EU Subsidies in 2014-2020:
Opportunities for PPP Projects
within the Scope of Subsidies by the EU
„Investing in Poland with a Focus on PPPs“ with President Dr. Christoph Leitl
5-6 November 2012 | Warsaw POLAND
Erste Group Infrastructure Finance
Dr. Werner Weihs-Raabl
Head of Group Infrastructure Finance
Erste Group
More than 17.7 million clients
Total population
Bankable population
120mn
92mn
Erste Group clients
whereof within EU
17.7mn
17.0mn
Share of loans and deposits
within EU
>99%
Clients: 5.2mn
Market share based on:
Retail deposits: 28.6%
Retail loans: 24.7%
Branches: 653
Bank position: 2nd
Clients: 0.9mn
Market share based on:
Clients: 2.4mn
Retail deposits: 8.3%
Market share based on:
Retail loans: 14.5%
Retail deposits: 26.1%
Branches: 184
Retail loans: 25.8%
Bank position:3rd
Branches: 289
Bank position: 1st
Retail market share
of 20-30%
AUT, CZ, RO, SK
of 5-15%
HU, CRO
Clients: 0.2mn
Market share based on:
Retail deposits: 0.3%
Retail loans: 1.6%
Branches: 131
Clients: 3.2mn
Market share based on:
Retail deposits: 18.9%
Retail loans: 19.3%
Branches: 1,051
Bank position: 1st
Clients: 0.9mn
Market share based on:
Retail deposits: 12.8%
Retail loans: 13.8%
Branches: 145
Clients: 0.3mn
Market share based on:
Retail deposits: 2.4%
Retail loans: 3.1%
Branches: 65
All data as of January 2012.
Position of banks according to number of assets
Erste Group core markets
Indirect presence (Savings Banks SLO, BiH)
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
Clients: 4.6mn
Market share based on:
Retail deposits: 23.1%
Retail loans: 18.0%
Branches: 667
Minority stakes (RU) / Investment Bank (PL)
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Group Infrastructure Finance
Financing solutions to Public and Private Sector Clients in the following sectors:
Areas of Expertise
Sector Expertise
Energy &
Environment
Renewable Energy:
• Hydro Power Plants
• Wind Power Plants
• Solar Power Plants
Project Finance /
Conventional Energy
Social
Infrastructure
• Thermal Power
Plants
• Airports
• Hospitals
• Ports
• Pump Storage Hydro
Power Plants
• Public Buildings
• Toll roads
• Schools, Universities
• Railways
• Prisons and Courts
• Rolling stock
• Car parks
• Electronic Tolling
• Sport Stadia
• Biogas Power Plants
• Oil & Gas storage
and infrastructure /
Electricity
transmission
• Geothermal Power
Plants
• Water / Waste
treatment
• Biomass Power
Plants
Transportation
 Long term infrastructure financing
 PPP financing
 Financial advisory
 EU Funding support
 Financial engineering
 PPP advisory
The Infrastructure Finance business comprises a large team of professional finance executives with a track record in Infrastructure
Finance and Public Sector business in Vienna at Erste Bank Holding as well as in the region.
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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What are the advantages & disadvantages of
using PPPs?
Disadvantages
Advantages

Deliver value for money


Project may become affordable within the
annual public budget
Loss of management control by the public
sector

Voluminous agreement system especially on
items like control, devolution, reversion of
rights and events of default

Force the public sector to focus on output
and benefit

Competition already in the design and
engineering
phases
(achievement
of
performance-orientated prices and cost
minimising effects)

Higher cost of finance

Long term, relatively inflexible contractual
commitment

Maximises the use of private sector skills


Adequate risk sharing
Risk of insolvency (selection rights to be
agreed)

Delivers assets on time and budget


Partly or completely off public budget
Higher efforts for control and monitoring of
(quality standards) for the community

Conclusion of fixed utilisation fee and
defined price adjustment clauses

Tax duty
PPPs are not “one size fits all” solutions
(each individual project has to be assessed for its PPP suitability)
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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What is the situation of the PPP market in
Poland?
Although there still exist barriers to PPPs, a positive
future development is expected in the long-run
 PPP legislation in place for 3.5 years (Act of December 19, 2008; Act of January 9, 2009;
Separate act on highway PPPs)
 Since 2009, 29 PPP contracts signed (current market value EUR 73m)
 BUT still barriers in place (e.g. support from the public sector, incoherence of the legal
framework,…)
 Sectors with potential for PPPs:
- Municipal housing (e.g. municipal housing PPP project in Krakow with a volume of
EUR 22m)
- Waste management (e.g. waste plant in Gdansk)
- Energy
- Healthcare
- Transport sector (e.g. airports, national roads)
- Urban infrastructure
Source: PPP Magazine Autumn 2012
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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When do banks finance PPPs?
„Bankability“ of transport infrastructure projects
Strong revenue
support e.g. through
availability
payment mechanisms
Secure and
Stable
Cash-Flows
Demand for
Project
Optimal Risk
Allocation
Strong Political will /
stable regulatory
and legal framework
Government
Support
Bankability
Issues
Environmental
Aspects
Debt Service
Reserve
Liability
of Sponsors
Technical
Complexity
EarlyTermination
Regulations
Solid
Private Partner
and adequate
Equity contribution
e.g. Step-in Rights,
compensation payments
Problem: PPP schemes are often only considered to avoid budget limitations, therefore the
pre-conditions are often insufficient causing failures and delays of projects
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Why do banks finance airports?
Critical factors in Airport valuations
 Traffic potential
 Catchment area, population size, propensity to fly
 Natural traffic flows (tourism, diaspora)
 Domestic and regional competition
 Key clients
 Strategy towards airlines: Anchor airline, Airline mix, Low Costers
 Malev effect
 Capex
 benchmark of capex volume, costs per m², considering complexity, number of bridges
etc.
 Opex
 Efficiency in operations, staff, outsourcing
Important airport extensions planned in Poland (e. g. Krakow, Bialystok, Olsztyn)
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Renewable Energy in Poland
New regulation: Wind energy support regime (I)
Draft law with transitional provisions.
• introduces the RES law: the new Energy law and the Gas law.
• Published on October 12th by the Polish Ministry of Economy
• To be enacted by end Q1 2013
• To come into force around mid 2013, after notification to the European
Commission, including the identification of potential elements for state
aid
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Renewable Energy in Poland
New regulation: Wind energy support regime (II)
Most important changes:
1. For running projects: RES installations that were operational before
the effective date of the RES law to get green certificates for a period of 15
years (from date since operational) . N.B.: Correction factor = 1.
1. For new projects : Correction factors exist for the years 2013-2017.
Correction factors for onshore wind with installed capacity >500 kW are:
2013 – 0.90
2014 – 0.90
2016 r. – 0.86
2017 – 0.83.
2015 – 0.88
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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WtE Projects in Poland
Poland aims at building 11 WtE plants with
the capacity to burn 2,337,000 t/a. (2013-2015)
- Facilitated through the “Law on Maintaining Cleanliness and Order
in Municipalities” (in force since 01/01/2012): allows municipalities
to implement waste projects financed by debt incurred directly by
The planned Polish WtE plants
municipalities or by private partners
- Expected that EU funds 61% of the total €1.516b
Example: WtE Project Gdansk
- PPP structure possible
- Project costs: 600-660 million zł (ca. 165 million EUR)
- EU Funding: 135 million EUR (60% of total costs)
- Capacity: appr. 250,000 t/a
- Start: expected in 2015
- Concession period: 30 yrs
Source: ASK – Access to Sustainable Knowledge
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Medicover Hospital in Poland
Structured Debt Finance
 In 2011, Erste Group originated, structured and
 provided a EUR 32m investment loan for 10 years
 for the acquisition of Medicover Hospital in Warsaw by Celox Group
 Medicover hospital was the first medical facility in Poland offering such a wide
range of hospital services, with a capacity of:



180-beds
Five fully equipped surgery rooms
Six-room private hotel (for family members or private treatment)
Erste Group aims at financing projects in the healthcare sector as we deem that crucial for the
economic growth of the whole country.
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Road Transport Infrastructure in Poland
PPPs so far only considered as a supplementary and not
major financing approach
 National road development set out in the „National Roads Building Program for the years 2011 –
2015“
 Between 2011 – 2013: expenditure limit within the National Road Fund (guaranteed by the State
Treasury and fiscally managed by the BGK bank) set at EUR 19.8b
 So far, the indroduction of motorways based on PPP legislation has failed (e.g. A1 between
Stryków and Pyrzowice)
Reasons:
 Lack of experience in structuring bankable PPP projects
 Off-balance sheet treatment from Eurostat not achieved
 Insufficient political support for the implementation of PPP projects
According to the „National Roads Building Program for the years 2011 – 2015“, the following
motorway projects could potentially be structured as PPPs:
 A2 motorway from Warsaw to Belarus
 A1 section from Tuszyn to Pyrzowice
Source: PPP Magazine Autumn 2012
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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PPP support by EU/ international institutions
and programmes?
 JASPERS (Joint Assistance in Supporting Projects in European Regions): The main objective of
this programme is to provide technical expertise to the twelve EU Member States which joined
the EU in 2004 and 2007
 Aimed at accelerating the absorption of the available funds (absorption level of
EU funds till the end of 2015 in Poland: EUR 67bn)
 JESSICA (Joint European Support for Sustainable Investment in City Areas): This fund supports
sustainable urban development and regeneration through financial engineering mechanisms.
 Ten–T ( Trans-European Transport Networks) projects are financed by the EU/ international
institutions through:




Grants from the Trans-European transport budget (Funding rules)
Grants from the Cohesion Fund budget, in the countries eligible for its intervention
Grants from the ERDF, majorly for convergence objective regions
Loans and guarantees from the European Investment Bank (EIB)
EIB plays a crucial role in the development of PPPs on the European level.
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Where do we see a potential for enhancing
PPPs with EIB’s support?
Europe 2020 Project Bond Initiative - Structure
Public Procurer
„Unitary Charge“ /
„Lease“ Payment
Public Sector
PPP Contract
Equity
Private Sector
Special Purpose Vehicle
SPV
Senior Debt in form
of Project Bonds
Subordinated
Debt
Construction
Company
Operator
Investors buy or
underwrite
Europe 2020 Project Bond
Initiative
Project Bond
Guarantee Facility
EIB
Risk
sharing
EU
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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How can projects be made more attractive? (I)
 Strong political consensus on a cross-regional master plan (What? When? How?)
 Realistic project planning & budgeting
 Awareness that PPPs are not a magic formula: bad projects cannot become good PPPs
 Awareness that private partners need certain returns & stable Cash-Flows
 Feasibility Studies and Public Sector Comparator crucial for choosing the right projects and
appropriate financing structure (Public Procurement vs. PPPs)
 Increase absorption of EU funds & make use of general support from EU institutions (e.g.
EIB, EPEC, Jessica, Jaspers, T-Ten,..)
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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How can projects be made more attractive? (II)
 Openness for alternatives to bank loans for financing (e.g. Project Bonds)
 Sufficient capacity and skills on the public sector side (PPP Task Force) & experienced
private partners (e.g. advisors)
 Legislation and regulatory framework to allow the proper execution of concession projects
(concession law, expropriation issues etc.)
 “Best Practice”: replicate the process of successfully realized projects available in the market
 “Best Practice” (even if it is in another country)
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Selected Credentials
Infrastructure Financial Advisory
Karlovy Vary Hospital
Czech Republic
Pardubice County Hospital
Czech Republic
Emergency Care Centre
Czech Republic
Courthouses
Czech Republic
Zlin Congress Centre
Czech Republic
Multifunctional Centre
Czech Republic
PPP methodology
Slovak Republic
Financial advisory
Financial Advisory and Project
Management
Financial advisory
Financial advisory
Financial advisory
Financial Advisory and Project
Management
Financial advisory
EUR 30,000,000
EUR 80,000,000
EUR 65,000,000
EUR 75,000,000
EUR 20,000,000
EUR 55,000,000
Amount undisclosed
2006
2006-2007
2006-2008
2006-2008
2007-2008
2007-2008
2007
PPP methodology
Slovak Republic
City Town Hall
Czech Republic
Kiev Ringroad
Ukraine
System of Transport
Infrastructure Financing
Czech Republic
DPP - Fleet renewal financing
strategy
Czech Republic
Stabilization plan of KNTB
hospital
Czech Republic
Aquapark Velesin
Czech Republic
Advisory on preparation of
methodology
Financial advisory
Financial advisory
Financial advisory
Financial advisory
Financial advisory
Financial advisory
EUR 40,000,000
EUR 45,000,000
EUR 2bn
N/A
EUR 1,6bn
EUR 10m
EUR 8m
2008
2008
2009-2010
2011-2012
2011
2011
2010-2011
D1 Highway
Czech Republic
Parking house FNO
Czech Republic
Parking house Ostrava Poruba
Czech Republic
Cultural Center of Trnava
Region
Slovak Republic
M3 - Highway
Hungary
D1 - Highway
Slovak Republic
R1 - Motorway
Slovak Republic
Financial advisory
Financial advisory
Financial advisory
Financial advisory
Financial advisory
Financial advisory
Financial advisory
EUR 1bn
EUR 7,6m
EUR 7,2m
N/A
EUR 400m
EUR 2,6bn
EUR 1bn
2010
2010
2010
2010
2009
2008-2011
2008-2010
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Selected Credentials
Infrastructure Financial Advisory
Communal Services Liptovsky
Mikulas
Slovak Republic
Aquapark Luka nad Jihlavou
Czech Republic
Strategy of financing, Kolin
city
Czech Republic
Financial advisory
Financial advisory
Financial advisory
EUR 13,6m
EUR 3,3m
N/A
2009-2010
2011
2011
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Selected Credentials
Infrastructure Financing
Jelačićka Sports Hall
Croatia
28y Investment Loan
EUR 29,000,000
Sportski Grad
Croatia
R1
Slovakia
Bina Istra
Croatia
Financing
Financing
Financing vol.: EUR 1.2b
ERSTE participation:
EUR 85,000,000
Phase II Financing
Financing vol.: EUR 693m
with ERSTE participation:
EUR 30,000,000
Financing vol.:
EUR 46,000,000
M6
Hungary
Medicover Hospital Warsaw
Poland
Financing
Infrastructure Acquisition
Finance
MEP/ Energy 21
Republic
Czech
Fersa
Dubrovnik
Airport
Poland
Energy Finance
Energy Finance
Investment loan for PV Power
Plant project pipeline
Investment loan for 24 MW
Wind Power Plant
Investment Loan
EUR 32,000,000
CZK 1.820 mln
PLN 116 mln
2011
2010
2010
RenoEnergie, a.s.
Czech Republic
HT WIND, s.r.o.
S&M CZ, s.r.o.
Energy Finance
Energy Finance
Energy Finance
Hydro Power Plant
Investment Loan
Supported by IFC Guarantee
Investment loan
Supported by IFC Guarantee
2008
2008
Financing vol.: EUR 445m
ERSTE participation:
EUR 60,000,000
Hospital Vienna North
Austria
AZM
Croatia
Financing
In Tender
Phase I Financing
Financing vol.:
EUR 18,800,000
Financing vol.:
EUR 605,000,000
Financing vol.:
EUR 375,000,000
IWP Windpark valuation in 6
different countries
Enerji SA
Turkey
Sale process of photovoltaic
assets in Bulgaria
Financial Advisory
on wind park portfolio
valuation
in different development
stages
Energy Finance
Financial Advisory
Financing
Identification of investors for
photovoltaic Power Plants
2009-2010
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
EUR 1bn.
European Power
Portfolio Deal
of the Year 2008
2009-2010
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Thank you for your attention!
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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Contact
Werner Weihs-Raabl
Erste Group
Head of Group Infrastructure Finance
1060 Vienna, Mariahilfer Straße 41 - 43
Tel.:
+43 (0) 50100 - 18010
Fax:
+43 (0) 50100 - 9 18010
mobile:
+43 (0) 664 818 05 27
werner.weihs-raabl@erstegroup.com
Investing in Poland with a Focus on PPPs | 5-6 November 2012 | Warsaw, POLAND
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