EU Grants in Polish Waste PPPs
Andy Normington
Pinsent Masons LLP
EPEC Private Sector Forum
Borschette Centre, Brussels
June 2nd, 2010
Four Questions
• Why blend grants with loans in PPPs?
• How to blend grants with loans in PPPs?
• What are the problems with blending grants with loans in
PPPs?
• What help is available?
(approached with Polish PPPs in mind.....)
Why blend grants with loans?
Grants
• Grants from the Cohesion Fund &
European Regional Development
Fund are available to help finance
infrastructure projects
• An attractive way to finance new
infrastructure, increasing the
affordability – for both the public
sector and the end-user
• Increased affordability should
increase asset use – e.g. more
passengers on an urban metro or
more waste diverted from land-fill
(indirect socio-economic benefits)
PPPs
• Financial incentives for the private
sector bring efficiencies in delivery
of the service
• PPPs bring a focus on future
services (asset and lifecyclemanagement) rather than simply
constructing the asset
• Leverage scarce public funds with
private investment – “do more with
less”
How to blend grants with loans?
Capex Subsidy
Parallel Co-Financing
•
•
•
EU grant is combined with national public
and private finance to pay for the capital
costs of the infrastructure assets
Availability payments or user charges are
reduced as a result of the grant
Operating Subsidy or Debt
Repayment
•
•
Private finance is used to construct the
asset
A grant is used to reduce the amount of
each availability payment or prepay a
tranche of the private finance on
construction completion
•
•
EU grant is combined with national public
finance for one part of the project
Private finance is used to finance another
part of the project
The two parts are combined and operated
as a single concession, with reduced
availability payments or user charges
Investment Fund
•
EU grants are combined with public and
private financing into an investment fund
which advances funds into a portfolio of
(generally smaller) projects
Capex Subsidy – more detail
A project without grant funding
Private
Finance
User tolls / availability payments
A project with capex grant funding
EU Grant
National
Private
Finance
User tolls / availability payments
What are the problems?
Size of grant available? How big is the funding gap?
• Apply the grant rate to “eligible expenditure”
Investment Cost – Discounted Net Revenues
Funding gap
Investment
Cost
Revenue
Opex
No funding gap
Revenue
Investment
Cost
Funding
gap
Investment
Cost
Opex
Revenue
Opex
Funding gap
Funding gap
What are the problems ? …..cont’d
• Timing
– commitment
– decommitment if funds not used (n+2 rule)
• Reclaiming misspent funds
• Public sector / procuring authority as grant beneficiary
• Ensuring the advantages of PPP are maintained
– Funding gap not too big or too small
– A realistic profit
– Limiting claw-back
– The credit impact for “senior” debt
What help is available?
• JASPERS
Joint Assistance to Support Projects in European Regions
• Set up by DG Regio, EIB and EBRD
• Main focus on major projects in Transport and
Environment sectors
• Provide assistance to the public sector on the structuring
of projects that will (or may) use grants from the
Cohesion Fund and ERDF
• EPEC !
Working hard to make it easier
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