȱPPPȱRevitalizationȱMeasuresȱtoȱeaseȱcreditȱcrunchȱ(Feb.ȱ09)
Provide Liquidity and
Risk Mitigation
Mitigate Interest
Fluctuation Risk
Initiate KDB Bank
Special Loan Program
Change reference rate
adjustment mechanism
Provide Credit
enhancement through
Infrastructure Credit
Guarantee Fund
Provide assistance to
excessive changes in
funding cost
Lower equity ratio
Special PPP Monitoring Task Force reviews the status of
implementations on a monthly basis
X[
Government Response (2)
Theȱ2ndȱPPPȱRevitalizationȱMeasuresȱforȱfavorableȱ
investmentȱenvironmentȱ(Aug.ȱ09)
Improve
project structure
Encouraging supplementary
projects
Increasing coverage for
Compensation on termination
Improve conditions
for financing
Improving environment
for investment
Revitalizing the issuance
of infra bonds
Strengthening tax incentives
Development of New Risk-Sharing
Structure
X\
ญU PPP Prospects in Korea
X]
Maintaining the Role of PPPs
•LimitedȱFiscalȱResourcesȱdueȱtoȱincreasedȱspendingȱinȱfosteringȱ
welfareȱandȱexpandingȱKorea’sȱfutureȱgrowthȱenginesȱ
•PrivateȱInvestmentȱwillȱcontinueȱtoȱcomplementȱtheȱ
government’sȱlimitedȱfiscalȱȱinvestmentȱinȱpublicȱinfrastructure.
i{v
Priority based on economic viability,
PPP
feasibility,
and bottleneck 㩅㐠
relief
T ⓸⦐
aG䝰㣕⓸⦐̔㥉㷨Ạᴸ
effect, etc
T 㷔⓸ aG䝰㣕Ạᴸ㢌 ᷱ㤸㷔 㩅㥄
T 䚡⬀ aG
㤵
- Roads : In the most congested areas
- Railway : Light-rail in congested areas
- Ports: Contingent on varying commercial
traffic
i{s
Increased end-user benefit through
providing necessary infrastructure
when most needed.
- Aging School Facilities
- Military housing/leisure facilities
- Sewage/Sanitary Systems
- Cultural/Welfare facilities
X^
Thank You!
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