USAID Réforme du secteur et commercialisation des services publics (SRUC) : Projet de transaction CPU Haïti Livrable 11 : Lignes directrices et recommandations pour la conduite d'un approvisionnement concurrentiel, reflétant le droit haïtien et les meilleures pratiques internationales

USAID Sector Reform and Utility Commercialization (SRUC): Haiti CPU Transaction Project Deliverable 11: Guidelines & Recommendations for Conducting a Competitive Procurement, Reflecting Haitian Law & International Leading Practice January 2017 PROCUREMENT METHODS BASED on INTERNATIONAL LEADING PRACTICE 2 Caracol Power Utility (CPU) Procurement Objective Engage a technically and financially well-qualified private partner that will manage the CPU in the longer term, including: •Investment in additional generation and distribution capacity and replacement o f depreciated assets. •Funding of any negative operating cash f lows. •Acceptance of all financial risks, ideally without subsidies from Government of Haiti (GoH). Therefore: The goal should be to maximize competition with a transparent international tender 3 Following are fundamental principles recommended in the Guidebook and based on international leading practice: Transparency: −Information shar ing & evaluation criteria Neutrality: −Tender rules that “do not provide scope for discretion” −S ufficient time fo r potential private partners to assess the opportunity and prepare bids. Non-discrimination: −“Equal treatment…foreign & domestic” 4 United Nations PPP Guidebook Reference: Guidebook on Promoting Good Governance in Public-Private Partnerships, 2008 –Over 80 PPPs awarded since 1991 –R esponsibility fo r the Concessions with the Coordination Department at the Ministry of Public Works –Categories: Highways, airports, reservoirs, ports, urban transport, hospitals –Electricity sector 100% privatized (not PPP) and unbundled, beginning in 1986: * Generation – 26 private companies * Transmission – 5 private companies * Distribution – 25 private companies 5 Chile: Positive PPP & Privatization Examples Can we add a picture or a map? Reference: “Chilean Experience in Public Private Partnership,” José Miguel Hidalgo, August 2014 Public & Private participation in Chile’s Electricity Sector The following tenets were central to the procurement process for Chilean PPPs: −Competitive and o pen to domestic and foreign bidders −Post-tender negotiation a voided −Transparent: •Widely advertised •R esults made public PPP Contracts −Renegotiations during contract term restricted since 2010, giving more con fidence to investors. 6 Chile: PPP Procurement Process Fundamental to Success Reference: “The Promise and Peril of Public- Private Partnerships: Lessons from the Chilean Experience,” International Growth Center, London, June 2011 A standard infrastructure procurement has three key steps based on international leading practice and historically successful PPPs 1 2 3 Request for Expressions of Interest (EOI) Request for Proposals (RFP) Selection of Winning Bidder and Contracting 7 Pre-qualification process: −Advertise EOI domestically and internationally −Direct solicitations: Permissible, but must be unbiased & transparent −Project information: not necessarily the full Information Memorandum but suf ficient to provide key details on the asset −Period to submit EOI: About six weeks is sufficient based on leading prac tice 8 Step 1: Request for Expressions of Interest (REI) −Not unreasonably confining – w ould undermine competition −Reasonable technical & financial qualification criteria (Private entities may partne r with other entities) −Pre-qualifications criteria made a vailable to parties expressing interest −Pre-qualified bi dders published on Internet Pre-qualification Criteria 9 Pre-qualified bidders may request tender documents to inform their decision bid: −Information memorandum −Obligations of private partner (cahier des charges) −Tender rules oProposal requirements & submission deadline oBid evaluation criteria −Draft contract Fur thermore, the pre-qualified bidders would typically have rights to: −Site visits −Data Room access 10 Step 2: Request for Proposals (RFP) Selection criteria should be objective, transparent, and simple; in order to maximize transparency, avoid subjective weighting when feasible Private partner’s investment & other obligations should be clearly stated in tender conditions. Leading Practice Utilizes the Following Criteria: −Winning bid: Ideally, single selection criterion, e.g. highest annual lease payment to government or lowest affermage fee to private partner −Technical and financial qualifications of bidder: Should be principally addressed in prequalification phase 11 Selection Criteria for Winning Bidder Selection committee is responsible for upholding transparency HAITIAN LAW RELEVANT FOR THE CPU TRANSACTION 12 −Collaboration between the two Ministries throughout the CPU PPP pr ocess. −Ministry of Public Works (Tr avaux Publics), through its Energy Cell, is the “relevant ministry” and therefore takes the leading policy role in preparation of Information Memorandum and Cahier des Charges. −Ministry of Economy & Finance (MEF) takes the leading role in preparing the Request for Expressions of Interest, the Request for Proposals, and Contracting with the winning bidder. −The foregoing Tender Documentation must be approved by the Co mmission Nationale des Marchés Publics, with final approval by the Cour des Comptes. 13 Roles of the Ministries of Finance and Public Works −PPP Unit pre pares tender documentation in consultation with relevant ministry (Travaux Publics in for Caracol Utility) −Commission Nat ionale des Marchés Publics (CNMP) must review documentation −Cour Superieur de s Comptes must give final approval to government contracts, including tender documents −Settlement of disputes (Article 95): Superseded by Haiti’s approval of the International Centre for Settlement of Investment Disputes (ICSID) Convention approved by Haiti in 2009 −International arbitrator sh ould be selected if winning bidder is a foreign entity, which is permitted under the law. 14 GoH Public Procurement & Concession Act of 2009 −The CMEP law would apply if CPU w ere deemed to be a “public enterprise”. −In that case, a concession of a public enterprise requires parliamentary appr oval. −Based upon discussions with GoH officials, their view is : •Referencing the 17 May 2005 decree on the “Organization de l’Administration Centrale de l’Etat,” CPU is not established by law or constitution and therefore is not a public enterprise. •Therefore the CMEP Law would not apply, and Parliamentary approval of the CPU concession is not required. 15 Modernization of Public Enterprises Law (CMEP Law) −Constitution: Muni cipal Councils have authority over the state private domain real estate. −Decentralization Decree of 2006: Responsibilities of local authorities/municipalities include the energy sector. −Identify author izations granted to EdH, Ministry of Travaux Publics, or Ministry of Finance for land occupied by distribution lines and for provision of electricity services in relevant service area. −Verify if author izations are transferable to private partners. 16 Authority of the Haitian Municipalities −Tariffs as- year tax holiday for private partner, as for other occupants of Caracol Industrial Park. −If no tax holiday, commercially viable tariffs would need to be highe r. −Formal GoH approval of tax holiday is needed. 17 Potential Tax Holiday 2016 PRESIDENTIAL ENERGY SECTOR DECREES and FUTURE IMPLICATIONS FOR ATTRACTING PRIVATE PARTNERS 18 −Promote competition and private sector participation in generation, trans mission, distribution, and commercialization. −Licenses and management contracts to be subject to public service procedures of procurement and concessions. −Tariffs and licensing would be under authority of proposed new re gulatory agency. 19 GoH Decrees Governing the Electrical Energy Sector have the following characteristics relevant to the CPU: Government of Haiti is preparing amendments to the three energy sector decrees of February 2016 −ANARSE, the elect ricity sector regulator is not yet established. −The amendments to the February 2016 Regulatory Decree are in the process of being drafted by a committee in the Office of the Prime Minister, and will subsequently need Parliamentary approval. −ANARSE would have authority to reform tariffs and license private ope rators, in line with leading practice for regulatory authorities −According to the Letters of Implementation signed by GoH and US AID in August 2016: Prior to the establishment of ANARSE the Ministries of Travaux Public, Finance, and Planning have authority to revise tariffs in communes served by Caracol Power Utility. 20 Regulatory Authority (ANARSE) Decree (February 2016) Government of Haiti is currently preparing amendments to the three energy sector decrees of February 2016 According to the subject decree, EDH should “maintain energy tariffs at a level enabling it to defray at least” the following: –All operating expenses –Debt interest and principal payments –Amortization of fixed assets –Profit corresponding to a rate of return on investment as specified by the re gulatory authority. 21 Electricité d’Haiti Decree (February 2016) Government of Haiti is currently preparing amendments to the three energy sector decrees of February 2016 POTENTIAL CPU CONCESSION STRUCTURE EXAMPLES DISCUSSED WITH THE GOVERNMENT OF HAITI, BASED ON INTERNATIONAL LEADING PRACTICE 22 Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering the following criteria for potential inclusion in the CPU REI: Financial: −Sufficient financial capacity to finance US$7 million or more i n capital investment, Years 1 to 3 (Ref: Session 2 slide) −Audited financial statements of the c andidate Technical: −Successful manage ment of an electric utility −Experience in o perating generation, transmission, or distribution. 23 Example: Potential Prequalification Criteria for CPU Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering the following as integral components of a CPU concession: Full financial responsibility: −Finance operations & i nvestments (with no subsidies from GOH) −Annual lease payments to government for existing assets −M ake ~$300,000 annual co ntribution for 16 years to independent reserve escrow fund toward 2032 replacement investments (Private partner will be responsible for shortfall) Full management responsibility: −Generation, distribution, and collection for a period of 30 yea rs 24 Example: Private Partner Concession Obligations (1) Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering the following as integral components of a CPU concession: Service area: −Complete expansion in current communes & Fort Li berté Electricity supply: −24 hour supply, subject to reasonable availability (e.g. 98%) Empl oyment: −Engage current Haitian PPSELD employees for their experience and as sistance with expansion 25 Example: Private Partner Concession Obligations (2) Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering commitment to the following to attract a private partner: −Accept 30-y replacements. −Grant rights to private partner to use of new assets for term of co ncession. −Abide by tariff schedule and quarterly adjustment formula specified in t ender documentation throughout term of concession. −Set and monitor safety s tandards. −Set and monitor environmental s tandards. 26 Example: Potential Government Obligations Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering the following criteria for potential inclusion in the CPU RFP: Deadline for submitting bids −At least three months after pr equalification period and launch of Request for Proposals. Expansion options for private partner, three- year decision period: −Ouanaminthe & Ferrier −Quartier Morin −Cap Haïtien 27 Example: Potential Tender Conditions (1) Based on international examples and on sessions with the MEF, Ministry of Public Works, and NRECA (the current CPU operator), the GoH is considering the following criteria for potential inclusion in the CPU RFP: Bid Criterion: −Highest annual lease payments for term of lease, or −L owest tariffs proposed −Single criterion is ideal for transparency, as prequalification addresses othe r requirements. Consistent with UN neutrality principle and World Bank Group preference. Potential second criterion: −Minimum investment commitment for expansion options −W ould require weighting of cr iteria 28 Example: Potential Tender Conditions (2) GOH identified the next steps to launch a CPU PPP tender, based on leading practice 1 2 3 4 5 Determine Appropriate Tariff Level & Adjustment Formula Tariff levels are fundamental to design of the PPP PPP Type Selection Approval of PPP type by GoH and USAID/Haiti Engage Government Entities Sequencing of engagement of government entities Draft Tender Documentation Including Pre-qualification, Information Memorandum, Tender Rules Launch REI, Determine Pre- qualified Bidders, then Launch RFP Develop time frame to launch REI and RFPs 29 END 30 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. 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