TRANSFORMATIVE PROJECTS

Saudi Arabia 2020 | TRANSPORT & LOGISTICS | INTERVIEW

A key part of Vision 2030 is implementing public transportation programs to help cities transport large numbers of people safely, quickly, and reliably in a cleaner environment and at an affordable cost.

Osama bin Ibrahim Abdouh

Can you walk us through the evolution of your operations over the past few years?

MJC is responsible for implementing the Jeddah Public Transportation Program (JPTP), an essential and important transportation and city development initiative for Jeddah. It focuses on developing mass rapid transit as a core mobility option in a multi-modal transportation system that will help Jeddah continue to grow. JPTP's components includes metro lines, LRT, the Corniche tramway, a bus network, ferries, Obhur Creek Bridge, and a multimodal station. MJC seeks to implement JPTP via the PPP procurement approach. Currently, we are working with our transaction advisors to complete four transactions vis-à-vis the Bus Network Project Phase 1, Obhur Creek Bridge, water taxis, and the development of the Corniche tram. These four transactions will be rolled out to the market in the same order. JPTP has the potential to transform the urban landscape of Jeddah and provide vastly improved transportation to a substantial population to come for decades.

Why are you starting with the bus package, and what are the operational implications following the tender announcement?

We are using the incremental delivery of benefits approach and the bus public transportation component as initial stage of the long-term public transportation strategy for Jeddah. The bus network project is an initial step in developing a sustainable urban transport outcome for a city that has sufficient travel demand and overall public market share to merit the project. Also, the bus network project is more than just a physical investment; it is transformative and meets the needs of Jeddah's residents. It also requires less initial CAPEX and allows faster delivery of initial public transport enhancement for the city. We will face similar challenges for modal shifts (mode share) like other global public transportation systems during the early days of commercial operations, but these challenges will be overcome by introducing policies to encourage the use of public transport.

What are the salient technological aspects of this masterplan?

JPTP is an integrated, multimodal public transportation system, and its design and implementation are based on technological aspects such as concurrent engineering, EDMS, 3D BIM modeling, and intelligent transport systems (ITS). The multimodal transportation modes are coordinated through an integrated travel network management and integrated operations control center and include an integrated and automated fare collection system, applications for travel planning, and real-time travel updates. JPTP uses technology that features a uniform brand and symbol for easy recognition by travelers. In addition, during the planning and design phases, MJC is keen to discuss updated technological solutions available in the market or expected to evolve in the future.

What financial aspects need to be considered when financing a transportation project?

Financing a public transportation system is challenging, and availability of funds is vital to developing any public transportation project. Several factors need to be considered while financing transportation infrastructure, including project-specific business cases and models, sources of funding, financial instruments, avoiding capital cost subsidies, the size of subsidies, keeping capital and operational costs minimal, the age of assets, avoiding preferential treatment for few financial investors, and regulatory policies.

What is needed to overcome the challenge of overreliance on direct revenue generation to approve a project's financial model?

A project's financial model output is used in cost-benefit analysis, to determine the economic feasibility of a project, or in performing financial analyses. Besides depending on the generation of revenue (direct and indirect) in approving the financial model of a project, the assessor or interrogator of said financial model must look into inputs such as capital, operating, service, and finance costs, escalation rates, and general assumptions made in the model. Additionally, government guarantees, tax exemptions or reductions, the certainty of revenue streams, termination compensation, incentives for new market penetration, and subsidies play an important role in a project's financial model. As a guide, a project's financial model can be approved if it can demonstrate it covers the operating costs and debt service expenses over the tenure of a debt.