Prsentation PowerPoint

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Regional PPP Workshop Riga, March 6-8 2007 The
French PPP Experience in the Rail Sector
Thomas VIEILLESCAZES Director France Southern
Europe DIF (Dutch Infrastructure Fund) www.dif.eu
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• Introduction
• Objectives of the PPP in the Rail Sector
• The Perpignan-Figueras Project
• Future Developments

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• Introduction
• Objectives of the PPP in the Rail Sector
• The Perpignan-Figueras Project
• Future Developments

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Introduction

• French rail sector a fully public-administered
  sector so far progressively opening (1st
  private freight train operated on june 2005)
• A sector that heavily relies on public financing,
  heavily indebted
• Few participation of the private sector
• Laws regulation provide for monopoly of State
  public companies for project undertaking and
  infrastructure operation maintenance

Project financing
Allocation of Risks

• Infrastructure manager (RFF) pays the NPV of the
  free cash flows
• Railway undertaking (SNCF) pays for rolling stock
• State regional public authorities pay for the
  rest (70 of investment)

• All risks (construction, traffic, maintenance)
  borne by public sector
• Use of subsidies (during construction period) for
  Public part of financing
• Important assymetry of information, few direct
  control on execution from administration

French Public Sector Organization Is Likely to
Evolve Allocation of Risk Clearly Not Optimal for
Public Sector
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Introduction
An amibitious High Speed line 8yrs, 15 BN
investment program
with ever-shrinking budgetary capabilities

• 2004 setting up of a government agency for
  transport infrastructure financing, to use money
  from the road (dividends initially) to finance
  rail
• Use PPP as alternative means of financing
  projects transfer project ownership to private
  companies to seek for efficiency More for
  less!
• Mediocre project profitability a major drawback
  (good projects done already!)

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• Introduction
• Objectives of the PPP in the Rail Sector
• The Perpignan-Figueras Project
• Future Developments

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Objectives for PPPs in the Rail Sector

• Leverage new ressources for the rail sector with
  the usage of private funds
• Optimize global investment costs, construction
  and allocation of risks on rail infrastructure
  projects with a better integration of
  construction, operation and maintenance tasks
• Lower the cost for the National community and
  lower the impact of the debt of RFF
• Accelerate the development of the National rail
  network by constructing more projects in lesser
  time enforce the decision taken by the
  Government on dec. 18th 2003
• Improve competitiveness of rail mode

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Three Schemes to be Contemplated
 Classical  scheme (HSL East, Rhin-Rhône ) RFF
is project undertaker, subsidies to be put in
place ab initio Infrastructure PPP RFF is
contracting authority, public availability
payments occur during the life of the contract,
demand-traffic risk generally borne by Public
sector Concession Gov't or RFF as contracting
authority, Public subsidies ab initio, Project
undertaking, financing and operation at the own
risks of the concessionaire
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Risk Sharing Matrix
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Changes with the law 2006-10 of Jan. 5 2006 on
the Security and Development of Transports

• The State and RFF are allowed to use the PPP
  contract (contrat de partenariat) or the
  Concession for the provision of National rail
  infrastructure
• The contract can contemplate the construction,
  maintenance and operation of part or all
  infrastruction, with the exception of trafic
  asignment procedures and operation and
  maintenance of safety installations, which
  continue to be undertaken by SNCF.
• Creation of the Rail Safety Agency, independent
  from RFF and SNCF, in charge of all (PPP and non
  PPP) projects, in charge of authorizations
  regarding safety, interoperability (safety
  certificates, safey agreements, etc.)

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• Introduction
• Objectives of the PPP in the Rail Sector
• The Perpignan-Figueras Project
• Future Developments

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Perpignan-Figueras Project
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Project Rationale

• France Spain have different rail gauges
  (1.435m -UIC gauge- in France Europe, 1.676m in
  Spain)
• Since 1988, Spain has progressively developed a
  UIC gauge network
• The Perpignan-Figueras project will directly link
  the spanish rail network to the rest of Europe
  (European TEN-T top priority project)
• Relieving this bottleneck will have major impact
  on both freight passenger transport
• 10 hours for freight (4.2 MM added tons p.a.)
• 2 hours for passengers (2.6 to 3.5 MM added
  passengers p.a.)
• Project under discussion/study on a
  Franco-Spanish basis since 1992

0.5 MM inhab.
0.2 MM inhab.
2 MM inhab.
1995 Madrid Treaty Perpignan-Figueras will be
constructed as a Concession (Treaty Also Sets Up
Concession Framework)
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Project description
A 50 km-long freight High-Speed link, the first
of its kind in Europe

• Freight trains 100-120 km/h
• High-Speed trains 300-350 km/h
• 5 bridges
• Links to French UIC network at Perpignan
• Links to Spanish new UIC line (under
  construction) Figueras-Barcelona
• a 8 km-long tunnel
• dual-tube with safety galleries
• A 1 Bn investment

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The Concession

• The concession has been granted through a
  bi-national tender process (EEC Directive
  93/37)
• under the aegis of the French Spanish States
• The Concessionaire will Build Operate the rail
  link (as an Infrastructure Manager), then
  Transfer it back to the States
• Design of the Project was undertaken by States
  (subcontracted to a JV formed by the 2 public
  railways companies no infra managers)
• Concessionaire will build finance the project
  at its own risk
• Concessionaire will receive a subsidy for the
  construction of the project
• Concesionaire will operate and manage the
  infrastructure (maintenance, availability,
  performance, security, ) at its own risk
• Concessionaire will levy tolls on Train Operating
  Companies (SNCF, RENFE, others) operating
  freight, passenger high speed trains tolling
  scheme will be specified in the Concession
  contract
• At the expiry of the Concession period, project
  will be transferred to the States in the exact
  shape it was at the opening of the line

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Tender Organization
France
Spain
Inter-Government Commission
Selection Commitee

• Representatives of 2 administrations
• In charge of 1995 Treaty implementation
• Assists the 2 Govts during tender preparation
  process

• Evaluates selects candidates bids
• Experts from 2 countries

Negociation Commitee

• Negociates the contract
• Experts from 2 countries

Technical group
Legal group
Economics Finance group
Construction Exploitation
Contract issues
Tarification Financing
Technical support
Legal counsel
Financial advisor
Tendering and Contract Negotiation Were
Undertaken Directly Jointly By The Two
Administrations
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The Tender Process

• Tender preparation was launched in May 2000
  (Santander Franco-Spanish summit
• Technical preparation
• Legal framework preparation of the Consultation
  Rules/ terms of reference/ draft of the
  Concession contract
• July 2001 Tender published at the OJEC
• Oct. 1st, 2001 6 candidates
• Nov. 2001 all candidates are permitted to submit
  bids
• April 2002 6 bids received
• July 2002 EUROFERRO (Bouygues- Dragados)
  selected as  preferred bidder 
• Sept. 2002 negotiations start with EUROFERRO,

6 bidders, mostly major civil works constructors
in Spain France (Bouygues-Dragados,
Eiffage-ACS, SPIE-FCC, Acciona-Sacyr,
Vinci-Ferrovial) and the incumbent infrastructure
managers (RFF-GIF)
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The Tender Process (Contd)
April 16th 2003 negociation with
Bouygues-Dragados interrupted May 8th 2003 new
tender published in OJEC

• A Tender as  closed  as possible
• Benefit from Tender 1 experience
• Major innovation candidates are invited to bid
  on an non-negociable draft contract (except a few
  clauses), based on Tender 1 contract as finally
  negociated
• No technical options allowed to ease comparison
• Objective reach a conclusion as fast as
  possible
• But doubts about number of candidacies and level
  of subsidies demanded
• July 2003 4 candidacies
• RFF-GIF, ACS-Dragados-Eiffage (ACS bought
  Dragados during Tender 1), Bouygues-FCC,
  Ferrovial-Vinci
• All candidacies accepted, bids received October 7
  2003
• November 13 TP Ferro (ACS-Dragados-Eiffage) and
  Ferromed (RFF-GIF the two State-owned
  companies) are invited to negociate with the two
  governments

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The Tender Process (Contd)

• December 26, after ameeting of the Council of
  Ministers in Spain, the two governments announce
  they are about to conclude with TP Ferro

Concession contract signed in Madrid February
17th for a 50-year duration

• Construction costs 952 M (Jan 03). 32 of
  costs related to tunnel
• Planning 60 months delivery starting Feb. 17th
  2004
• Tolling scheme in the contract, with first 3
  years of operations limited fee to allow for
  build-up of traffic (as set in terms of
  reference)
• State Subsidy 540 M (57 of construction
  costs), shared by France Spain (50/50) EU,
  paid during construction
• Sponsor equity 102,9 M, closing had 1 year to
  take place
• No guarantees concesionaire will operate the
  concession at its own risk
• Penalty system for construction, performance,
  termination, etc.
• Contract is made public (integrally published in
  French official journal)

Debt financial closing took place Feb 10th 2005
with a  project finance  scheme, 520 M with
limited recourse on the sponsors
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The Concession (Contd)
Inter-government Commission (CIG)
Security commitee (tunnel)
Contractual relationship
States
Train Operating Companies
Toll Payments
Subsidies
European Union
Concessionaire
99.8 regularity
Sponsors
Equity
RFF (France)
Route definition Interfaces
Banks
Debt
Construction company
GIF (Spain)
Insurances
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Lessons Learned

• Excellent collaboration between the
  administrations of the 2 countries on a
  cross-border project
• Technically, a major project within the
  pan-european rail network
• A breakthrough project for the rail sector
• Application of the highway concession model to
  rail, a success so far for a project that was
  found difficult from the very beginning
• New player private between two public Infra
  managers
• Interaction with incumbent train operating
  companies (SNCF, RENFE) for both train operation
  and infrastructure management
• Proof that PPP in the rail sector is feasible,
  with effective full transfer of risks to a
  private operator
• Construction/completion risks
• Operational/traffic risk maintenance risk
• Tender procedure was long and difficult but
• Administrations learned (so did the candidates)
• Major innovations have been successfully
  introduced
• Challenges still ahead traffic, operation,
  completion of national connecting lines

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Project on Track for Opening in 2009
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• Introduction
• Objectives of the PPP in the Rail Sector
• The Perpignan-Figueras Project
• Future Developments

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Tours Bordeaux HSL Project

• LGV Sud-Europe-Atlantique, a High-Speed line
  project linking Paris to Bordeaux in 2 h is the
  next infrastructure project to be launched as a
  concession
• Challenges
• Size of the project, over 300 km, 4,5 BN
• Project economics are they strong enough to
  make the project bankable?
• Interfaces with existing network (several
  connexions) and future projects
• Project divided into two phases, long period of
  civil works, risks
• Co-financing with regional authorities needs
  solidarity on the long run, way over polical
  rythms
• Concession prequalification launched in February

Paris
Existing High-Speed Line
Bordeaux
Toulouse
Spain
TGV SEA Will Be a Test on How Innovative Schemes
Can Be Put in Place in France For Very Large
Scale Projects
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Nîmes Montpellier Bypass

• Existing line crossing Nîmes and Montpellier is
  saturating progressively
• The new 70 km line will create a pair of lines
  allowing freight trains to run out of cities
• Mix High-Speed Freight trains
• TEN-T top priority project (along with Perpignan
  - Figueras

• Cost of 1,2 billion
• Project ready, land control under way
• Will be launched as a PPP (contrat de
  partenariat, DBFO) where RFF will pay an
  availability fee to the project owner
• Preparation of the tender underway

Will Be a Test of The PPP (DBFO) Model on Linear
And Costly Infrastructure
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About DIF

• An independant, continental Europe-based, Equity
  investment fund focusing on PPP projects in
  Europe
• 150 MM closed in March 2006 (investors
  individuals, Dutch pension funds, Helaba,
  Sumitomo Mitsui Bank, European investment bank)
• An experienced team of professionals with a
  background in Project Financing and PPPs

• Todays focus on Western Europe, primarily
  Benelux, France, UK, Germany
• New markets, especially Eastern Europe, to be
  considered in the future
• A flexible, aggressive, independant fund,
  acquiring majority/minority positions in both
  Greenfield and Brownfield projects in the PPP
  sector
• 7 projects already acquired in France, UK
  (including Frances first PPP project)
• Participating in several tenders across Europe
• Core team in Amsterdam branch just set up in
  Paris

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Thank you for your attention
Thomas VIEILLESCAZES Director France Southern
Europe DIF (Dutch Infrastructure Fund) Mobile
(France) 33 6 87 96 66 61 Phone (Holland) 31
mailto t.vieillescazes_at_dif.eu www.dif.eu