1. Instruments and development needs
Nicholas Jennett
European Investment Bank

2. Key lessons from EIB’s PPP experience
The evidence on project performance
Key success factors
The importance of procurement and the contractor market
Mobilising funding sources
Building scale & expertise in PPP programmes
EIB initiatives
New financial instruments
JASPERS
European PPP Expertise Centre

3. Evidence on PPP performance
National audit authorities commit significant resources to assessing PPP VFM
Reports are an important source of information, learning and benchmarking
Tribunal de Contas, Portugal
Hungarian State Audit Office
UK National Audit Office
German Bundesministerium für Verkehr, Bau u. Stadtentwicklung

4. Procurement & the contractor market
Competitive procurement consistently a key to delivering value for money
Importance of attracting high quality bidders
Depth in the bidder / contractor market delivers multiple benefits
Local contractor market may require education
Public sector may need to show:
Attractive pipeline of deals;
High degree of professionalism in procurement management
Political commitment and credibility

5. Mobilising Funding: Structural & Cohesion Funds 2007-2013
Will dominate the infrastructure market in eligible areas
Potential for unprecedented investment in transport, energy and telecommunications
EUR 350 billion of grant funding – over EUR 300 billion for major infrastructure

6. Blending grants and loans: the new PPP alchemy
Successful models include:
Tagus Bridge (Portugal)
Sparta Airport (Greece)
West Lothian College (UK)
M1 Drogheda bypass (Ireland)
Perpignan-Figeras rail link (France-Spain)
But new rules (on additionality & grant rate calculations) apply since most of these projects closed
Four basic models under investigation

7. Models (1) Capex subsidy
Unitary payments or
user charges
savings
construction
………..
National
EU Grant
Private
operations
Characteristics:
Most common model
Leverage: Low
Incentives: Low (depends on grants)
Issues:
Timing of grant commitment
Scale for private finance

8. Models (2) Parallel Co-finance
Unitary payments or
user charges
savings
Separate construction contracts
………..
National
EU Grant
Component A
Single operations SPV
Private
Component B
Private
Characteristics:
Common in transport
Leverage: Moderate
Incentives: Moderate
Issues:
Interface problems
Ability to slice up project

9. Models (3) Payment subsidy
EU grants
construction ?
………..
Private
2015
operations
Characteristics:
Similar to UK PFI credits?
Leverage: High
Incentives: High
Issues:
Only for availability schemes
Eligible expenditure period
Regulations unclear

10. Models (4) Co-Investor (Fund or Project)
EU Grant
National
Private
Investment Fund or Project
projects
Characteristics:
Like urban regeneration funds
Leverage: High
Incentives: High
Issues:
Social objectives v profitability
Selection of private partner
Recycling of profits

11. Building public sector capacity
Lack of public sector capacity shown to be consistent constraint on the development of PPP programmes
Public and private sector will need to acquire new skills including legal, financial, procurement, risk analysis, contract management
Significant challenge for regional authorities with limited PPP experience
National PPP Task Forces can play key role in securing VFM in programmes
An important means of demonstrating political commitment

12. Developing PPP in the Regions: EIB initiatives
New financial instruments
New debt instruments for low investment grade lending (Structured Finance Facility)
Equity investments through PPP investment funds
Loan Guarantee for TENs Transport (LGTT)
JASPERS
Joint Assistance to Support Projects in the European Regions
Joint policy initiative of EIB, EBRD and European Commission (DG REGIO)
Assist EU countries (principally new Member States and Acceding Countries) to absorb Structural & Cohesion Funds period 2007 to 2013
Assistance with project presentation and identification, including PPP

13. Developing PPP in the Regions: Public sector capacity building
European PPP Expertise Centre (EPEC)
Sharing of policy knowledge and expertise
Information resource and network facilitation
Policy support services for programme planning and development
Preparation of synthetic review papers on EU experience
Preparation of case studies, generic guidance, tried and tested PPP structures
Cinderella of the IFIs
One hand EU Institution, other hand BANK
Policy set by EU, don’t write lots of policy docs
Operates on sound banking principles
Both developed and developing world
Challenge of New Member States
No policy to promote PPP – its a political choice

14. Critical success factors for PPPs in the Regions
Clear legal & institutional framework
Public Sector political commitment – national as well as regional
Support from focused, dedicated and experienced public sector team – PPP Task Force
Transparent & competitive procurement
Well designed, bankable projects
A committed contractor market
Ability to mobilise funding
Realistic risk sharing