What is PPP?

1. What is PPP? Planning + Building + Financing + Operation (+ Post-contract life) = PPP PPP-Sectors: PPP – construction, PPP – infrastructure

2. Folie 2 Movement of selected public sectors towards private structures

3. Types of PPP contracts- in German law - Differences and core content Acquisition model Hire-purchase of facility/asset Owner model Planning, construction, financing, operation under ownership of the principal Leasing model Rent with option to buy Rent model Contract for rent extending beyond 10 years Contracting model Contract to operate the facility/asset Licence model Operation of facility/asset with user fees collected privately Company model Operation by way of project group

4. Licenser Advisor Advisor Fed / Land / Municipality PPP project structure- example - Service Construction Concession Grant Loan provider Shareholder Equity capital Loan Licensee Banks/capital market Investors Project company Return Interest/re-payment Maintenance Operation Remuneration Remuneration Construction at agreed price and timeframe Remuneration Operator Maintenance Operation Maintenance General contractor Provision of service Rent or fee Construction planning Public sector or private sector use

5. History of PPP at EU level 07 May 2003 Commission publishes “Internal market strategy – priorities 2003 – 2006”, which highlights the need to clarify legal issues relating to PPP. The publication of a green paper on PPP is announced. 21 May 2003 Commission publishes Green Paper on services of general interest. This paper entails a substantial review of the Commission's service policy and asks whether a general legal framework should be created at Community level for services of general interest. The Commission plans top publish a green paper on public procurements and on PPP in the second half of the year. 30 Apr 2004 Commission adopts Green Paper 30 Apr 2004 Forwarded to the Council 30 Apr 2004 Forwarded to the European Parliament (EP) 27 Oct 2004 Opinion by the European Economic and Social Committee 17 Nov 2004 Opinion by the Committee of the Regions End 2005 Commission announces resolution on further PPP legislation for the end of 2006 26 Oct 2006 Resolution by EP

6. History of PPP at federal level in Germany Source: PPP Task Force, Federal Ministry for Transport, Building and Urban Affairs

7. More PPP More private capital for public tasks Market structure of PPP in Germany More co.’s in the provision of public services Framework More/bigger projects Admin. building Education Research Laws Regulations Models Transport modify: Contracts PC PSC Budget issues System of NA Double entry bookkeeping Defence Health Provision amendments: Competition law Tax law Accounting law Statistics law Change in rules on awarding contracts PB = Profitability calculations PSC = Public Sector Comparator NA = National accounting

8. Ministry of Transport Ministry of Defence Ministry of Economics ConstructionTransportCivil Defence PPP organisation of the govt in Germany Project working group PPP Task Force g.e.b.b., Dept. M / Group M I Gesellschaft für Entwicklung, Beschaffung und Betrieb mbH Project development co. Roads Rail, Sea, Air Ministry of Finance Federal states East West Deutsche Einheit Fernstraßenplanungs- und -bau GmbH Verkehrsinfrastruktur- entwicklungsgesellschaft mbH Deges VIFG = Project management co.’s

9. The phases in the PPP procurement process Steps in examining PPP profitability Phase I Determining needs, financeability and profitability of measures PPP test for suitability Preliminary decision for or against continuing to pursue varies PPP options Phase II Drawing up conventional comparative values (Public Sector Comparator – PSC) Provisional examination of profitability Preliminary decision for or against publishing call for tender Determining the maximum amount to be appropriated in the budget (budget readiness) Appropriation in budget and call for tender Phase III Final profitability analysis Final decision on awarding and signing of contract Phase IV Project controlling The PPP procurement process in GermanyAgreed procedure between central and regional government

10. An example for possible risk allocation – traditional procurement vs. PPP Traditional procurement PPP Public sector Private partner deficient construction unavailability bad service insufficient usage obsolescence residual value below forecast deterioration of commercial basis (framework) force majeure changing legislation deficient construction unavailability bad service insufficient usage obsolescence residual value below forecast deterioration of commercial basis (framework) force majeure changing legislation

11. ABC modules of tender I Module A: Construction Mostly invitation to tender as a general contractor subject to the provisions of the guidelines on awarding contracts; to be built, for example, on a piece of land owned by the party issuing the invitation to tender Module B: Financing part A B1: conventional lease financing via the budget B2: pure finance leasing (no equity capital of private investors, thus no tax effects), sometimes with forfeiting. B3: tax-optimised fund leasing models with equity capital of private investors. Module C: Investor model Same-source construction and financing on the basis of the conditions of modules A and B with a fixed-price model without disclosing the details of the calculation.

12. ABC modules of tender II In addition to parts A, B und C, additional tenders can be invited in suitable cases: Module D: Similar to Module C, but using functional description of construction and with the bidder’s own planning, possibly also on a piece of land owned by the party inviting tender. Module E: Offers to buy, hire-purchase of simply rent suitable objects which have already been built or which are in the process of being built.

13. Folie 13 Overview of the current status of the PPP Simplification ActProject working group consisting of the majority parties in the German Bundestag and including representatives of German industryAs of May 2007

14. Overview of standardisation work of central and regional governments in Germany * SME = Small and Medium sized Enterprises

15. Table of PPP Projects I

16. Table of PPP Projects II

17. Table of PPP Projects III Landesprojekte Bundesprojekte

18. Folie 18 Focus of PPP investments in public construction works in Germany

19. Folie 19

20. Folie 20 Plans for the foundation of a company called Partnerschaften Deutschland

21. Folie 23 What Partnerschaften Deutschland represents Partnerschaften Deutschland is conceived as a broadly positioned quality service provider offering comprehensive consulting services on PPP matters for the public sector – with a focus on the early stages. What Partnerschaften Deutschland offers: • Objectivity, independence and credibility • Cost savings (optimisation of processes, standardisation, know-how) • Speed (especially easy to engage its services) But: Public authorities can continue to procure consulting services on the open market

22. Folie 24 Partnerschaften Deutschland’s areas of activity Dual mission Areas of activity Projectadvisory service Specific investment projectsProviding highly qualified, professional advice for the public sector when examining the use of PPP for investment projects as well as when scoping and implementing specific PPP projects Basic PPP advisory service on behalf of public sector Framework conditionsAdvising the public sector in further developing standards and the institutional basis for PPP Systematic knowledge transferPromoting knowledge transfer between all involved in PPPs, targeted build-up of PPP know-how within the public administration Market development Highlighting areas of priority for PPP andsupporting policymakers and the administration in creating a sustainable PPP pipeline

23. Folie 25 Organisation and ownership structureof Partnerschaften Deutschland Shareholdings Companies/executive bodies Advisory bodies Public-sector shareholders Private-sector shareholders Industry, banks, etc. Federation Länder Local authorities 1% 99% Holding company 50.1% 49.9% General meeting Advisory board Supervisory Board Management board Partnerschaften Deutschland

24. Folie 26 Avoiding the adviser/tenderer problem and conflicts of interest • Avoiding the adviser/tenderer conflict and direct holdings through the interposition of the holding company and avoiding overlap between representatives of private shareholders and bodies or employees of Partnerschaften Deutschland • Delegation of staff from the private shareholders of the holding company are excluded from Partnerschaften Deutschland for project work • As the holding company is not dedicated to a specific purposes and is not dominated by one company (or industry) either, steps have been taken to ensure that the operative activities of Partnerschaften Deutschland cannot be influenced by the particular interests of its shareholders

25. Folie 27 Procedure for selecting private shareholders Formal award procedure Informal survey of market’s interest Bidding competition Award Examine markets‘ interest in participation “Lots” to include different PPP industries • Selection of • applicants qualified for PPP • Selection criteria • PPP experience / references • Ability • Acquisition of share inholding company /Partnerschaften Deutschland • Criteria for the award of holding • Price for the share • Quality of the concept for participation • Assessment criteria • Qualitative • Financial