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Ireland Infrastructure Briefing i n association with Osborne Clarke & Inspiratia Investment Opportunities: The N ext W ave of PPP Projects 10 th September 2013. Introduction and Background. Track Record in Ireland of successful PPPs. Historic 9 major inter-urban motorways/by-passes
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Ireland Infrastructure Briefing in association with Osborne Clarke & Inspiratia Investment Opportunities: The Next Wave of PPP Projects 10th September 2013
Track Record in Ireland of successful PPPs • Historic • 9 major inter-urban motorways/by-passes • 5 education PPPs, including 15 schools • International Convention Centre • Major criminal courts complex • Motorway Services Stations contract • And recently…. • N11 roads contract (April 2013) and Schools Bundle 3 (November 2012) • A further roads contract is scheduled to close by end 2013
Irish Government Stimulus Package and PPP Programme: Phase 1 (announced in July 2012)Appendix 1: Stimulus Package PPP ProjectsAppendix 2: Ireland Regaining Creditworthiness
€1.4 billion Phase 1 PPP Programme Education • 12 Schools to be delivered in 2 bundles • A single prequalification procedure with access to 2 lots of 6 schools • OJEU notice published for both bundles in June 2013. PQQ submissions received in July 2013 • Authority to secure Full Planning Permission based on Specimen Designs • Grangegorman/DIT Campus: 2 Quadrangles – expected to be procured as a single project - PIN published August 2013, OJEU expected early October 2013 Health • Primary Care Centres: circa 15 sites • Single-supplier national framework • Authority to secure Full Planning Permission based on Specimen Designs
€1.4 billion Phase 1 PPP Programme Justice • 3 Divisional Garda HQs : single contract expected • 7 Courthouse developments: single contract expected • Authority to secure Planning Permission based on Specimen Designs Transport • 2 new road procurements have commenced in 2013 (by National Roads Authority, with NDFA as financial advisor) • N25 New Ross Bypass; OJEU notice published in March 2013. Shortlisted consortia announced in August 2013 • M11 Gorey to Enniscorthy; OJEU notice published in July 2013 • N17 N18 Gort to Tuam scheme forecast to reach financial close in Q4 2013 • All PPPs so as to be “off balance sheet” in accordance with EuroStat rules • Standard availability based payment mechanism proposed for all schemes
Market consultation • Sponsors, equity • Debt Funders • Contractors/FM • Professional service providers
Issues and concerns • Pipeline • Deal size • Sovereign credit rating • Availability of funding • Previous project cancellations • Process – cost and duration
Potential debt funding sources identified • European Investment Bank • Council of Europe Development Bank • National Pension Reserve Fund • To be re-orientated as Ireland Strategic Investment Fund (ISIF), with €6.4 billion discretionary portfolio available for commercial investment in Ireland (including PPPs) • Required legislative changes (in draft form) approved by Government, to be signed into law later this year • Domestic banks • Other Private: domestic (e.g. pension funds) and foreign (e.g. banks, pension funds, insurers) • Part of the proceeds realised from sale of “State assets” is available to fund project elements that require up-front exchequer spending.
Initiatives to reduce bid time and cost • Overall objective to reduce bid costs for private sector partners by 50% • Development of specimen/exemplar designs for repeat building types • Schools, Primary care centres • Target reduction of procurement schedule to between 15 mths (schools) and 18 mths (from OJEU Notice to financial close/contract award) • Publication in advance of indicative capital budget • Reduced submissions and no draft tender submission stage • Expect to continue to use Negotiated Procedure Policy decision agreed by Government in December 2012 • Reimbursement of part-bid costs for bidders/PT in event of PPP project cancellation • Reimbursement of part-bid costs to unsuccessful bidders (with a compliant bid)
Authority Term Sheet Already in place for roads Negotiated Procedure (envisaged for all schemes) 3 months Pre-Qualify & Shortlist Tenderers Invitation to Negotiate 5 - 8 months Authority Secures Planning Conclude Negotiation Submit Tenders 2 months Appoint Preferred Tenderer Debt Funding Sourced 5 months Contract Award
Other initiatives • Increased “Self-declaration” regime for pre-qualification stages • PA: Remove requirement for Authority Bond • PA: Reduce/remove “Change-in-Law” provisions (in line with PF2) • PA: Review insurance provisions (in line with PF2) BUT • Expect to keep “soft FM” services with private sector • Areas for innovation: increased focus on • energy use and performance of buildings; and • Lifecycle material/equipment decisions as part of the technical/quality evaluation
Education – PPP Schools • 2 PPP contract bundles expected of 6 schools each • OJEU notice published for both bundles in June 2013. PQQ submissions received in July 2013 • Continuation of successful PPP programme • 15 schools completed; FC on 8 further schools in Nov ‘12 • Standardised PPP contract in place • Standard availability-based payment mechanism • NDFA to develop specimen designs with full planning permission • Technical adviser appointed Kildare Town: a post-primary school for 1,000 pupils
Demographics driving need for places 45,000 additional Primary school places by 2018
Education – New campus, Dublin • Development is part of the consolidation of Dublin Institute of Technology (“DIT”) onto a new campus • 57,000 m² of teaching space in two major buildings • Expected to be procured as a single PPP project • Standard availability-based payment mechanism • Capex estimated circa €200m • Site in central Dublin has special planning status to facilitate development • First planning applications lodged (site infrastructure) • Technical advisor appointed • www.ggda.ie
Grangegorman DIT Campus Healthcare facility: near completion Central Quad East Quad
Health – Primary Care Centres • Circa 15 sites to be developed • Single supplier national framework-type structure • Does not involve GP or healthcare related services • HSE/NDFA to procure planning permission • Common template (specimen) design • Availability-based payments • Potential Phase 2 developments
Justice – Garda (Police) Regional HQs • 3 locations identified • Dublin, Galway, Wexford • Total capex estimated circa €65m - €75m • Special planning consent regime • Standard availability-based payment mechanism • Single contract expected Dublin, Kevin Street Site
Justice - Courthouses • 7 locations identified • Cork, Drogheda, Letterkenny, Limerick, Mullingar, Wexford and Waterford • Single contract expected • Total capex estimated circa €120m • Will follow special planning consent regime • Refurbishment/development of existing historical structures a feature of some sites • Standard availability-based payment mechanism Wexford Court House - Schematic Development
Second PPP Roads Programme • 2 new road procurements to commence in 2013 • N25 New Ross Bypass: • OJEU notice published in March 2013 • PQQ submissions received in June 2013 with shortlisted consortia announced in August 2013 • 14.6km dual carriageway, 1.2km of single carriageway including an extrados bridge of c. 900m • M11 Gorey - Enniscorthy: - OJEU notice published in July 2013 - 28 km new build motorway • Standard availability-based payment mechanism
Ireland continues its macro/fiscal recovery in 2013 • Government deficit of 7.5% of GDP in 2012 means target was beaten by a wide margin again; this time full percentage point below EU (EDP) target • Second year of outperformance, following deficit 1.5pp of GDP lower in 2011 • Fiscal data for first half of 2013 point to further progress; Revenue slightly better-than-expectations and expenditure control is quite tight • EDP target of 7.5% of GDP looks readily achievable at this stage • Second consecutive year of real and nominal GDP growth in 2012 • Export growth remained resilient in 2012, despite weak external demand • Domestic demand bottoming over last nine months, ending five-year drag • Unemployment rate drops from high of 15.1% to 13.7% as of latest data • Ireland’s GDP growth expected to be among highest in euro area for 2013/14 • Banking-related contingent liabilities for the State reduced sharply • Pillar bank deleveraging almost complete: haircuts smaller-than-feared • State has reformed insolvency laws to deal with mortgage debt overhang • Ireland's main contingent liability being reduced: NAMA is well on track to repay €7.5bn of its senior bonds by end-2013 (repaid €6.25bn thus far) • Ending of ELG scheme for new liabilities after 28th March 2013 marks significant step towards banking system normalisation; ECB reliance now only ~20% of GDP
NTMA working plan to normalise market access in 2013 is on track • NTMA issued a new 10yr benchmark Treasury Bond in March 2013 • Sold €5bn of 2023 bond at 4.15% through a syndicate of six primary dealers; first 10yr issuance since January 2010 (well below previous yield of 5.09%) • Broad investor interest: over 400 investors submitted bids, including fund managers, pension funds, banks and insurance companies • 82 per cent by overseas investors; mainly from the U.K. (25%), Germany (12%), the Nordic region (12%), France (11%) and U.S. (7%) • NTMA also issued conventional bond via syndication in January 2013 • Sold €2.5bn of 2017 bond at 3.32% through syndicate of five primary dealers: the first such syndicated deal for three years • Investor spread was broad-based and skewed towards real money accounts across the UK, euro area and US • This followed the initial return to the Treasury Bill and bond market in 2012 • Next steps towards sustainable market re-entry in early 2014 • Continue regular schedule of Treasury Bill auctions – rate fell to 0.2% or lower over 5th–11th auctions (Jan-Jul 2013) from 1.8% at first auction (July 2012) • Continue to engage with investors on a regular basis: the NTMA conducted two non-deal road shows each year during both 2011 and 2012 • Possibility of MLT bond auction(s) in Q4 2013 after Budget 2014
Irish bond market recovery continues in 2013 (yld: %) Source: Bloomberg (weekly data)
Foreign ownership of marketable bonds is high Source: Central Bank of Ireland * The Mar-2013 holdings are adjusted here for the recent IBRC Promissory Note repayment (non-cash settlement) which resulted in €25bn of long-dated Government bonds being issued to the Central Bank of Ireland on liquidation of IBRC. This transaction results in a large increase in the share of resident holdings.
Total funding requirement declining steadily (€bn) • Funding requirement substantially improved since Budget 2013 (Dec. 2012) following sale of BOI CoCos and Irish Life. Restructuring of IBRC Promissory Note and extension of EFSF/EFSM maturities also of significant benefit • Cumulative NTMA Funding Requirement for 2014-15 now c.€11bn lower than at Budget 2013 • End-June cash and other financial assets of €30.6bn provide a considerable funding buffer for future years • EFSF/EFSM maturity extension and banking-related deals meant that 2014-15 funding requirement was dramatically reduced; NTMA has already pre-funded that lower 2014 requirement (shaded) via its 2012 and 2013 market forays Source: NTMA; Department of Finance • 1. “Est. Funding Requirement” includes the EBR, maturing Government bonds and EU/IMF Programme loans. • 2. EFSF loans have been extended by a weighted average 7 years . EFSM loans are also subject to a 7 year extension. It is not expected that Ireland will have to refinance any of its EFSM loans before 2027. A €5bn EFSM loan originally due to mature in 2015 is therefore no longer part of the “Latest Est. Funding Requirement” in 2015. • .
Exports continue to drive recovery as domestic drag lessens (annual real GDP growth contributions, p.p.) Sources: NTMA, CSO and Department of Finance (SPU April, 2013)
Ireland’s balance of payments current account surplus reflects large-scale rebalancing of economy (% GDP) • Highest quarterly surplus on record in Q1 2013 (5.6% of GDP), but may be somewhat flattered by record net factor inflows Source: CSO
Ireland’s competitive position vastly different to the other non-core countries Current Account Balance (% GDP) Source: DataStream
Ireland is far more open than other non-cores Source: Eurostat Note: Based on 2012 data