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May 2013

May 2013. Ireland Case Study - Schools Bundle 3 PPP Project. Background. Track Record in Ireland of successful PPPs. First a question…… How Many to Date? (A) 18 (B) 25 (C) 10. Track Record in Ireland of successful PPPs. Historic 9 Major inter-urban motorways/by-passes

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May 2013

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  1. May 2013 Ireland Case Study - Schools Bundle 3 PPP Project

  2. Background

  3. Track Record in Ireland of successful PPPs • First a question…… How Many to Date? (A) 18 (B) 25 (C) 10

  4. Track Record in Ireland of successful PPPs • Historic • 9 Major inter-urban motorways/by-passes • 4 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

  5. However…… • Black clouds emerging after 2007 • Government Finances increasingly under pressure • Affordability constraints emerged • Leading to many project cancellations • Increasingly negative environment for delivering infrastructure

  6. Who is the NDFA? NDFA: statutory body with dual mandate • Established under legislation in 2003 • Report to Minister for Finance • Statutory financial adviser on capital projects >€20m • Project financial assessments • Issue formal “Value for Money” Opinions • Delivery agent for State Authorities for PPPs except transport and regional authorities • Administer the procurement and construction phases • Hand back to sponsor / PPP contract management The Department for Public Expenditure and Reform is responsible for PPP policy matters and for issuing guidance in the area.

  7. The Schools Bundle 3 PPP Project

  8. The Project • Now, another question…….. What is the expected increase in pupils in the primary school system between now and 2018? (A) 25,000 (B) 35,000 (C) 45,000

  9. The Project • Third Bundle in the Irish Department of Education and Skills Schools PPP Programme • €100m construction contract generating more than 1,600 direct and indirect jobs during construction • Design, Build, Finance and Maintain PPP contract (25 yr. term) - Procured by means of Negotiated Procedure • EIB had confirmed project met its eligibility requirements & historically a strong supporter of Irish projects including the schools programme • Method of Payment – Monthly Unitary Charge payable by Government • Construction and Availability risk passed to PPP Co

  10. The Project • The project comprised 8 Schools on 7 sites, providing accommodation for 5,700 Pupils • Locations

  11. The Timelines • Original Actual 7 month delay ????

  12. The Issues – Funding… Funding… Funding ! • Issue 1: The Financial Crisis!!!....2007 onwards • Significant contraction of PF funding market - not only an Irish issue • Insufficient funders remaining in Irish PPP market to finance all tenderers • Remaining funders also unwilling to carry out due diligence until PT stage • Prompted use of Negotiated Procedure for Schools Bundle 3 PPP in place of Competitive Dialogue, with committed financing deferred to PT stage • Authority generated term sheet issued to tenderers during procurement

  13. The Issues – Funding… Funding… Funding ! • Issue 2: The EU/ ECB/ IMF programme for Ireland….2010 onwards • In short Ireland’s credit rating has gone from AAA (S&P, Jan 2007) to BBB+ (S&P present) & the PF funding constraints experienced across Europe were amplified in Ireland • Led to remaining international PF banks exiting Irish market • Furthermore Irish banks had huge recapitalisation requirements due to the collapse in the Irish property market and their ratings plummeted to typically BB levels • Therefore Authority/PT concluded that potential funding was limited to Bank of Ireland (“BoI”) & EIB

  14. The Issues – EIB & Irish Banks • However • EIB’s co-funding requirements meant a mismatch between EIB & Irish Banks!! EIB (AAA ) + Irish Banks (c. BB) Enter the National Pensions Reserve Fund (“the NPRF”). • The NPRF was established to meet as much as possible of the costs of Ireland's social welfare and public service pensions from 2025 onwards. Split across two portfolios, the discretionary portfolio (value €6.4bn March 2013) and directed portfolio (value €8.8bn March 2013). The Fund is controlled and managed by the National Pensions Reserve Fund Commission.

  15. The Issues – EIB & Irish Banks • With the NPRF…. EIB (AAA) + Bank of Ireland (BB) + NPRF • Final Funding Structure

  16. The Outcome • Successful financial close reached in November 2012 - with only 7 month delay! • Construction progressing well …. as you can see in following slides • (Aerial photos taken Feb 2013)

  17. Athlone, Co. Westmeath 1,000 pupils before after

  18. Ballinamore, Co. Leitrim 400 Pupils before after

  19. Doon, Co. Limerick 400 Pupils before after

  20. Doughiska, Co. Galway Primary & Post Primary 1,100 Pupils before after

  21. Gorey, Co. Wexford 1,000 Pupils before after

  22. Letterkenny, Co. Donegal 350 Pupils before after

  23. Tramore, Co. Waterford 1,000 Pupils before after

  24. The Outcome Best Education Project, EuropeIrish Schools

  25. National Development Finance AgencyTreasury Building | Grand Canal Street | Dublin 2 | Ireland www.ndfa.ie Brian Murphy, Chief Executive D +353 1 664 0246 M +353 862346992 E bmurphy@ntma.ie

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