53069 PPI data update note 33 December 2009 Investment commitments reach a new peak in South Asia while the number of new projects declines Private activity in infrastructure in South Asia showed mixed results in 2008, according to just-released data from the Private Participation in Infrastructure Project Database. Investment commitments to infrastructure projects with private participation reached a new peak thanks to additional investment in existing telecommunications operators and new energy and transport projects that reached financial or contractual closure in the first half of the year. But investment in new projects slowed in the second half of the year with the full onset of the financial crisis. This slowdown led to a decline in the number of projects for the entire year. The region accounted for 22% of the year's total investment commitments in developing countries. In 2008, 36 infrastructure projects with private participation reached financial or contractual closure in three South Asian countries (Bangladesh, India, and Pakistan). 1 These projects involve investment commitments (hereafter, investment) of US$17.9 billion. Infrastructure projects implemented in previous years had additional commitments of US$15.4 billion, bringing total investment in 2008 to US$33.4 billion. That represented an increase of 12% from the level reported in 2007 and a new peak for the region (figure 1).2 Both new and existing projects accounted for the increase. Investment in new projects increased by 8% from the level in 2007, while investment in existing projects rose by 18%. When investment is classified by type, investment in physical assets explains most of the growth in total investment. Such investment amounted to US$31.9 billion in 2008, up 10% from the level reported in 2007 (figure 2). Payments to governments (such as concession or lease fees and divestiture revenues) rose by almost 140% to US$1.5 billion. Figure 1 Investment commitments to infrastructure projects with Figure 2 Investment commitments to infrastructure projects with private participation in South Asia, by implementation status, 1990­ private participation in South Asia, by type of investment, 1990­2008 2008 2008 US$ billions* New projects 2008 US$ billions* New projects 35 80 35 80 30 30 60 60 25 25 20 20 40 40 15 15 10 10 20 20 5 5 0 0 0 0 1990 1995 2000 2005 2008 1990 1995 2000 2005 2008 Investment in new projects, 1st semester Investment in new projects, 2nd semester Investment in physical assets Payments to the government New projects Additional investment in existing projects New projects Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. New projects and associated investment in 2008 were more evenly distributed between the first and second half of the year than in 2006 and 2007, when new activity was concentrated in the second half of the year. Of the 36 new projects in 2008, 17 were implemented in the first half of the year. These involve investment of US$9.6 billion, 90% more than the investment in new projects in the same This note was written by Ada Karina Izaguirre, infrastructure specialist, and Rossa FitzGerald, consultant, Finance, Economics, and Urban Development Department, Sustainable Development Network, World Bank. 1 The data on infrastructure projects with private participation include primarily medium-size and large projects as reported by the media and other public sources. Small-scale projects are generally not included because of lack of public information. Additional investment in some projects may have been omitted for the same reason. 2 Investment data are reported in 2008 U.S. dollars, using the U.S. consumer price index and 2008 as the base year. Data at http://ppi.worldbank.org/ are reported in millions of current U.S. dollars unless otherwise indicated. period of 2007--and more than in any other first semester in 1990­2008. That suggested a continuation of the investment growth for new projects seen since 2006 (see figure 1). But in the second semester of 2008 investment in new projects declined by 28% compared with the same period of 2007, to US$8.3 billion. Preliminary data on new projects in the first semester of 2009 suggest a strong recovery from the level reported in the second half of 2008. Investment reached US$18.2 billion, driven by the implementation of large generation projects. 3 Similar analysis is not possible for existing projects because the data do not allow the separation by semester of additional investment. The number of projects reaching financial or contractual closure declined by 40% in 2008. The number was down in both the first and second half of the year compared with the same periods of 2007 (figure 3). The closure of larger projects explains the divergence in trends between investment and number of projects. Investment in large projects (US$1 billion or more) grew by 40% to US$10.5 billion in 2008, offsetting the decline in smaller projects. With the large projects excluded, investment in new projects would have fallen by 18% in 2008, to US$7.5 billion, in large part because of the decline in projects of less than US$500 million (figure 4). Figure 3 New infrastructure projects with private participation in Figure 4 Investment commitments to infrastructure projects with South Asia, by semester, 1990­2008 private participation in South Asia, by project size and implementation status, 2000­08 80 New projects 2008 US$ billions* 35 30 60 25 20 40 15 10 20 5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 1990 1995 2000 2005 2008 New projects of less than US$500 million New projects of US$500 million and up to US$1 billion 1st semester 2nd semester New projects of US$1 billion or more Additional investment in existing projects Note: Includes investment in projects reaching financial closure in 1990-2008. Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. As in previous years, greenfield projects were the most common type of private participation. They accounted for US$27.5 billion in investment, 83% of the regional total in 2008 (figure 5).4 That level represented a 15% increase from 2007 and was the highest in 1990­2008. Investment in existing projects accounted for most of the increase, growing by 26% to US$14.3 billion. Investment in new greenfield projects also contributed to the growth. The 26 new greenfield projects reaching closure in 2008 involve investment of US$13.2 billion, up 5% from the level in 2007. Concessions were the second most common type of private participation in 2008.5 Eight new concessions were signed, involving investment of US$4.7 billion--14% of the regional total in 2008. But while new concessions attracted 40% more investment in 2008 than in 2007, they fell in number by 70%. Seven of the concessions were for transport projects, while the eighth was for a water treatment plant. The region's two other new projects were a partial divestiture of Titas Gas Transmission and Distribution Company in Bangladesh and a management contract for a water utility in Mysore, India. 3 Assessment of the Impact of the Crisis on New PPI Projects: Update 4, PPI data update note 24 (October 2009). 4 This note uses the term greenfield project as defined in the PPI Project Database methodology. The definition includes the following schemes: build, lease, and transfer (BLT); build, operate, and transfer (BOT); build, own, and operate (BOO); merchant; and rental. 5 This note uses the term concession as defined in the PPI Project Database methodology. The definition includes contracts under which a private entity takes over the management of a state-owned enterprise or asset for a given period during which it also assumes significant investment risk. The following schemes are considered concessions: build, rehabilitate, operate, and transfer (BROT); rehabilitate, lease or rent, and transfer (RLT); and rehabilitate, operate, and transfer (ROT). As in previous years, India accounted for most of the regional activity (figure 6). India attracted 84% of regional investment and implemented 28 of the 36 new projects. Investment in the country rose by 21% from 2007, reaching a record US$27.9 billion. With India excluded, investment in South Asia would have declined by 19% to US$5.5 billion. Pakistan was the second most active country in the region, implementing seven new projects and attracting 12% of regional investment. Figure 5 Investment commitments to infrastructure projects with Figure 6 Investment commitments to infrastructure projects with private participation in South Asia, by type of PPI and implementation private participation in main recipients and rest of countries in South status, 2005­08 Asia, 1990­2008 2008 US$ billions* 2008 US$ billions* New projects 30 40 80 25 20 30 60 15 20 40 10 5 10 20 0 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Concessions Divestitures Greenfield projects 0 0 Investment in new projects, 1st semester Investment in new projects, 2nd semester 1990 1995 2000 2005 2008 Additional investment in existing projects Remaining countries India Pakistan New projects Note: Includes investment in projects reaching financial closure in 1990 - 2008. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. Activity by sector. In 2008, as in previous years, the largest shares of regional investment went to telecommunications (42%) and energy (41%). Investment in energy rose by 11% to US$13.6 billion, the highest level in 1990­2008 (figure 7). New projects accounted for most of that investment (figure 8). Investment in telecommunications grew by 9% to US$13.9 billion, again the highest level in 1990­ 2008. Network expansion by existing telecommunications operators drove the growth. In transport, investment increased by 27% to US$5.8 billion, the second highest level in 1990­2008. In water and sewerage only two projects, representing investment of US$76 million, were implemented in 2008. Figure 7 Investment commitments to infrastructure projects with private Figure 8 Investment commitments to infrastructure projects with private participation in South Asia, by sector, 1990­2008 participation in South Asia, by sector and implementation status, 2005­08 2008 US$ billions* New projects 2008 US$ billions* 40 80 15 35 70 12 30 60 25 50 9 20 40 6 15 30 3 10 20 5 10 0 0 0 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Energy Telecoms Transport Water 1990 1995 2000 2005 2008 Investment in new projects, 1st semester Investment in new projects, 2nd semester Energy Telecoms Transport Water New projects Additional investment in existing projects Note: Includes investment in projects reaching financial closure in 1990 - 2008. * Adjusted by US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI. Source: World Bank and PPIAF, PPI Project Database. In energy three countries implemented 21 new projects, involving US$12 billion in investment. India was by far the most active, with 15 projects (table 1). Thirteen of these are for electricity generation plants, involving almost 10,600 megawatts (MW) and US$10.8 billion in investment. Four involve investment of more than US$1 billion: the US$4.2 billion, 4,000-MW Mundra Ultra Mega power project sponsored by Tata Enterprises; the US$1.4 billion, 1,005-MW Monnet Ispat power project sponsored by the Monnet Group; the US$1.1 billion, 1,200-MW Jamnagar power plant sponsored by the Essar Group; and the US$1 billion, 1,050-MW Maithon Right Bank power project sponsored by Tata Enterprises. India also implemented a US$234 million electricity transmission line as well as a US$55 million natural gas distribution project in Faridabad, in the state of Haryana. Through an initial public offering, Bangladesh divested 25% of Titas Gas Transmission and Distribution Company for US$31 million. Pakistan implemented five greenfield electricity generation projects with total investment of US$882 million and total installed capacity of 879 MW. Two existing energy projects attracted additional investment in 2008: the Mundra thermal power project in India (US$1.4 billion) and Karachi Electricity Supply Company in Pakistan (US$202 million). In telecommunications previously implemented projects attracted investment of US$13.9 billion in six countries--Afghanistan, Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Mobile and multiservice operators accounted for US$13.5 billion (97%) of that investment. India attracted 71% of regional investment in telecommunications, up from 62% in 2007. No new telecommunications projects with private participation were implemented in 2008. In transport the region had 13 new projects, all in India and Pakistan, involving investment of US$5.8 billion. India implemented 11 projects. Eight of these are road projects, involving more than 1,500 kilometers and US$4.6 billion in investment. Seven of the road projects are concessions, with contract periods ranging from 12 years to 20. The other road project is a 12-year BOT (build, operate, and transfer) contract for Katni Bypass NH-7. India's other new transport projects are a 35-year BOT contract for Mumbai Metro One (Line 1), a project involving investment of US$542 million, and two 30- year BOT contracts for seaports (a US$117 million contract for the Ennore iron ore terminal and a US$238 million contract for a container terminal at Mumbai Port). In Pakistan two BOT seaport projects at Port Mohammad Bin Qasim reached financial closure (a US$92 million grain and fertilizer terminal and a US$211 million second container terminal). In water and sewerage new private activity took place only in India, where two projects reached closure. These projects are a US$76 million, 25-year BROT (build, rehabilitate, operate, and transfer) concession for a water treatment plant in Haldia, West Bengal, and a 6-year management contract for a water supply utility in Mysore, Karnataka. Potential projects. In addition to the 36 new projects reaching financial or contractual closure in 2008, at least 41 other infrastructure projects, representing investment of US$24 billion, were awarded but had not reached closure by the end of the year. Of these potential projects, 24 were energy projects--23 for power plants (13 for total installed capacity of 2,533 MW in Pakistan and 10 for a total of 8,820 MW in India) and one for an electricity transmission line in India. In transport there were 16 potential projects, all of them in India--for 9 roads, 3 railways, 2 airports, and 2 ports. There was one potential water project, a BOT contract for a water utility in Maharashtra, India. Canceled and distressed projects. No infrastructure projects with private participation were canceled or became distressed in the region during 2008. Concluded projects. Two infrastructure projects with private participation concluded in 2008. In Bangladesh the two-year management contract for Chittagong Container Terminal concluded. In India the ROT (rehabilitate, operate, and transfer) concession contract for Udaipur Bypass, whose term was 11 years and 8 months, concluded. Table 1 Infrastructure projects with private participation reaching financial or contractual closure in South Asia in 2008 Note: .. = not available; n.a. = not applicable. Energy Private Investment Capacity Contract Project Sub- equity commitment size and period Country Project name status sector Type of PPI (%) (US$ millions) type (years) Main sponsors 1 Bangladesh Titas Gas Transmission Operational Natural Divestiture 25 31 10,890 km .. Others (..%, ..) and Distribution Co. Ltd. gas (partial) 2 India Belgaum Wind Farm Construction Electricity Greenfield 100 33.5 24.8 MW .. Indian Energy Limited (..%, project (BOO) United Kingdom) 3 India Bhoruka Power Operational Electricity Greenfield 100 12 6 MW .. Bhoruka Steel Ltd. (100%, ..) project (BOO) 4 India Essar Power Gujarat Construction Electricity Greenfield 100 1,129 1,200 MW 25 Essar Group (..%, India) Limited (Jamnagar Power project (BOO) Plant) 5 India Faridabad City Gas Construction Natural Greenfield 50 55.78 20 km 25 Adani Group (50%, India) Distribution Project gas project (BOO) 6 India Jaypee Powergrid Ltd. Construction Electricity Greenfield 74 234 248 km .. Jaiprakash Associates Ltd. (74%, project (BOO) India) 7 India Jharkhand Thermal Power Construction Electricity Greenfield 100 296 270 MW 25 Adhunik Group (..%, India) Plant Phase I project (BOO) 8 India Jindal Orissa Thermal Construction Electricity Greenfield 100 682 600 MW 25 B C Jindal Group (..%, India), Power Plant project (BOO) Soyuz Trading (..%, India) 9 India Lanco Kondapalli CCPP Construction Electricity Greenfield 100 278 366 MW 25 Lanco Group (100%, India) Expansion St-II project (merchant) 10 India Maithon Right Bank Power Construction Electricity Greenfield 74 1,042 1,050 MW 25 Tata Enterprises (74%, India) Project project (BOO) 11 India Monnet Ispat Power Construction Electricity Greenfield 100 1,401 1,005 MW 25 Monnet Group (..%, India) Project project (BOO) 12 India Mundra Ultra Mega Power Construction Electricity Greenfield 100 4,200 4,000 MW 25 Tata Enterprises (100%, India) Project project (BOO) 13 India Punjab Biomass Power Construction Electricity Greenfield 100 13 24 MW 20 Gammon India Ltd. (..%, India) Ltd. project (BOO) 14 India Rosa Thermal Power Construction Electricity Greenfield 100 585 600 MW 25 Reliance ADA Group (100%, Project Phase II project (BOO) India) 15 India Sidhi Thermal Power Plant Construction Electricity Greenfield 100 984 1,320 MW 25 Jaiprakash Associates Ltd. project (BOO) (100%, India) 16 India Usegaon Thermal Power Construction Electricity Greenfield 100 152 120 MW 25 Gupta Corp. (..%, India) Project project (BOO) 17 Pakistan Almoiz Bagasse-Fired Operational Electricity Greenfield 100 7.5 27 MW 10 Almoiz Industries Limited (100%, Cogeneration Plant project (BOO) Pakistan) 18 Pakistan Engro Power Project Construction Electricity Greenfield 100 205 227 MW 25 Engro Chemical Pakistan Ltd. project (BOO) (100%, Pakistan) 19 Pakistan Halmore Bhikki Power Construction Electricity Greenfield 100 231 225 MW .. Halmore Power Generation Project project (BOO) Company Ltd. (100%, Pakistan) 20 Pakistan Nishat Chunian Power Construction Electricity Greenfield 100 235 200 MW 25 Nishat Group of Industries Project project (BOO) (100%, Pakistan) 21 Pakistan Nishat Power Project Construction Electricity Greenfield 100 204 200 MW .. Nishat Group of Industries project (BOO) (100%, Pakistan) Transport Investment Private commitment Type of Capacity Project Sub- Type of equity (US$ government size and Country Project name status sector PPI (%) millions) support type Main sponsors 1 India Khalghat-Borghat Operational Roads Concession 100 185 n.a. 82.5 km SEW Infrastructure (49%, Highway (BROT) India), Navayuga Group (51%, India) 2 India Surat Dahisar NH-8 Operational Roads Concession 100 664 n.a. 239 km IRB Infrastructure (BROT) Developers Ltd. (90%, India) 3 India Ashok Highways­ Operational Roads Concession 100 176 n.a. 86 km Infrastructure Development Bhandara Road (BROT) Finance Company Ltd. (IDFC) Project (NH-6) (..%, India), Ashoka Buildcon Ltd. (..%, India) 4 India Katni Bypass NH-7 Operational Roads Greenfield 100 15 n.a. 35.2 km Ashoka Buildcon Ltd. (99%, project India) (BOT) 5 India Panipat Jalandhar Operational Roads Concession 100 1,000 n.a. 291 km Isolux (51%, Spain), Soma of NH-1 (BROT) Enterprise Ltd. (39%, India) 6 India Gurgaon Kotputli Operational Roads Concession 100 704 n.a. 225.6 km KMC Constructions Ltd. Jaipur NH-8 (BROT) (49%, India), Emirates Trading Agency LLC (51%, United Arab Emirates) 7 India Chilkaluripet­ Operational Roads Concession 100 197 n.a. 82.5 km IJM Corporation Berhad (..%, Vijayawada NH-5 (BROT) Malaysia), Infrastructure Development Finance Company Ltd. (IDFC) (..%, India) 8 India Ennore Iron Ore Construction Seaports Greenfield 84 117 n.a. 20 Sical (63%, ..) Terminal project throughput (BOT) (thousands) 9 India Mumbai Port Construction Seaports Greenfield 100 238 n.a. 150 Gammon India Ltd. (50%, Container Terminal project throughput India), ACS Group Project (BOT) (thousands) (Actividades de Construccion y Servicios) (50%, Spain) 10 India Mumbai Metro One Construction Railways Greenfield 74 542 n.a. 13 km Reliance ADA Group (69%, (Line 1) Project project India) (BOT) 11 India Halol-Godhra- Operational Roads Concession 100 1,691 n.a. 493 km Larsen & Toubro Limited Shamlaji, (BROT) (100%, India) Ahmedabad- Viramgam-Maliya, Rajkot-Jamnagar- Vadinar 12 Pakistan Qasim Grain and Construction Seaports Greenfield 100 92 n.a. .. Akbar Group (50%, Fertilizer Terminal project Pakistan), Fauji Foundation (BOT) (50%, Pakistan) 13 Pakistan Second Container Construction Seaports Greenfield 100 211 n.a. 1,175 DP World (100%, United Terminal at Port project throughput Arab Emirates) Mohammad Qasim (BOT) (thousands) Water and sewerage Investment Contract Project commitment period Capacity size Country Project name status Subsector Type of PPI (US$ millions) (years) and type Main sponsors 1 India Haldia Water Operational Treatment Concession 75.9 25 114 cubic Ranhill Bhd (34%, Malaysia), Management plants (BROT) meters per day Infrastructure Development Limited (thousands) Finance Company Ltd. (IDFC) (34%, India), Tata Enterprises (34%, India) 2 India Water Management Operational Utilities Management n.a. 6 133,000 Tata Enterprises (100%, India) Contract for and lease connections Mysore City contract (management contract)