Circular 19/2019/TT-BGTVT guiding the field of investment and the content of feasibility study reports of investment projects in the form of public-private partnership in the field of transportation, issued by the Minister of Transport download issued

CIRCULAR

DETAILED GUIDANCE ON INVESTMENT FIELDS AND CONTENTS OF FEASIBILITY STUDY REPORTS OF INVESTMENT PROJECTS IN PUBLIC-PRIVATE PARTNERSHIP FORM IN TRANSPORT SECTOR

Pursuant to the Law on construction No. 50/2014/QH13 dated June 18, 2014;

Pursuant to the Law on investment No. 67/2014/QH13 dated November 26, 2014;

Pursuant to the Government’s Decree No. 63/2018/ND-CP dated May 04, 2018 on investment in the form of public-private partnerships;

Pursuant to the Government’s Decree No. 12/2017/ND-CP dated February 10, 2017 defining the functions, tasks, powers and organizational structure of the Ministry of Transport;

At the request of the Director of the Public - Private Partnership Investment Project Management Department;

The Minister of Transport promulgates this Circular to provide detailed guidance on investment fields and contents of feasibility study reports of public-private partnership investment projects in transport sector.

Chapter 1

GENERAL PROVISIONS

Article 1. Scope

This Circular provides detailed guidance on investment fields and contents of feasibility study reports of investment projects in public-private partnership form in transport sector.

Article 2. Regulated entities

1. This Circular applies to regulatory authorities, organizations and individuals involved in the execution of investment projects in the form of public-private partnerships (hereinafter referred to as “PPP projects”) in transport sector.

2. This Circular does not apply to Build-Transfer (BT) contracts under which investors are paid by land area.

Article 3. General regulations on feasibility study reports

1. The feasibility study report of a PPP project (hereinafter referred to as “FSR”) shall include the principal contents specified in Clause 1 Article 29 of the Government’s Decree No. 63/2018/ND-CP dated May 04, 2018 and this Circular. A FSR must also include the contents specified in the Circular No. 09/2018/TT-BKHDT dated December 28, 2018 by the Minister of Planning and Investment.

2. With regard to PPP projects with construction packages, FSR must include fundamental design as regulated in the Law on construction.

Article 4. Investment in transport sector

Projects on construction, modification, operation, business, management of infrastructural constructions and provision of public services include:

1. Road projects;

2. Railway projects;

3. Inland waterway projects;

4. Maritime projects;

5. Aviation projects.

Chapter 2

CONTENTS OF FEASIBILITY STUDY REPORT

Article 5. Grounds for preparing feasibility study report

FSR is prepared on the following grounds:

1. Laws, Decrees and Circulars providing guidelines for implementation of the PPP project;

2. Laws, Decrees and Circulars providing guidelines on the investment sector/field of the PPP project;

3. Resolutions or decisions giving approval for relevant planning as regulated in the Law on planning, national, industry sector/field, regional and local socio-economic development plans relevant to the PPP project;

4. Decisions and/or documents given by competent authorities in the course of establishment, appraisal and decision on investment proposals (except group-C PPP projects);

5. Other relevant legislative documents (if any).

Article 6. Necessity and objectives of an investment project

1. General context:

a) Provide general explanations about the national/local social-economic contexts in the project implementation stage, the development of relevant road transport system, natural and environmental conditions which are likely to affect the project;

b) Give the general overview on proposed sector/field of the project, direct and indirect effects of specialized laws on the project;

c) Evaluate the conformity of the project with relevant planning as regulated in the Law on planning and socio-economic development plans;

d) Make judgments on expected benefits from the project to the national and local development.

2. Necessity of investment project and social demand:

a) FSR must contain analysis on capacity of given works to meet current transport demand before and after the investment project is executed, and analysis on the potential and benefits accrued from the investment project which then will be used as the basis for determining demands, time and scale of the investment project;

b) The forecasting of demands of using the works and the project’s products and services must include analysis on current demands and future demands in a scientific manner, and the forecasting result is obtained on the basis of the division of demands to modes of transport on the entire network (if any); input data, grounds and analytical results must be specified according to specialized instructions (if any) with various scenarios during the life cycle of the project. Demand forecasting dossier must be enclosed with FSR dossier;

c) FSR must also include detailed description of existing conditions of the given works and matters to be taken into consideration when establishing the project; relevant works and projects (including ancillary projects and competing projects); analysis on influences of these projects on the implementation of the proposed project (including influences on revenues, projects and costs, etc.); explanation about both positive and negative impacts of these projects on the proposed project.

3. Project’s objectives

a) General objectives: Determining socio-economic benefits that the project brings to the entire country and locality; contributions to accomplishing the general objectives of transport sector or field;

b) Specific objectives: Specifying quantitative indicators (including quantity, quality and time); the explanation about issues and current situations that may be solved, and the number of beneficiaries of the project; the objectives regarding the scale and capacity that the project is expected to reach in order to meet the demands of users; and other specific objectives.

Article 7. Advantages of making investment in a PPP form and consulting opinions

1. Giving the thorough analysis of advantages of the PPP investment form (including the study on conversion of investment form of projects using public investment capital), including the capability of calling for funding sources, technologies and experience in management of the private sector; results of the practical survey on the private sector’s capability of implementation of the project; plans to divide risks between involves parties.

2. Specifying limitations on making investment in the PPP form in comparison to other investment forms, including: related parties’ capabilities of managing the project; the complexity of formulating and implementing terms and provisions of the project contract.

3. With regard to projects proposed by investors, FSR must include the analysis on advantages of funding sources and investors’ balancing capabilities; the capability of balancing state budget allocations for the project; investors' managerial capability and experience; the investment recovery capability, investment efficiency and capability of receiving and dealing with risks.

4. The preparation of FSR should take into account consulting opinions on investment in the project given by one or more regulatory authorities and organizations such as People’s Council, People's Committee, National Assembly Deputy Delegation of the province or city where the project is implemented, and trade and professional associations related to the investment sector of the project.

Article 8. Relevant of project to development plans and planning schemes

1. Giving explanation about the relevance of the project to relevant planning schemes according to legislative regulations on planning, the national plans for socio-economic development, sectoral, industrial, regional and local development plans; the level of fulfillment of the approved planning scheme in case of investment phasing or limitations on technical standards.

2. Giving explanation about the relevance of the project to investment sectors specified in Article 4 hereof.

3. In case of the investment phasing that is meant to minimize the complexity of the project and/or improve the feasibility and attraction of the project, FSR must include the explanation about the project's scale and the master plan for implementing the project in order to analyze difficulties that may arise during the implementation of the project.

Article 9. Project scale and location, and utilization of natural resources

1. Making the analysis of the demands for infrastructure facilities based on planning schemes, practical survey data or reporting data; giving the explanation about the project scale and capacity, the relevance of technical grades of project works to technical regulations and standards announced by regulatory authorities; the relevant of investment plan to the forecast of increase in demands and investment phasing contents (if any).

2. Project location: Describing information about the project location and the vicinity of the project site (beginning points, ending points and control points); place-names that the project goes through. In case other projects or works that are being developed or are going to be developed are located within the vicinity or boundary of the project, the analysis of the extent of impacts of these projects or works on the proposed project must be made.

3. Demands for use of land: Determining the area (boundary) of the land plot used as the project site; total land area used for the project (temporarily or permanently used land areas), advantages in terms of project location, safety corridor (if any), classification of land according to current using purposes which shall be used as the basis for determining compensation and developing site clearance orientations.

4. Demands for use of natural resources: Collecting data and evaluating natural resources at the project site; capability to use such natural resources as building materials (reserves and quality) and the feasibility of the extraction of such natural resources.

Article 10. Natural conditions at construction site and current conditions of works

1. Natural conditions: Describing detailed information about natural conditions at the construction site and evaluating impacts of natural conditions on the project based on survey data.

2. Evaluating current conditions of works according to technical criteria of the project; specific status of current works and their capacity to meet operation demands; capability of using the entire of a part of current works.

3. Evaluating current conditions of works and determining residual value of transport infrastructure facilities according to current regulations on transport infrastructure projects.

Article 11. Engineering, technologies and solutions

1. Describing the list of technical regulations and standards applicable to the project and primary technical specifications.

2. Giving information about the fundamental design which is developed according to legislative regulations on construction, including the building location, direction or route of the works, list and scale, type or grade of the works which must be conformable with investment scale, technical standards and grade of the project; making analysis of technical aspects of investment phasing plan (if any).

3. Giving detailed explanation about investment items, selected technical solutions, technological methods and equipment for each work item; the utilization and connection with existing works; architectural solutions, ground plan, cross-sections and vertical sections of construction works and their sizes and main structures. When adopting new technical solutions or technologies or using new materials, describing their satisfaction of requirements concerning the technical quality of works and capability to improve the efficiency of the project.

4. FSR of transport infrastructure construction projects must also include calculations of the main force-bearing structures or new structures; technical and economic comparison in the course of selecting technical methods or design solutions for achieving the best one.

5. Describing relevant infrastructure works; plans for infrastructural connection inside and outside the works; solutions for preventing and controlling fire and explosion, traffic safety, environmental sanitation and occupational health.

Article 12. Project implementation plan, progress and period of project contract

1. Describing the master plan for implementation of the project (making the project’s progress chart), which must indicate dates of beginning and completion of main tasks of the project such as the preparation of FSR, approval for the project, bidding for investor selection, conclusion of the project contract, construction stage, operation stage, time limit for transferring the project, and other time marks (if any). The plan for implementation of the project must be formulated in conformity with actual conditions for ensuring the project progress.

2. With regard to the project with construction packages: Making the general construction progress based on construction volume and topographic, geological and climate conditions at the project site as the basis for determination of project stages, cost estimation and investment allocations which should be conformable with investment process.

3. Operating duration of the project: The operating duration of the project starts from the time when the project or the work is put into operation or transferred from the project management agency until the end of the project term as defined in the financial plan; this operating duration must be expressed in days.

Article 13. Site clearance and relocation

1. The plan for site clearance and relocation must be conformable with the demands for land area prescribed in Clause 3 Article 9 of this Circular, the State regulations on land appropriation, compensation and relocation subsidies and relevant laws. The plan must include:

a) The scope of site clearance;

b) The plan for performing the site clearance, compensation and relocation subsidies (divided into centralized and dispersed relocation). In case of centralized relocation, location and construction scale of the relocation area, and resettlement subsidies (if any) shall be determined;

c) Funding sources; making payment plan which must be conformable with the master plan for implementation of the project for using as the basis for allocating investment capital and determining loan interests;

d) Impacts of the site clearance and relocation, and solutions thereof. Where necessary, a public consultation may be carried out to set up a suitable plan.

2. The master plan for site clearance and relocation must be approved by competent authority of the locality where the project goes through.

3. The contents of the site clearance and relocation plan must comply with the Government’s Decree No. 47/2014/ND-CP dated May 15, 2014 and relevant regulations.

Article 14. Total investment, total investment capital and financial plan

1. Total investment must be determined in a sufficient and accurate manner according to legislative regulations on construction cost management and Decree No. 63/2018/ND-CP, Circular No. 09/2018/TT-BKHDT dated December 28, 2018 and this Circular. While determining the total investment, the following should be taken into account:

a) Costs of compensation, support and relocation (if any); construction costs; equipment costs; project management costs; costs of construction investment consultancy; provisional amounts for arising volumes and inflation, and other costs as prescribed by law;

b) Provisions, loan interests and other necessary costs permitted by law in the course of capital mobilization (guarantee fees, undertaking fees, credit insurance and brokerage costs) incurred during the construction which must be determined according to the disbursement schedule and the project implementation progress (the cash flow must be formed during the project implementation);

2. Total investment capital must be determined in a sufficient and accurate manner as regulated in the Decree No. 63/2018/ND-CP and other relevant laws. While determining the total investment capital, the following should be taken into account:

a) Total investment which must be determined according to Clause 1 of this Article;

b) Minimum owner’s equity, borrowed capital and State contribution to the project (if any);

c) Grounds and the necessity of consideration of costs relating to the initial working capital needed for operation of the project (if any).

3. The financial plan must include primary contents specified in Section VI Appendix III enclosed with the Circular No. 09/2018/TT-BKHDT dated December 28, 2018. To be specific:

a) Providing sufficient grounds for determining input parameters used in the project’s financial model; carrying out the assessment of financial feasibility and capital mobilization feasibility, and determining the payback period and period for gaining profits based on such grounds;

b) Giving detailed explanation about costs included in the financial model, including: total investment capital of the project, enclosed with the project’s financial plan (the capital mobilization plan), estimated interest rate, loan conditions and other costs;

c) Revenues: Describing the planning prices and charges which must be conformable with the project contract, general market prices and current laws; describing and determining revenues generated from the project under various scenarios (basic-, maximum- and minimum-level revenues) based on analytical and demand forecasting data specified in Point b Clause 2 Article 6 hereof;

d) Making analysis of the relevance of unsafe input parameters and output parameters (sensitivity) to input parameters of the financial model (analysis shall be carried out in both cases of good and bad financial plans);

dd) Making detailed analysis of at least the following output parameters of the financial model for ensuring the project’s possibility of getting loans, including: The ratio of borrowed capital to equity; debt service coverage ratio (DSCR); minimum return on equity or equity internal rate of return; project internal rate of return (IRR); net present value (NPV) and payback period (Thv).

4. As for projects that need the State capital contribution to ensure their financial feasibility, describing information concerning the State capital contribution specified in Clause 1 Section IX Appendix III enclosed with the Circular No. 09/2018/TT-BKHDT dated December 28, 2018 based on the project’s financial model and analytical data of the selected project contract, including:

a) The necessity of the State investment in the project;

b) Maximum State investment, balancing capacity; methods, plans and schedules for disbursement of funds to investors;

c) Requirements for the State capital contribution to the project such as various plans and selected plans, values, proposed tools, mechanisms for disbursement and payment.

Article 15. Selection of project contract type

1. Based on explanations about technical plans, demand forecasts, financial plans of the project, the State capital contribution, and payment plan, FSR shall determine whether the project is implemented in the model of investment made for business purposes or payments to investors are based on the quality of services rendered, and concurrently, analyse the relevance of the project contract type to project conditions.

2. Making analysis of advantages and disadvantages of the selected project contract type in different ways including the division of risks and other matters related to the project’s feasibility.

3. Making the detailed interpretation of responsibilities of parties involved in implementation of the project contract (for design, construction, operation and capital arrangement) of regulatory authorities, investors, project management enterprises and other related entities (e.g. lenders, input product or service suppliers and contractors, etc.).

Article 16. Investment capital, capital mobilization plans and feasibility

1. Giving information about the project’s funding source and the funding plan for each source (including equity, borrowed capital and the State capital contribution) in conformity to the project implementation schedule.

2. Assessing the feasibility of calling for funding for implementation of the project; market demands, payment capacity, service users’ payment capacity and the interest of investors and lenders in the project.

Article 17. Management of project implementation, operation and maintenance of works

1. Giving information about capacity and organization structure of management of implementation of the project by regulatory authorities over specific periods of time, including the preparation and appraisal of FSR.

2. Determining indices measuring the quality of transport infrastructure works in terms of engineering, operational, environmental, social, financial and implementation progress issues, etc. during the construction and operation (hereinafter referred to as KPIs), as a basis for supervision of the project by involved parties. Based on specific characteristics of each project, determining contents to be supervised during the project implementation and requirements for the fulfillment of such contents for identifying KPIs relating to the project; giving information about grounds for measuring each indicator, information providers and supervision procedures.

3. Management, operation and maintenance of works shall conform to legislative regulations on management, operation and maintenance of relevant works.

Article 18. Risk analysis and proposed investment incentives and guarantee

1. Describing risks likely to incur during the entire life cycle of the project and assessing the level of impacts caused by these risks on the project as the basis for distribution of risks in a reasonable manner and in conformity with legislative regulations to regulatory authorities and investors, and concurrently proposing risk minimization solutions and responsibilities for risk management shared between involved parties during the project implementation period. These contents shall be described in a summary of risk sharing responsibilities, including:

a) Determining major risks of the project in a systematic way such as legal risks, social risks, land-use rights risks, environmental risks, design, construction, engineering, technological and production risks, financial risks, risks in macroeconomic situations, market demand risks, operational risks, contract termination risks and other risks (if any);

b) Describing major risks of the project and concurrently analyzing the likelihood of incurring these risks and level of impacts of these risks on the project (in terms of costs, implementation progress, design changes and capital allocation, etc.); assessing financial impacts of these risks on the project and where necessary, employing various plans in the financial model for assessing such impacts;

c) Assessing impacts of risks on the project as well as costs and benefits of risk minimization solutions based on specific technical, economic and financial conditions of the project, and financial analytical data. FSR shall describe the plan for distribution of risks and responsibilities for risk management shared between involved parties during implementation of the project; specific proposals for support from regulatory authorities and the mechanism for sharing of risks between regulatory authorities and investors.

2. Based on the assessment of impacts of risks on the project and current situations of domestic and international financial markets, giving explanations about recommendations about investment incentives, types of guarantee or assurance of the Government as prescribed in Chapter IX of Decree No. 63/2018/ND-CP and associated conditions as well as other required obligations assumed during the project contract period.

3. Giving explanations about measures for dealing with the cases where the actual revenues generated from the project significantly differs from the expected or estimated revenues for reducing the fee collection and payback periods.

Article 19. Socio-economic efficiency and impacts caused by the project

1. Analysis of socio-economic efficiency

FSR must describe all contents specified in Section V Appendix III enclosed with the Circular No. 09/2018/TT-BKHDT dated December 28, 2018, including determination of socio-economic costs and benefits of the project (including quantifiable elements, elements that may be quantified but cannot be valued, and qualitative elements).

On this basis, analyzing socio-economic efficiency of the project, including qualitative evaluation of the project's major impacts that cannot be quantified or that may be quantified but cannot be converted into monetary value and quantifying the impacts that are quantifiable and convertible into monetary value; calculating, quantifying and analyzing benefits for service users that may be obtained by implementation of the project (including cost payment) and implementation of no project, and evaluating indices measuring the socio-economic efficiency of the project such as Economic Net Present Value (ENPV), Economic Internal Rate of Return (EIRR) and Benefit-cost ratio (BCR).

Conclusions on socio-economic efficiency of the project: Based on the analysis made according to the abovementioned instructions, FSR should give conclusions on the socio-economic efficiency of the project. In case of lack of prerequisites for determination of cost and benefit elements that may be quantified and concerted into monetary values as a basis for calculation of indices measuring the socio-economic efficiency of the project, FSR should give conclusions on the socio-economic efficiency of the project based on other remaining elements.

2. Environmental impacts: FSR shall include the environmental impact assessment report which is prepared, appraised and approved in accordance with the Law on environmental protection.

3. Social impacts: FSR should give explanations about elements affecting society during the project implementation period such as relocation subsidies, gender equality, labor or job creation, etc., and measures to minimize negative impacts in accordance with current legislative regulations.

4. Other impacts: FSR should give explanations about elements affecting national defense and security and other impacts (if any) during the project implementation periods.

Article 20. Conclusion and recommendations

1. In its conclusion part, main contents of FSR of the project should be summarized, including:

a) Project name; name of the regulatory authority, name of the entity preparing the project or the investor proposing the project;

b) Project location and land area to be used (if any);

c) Scale, capacity and technical requirements of the project;

d) Total investment capital and total investment (determining the State capital investment in the project, if any);

dd) Project contract type and project contract period (estimated project implementation progress and operating period);

e) Financial indicators in the financial plan;

g) Investment incentives and guarantee;

h) Other contents.

2. In the suggesting part of FSR, recommendations and proposals are specified (if any) shall be given.

Chapter 3

IMPLEMENTATION

Article 21. Effect

1. This Circular comes into force from July 10, 2019 and supersedes the Circular No. 86/2015/TT-BGTVT dated December 31, 2015 of the Minister of Transport.

2. In case legislative documents referred to in this Circular are amended, supplemented or superseded, the new ones shall apply.

Article 22. Implementation

Chief of the Ministry Office, Chief Inspector of the Ministry, Director General of Directorate for Roads of Vietnam, Directors of Departments/ Divisions affiliated to the Ministry of Transport, Directors of Project Management Boards affiliated to the Ministry of Transport, heads of relevant authorities/agencies and relevant individuals shall implement this Circular./.

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