THE RESOURCE BOOK
Methodology and Case Studies
Simon Murray
Brussels
5th July 2004
ISPA – PPP Framework Contract
Presentation
•
•
•
•
Background
Methodology
General conclusions
Sector analyses
– Water and waste water
– Solid waste
– Transport infrastructure
• Recent developments
Background
• “Guidelines for the Development of Successful
PPPs”
• Seminars in Brussels and the Candidate
Countries
• Request for examples of real projects to
complement the Guidelines
• Three key sectors chosen
• Case studies identified and analysed
• Report published
Methodology
• The Resource Book supports the Guidelines
• It provides detailed case studies of actual projects
in three key sectors
• Three sectors in which the EC has provided grant
financing to the Candidate Countries through ISPA
and the Cohesion Fund
• Case studies are not statistically representative
• But they do demonstrate structures, issues and
problems that are commonly found
• Case studies have been analysed against six criteria
Criteria for Analysis of Case Studies
•
•
•
•
•
•
Value of the investment
Contract duration
Transfer of responsibility
Demand risk
Availability risk
Contract type
Values Assigned to Criteria
Criteria/Scale
1
2
3
4
5
Investment value
<10m
10-50m
50-100m
100-150m
>150m
Contract duration
5yr
10yr
15yr
20yr
>20yr
Responsibility
transfer
Public
70/30
50/50
30/70
Private
Demand risk
<20%
20-49%
50%
51-80%
>80%
Availability risk
<20%
20-49%
50%
51-80%
>80%
Results of the Analysis
• Investment value – largest
investments in water and
transport. Smallest in solid
waste.
Sector Comparison
Investment Value
• Contract duration – water and
transport sectors have the
longest contract durations, often
over 20 years.
5
4
3
2
1
0
Availability Risk
Contract Duration
Demand Risk
• Responsibility transfer – solid
waste projects have the highest
transfer of responsibility to the
private sector.
Water
Responsibility Transfer
Waste
Transport
Results of the Analysis
• Demand risk – solid waste
projects have the highest
transfer of demand risk to the
private sector.
Sector Comparison
Investment Value
5
4
3
2
1
0
Availability Risk
• Availability risk – generally
determined by the
characteristics of the project.
Demand Risk
Water
• Contract type ………….
Contract Duration
Responsibility Transfer
Waste
Transport
Distribution of Contract Types
14
12
BOT
Number
10
BOO/DBFO
8
Service Agreement
6
JV
4
Concession
2
0
1
Contract Type
General Conclusions
• Risk transfer lies at the heart of effective PPP
design. Every project is unique but risks should be
borne by the parties best able to manage them.
• Need for sustained political support and
commitment, in particular for large projects of long
duration.
• Demonstrate value for money for the project.
Important for assessing that the project design is
most effective.
General Conclusions
• Need for well defined legislative and regulatory
environment to support project implementation.
• Importance of rigorous analysis of costs and
revenues undertaken by both parties as the basis
for a sustainable contract.
Sector Analysis – Water and Waste Water
• This is a mature sector. Water concessions have
been common for 40 years in EU countries.
• This is a growth sector. Member States will have
to undertake substantial investments in water and
waste water treatment facilities.
• There is considerable experience of the full range
of PPP structures in this sector.
Sector Analysis – Water and Waste Water
• EC co-financing can improve the operational
efficiency and fairness of a PPP.
• PPPs can capture private sector expertise and new
technologies.
• There is a big difference between privatisation and
PPPs
Sector Analysis – Solid Waste
• Four interdependent elements – vehicles and
equipment, sanitary landfills, MSWM strategies
and collection and transport services.
• Private enterprise has been leading modern waste
management in the Candidate Countries.
• Service contracts, concessions and JVs are
prevalent reflecting long-term stable contracts in
this sector.
Sector Analysis – Solid Waste
• Affordability in terms of acceptable tariffs is the
key issue in this sector.
• High cost of compliance with EU Directives has a
significant impact on project design.
Sector Analysis – Transport Infrastructure
• This is a mature sector and is seen as a viable
opportunity for PPPs across the EU.
• There is a long history of optimistic forecasts of
costs and revenues on transport projects. Errors of
up to 40% are typical on railway projects.
• Simple connections like bridges and tunnels are
well-suited to financing through user charges.
Sector Analysis – Transport Infrastructure
• More complex projects cannot exist in isolation and
must form part of a regional development plan.
• Considerable potential for public outcry.
Committed and sustained political support is
critical to the success of projects.
Recent Developments
• The EC has taken steps to promote, define and
regulate the use of PPPs.
• Recent publication of the Green Paper on PPPs
and Community Law on Public Contracts and
Concessions.
• The EU rules governing the choice of a private
partner have been coordinated so that a wide
variety of approaches are still possible at national
level.
• Eurostat has published a decision defining the
treatment of PPP investments in public accounts.