Multimodal Transport and Trade Facilitation Southeast European Forum 2004

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Multimodal Transport and Trade FacilitationSouthe
ast European Forum 2004

• The EIB and the Financing of PPPs

Alexandroupolis, 5-7 December 2004
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Defining PPPs

• The term PPP covers a wide range of situations.
• From the perspective of the public sector and EIB
  the key feature of a PPP is that it involves a
  risk sharing relationship between public and
  private promoters, based on a shared commitment
  to achieve a desired public policy outcome.

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Policy Developments and Priorities

• TENs / PPP Growth Initiative
• Public Sector Accounting (ESA 95)
• Public Sector Procurement (Green Paper)
• Market Evolution

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Single market and monetary union
Budget constraints required by Maastricht EMU
conditions
Critical role of TENs TINA network
Integration of peripheral regions
Need for increased efficiency in public
investment
New challenges for both the public and the
private sectors

• Competition and transparency
• Deregulation
• Privatisation

Public-Private Partnerships (PPPs)
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(No Transcript)
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Main Characteristics of PPPs

• Risk-sharing between public and private sectors
• Long-term relationship between parties
• Public service and ultimate regulatory
  responsibility in public sectors hands

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Main Characteristics of PPPs (cont.)
Utilising private sector skills
for public sector services via

• Contracts for services, not procurement of assets
• Output, not input, specifications
• Payments related to service delivery
• Whole life approach to design, build and operation

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Criteria for PPPs
Economially viable for the Public Sector
Financially viable for the Private Sector
Appropriate Risk and Reward Balance for Public
and Private Sector
Public Sector value for money
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PPP Value for money

• Complexity transaction costs
• Financing costs
• Bidding process

• Cost/time discipline
• Innovation
• Optimal risk allocation
• Optimal lifecycle costs
• Competition (?)

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Must for successful PPPs
Public Sector Political Commitment PPP Task Force
- Leadership Forum by focused, dedicated and
experienced public sector team Clear legal and
institutional framework Transparent competitive
procurement Realistic risk sharing Government
Partnership
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EIB role in PPPs
Advisor to Public Authorities, Member States and
EU Institutions Supporting all players Sharing
experience from other PPP environments Applying
best practice of successful PPP EIB risk
sharing EIB benefit passed to Public Authorities
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EIBs approach to PPPs

• Policy driven approach to PPPs (evaluation of the
  benefits achievable)
• PPPs are an additional policy option (no bias)
• Expand expertise and financial resources
  available for infrastructure investment
• Facilitating greater private sector investment
• Focus on strategic public services with clear
  value added

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Key PPP sectors for EIB
Supporting PPPs in areas of critical policy
significance

• TENs and modernising transport infrastructure
• Environmental improvements
• Primary and acute healthcare services
• Primary, secondary and tertiary education

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EIB PPP financing principles

• Competitive tendering
• Non-exclusivity - support of all bidders through
  bidding stage
• Investment grade risks
• EIB complementarity with and leveraging of banks
  capital markets
• EIB benefits passed to end-users/taxpayer

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TIF-TENs Investment Facility

• Strengthen and, where possible, accelerate the
  investment in TENs
• Increase the EIB resources available for the
  development of TENs transport to 2010
• Improve the range of financial instruments
  available from the Bank
• in collaboration with the Commission, Member
  State Authorities and the Private Sector

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Typical PPP structure
Government customer
Operation
Finance
Construction Investor
Equity and sub-debt
Special purpose project company
Procuring Authority
Services
Operator investor
Unitary payments
Debt finance
3rd party equity
Construction Contractor
Operator
Debt funders
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ESA 95 / Public Sector Accounting Decision Tree
Will government make most payments to the
partner?
PPP is private investment
No
Yes
Yes
Will the partner bear most construction risks?
Will the partner bear the availability risk?
Yes
No
No
Will the partner bear the demand risk?
Yes
PPP is government investment
No
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Motorway Developments
With Tolls (user-pay)
PRIVATE
Toll Free (tax-payer)

• Private Concessions
• DBFO shadow tolls (UK, FIN, P, ESP...)
• Other off-budget methods
• German method DBF
• Dutch method (DB and F)
• Belgian Intercommunales
• Public Traditional Financing
• Road Fund NL, B, L.
• and/or Vignette (CH), A
• Pure traditional method D, UK, ESP autovias,
  I sud, DK, SWE...

• Private Toll Concessions Companies
• stand-alone BOT-PPP(bridges, tunnels or
  motorways in UK, ESP, P, GR, F, I ).
• Public Toll Concession Companies
• Toll Motorway Networks in F, I, ESP
  (partial), P (former).
• Public Toll Companies/Authorities
• Complex stand-alone projects (e.g. DK-SWE)
• Toll roads in A, GR

PUBLIC
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Learning Process
Risk-sharing
Value added
Extra costs
Benchmarking
Procurement
Extra costs
Value added
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EIB PPP signatures (in EUR billion)
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EIB loans for PPP/Concession projects -
Approvals
TOTAL TRANSPORT WATER HEALTH/EDUCATION
MEUR MEUR MEUR MEUR
TOTAL 28 845 24 883 1 146 2 549

AUSTRIA 170 170    
BELGIUM 805  805  
DENMARK 3592 3592    
FRANCE 1838 1838    
GERMANY 1048 1048    
GREECE 2503 2503    
IRELAND 482 377    105
NETHERLANDS 818 693  125  
POLAND 275 275    
PORTUGAL 3615 3531  84  
SPAIN 4680 4620 60   
SWEDEN 749 749    
UNITED KINGDOM 8270 5487 73   2444
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PPP Loan Maturities
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PPP financing by sector
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Contact G. Papadopetrou-Tsingou tel 00 352
4379 6420, e-mail tsingou_at_eib.org
www.eib.org