1. EU Grants in Polish Waste PPPs Andy Normington Pinsent Masons LLP EPEC Private Sector Forum Borschette Centre, Brussels June 2 nd, 2010

2. 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.....)

3. 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 lifecycle- management) rather than simply constructing the asset Leverage scarce public funds with private investment – do more with less

4. How to blend grants with loans? Capex Subsidy 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 Parallel Co-Financing 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 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 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

5. Capex Subsidy – more detail A project without grant funding A project with capex grant funding User tolls / availability payments Private Finance National Private Finance EU Grant

6. 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 No funding gap Funding gap Revenue Investment Cost Opex Investment Cost Opex Investment Cost Opex Funding gap

7. What are the problems ? …..contd 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

8. 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 !

9. Working hard to make it easier LONDON DUBAI BEIJING SHANGHAI HONG KONG SINGAPORE OTHER UK LOCATIONS: BIRMINGHAM BRISTOL EDINBURGH GLASGOW LEEDS MANCHESTER Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) and regulated by the Solicitors Regulation Authority (reference number: 00471972). The word 'partner', used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm who is a lawyer with equivalent standing and qualifications. Singapore location in association with MPillay. A list of members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP's registered office: CityPoint, One Ropemaker Street, London, EC2Y 9AH, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP and affiliated entities that practise under the name Pinsent Masons or a name that incorporates those words. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. For important regulatory information please visit: www.pinsentmasons.com.www.pinsentmasons.com © Pinsent Masons LLP 2010 www.pinsentmasons.com 23280351