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EBRD 25 th September 2009 Sarajevo Public-Private Partnership in developing municipal infrastructure.

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Presentation on theme: "EBRD 25 th September 2009 Sarajevo Public-Private Partnership in developing municipal infrastructure."— Presentation transcript:

1 EBRD 25 th September 2009 Sarajevo Public-Private Partnership in developing municipal infrastructure

2 2 Agenda Introduction to the EBRD PPP – definition and rationale EBRD EBRD Experience in PPPs

3 3 Introduction to EBRD International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia Owned by 62 countries and two inter- governmental institutions including countries of operation Capital base of 20 billion

4 4 Introduction to EBRD Mandated to finance projects in Central and Eastern Europe and former Soviet Union AAA rated by Moodys and Standard & Poors Provides debt and equity financing to state and private projects >London headquarters >30 Resident Offices in 27 countries

5 5 EBRD Differs from Commercial Banks Mandate to foster transition from planned to market economies The EBRD promotes environmentally sound and sustainable development in all its activities Can finance projects without bank guarantees or sovereign guarantees Willingness to try new products/structures Broad market knowledge

6 6 Municipal and Environmental Infrastructure MEI covers all forms of PPP related to municipal infrastructure: Water/Wastewater Solid Waste Urban Transport District Heating MEI Investment Portfolio

7 7 Sofia Water System Concession Bulgaria 31 million syndicated loan December 2000 Privatisation of Sofiyska Voda Sofia Water System Concession Bulgaria 31 million syndicated loan December 2000 Privatisation of Sofiyska Voda Brno Waste Water Treatment Plant Czech Republic 47.5 million syndicated loan December 1999 Operation wastewater treatment plant Brno Waste Water Treatment Plant Czech Republic 47.5 million syndicated loan December 1999 Operation wastewater treatment plant Zagreb Waste Water Treatment Plant Croatia 55.2 million syndicated loan December 2001 Construction and operation of wastewater treatment plant Zagreb Waste Water Treatment Plant Croatia 55.2 million syndicated loan December 2001 Construction and operation of wastewater treatment plant Maribor Waste Water Concession Slovenia 14.8 million loan April 1999 Construction and operation of wastewater treatment plant Maribor Waste Water Concession Slovenia 14.8 million loan April 1999 Construction and operation of wastewater treatment plant Tallinn Water Limited Privatisation Estonia 31 million syndicated loan October 2001 Partial privatisation of AS Tallinna Vesi Tallinn Water Limited Privatisation Estonia 31 million syndicated loan October 2001 Partial privatisation of AS Tallinna Vesi Selected Water and Wastewater Projects Budapest Wastewater Services Privatisation Hungary 13.1 million equity investment December 1998 Partial privatisation of waste- water services companies Budapest Wastewater Services Privatisation Hungary 13.1 million equity investment December 1998 Partial privatisation of waste- water services companies St Petersburg South-West Wastewater Treatment Plant Russian Federation 105 million loan November 2002 Construction and operation of wastewater treatment plant St Petersburg South-West Wastewater Treatment Plant Russian Federation 105 million loan November 2002 Construction and operation of wastewater treatment plant Apa Nova Water Treatment Plant Romania million loan December 2002 Modernisation of the Crivina Treatment Plant Apa Nova Water Treatment Plant Romania million loan December 2002 Modernisation of the Crivina Treatment Plant

8 8 How do we Define a PPP? A PPP is a contractual agreement between a public agency (i.e. municipality) and a private entity Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public Each party also shares in the risks and rewards potential in the delivery of the service and/or facility Agreements between the public and private entities differ in their allocation of risks and responsibilities, in the ownership of the assets and their duration

9 9 Main Options for PPP and Degree of Risk Transfer Government Design-Build Management Contract Lease Concession Build-Operate-Transfer Privatisation Degree of Private Sector Involvement Degree of Private Sector Risk

10 10 PPPs in Transition Economies PPPs meet the transition test –Utilisation of the private sector –Transparency and competition –Priority infrastructure investments –Efficiency and lower costs (public sector comparator)

11 11 Typical Concession Structure Government Concessionaire Shareholders Contractor Operator Loan Agreement Equity Concession Contract Construction Contract Operation Contract

12 12 Pros and Cons of Different PPP Structures StructureService Contract Management Contract LeaseConcessionBOT DescriptionPrivate sector performs specific service. Public sector remains responsible. Operation and maintenance of utility transferred to private sector. Private sector leases assets of utility and operates and maintains them. Private sector has right to use assets, and responsible for operation, maintenance, and investments. Public sector owns assets. Private party builds and owns asset, then transfers it to public sector. ProPrivate sector expertise for technical tasks. Public sector keeps control. Allows improvement in management and cost control. Prepares for greater private involvement Strong incentive for private sector to perform. Prepares for greater private involvement Passes full responsibility for operations and investments to private sector. Wholly private funding. ConNo private sector investment. Limited risk sharing. No private sector investment. Little incentive to reduce costs and improve services. No private sector investment. Administratively demanding on public sector. Limited to stable political and economic contexts. Lengthy process and high development costs.

13 13 How are PPPs in EU Markets Evolving? 0 9 Time (Years) More difficult Interest Some Projects Implemented Pathfinder or Single Projects Belgium Italy Spain Greec e Hungary Czech Rep Poland Slovenia Slovakia Romania Bulgaria Croatia Estonia Latvia Lithuania Russia UkraineKazakhstan Kyrgyz Rep Albania Bosnia/Herz FYR Macedonia Serbia/Montenegro Belarus Moldova Armenia Azerbaijan GeorgiaTajikistan Turkmenistan Uzbekistan Widespread Use of PPPs

14 14 Water supply and wastewater treatment Meeting EU water and wastewater standards Need to increase investments in maintenance and asset renewal Improve water supply standards Improve collection and treatment of sewage Improve operational and financial performance of municipal water and sewerage companies Investment challenges EBRD water and sewerage Projects

15 15 Meeting EU waste standards Efficiency and frequency of collection of waste Improve adequacy of waste disposal Prevent groundwater contamination due to inadequate treatment of leachate Need to organise waste management systems EBRD in waste management projects EBRD is experienced in structuring waste management projects Investment challenges

16 16 Key factor in promoting economic growth Rehabilitation of public transport in urban areas and need to replace ageing and operating equipment Improve financial performance of transport operators to allow access financing Need to introduce public service contracts between transport authority and operator Investment in public transport needed to counter the negative effects of rapid motorisation EBRD in urban transport projects Investment challenges

17 17 EBRD offers Several Financing Structures Equity Loans Leasing Partial guarantees From pure to portage equity in project company Limited or non-recourse project financing to public or privately-owned project companies; senior or subordinated debt EBRD will structure each product according to project needs Various forms of leveraged leasing structures for creditworthy entities Partial risk, credit and specified event guarantees

18 18 EBRD investment selection criteria Financial, economic, legal and technical viability Creditworthiness of borrower, sponsors and guarantors Project would need to contribute to structure and extent of markets, institution building, and/or market-based skills and innovation Legal framework would need to allow PPP arrangement and enforceability of contracts Technology would need to be appropriate for site and service/performance required

19 19 Some Lessons What our experience has taught us… Establish Dedicated Team Realistic Expectations Financial and Contractual Basis Motivation of Public Sector to champion commercially oriented approach Understand user pays and cost recovery concepts Accept possible need for tariff adjustments Establish clear project parameters up front Establish all timing obstacles

20 20 Contact details Davor Inđić Giulio Moreno Principal Banker Zagreb Resident Office Miramarska 23/111, Zagreb Tel: Fax: Head of Sarajevo Resident Office Unitic Towers, 15 th floor, Tower B Fra Andela Zvizdovica 1, Sarajevo Tel: Fax:


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