Jaroslav Straka, F4 Czech Republic and Slovakia, G.1 – Transport Use of ESI Funds and financial instruments for financing of transport in Slovakia - D4 motorway Jaroslav Straka, F4 Czech Republic and Slovakia, G.1 – Transport

Case Study – D4R7 PPP The design, build, finance, maintenance and operation of approx. 27 km of the D4 motorway (TEN-T) around Bratislava The project was procured under a PPP contract – together with 32 km of the R7 expressway Only the D4 Motorway (TEN-T) of the PPP was considered eligible for EIB finance

Consistency with the operational programme Integrated Infrastructure The resources from the OP Integrated Infrastructure for motorway projects already committed to other large scale projects, some of them phased from the previous programming period. It is envisaged by the operational programme Integrated Infrastructure that: "financial instruments may be used to support the implementation of that those activities where the efficient use of funds from the European Structural and Investment Funds (ESIF). In case of economically viable projects, where the return on investments or cost savings are expected, financial instruments represent a more appropriate form of support, avoiding market distortion".

Consistency with the operational the SK Master Plan Transport When the use of financial instruments and PPP is considered, the focus should be to finance the projects with the top priority. The D4 motorway bypass of Bratislava has been identified as a priority investment, besides D1 and D3 motorway.

Consistency and complementarity with the principles of ESI Funds and EFSI – main principles ESI Funds may be combined with EFSI support in cases where the respective applicable eligibility criteria are satisfied. Such combination of EU support should result in an overall higher value added of EU funds. In practice, there will also be cases where this complementarity will equally lead to co-investing EFSI supported resources with ESI Funds programme(s) support in one single project. This may be the case in certain countries or sectors, where the associated risks would make it unlikely for granting EFSI support without the presence of ESI Funds programme contributions. The ESI Funds financial instrument shall be part of an operation with eligible expenditure distinct from the EFSI support. EFSI support to the project cannot count as national co-financing of an ESI Funds programme and consequently cannot be declared as eligible expenditure.

State aid and Eurostat treatment The Slovak national authorities in charge of competition issues confirmed that State aid has not been provided to a private investor (i.e. commercial funders) thus discriminating other private investors who do not get this support. This applies to the relation between ESIF and private investors. Eurostat evaluated the project and confirmed that the project will be kept off balance, i. e. it should be treated as a non-governmental asset in the national accounts.

Optimisation of the project scope Initial Pre-feasibility cost estimations were comparatively high (c. EUR 1.4 bn) EIB & SIH & European Commission worked with the Public Sector to identify technical optimisations and delivering a combination of financial instruments cost savings making de-scoping recommendations Impact of c. EUR 400 m (or 35%) savings from pre-feasibility estimates; Project Features Payment Mechanism based on availability payments (deductions applied due to non availability or poor performance); Optimised Technical Specification & intense international competition resulted in a high ERR. A Good use of public money; Slovak Government desire to maximise the use of Financial Instruments in order to ensure a more resource efficient use of EU Funds; Concession agreement for construction period plus 30-years (c. 34 years in total)

The results of the scrutiny by EIB, European Commission and SIH Reduction of number of lanes (most of the alignment were reduced to 2x2 lanes apart from a few exceptions); Simplification in the bridge over the Danube – no cable stayed or suspension option; All bridges unified and simplified; Design speed reduction from 120 km/h to 100 km/h; Simplification of interchanges, rest areas and operation and maintenance centres.

Financial structure of the project

Conclusion: The early involvement of EIB & SIH allowed a discussion to reduce the construction costs and improved the overall cost-benefit balance of the project. The D4R7 PPP is an example of how an authority can use public money in a smart way. With a minimum ESIF resources, the Public Authority was able to implement an important and complex infrastructure project. The EIB participation in the senior debt (in amounts only possible under EFSI) was essential in enabling the project to reach Financial Close. The SIH Mezzanine product made it possible to use a modest amount of ESIF to substantially improve the financial cost of the project and address the shortfall in the availability of subordinated funding. This combination of senior and subordinated instruments is a very useful to catalyse the implementation of difficult and complex projects. Commercial Sponsors invest in the project alongside the EIB and SIH instruments and are incentivised to properly perform the project.

D4/R7 PPP project

D4/R7 PPP project

Further information Brochure European Structural and Investment FUNDS and European Fund for Strategic Investments complementarities: http://ec.europa.eu/regional_policy/sources/thefunds/fin_inst/pdf/efsi_esif_compl_en.pdf EFSI: http://www.eib.org/efsi/ D4/R7 project: http://www.obchvatbratislavy.sk/sk/uvod/