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Public Transport Investment financing

Public Transport Investment financing. Karolis Dekeris Urban Transport Consultant to EBRD. Content. About EBRD Has the moment come for private operators? Can private contribute to a better service quality? Things important to banks financing public transport Conclusions.

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Public Transport Investment financing

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  1. Public Transport Investment financing Karolis Dekeris Urban Transport Consultant to EBRD

  2. Content • About EBRD • Has the moment come for private operators? • Can private contribute to a better service quality? • Things important to banks financing public transport • Conclusions

  3. European Bank for Reconstruction and Development (EBRD) • Owned by 64 shareholder countries and organisations • Active in 36 countries of operation • Annual business volume EUR 9 billion

  4. Municipal & Environmental Infrastructure • Department finances: • District heating • Solid waste • Water and waste water About half of portfolio is urban transport projects

  5. Kaunas Public Transport Project (2004) • Bank’s first loan to a municipal bus operator in Kaunas without a municipal guarantee • Based performance-based gross cost Public Service Contract • Corporate Development Programe of UAB Kauno autobusai (Lithuania) with impressive performance improvements

  6. Content • About EBRD • Has the moment came for private operators? • Can private contribute to a better service quality? • Things important to banks financing public transport • Conclusions

  7. UT Challenges at a City Level • Lack of borrowing capacity for investment needs • High agenda toward sustainability goals in the context growing car ownership • Call for liberalization of services • Growing diversification in technology

  8. Public Operators Dominate the Market • Stagnating quality of service • Strong trade unions and ever growing cost • Weak lobby when it come to tariff adjustment • Delayed investments • Often focus on technology rather than on passenger and service quality At the same time… Minibus era left bad association about private operators

  9. Context Delaying Private Operators Involvement • Regulatory framework • Know-how and experience in contract management • Lack of equipment to sustain system’s integration (AFC and AVL) • Inefficient network • Weak private operators Currently many cities has these issues behind

  10. Private operators could • Provide good benchmark of PT service cost and quality for public operators • Reduce bargaining power of trade unions • Facilitate timely adjustments in tariffs • Bring more investment into public transport • Attract more passengers and revenue to the system

  11. Content • About EBRD • Has the moment came for private operators? • Can private contribute to a better service quality? • Things important to banks financing public transport • Conclusions

  12. What is important for banks?

  13. CONTRACT AWARD TENDER SERVICE PROVISION Commencement of service provision

  14. CONTRACT AWARD TENDER SERVICE PROVISION Tender for buses Delivery of buses Advance payment for buses Remaining payment

  15. FINANCIAL CLOSURE CONTRACT AWARD TENDER SERVICE PROVISION Tender for buses Delivery of buses Tender for financing Financial analysis

  16. Project Assessment by the Bank Market Tender Contract Operator City

  17. Project Assessment by the Bank • Controlled, • Competitive Market Tender Contract Operator City

  18. Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract Operator City

  19. Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract Operator City • Well structured, • Balanced

  20. Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract Operator City • Well structured, • Balanced • Experienced, • Creditworthy

  21. Project Assessment by the Bank • Capable • Has sector strategy • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract Operator City • Well structured, • Balanced • Experienced, • Creditworthy

  22. Financing Application Process Overview

  23. Importance of Public Service Contract

  24. Things to consider in the contract • Ensure strict payment mechanism, including penalties for delayed payments • Clearly defined scope of service with flexibility to amend it • Indexation formula • Strong and balanced contract termination clauses • Dispute resolution mechanism

  25. Things that also help… • The longer the contract – the better • Part of operator’s payment comes from fare revenue • Penalties not too excessive • Clear reporting and information exchange requirements

  26. EBRD’s Technical Cooperation Funds • Available for project preparation and implementation • Project development stage: • Preparation of PSC and tender document package • Feasibility studies for larger projects (PPP) • Investment and Business plans • Implementation stage: • Corporate development programmes • SUMPs • Market liberalisation strategies • Gender inclusion and environmental for companies strategies • ITS projects, etc.

  27. Summary • Private operators can contribute to overall public transport service improvement • Engagement with financiers early increases chances of success • Time constrains needs to be properly assessed • EBRD can still be source of financing in Baltics in particular for private operators

  28. Questions?

  29. Matthew Jordan-Tank Head of Infrastructure Policy European Bank for Reconstruction and Development One Exchange Square, EC2A 2JN London, United Kingdom Tel: +442073386000 Email: jordantm@ebrd.com Contact details Presentation by: Karolis Dekeris Urban Transport Consultant to EBRD LT-48334, Kaunas, Lithuania Tel: +370 640 15 406 Email: karolisdek@icould.com

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