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16/02/2014 PPPs and Trans-European Networks in Transport Jean-Eric Paquet, DG MOVE Director for Trans-European Transport Networks & Smart Transport.

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Presentation on theme: "16/02/2014 PPPs and Trans-European Networks in Transport Jean-Eric Paquet, DG MOVE Director for Trans-European Transport Networks & Smart Transport."— Presentation transcript:

1 16/02/2014 PPPs and Trans-European Networks in Transport Jean-Eric Paquet, DG MOVE Director for Trans-European Transport Networks & Smart Transport

2 Advantages of PPPs in Transport projects Public policy planning is changing structurally Approach is evolving from a focus on input specification to a focus on output specification More efficient Planning Improvement of design and preparation of projects Through tapping the private sector competences and improving the public sectors ability to negotiate with the private partner Calculation of total costs Integration of maintenance and operating costs in the public sectors evaluation Modernisation of public approaches and development of administrative capacity

3 Advantages of PPPs in Transport projects Better control of costs Negotiated transfer of risks allows for optimisation of private partners intervention: infrastructure is realised on time/on budget Economic and Budgetary Efficiency 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

4 Advantages of PPPs in Transport projects Contract complexity Find the adequate level of specification in contract : rights and obligations, risks and rewards, termination conditions, etc. 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 Need to increase des public sectors administrative capacity 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 … with its complexities

5 DG MOVEs actions in favour of PPPs 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) Improving public sectors administrative capacity 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)

6 DG MOVEs actions in favour of 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 … Blending EU funds with PPPs 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

7 DG MOVEs actions in favour of PPPs 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 Innovative financial instruments

8 DG MOVEs actions in favour of PPPs 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 Innovative financial instruments

9 DG MOVEs 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 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 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 Creation of a specific instrument for availability-payment schemes To cover risks both in construction phase and operational phase

10 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) …

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