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Instruments and development needs Nicholas Jennett European Investment Bank.

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Presentation on theme: "Instruments and development needs Nicholas Jennett European Investment Bank."— Presentation transcript:

1 Instruments and development needs Nicholas Jennett European Investment Bank

2 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 Key lessons from EIBs PPP experience

3 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 Evidence on PPP performance

4 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 Procurement & the contractor market

5 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 Mobilising Funding: Structural & Cohesion Funds

6 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 Blending grants and loans: the new PPP alchemy

7 Models (1) Capex subsidy National EU Grant Private construction operations savings Unitary payments or user charges ……….. 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 National EU Grant Private Single operations SPV savings Unitary payments or user charges ……….. Private Separate construction contracts ComponentA ComponentB Characteristics: Common in transport Leverage: Moderate Incentives: Moderate Issues: Interface problems Ability to slice up project

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

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

11 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 Building public sector capacity

12 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 Developing PPP in the Regions: EIB initiatives

13 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 Developing PPP in the Regions: Public sector capacity building

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

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