LNG infrastructure project financing through Public Private Partnerships

Alan Yogi Lau's picture
Alan Yogi Lau, President Director , Anglo Euro Energi Indonesia, PT
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Mr. Lau is a member of United Nations Economic Committee for Europe's Team Of Specialists on Public-Private Partnerships (TOS PPP) as well as a member of the task force on LNG best practice policy guidance, Group of Experts on Gas.

Gastech News: What is PPP? Is PPP similar to Privatization?

Alan Yogi Lau: A broad definition of PPP is a long-term contract between the public party and a private party for the development (or significant upgrade or renovation) including operations and maintenance of a public asset, in which the private party bears significant risk and is responsible for the performance throughout the life of the contract.

  • PPP is a method used to procure infrastructure and services
  • It is a tool to deliver new or upgraded infrastructure efficiently
  • It is a relationship to procure public infrastructure (including finance, construction, operations and maintenance) with private sector expertise and finance participation
  • PPP is a process from project due diligence, analysis, and diagnosis to procurement, implementation and monitoring throughout project life cycle
  • PPP is hence not only about raising capital to fund infrastructure projects
  • PPP is not Privatization which implies infrastructure have already been constructed

Gastech News: How can PPP be utilized to implement LNG Infrastructure Projects?

Alan Yogi Lau: LNG infrastructure projects such as Storage and Regas terminals, FSRUs, FSU, and other floating storage solutions including gas to power projects can be actualized through Public Private Partnerships. Partnerships between the Federal or the Provincial governments and the private sectors including state owned enterprises promotes economic growth across local regions and PPP can be designed to benefit communities by implementing grass roots projects. In the emerging markets and developing economies PPP provides a structure for project bankability through mitigation of localized risks.

Gastech News: What are the failures and pitfalls in PPP project implementation?

Alan Yogi Lau: A common mistake is to hand over the project responsibility to the private sector without public sector constant oversight and active participation. PPP is a process base on long-term relationships and the public sector has to be involved actively at every stage throughout project life.

Other major failures amongst many include:

  • Poor project preparation and management of tender process
  • Lack of transaction management capacity including lack of funds to hire PPP advisors
  • Failure to communicate (inside, outside, to the public — raising acceptance and managing resistance, and to investors)
  • Failure to ensure that the project matches the government’s strategic objectives or changes in the government objectives

Gastech News: What are the benefits of PPP projects?

Alan Yogi Lau: Governments especially in emerging markets often lacks the funds and expertise required to implement and operate infrastructure projects. PPP is an important practical solution amongst others to rise vital financing and tap into private sector experience and expertise to successfully implement much needed infrastructure projects.

In our view, the derived benefits from PPP projects must include socio economic benefits for the local communities.

Gastech News: How can PPP be effective in community development?

Alan Yogi Lau: Anglo Euro Energi is developing an innovative model whereby the socio-economic and social development is embedded in the PPP project design from the outset. The project design is tiered to encapsulate the objectives of corporate social responsibility (CSR) in a concrete, collective and sustainable form, ensuring on-going socio-economic benefits and distribution of resources to provinces and communities that need assistance most. A social foundation, cooperative, trusts or NGO shall be incorporated as stakeholder in this "People First" PPP project hence ensuring constant revenue stream is available for grassroots social projects.

A "People First" PPP structure is more effective and goes beyond CSR, ensuring public private partnerships projects provides constant revenue stream to implement a host of grassroots projects to benefit local communities economically and socially.

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Image Source: Courtesy of Anglo Euro Developers