Multimodal Transport and Trade Facilitation Southeast European Forum 2004

1. Multimodal Transport and Trade FacilitationSoutheast European Forum 2004 The EIB and the Financing of PPPs Alexandroupolis, 5-7 December 2004

2. 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.

3. Policy Developments and Priorities TENs / PPP Growth Initiative Public Sector Accounting (ESA 95) Public Sector Procurement (Green Paper) Market Evolution

4. 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)

6. Main Characteristics of PPPs Risk-sharing between public and private sectors Long-term relationship between parties Public service and ultimate regulatory responsibility in public sector’s hands

7. 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

8. 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

9. PPP: Value for money • Complexity & transaction costs • Financing costs • Bidding process • Cost/time discipline • Innovation • Optimal risk allocation • Optimal lifecycle costs • Competition (?)

10. “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

11. 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

12. EIB’s 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

13. Key PPP sectors for EIB • TENs and modernising transport infrastructure • Environmental improvements • Primary and acute healthcare services • Primary, secondary and tertiary education Supporting PPPs in areas of critical policy significance:

14. 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

15. 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

16. 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

17. 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

18. 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 (D&B 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

19. Learning Process Risk-sharing Value added Extra costs Benchmarking Procurement Extra costs Value added

20. EIB: PPP signatures (in EUR billion)

21. EIB loans for PPP/Concession projects - Approvals

22. PPP : Loan Maturities

23. PPP financing by sector

24. Contact : G. Papadopetrou-Tsingou tel: 00 352 4379 6420, e-mail: tsingou@eib.org www.eib.org