1. The EIB and the Financing of PPPs
Multimodal Transport and Trade Facilitation Southeast European Forum 2004
The EIB and the Financing of PPPs
Alexandroupolis, 5-7 December 2004

2. Defining PPPs The term PPP covers a wide range of situations.
From the perspective of the public sector and EIB the key feature of a PPP is that it involves a risk sharing relationship between public and private promoters, based on a shared commitment to achieve a desired public policy outcome.

3. Policy Developments and Priorities
TENs / PPP Growth Initiative
Public Sector Accounting (ESA 95)
Public Sector Procurement (Green Paper)
Market Evolution

4. Single market and monetary union
Budget constraints required by
Maastricht EMU conditions
Critical role of TENs & TINA network
Integration of peripheral regions
Need for increased efficiency
in public investment
New challenges for both the public and the private sectors
Competition and transparency
Deregulation
Privatisation
* Public-Private Partnerships (PPPs)

6. Main Characteristics of PPPs
Risk-sharing between public and private sectors
Long-term relationship between parties
Public service and ultimate regulatory responsibility in public sector’s hands

7. Main Characteristics of PPPs (cont.)
Utilising private sector skills
for public sector services via:
Contracts for services, not procurement of assets
Output, not input, specifications
Payments related to service delivery
Whole life approach to design, build and operation

8. Criteria for PPPs Economially viable for the Public Sector
Financially viable for the Private Sector
Appropriate Risk and Reward Balance for Public and Private Sector
Public Sector: value for money

9. PPP: Value for money Complexity & transaction costs
Financing costs
Bidding process
Cost/time discipline
Innovation
Optimal risk allocation
Optimal lifecycle costs
Competition (?)

10. “Must” for successful PPPs
Public Sector Political Commitment
PPP Task Force - Leadership Forum by focused, dedicated and experienced public sector team
Clear legal and institutional framework
Transparent + competitive procurement
Realistic risk sharing
Government Partnership

11. EIB role in PPPs
Advisor to Public Authorities, Member States and EU Institutions
Supporting all players
Sharing experience from other PPP environments
Applying best practice of successful PPP
EIB risk sharing
EIB benefit passed to Public Authorities

12. EIB’s approach to PPPs
Policy driven approach to PPPs (evaluation of the benefits achievable)
PPPs are an additional policy option (no bias)
Expand expertise and financial resources available for “infrastructure” investment
Facilitating greater private sector investment
Focus on strategic public services with clear value added

13. Key PPP sectors for EIB TENs and modernising transport infrastructure
Supporting PPPs in areas of critical policy
significance:
TENs and modernising transport infrastructure
Environmental improvements
Primary and acute healthcare services
Primary, secondary and tertiary education

14. EIB PPP financing principles
Competitive tendering
Non-exclusivity - support of all bidders through bidding stage
Investment grade risks
EIB complementarity with and leveraging of banks & capital markets
EIB benefits passed to end-users/taxpayer

15. TIF-TENs Investment Facility
Strengthen and, where possible, accelerate the investment in TENs
Increase the EIB resources available for the development of TENs transport to 2010
Improve the range of financial instruments available from the Bank
… in collaboration with the Commission, Member State Authorities and the Private Sector

16. Typical PPP structure Government customer Operation Finance Special
Construction
Investor
Equity and sub-debt
Special
purpose
project
company
Procuring
Authority
Services
Operator –
investor
Unitary payments
Debt finance
3rd party
equity
Construction
Contractor
Operator
Debt funders

17. ESA 95 / Public Sector Accounting Decision Tree
Will government make most payments to the partner?
PPP is private investment No
Yes
Yes
Will the partner bear most construction risks?
Will the partner bear the availability risk?
Yes No No
Will the partner bear the demand risk?
Yes
PPP is government investment No

18. Motorway Developments
With Tolls (user-pay)
PRIVATE
Toll Free (tax-payer)
Private Concessions:
DBFO shadow tolls (UK, FIN, P, ESP...)
Other “off-budget” methods:
German method: DBF
Dutch method (D&B and F)
Belgian ”Intercommunales”
Public ”Traditional ” Financing
Road Fund: NL, B, L.
and/or ”Vignette ”: (CH), A
Pure ”traditional ” method: D, UK, ESP autovias, I sud, DK, SWE...
Private Toll Concessions Companies:
stand-alone BOT-PPP (bridges, tunnels or motorways in UK, ESP, P, GR, F, I …).
Public Toll Concession Companies:
Toll Motorway Networks in F, I, ESP (partial), P (former).
Public Toll Companies/Authorities:
Complex stand-alone projects (e.g. DK-SWE)
Toll roads in A, GR
PUBLIC

19. Learning Process Value added Value added Risk-sharing Extra costs
Benchmarking
Procurement
Extra costs
Value added

20. EIB: PPP signatures (in EUR billion)

21. EIB loans for PPP/Concession projects - Approvals
TOTAL
TRANSPORT
WATER
HEALTH/EDUCATION
MEUR
28 845
24 883
1 146
2 549
AUSTRIA
170
BELGIUM
805
 805
DENMARK
3592
FRANCE
1838
GERMANY
1048
GREECE
2503
IRELAND
482
377
 105
NETHERLANDS
818
693
 125
POLAND
275
PORTUGAL
3615
3531
 84
SPAIN
4680
4620
60 
SWEDEN
749
UNITED KINGDOM
8270
5487
73 
 2444

22. PPP : Loan Maturities

23. PPP financing by sector

24. G. Papadopetrou-Tsingou tel: 00 352 4379 6420, e-mail: tsingou@eib.org
Contact :
G. Papadopetrou-Tsingou
tel: ,