Public Private Partnerships:
policy outlook and the Annual
Call 2012: Support for PPPs
Stéphane Ouaki- Head of Unit B.4 Connecting Europe and
Infrastructure Investment Strategies, Directorate General Mobility and
Transport, European Commission
Katarzyna Gryc- Policy Officer- Unit B.4, Directorate General Mobility
and Transport, European Commission
Shelley Forrester – Senior Financial Engineering Manager, Unit T4,
TEN-T Executive Agency
1
29 November 2012,
TEN-T Info Days
Transport
Infrastructure
Investment Challenge
• estimated investment needs
in the TEN-T core network of
EUR 250 bn by 2020
• scarcity of EU, national and
local budgetary resources as
consequence of the economic
downturn
• private capital difficult to
attract to finance risky or
long term investments
29 November 2012,
TEN-T Info Days
2
Transport
Market outlook on PPP activity
• EUR 17.9 bn in
2011, well below
2005 transaction
level
• in Q2 2012, EUR
6 bn transactions
closed, the
lowest level in
the decade
29 November 2012,
TEN-T Info Days
3
Transport
Policy Framework to
address the challenge
TEN-T to optimise EU-wide PPP
projects pipeline and pave the
way for the Connecting Europe
Facility (CEF)
-
-
-
Capacity Building of the Network of the
National PPP units through the European
Expertise Centre (EPEC)
Loan Guarantee Instrument (LGTT)
jointly funded by EU and the EIB to
mitigate traffic dependent risks &
cashflows
Currently supporting 6 TEN-T investments
worth EUR 11 bn
Project Bond Instrument pilot phase
(2012-2016) is in force
PPP project preparation grant funding
29 November 2012,
TEN-T Info Days
4
Transport
Policy Framework to
address the challenge
Connecting Europe Facility
2014-2020
-
Grants to support projects with EU
value added to address key societal and
economic challenges (mobility,
competitiveness, inter-connectivity, modal
shift to adapt to climate change)
-
Financial instruments …
… to attract private capital through
innovative financial instruments
… to share risks with private investors
and provide Public sector commitments
… to unlock the full potential of the debt
capital markets through the pilot phase of
the Project Bond Instrument
29 November 2012,
TEN-T Info Days
5
Transport
Pilot Phase of Project Bond Initiative: private
capital to deliver EU infrastructure priorities

Implemented since 7 November 2012,with signing of Cooperation
Agreement between Commission and EIB

the applications, appraisal and pricing of the individual projects done by
the EIB

EIB approvals until 31 December 2014, financial close by end of 2016

the PB credit enhancement is designed to improve the credit quality of
senior debt of a project company in order to issue project bonds

the EIB provides a finance facility to a project company in the form of
a sub-ordinated loan and / or guarantee

target investment rating of at least A-, a level expected to attract
long term institutional investors (insurance companies and pension funds)

mitigates all types of project risks (construction, operations,
performance, traffic)

Adaptable to all types of PPP payment mechanisms, including
availability and user-pay
29 November 2012,
TEN-T Info Days
6
Transport
2012 Annual Call Priority 3: Support for PPPs
and innovative financial instruments
The objective of this priority is to support the screening and
development of projects for suitability to be procured as PPPs
and to exploit EU level financial instruments.
The expected result will be the creation of an EU level PPP
project pipeline within the TEN-T that will:





Provide a clear signal to the private sector of the long term public sector
commitment to PPP procurement
Enhance the preparation of projects suitable for PPP procurement
Ensure the effective and efficient use of EU funds
Provide upstream support to projects, facilitating access to innovative financial
instruments such as the EU project bond initiative (PBI) and LGTT
Contribute to the success of the pilot phase of the project bond initiative to
open the bond market as a source of long term finance for TEN-T projects
29 November 2012,
TEN-T Info Days
7
Transport
Steady growth of EU level PPP project pipeline
•
Annual Call 2010 €7 million offered, 3 projects selected
 2010-NL-93302-S – Implementation study to prepare PPP to
improve maritime access to TEN-T at Amsterdam – Sea Lock
•
Annual Call 2011 €15 million offered, 6 projects selected
 2011-CZ-94064-S
PPP for D3 motorway
 2011-ES-94123-S
PPP for intermodal logistics platform
 2011-FR-94036-S
PPP for CNM stations
 2011-IT-94006-S
PPP for Port of Venice
 2011-IT-94030-S
PPP for rail link at Malpensa
 2011-NL-94111-S
PPP for Beatrix locks and Lekkanaal
•
Annual Call 2012 € 25 million offered
Evolution towards stronger linkage to financial instruments
29 November 2012,
TEN-T Info Days
8
Transport
2012 Annual Call Priority 3 - Support for
PPPs: feasibility to maturity
PPP screening: feasibility studies
preparation of business case:

necessary
for
value
for
money
assessment
and

Market scan to identify private sector potential; Risk analysis, allocation and mitigation

Affordability – funding and financing models, including revenue generation studies, payment model
options
Identification of output requirements, development of public sector comparator
Development of financial models based on robust cost estimates, current market pricing and
quantitative risk assessment


PPP procurement: Mature project preparation phase, studies necessary to bring project to
tender and to support procurement phase:
 Further technical studies to define preferred solution: output requirements and service quality
standards
 Establishment of risk allocation, mitigation and pricing model
 Financial studies to identify optimal sources of financing, including capital markets solutions
 Preparation of draft PPP contract, including provisions to accommodate bond solutions
 Studies to support procurement phase, including development of shadow credit rating but not
including bid evaluation
29 November 2012,
TEN-T Info Days
9
Transport
Opportunities available for projects
selected under Priority 3
• Screening of mature PPPs for pilot phase of PBI:
• Procurement phase to be launched not later than
mid-2014
• ‘Bond friendly’ tender documentation
• Similar financial viability and political support as
needed to attract bank finance
• Screening for feasibility of PPPs for the future
• Develop robust value for money assessment
• Prepare PPP projects for Connecting Europe Facility
• Increased use of financial instruments at EU level
29 November 2012,
TEN-T Info Days
10
Transport
ANY QUESTIONS?
29 November 2012,
TEN-T Info Days
11
Transport
Transport
Stéphane Ouaki
Stephane.ouaki@ec.europa.eu
Katarzyna Gryc
Katarzyna.gryc@ec.europa.eu
Shelley Forrester
Shelley.forrester@ec.europa.eu
29 November 2012,
TEN-T Info Days
Thank12 you!
Transport
PBI: funded and un-funded debt
Project
Bonds
SPV
Target
rating
minimum
A-
Bond Issue
and
underwriting
Project
Bond
Investor
SPV
Project
Costs
Project
Costs
EIB/EU
Sub-debt
Equity &
Quasiequity
Project
Bonds
up to 20%
of total
Bond issue
Target
rating
minimum
A-
Bond Issue
and
underwriting
Project
Bond
Investor
EIB/EU
Un-funded
Sub-debt
Equity &
Quasiequity
up to 20%
of total
Bond issue
EIB/EU Sub-debt comes as a mezzanine, sub-ordinated loan – replacing part of the bond to increase
its target rating
EIB/EU Unfunded Sub-debt guarantees part of the bond issued to improve the target rating
• Increases the amount of bonds to be issued
• Available during the whole lifetime of the project
• Can address the problem of cash shortfalls during
the construction period
13
European Investment
• EIB pays only when guarantee is called
Bank