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Veolia Transport Growing with Public Private
Partnerships (PPP)An alternative financing
solution
2

• PPPs are more and more a solution for our
  customers
• Veolia Transport PPP policy
• Main feedbacks from experience

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Background Elements

• The request for infrastructure is increasing due
  to major elements such as
• Long term worldwide economic growth
• Climate change
• Ageing infrastructure
• Growing cities and traffic congestion
• But how to finance them quickly ?

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PPPs are an attractive alternative solution to
governments for the following reasons

• Reform the public sector
• Focus on core mission of PTAs
• Improve efficiency
• In some cases, lack of technical skills
• A paradox to common ideas improve delivery and
  reduce costs (10 to 20 savings)
• Total lifecycle cost optimization
• Private model efficiency cost and delivery
• See next slide
• Create additional financing capacity
• Decrease opex and capex expenditures
• Reduce public debt
• Finance off-balance sheet

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PPPs should be less expensive

• Total optimization
• System optimization based on functionnal requests
  and performances
• Total lifecycle cost optimization including long
  term reliability, overhauls, maintenance
• Avoid piling margins and unnecessary redundancies
• Main pitfalls to avoid extra costs and
  contingencies
• Governance of the project for decision making
• Lack of clarification of functionnal requests
• Poor risk allocation involving contingencies on
  private side

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• PPPs are more and more a solution for our
  customers
• Veolia Transport PPP policy
• Main feedbacks from experience

7
Veolia Transport PPP policy governance issues

• Strong focus on governance and decision process
  with the PTA and within SPC
• To be a long term partner in the private special
  purpose company (the SPC) with all the risks
  attached to
• Operator influence at very early stage
• General management of the SPC not later than
  commercial start
• Single turnkey construction contract with the
  builders

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Role of the operator in the early stages and
during construction

• The operator is part of the optimization of the
  total lifecycle cost and of commissioning
• Optimization of basic design during bid
  preparation
• After start of detailed design the success of
  the project lays in the details
• Commissioning and testing
• A very critical phase, not to be shortened if we
  want to avoid problems with passengers on board
• To assist SPC, and to operate during empty trial
  running
• System acceptance
• Main pitfall in the design its too late, too
  expensive, too complicated

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Veolia Transport PPP policy finance issues

• Importance of a good balance between upfront
  investment subsidy and yearly operational
  subsidies
• Tarif and subsidy escalation reflecting cost
  structure of the SPC
• Exchange risks if any to be covered (construction
  and spare parts)

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Veolia Transport in BOT projects some examples

• BOT contracts in operation
• Rouen (France)
• A 30-year BOT contract to finance, build and
  operate the LRT system
• Veolia responsible for operating and maintaining
  the system
• LRT operations began in 1994
• Barcelona (Spain)
• 2 successive 25-year BOT contracts related to the
  2 LRT systems
• TramBaix and TramBesos the first two LRT
  lines to be run by a private operator in Spain
• BOT contracts under construction
• LESLYS (France) the first express
  city-to-airport rail link in France
• Consortium RhônExpress
• Brought into service in September 2009 for 28
  years
• 22 km of lines, 6 Stadler Tango express
  tram-trains
• Mumbai underground system (India)
• A 35-year BOT contract awarded by the consortium
  Mumbai Metro One in July 2006
• 1st line in operation in 2010

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• Why PPPs are more and more an issue for our
  customers
• Veolia Transport PPP policy
• Main feedbacks from experience

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Cooperation operators / builders !!
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Main lessons for a win/win partnershipA process
aimed at eliminating uncertainties

• To have a detailed Pre-Project, precise and
  politically stabilized.
• To pre-qualify some consortium presenting all the
  skills in terms of integration of the system,
  vehicles, and operation.
• To organize the risk sharing on a fair balance,
  as
• Commitment of the Local Authority to
• the networks integration
• the schemes and priorities of circulation
• security and vandalism
• the fare policy
• clauses of revisions or of buy back in case of
  changes of structure in the transport environment
• To ask functional commitments and performance
  guaranties of the SPC
• 4. To organize governance of the project on both
  side PTA and SPC