Download E. Cuaz - ASECAP - European Investment Bank

2nd June 2010,
EPEC Private sector forum
Borschette center
Leveraging EU grants: the case for PPPs
« A perspective from the road
concessions’ industry »
Outline
• Presentation of ASECAP
• EU Legal framework / concessions
• Leveraging EU funding: the case for PPPs
ASECAP
ASECAP, the European professional Association of
Tolled Road Infrastructures Concessionaires
• 21 NATIONAL MEMBERS OPERATING 45.068 km
(mainly TEN’s)
• 149 TOLLED MOTORWAYS OPERATORS
• 19.000.000 ETC SUBSCRIBERS
• OVER 23 BILLIONS EUROS OF REVENUES
Motorways concessions in Europe
Range of practices
Shadow Toll
UK
Finland
Real Toll
Concessions
Netherlands
Germany
Belgium
State Budget
France
Portugal
Greece
Slovenia
Croatia
Spain
Austria
Hungary
Portugal
Pre-financing
Italy
Sweden
Denmark
Operators of tolls
UK
Norway
Germany
by all (tax payers)
PAYMENT
Netherland
by users
ASECAP main agenda & mission
ASECAP's mission is to promote concessions schemes
(DBFO model) and toll as the most efficient tool to finance
the construction, operation and maintenance of
safer, greener and smarter road infrastructures.
…High cost of infrastructure + Public budgets scarcity
!!! Private investment = cost-efficiency, time-frame, risk sharing !!!
 1st sector in Europe that understood the merits of PPP
at EU level, a preferred partner of the European institutions & major stakeholders:
 Financing (PPPs, Tolling, EETS Interoperability)
 Safety & Environment
 ITS
ASECAP vision
• There are no free roads (direct charging vs indirect taxation) ;
• Motorways are expensive:
 to build
 to operate
 to maintain
• Socially, tolls are the fairest system for road financing;
• Toll conceeded roads have delivered excellent results worldwide
based on « Fair charging » and « Direct road user charging » ;



Immediate and stable source of funding;
Tariffs regulated by performance and quality indicators;
Optimal (fair, effective and efficient) risk transfer
and allocation;
Real tolls are the answer !
• Use of roads produce externalities that need to be internalized;
• Road pricing can be flexible:
(time of the day, vehicle category, level of pollution);
• Users have to pay for the quality of the service offered (and in the
future will have to pay for the externalities they cause for the society);
• Earmarking of collected revenues to the road infrastructure is the key!
= Concessions (and user-payer’s principle) provide
adequate solutions to match EU goals
EU legal framework / concessions
• The EC Treaty (general principles = only solid basis!)
• « Public procurement » Directives (2004/18/EC, 2004/17/CE)
= distinguishing public contracts vs concessions (service concessions?)
• Interpretative communications (COM2005/569, COM2000/C 121/02)
on Public Procurement and Concessions
• Case-law of the European Court of Justice (i.e.: TeleAustria, C324/98) identifying notions such as “remuneration” (economic activity),
“right of exploitation” and “transfer of risk” as main characterizing
elements for «Concessions».
EU legal framework / concessions
• Strong political commitment:
 Establishment of the European PPP Expertise Centre (EPEC) by
the Commission and the EIB;
 EU Commission’s Communication on « Mobilising private and
public investment for recovery and long term structural change:
developing Public Private Partnerships ».
But…
 Many Member States do not yet have clear public sector rules;
 Recent examples prove the EC could act to prevent uncertainty
undermining future initiatives;
= Lack of legal certainty at EU level detrimental to Internal Market ?
Towards new EU rules in the field of
PPPs and concessions?
• By favouring legal clarity, the EU can serve as the leverage/sponsor to
foster political readiness in Member States to adopt a “PPP agenda” and
explore more efficient ways to develop infrastructure.
EU should:
• Keep a flexible approach; “Clarifying” vs. “Stricter” approach
• Guarantee compliance with the principles of equal treatment, non
discrimination and transparency, while ensuring respect of confidentiality
and intellectual property;
• Limit the possibilities for unilateral alteration of the contractual position;
• Establish a list of best practices & concepts underpinning the various types
of PPP found in Europe;
• Establish EU guidelines to clarify rules on provision of Funds.
Leveraging EU funding:
the case for (roads) PPPs
Crisis !!! The recession and the credit crisis created problems for:
Existing concessions:
•
=
=
Dramatic HGVs traffic decline (Jan 08/09)
- 33.9 % Spanish tolled network, - 20.27 % Austria, - 19.31% CZ Rep...
Strong correlation with GDP which is sharply declining.
Earnings lower than forecast, difficulties to repay interest and loans.
Future concessions contracts:
•
=
Radical change in the banking sector
(part or full nationalisations, collapses, etc.)
Sponsors panic & shortage of capital
Leveraging EU funding:
the case for (roads) PPPs
Strong impact on market players:
• Banks: less cash flow prospects, higher financial costs, higher uncertainty;
• Grantors (Governments / State agencies):
less brownfield projects being tendered, postponements and cancelations;
but, some governments are fighting recession by promoting investment in
infrastructure (Keynesian policies for greenfields projects);
• Construction companies’ focus on the short-term construction business;
• Operators’ focus on existing assets, domestic market, protecting cash flow
levels and mitigating risks;
= Need to quickly adapt, restructure and focus on financial strength
Leveraging EU funding:
the case for (roads) PPPs
= Hybrid PPPs: added value / current shortage of public funding and
private liquidity
+ 2000-2010: Increasing attention to the potential role that private finance can
play in helping the investment challenge in the EU;
+ Significant available funding: Cohesion/Structural funds/TEN funds + EIB
 NEW = Emergence of public authorities/multilateral lending for PPPs…
…but no discernable EU PPP policy
Today PPPs are carried out without EU funding,
while EU money is spent on traditional projects
Leveraging EU funding: the case for
(roads) PPPs
 EIB financial instruments: Senior debt, SFF reserve, LGTT
EIB support: JAPERS/JESSICA, EPEC
EIB = Key financer of transport infrastructure
(1994-2007: 85% PPP funding to transport projects, € 25 bn.)
EIB lending to roads & motorways PPP (MEUR)
EIB financing for PPPs
85% to the transport sector
4000
EIB signatures for PPP projects (1994-2007)
EUR 25.2 bn in total
3500
3000
2500
6%
4%
4% 2%
1%
15%
2000
36%
1500
1000
31%
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Roads and Motorw ays
Urban Development, Renovation & Transport
Social Infrastructure (Education & Health)
Tunnels and Bridges
Traditional and High Speed Trains
Airports
Water
Energy
4
Leveraging EU funding:
the case for (roads) PPPs
• Advantages
 Maximising absorption of EU grants by pursuing direct lending and
PPPs/concessions;
 Presence of public players as « catalyst » for commercial banks and
« comfort » for private operators;
• Main obstacles
 More complex procedures to be managed jointly;
 EU Public procurement procedures to be flexible enough/nuances of PPP
 Time issue: (budgetary period is limited = uncertainty of available
funding? Increased risk? Require governments underwriting for financial
close?);
 Institutional and legal framework;
 Lack of information (& limited successful precedents)
Succesfull exemples (toll concessions)
1/2
1/ The Rion - Antirion bridge – West Greece: the longest cable stayed
bridge worldwide - 2.880 m
• Built: 1999-2004 (five months ahead of schedule)
• Total cost: €803.000.000
EU Grant: €256.000.000 (32%)
State budget: €108.000.000 (14 %)
Private financing: €438.000.000 (54 %)
• Duration: 35 years




A significant role in the development of the region;
1.5 bn € influence to Greece economy (source: DG REGIO);
Reduced crossing time to 5 min;
Engineering masterpiece (remaining in operation whatever
the weather conditions).
Other successful examples (toll concessions)
2/2
N1-M1 Dundalk bypass (Ireland) – Dublin Northern border route
 Construction Drogheda bypass – 21.5 km. (Public procurement)
 Operation and maintainance Drogheda bypass + other 43 km.
 Dundalk bypass = 11 km new section of motorway + 7 km
of new link roads (DOBF model)
• Built: 2000 – 2003 (Drogheda bypass);
2004 – 2006 (Dundalk bypass) (4 months ahead of schedule)
• Total cost: € 246 M (Drogheda bypass); € 500 M (Dundalk bypass)
Drogheda bypass: Irish Government + EU grants (€ 61 M. ≈ 25 %)
Dundalk bypass: 30-year concession (no EU funding)
Other successful examples (toll concessions)
2/2
 Procured separately, but became hybrid
through combined O & M
concessioning
The Dundalk Western By-pass is not only an
integral link between Dublin and Belfast but
is also part of the TERN (Euroroute E01) ;
 Significant project: 1.25 million m3 of
earthworks + 14 major structures;
 1st of the new generation of PPP road
schemes in Ireland;
 Extensive ecological mitigation measures;
 Intense archeological scrutiny.
Conclusions
• A mix of legal uncertainty (national and EU level), complexity of
combining procurement requirements of PPPs with those for grant
funded projects, and lack of precedents have hampered undertaking of
« hybrid » PPPs;
• Need new success stories !
• EU funding (ex.: « new » Member States) shall not be in conflict with
a stronger involvement of the private actors;
• EC, EIB/EPEC have an crucial role in fostering EU and national public
sectors’ expertise, promoting result-oriented culture in the
management of public services, and eliminating administrative
bottlenecks;
 Coordinated action at EU level to improve leverage of EU funds
would be beneficial to state of EU infrastructures.
“Not our wealth created our transport infrastructure;
It is our transport infrastructure, which created our wealth”
J.F.Kennedy, former US President, 1960
Thank you for your attention !
[email protected]
www.asecap.com
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