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PPPs and Trans-European
Networks in Transport
Jean-Eric Paquet,
DG MOVE Director for Trans-European
Transport Networks & Smart Transport
07/04/2015
Advantages of PPPs in Transport projects
More efficient Planning
Public policy planning is changing structurally
Approach is evolving from a focus on input specification to a focus on output
specification
Improvement of design and preparation of projects
Through tapping the private sector’ competences and improving the public sector’s
ability to negotiate with the private partner
Calculation of total costs
Integration of maintenance and operating costs in the public sector’s evaluation
Modernisation of public approaches and
development of administrative capacity
Advantages of PPPs in Transport projects
Economic and Budgetary Efficiency
Better control of costs
Negotiated transfer of risks allows for optimisation of private partner’s intervention:
infrastructure is realised on time/on budget
Better use of public resources
Through the leverage effect of PPPs, the public sector can finance at the same time
more projects.
Better quality of service
Public sector can define the service requirements and the private sector can use its
capacity to innovate
Higher leverage and
best value for money
Advantages of PPPs in Transport projects
Risk sharing…
Evaluation and transfer of risk
Quality of a PPP rests on a proper assessment of risk and the negotiated transfer of
the various risks towards the partner best suited for shouldering these risks
… with its complexities
Contract complexity
Find the adequate level of specification in contract : rights and obligations, risks and
rewards, termination conditions, etc.
Long and demanding process
The setting up of a PPP takes generally more time than traditional procurement and
consumes more financial and non-financial resources in both the public and private
sectors
Need to increase des public sector’s
administrative capacity
DG MOVE’s actions in favour of PPPs
Improving public sector’s administrative capacity
Cooperation with EIB: EPEC
Creation in 2008 jointly with EIB of the European PPP Expertise Centre – EPEC
Dissemination of best practices
Advisory capability
Analysis of legislative and political obstacles to development of PPPs
Creation of a network of EU PPP taskforces and helpdesk services
Monitoring of the development of PPP market in Europe
Production of comprehensive guidance documents (Guide to Guidance)
Production of specialised documents on key issues of interest to PPP taskforces
(Eurostat treatment of PPPs, Procurement of PPPs and the use of Competitive
dialogue in Europe)
Cooperation to continue in 2011-2012
DG MOVE will continue to provide funding to EPEC through a contribution
agreement jointly established with DG REGIO
Identification of obstacles in design of future funding instruments for transport
Use of EU funds with PPPs (blending)
DG MOVE’s actions in favour of PPPs
Blending EU funds with PPPs
Real opportunities
Co-financing with Cohesion and Structural Funds as well as with the TEN-T
Programme
High-speed rail project in Portugal Poceirão – Caio
Motorway E18 in Finland
…
Still some elements to be improved
EU funding constraints are not always ideally suited to PPP projects
Duration of EU budgetary cycle and duration of PPP contracts
TEN-T funds must be allocated 3 years maximum after the financing decision
Confidentiality issues : EU reimburses real costs incurred, which create problem
for private partner
DG MOVE’s actions in favour of PPPs
Innovative financial instruments
Loan Guarantee instrument for TEN-T projects – LGTT
Created in 2008 jointly with EIB to support demand-based PPPs with transfer of
traffic risk
€1 billion (€500 million from TEN-T programme and €500 from EIB)
All TEN-T projects eligible (TEN-T Guidelines 1692/96/EC)
Cannot exceed 20% of senior loans
Amount of guarantee cannot exceed €200 million
To be used by project promoters to ensure the servicing of the senior debt if traffic
revenues generated by the project are lower than forecast during the initial operating
phase of the project
Guarantee period of 7 years (ramp-up phase)
Pipeline of 17 projects
DG MOVE’s actions in favour of PPPs
Innovative financial instruments
The 2020 European Fund for Energy, Climate Change and Infrastructure
(«Marguerite Fund»)
Created in 2009 several other sponsors (EIB, Commission, CDC, KfW, CDP, ICO,
PKO) to invest in minority participations with other strategic investors greenfield
infrastructure projects in TEN-T, TEN-E and renewable energy
Goal of the Fund to reach €1.5 billion by the end of 2011
Associated loan facility of €5 billion
Investment period of 4 years
Duration of the Fund: 20 years
DG MOVE’s actions in favour of PPPs
TEN-T Review process
Within the TEN-T review process, an Expert Group was convened to look
at funding and financing issues for TEN-T projects.
Main conclusions:
LGTT could be amended to extend the guarantee period
To cover risks of difficult revenue scenarios after the initial ramp-up period
Creation of a specific instrument for availability-payment schemes
To cover risks both in construction phase and operational phase
Possible use of escrow accounts
In order to better support PPPs on the entire duration of the contract concession
and to avoid the constraints of the EU budgetary cycle
Possibility to launch an EU initiative on project bonds
Credit enhancement instruments to facilitate bond issuance at appropriate rating
(at least single A) to attract interest of institutional investors and pension funds
European Projects and PPPs
Concrete examples
In transport projects:
Road projects (M6, M Hungary, E18 in Finland, A5 in Germany, etc.)
Rail projects (High-speed rail Poceirão – Caio Portugal, High-speed rail Tours
Bordeaux France, etc.)
Complex projects (Fixed link on the Øresund Danmark-Sweden, Tunnel
Perpignan Figueres France-Spain, etc.)
Inland waterways (Canal Seine Nord)
…