Readers of this module should gain an appreciation for port finance and its relationship to reform as well as how the financial risks and rewards vary from one reform option to another. Some of the financial implications that need to be taken into account include risk allocation among port stakeholders, potential sources of funding for the reform process, and pricing port services to achieve revenue and public policy objectives. A comprehensive financial model is also included as an annex to Module 5.
Part A: Partnerships in Ports: Risk Analysis, Sharing, and Management
Characteristics of the Port Operator
Industrial and Commercial Dimension
Specific Aspects Particular to the Port Sector
Vertical Partnership with the Concessioning Authority
Horizontal Partnership with Numerous Players
Interference or “Restraint of Prices” Risk
Economic and Financial Regulation
Golden Share Blocking Minority
Operator Handling Only Its Own Traffic
Operator Acting on Behalf of a Third Party in a Competitive Situation
Operator Acting on Behalf of a Third Party in a Monopoly Situation
Transit or Transshipment Traffic
Other Concessioning Authority Guarantees
Approach of the Different Partners to Risk and Risk Management
Measuring Economic Profitability from the Perspective of the Concessioning Authority
Differential Cost-Benefit Analysis
Commonly Used Economic Profitability Indicators
Assessing the Economic Costs of the Project
Rating Risk from the Perspective of the Concession Holder
Financial Profitability and “Bankability” of the Project
Assessing the Project Risks by Producing a Rating
Commonly Used Financial Profitability Indicators
Project Discount Rate—Cost of Capital
Financial Debt Remuneration Requirement
Debt Remuneration Requirement Conclusion
Equity Remuneration Requirement
Financial Structuring within the Framework of a Project Finance Set-Up
Financial Credits with a Multilateral Umbrella (A- and B-loans)
Structuring Equity and Quasi-Equity
Equity Provided by the Public Sector
Equity Invested by the Project’s Sponsors
Equity Invested by Multilateral Institutions
Equity Invested by Bilateral Institutions
Managing Exogenous Financial Risk
Firm Financial Instruments in the Over-the-Counter Market
Firm Financial Instruments in the Organized Markets
Conditional Financial Instruments (interest rate options)
Foreign Exchange Risk Management
Counterpart Risk Management and Performance Bonds
Financial Engineering and Political Risk Management
Guarantees Offered by Multilateral Agencies
Guarantees Offered by Export Credit Agencies
The Use of Private Insurers for Covering Political Risks
Financial Modeling of the Project
Construction of the Economic Model
Operating Revenues and Expenses
Operating Revenue and Charges in Terminal Management Operations
Construction of the Financial Model
Profit and Loss Account (income statement)
Box 1: Richard’s Bay Coal Terminal: A Wholly Private Terminal
Box 2: Port Réunion: A Single Container Terminal Using Several Handling Contractors
Box 3: Owendo Ore Terminal in Gabon
Box 4: Container Terminals in the North European Range
Box 5: Container Terminal Operator in the Port of Klaipeda
Box 6: Port of Djibouti: Transit and Transshipment
Box 7: Djibouti Fishing Port: Public Service and Semi-Industrial Activity
Box 8: Horizontal and Vertical Partnerships in the Port of Maputo, Mozambique
Box 9a: The Country Ranking Developed by Nord-Sud Export
Box 9b: The Country Ranking Developed... (continued)
Box 10: An Example of Export Cover by COFACE in a Port Project
Box 11b: Principal Guarantees...(continued)
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