GOVERNMENT GUARANTEES CAN DRIVE PROJECT BANKABILITY
However, the building of such infrastructure requires vast areas of land and therefore land approval permits with all zonal stakeholders are necessary (central planning authorities, municipal authorities, other permit authorities, etc.). This potentially leads to severe project delays. In addition, there are other concerns such as traffic risks, demand risks and operator performance risks to worry about. Measures (such as concessions and guarantees) then have to be put in place to mitigate or transfer these risks and enhance overall project feasibility and bankability.
For example, the Thai-China railway project has put in place an arrangement minimizing performance risk. China will be fully in charge of operations and maintenance for the first three years with a gradual transition in operations to Thailand over the next four years. Thereafter, Thai officials will take full responsibility on railway operations, with help from Chinese advisers on an ongoing basis.53 In a separate example, the Indonesian government, in February, took on the political risk via a guarantee worth $2.8 billion for the development of four toll roads. This agreement provided security and convenience to investors, improving overall project bankability.54
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EXHIBIT 20: EXAMPLES OF RAIL AND ROAD INFRASTRUCTURE PROJECTS
NORTH-SOUTH EXPRESS RAILWAY (VIETNAM)
| PROJECT DETAILS: Project involves the construction of a 1,570 km rail line connecting Hanoi and Ho Chi Minh City in Vietnam and will comprise of 27 stations. Construction works are expected to commence in 2022 and is estimated to complete by 2050 | PROJECT STAGE: Study PROJECT VALUE: $56 billion PROJECT OWNER: Vietnam Railways PLANNING AUTHORITY: Ministry of Transport, Vietnam EPC CONTRACTOR: Japan International Cooperation Agency | |
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TRANS-SUMATRA HIGH GRADE HIGHWAY- LAMPUNG (INDONESIA)
| PROJECT DETAILS: Project involves the construction of a 2,600 km toll road, which will link the provinces of Lampung and Aceh in Sumatra Island, Indonesia. Implemented in 24 sections, the construction works commenced in 2014 and are estimated to complete by 2025 | PROJECT STAGE: Execution PROJECT VALUE: $24.6 billion PROJECT OWNER: Ministry of Public Works, Indonesia PLANNING AUTHORITY: Ministry of Transportation, Indonesia EPC CONTRACTOR: PT Hutama Karya; PT Pembanunan Perumahan; Waskita Karya; PT Adi Karya; Wijaya Karya | |
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DARK RED METRO LINE (THAILAND)
| PROJECT DETAILS: Project involves the construction of an 80.8 km rail line connecting Pathum Thani, Bangkok and Samut Sakhon in Thailand. Comprised of 36 metro stations, the construction works commenced in 2014 and are estimated to complete by 2020 | PROJECT STAGE: Execution PROJECT VALUE: $2.5 billion PROJECT OWNER: State Railway of Thailand PLANNING AUTHORITY: State Railway of Thailand EPC CONTRACTOR: Uniq Engineering and Construction Plc; Chunwo Construction & Engineering Co. | |
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Source: APRC analysis of data from Construction Intelligence Center