1 application on the spanish concessional model to central and estern europe world bank workshop on...

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APPLICATION ON THE SPANISH CONCESSIONAL MODEL TO CENTRAL AND ESTERN EUROPE

WORLD BANK WORKSHOP ON PPP IN HIGHWAYS: INSTITUTIONAL, LEGAL, FINANCIAL AND

TECHNICAL ASPECTS

Antonio M. López CorralProfessor of the Polytechnic University of Madrid

Washington, April 3rd, 2006

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- 10.000 km of state and regional motorways

- 4,400 km of toll

motorways

- 2,200 km tendered during last 8 years and 600 during last 3 years

- 10.000 km of state and regional motorways

- 4,400 km of toll

motorways

- 2,200 km tendered during last 8 years and 600 during last 3 years

MOTORWAYS MAP OF SPAIN MOTORWAYS MAP OF SPAIN

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INVESTMENT AND FINANCING TRANSPORT INFRASTRUCTURES OF STATE IN SPAIN

INVESTMENT AND FINANCING TRANSPORT INFRASTRUCTURES OF STATE IN SPAIN

20%20%Private Capital

Public Budgetary

40%40%

FF.EE

5%FF.EE

5%

20%20%Public non Budgetary

FF.EE

15%

FF.EE

15%

Ministry30%30%

Public Companies

50%50%

20%20%Private Sponsors

EXECUTION

TOTAL FINANCING 2000-2006 : 60.3 BILLION €

60%%

60%%

20%20%European Funds

20%20%Private Capital

FINANCING

Public (Budgetary and not

Budgetary)

Public (Budgetary and not

Budgetary)

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- All the projects to be executed in

concession regime will have the same

indispensable conditions of maturity that

any other project that use any other

route of financing

- Additionally they will require a feasibility

study that will have also to be put under

public information

- Definition of concessional formula

- All the projects to be executed in

concession regime will have the same

indispensable conditions of maturity that

any other project that use any other

route of financing

- Additionally they will require a feasibility

study that will have also to be put under

public information

- Definition of concessional formula

PREPARATION OF CONCESSIONAL PROJECTS FOR TENDERING

PREPARATION OF CONCESSIONAL PROJECTS FOR TENDERING

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- It is reflected in the law of concessions, in

the sector law, in some cases, in their

regulations decrees and, specially, in the

terms of references that considers the

feasibility study

- Possibility of cross financing

- Application of the progress clause

- It is reflected in the law of concessions, in

the sector law, in some cases, in their

regulations decrees and, specially, in the

terms of references that considers the

feasibility study

- Possibility of cross financing

- Application of the progress clause

DEFINITION OF CONCESSIONAL FORMULA (1)


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- Different alternatives to the project

- Prizes and penalties associated to quality

- Possibility of operating businesses related

with the goal of concession

- Possibility of public financing

- Contract known with few opened clauses,

most of them of economic content

- Different alternatives to the project

- Prizes and penalties associated to quality

- Possibility of operating businesses related

with the goal of concession

- Possibility of public financing

- Contract known with few opened clauses,

most of them of economic content



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- Normally in the Spanish model the open competition made in a single phase is preferred

- Criteria of awarding are transparent and quite objective: they looks for, between the projects of quality in reliable hands, the one that guarantees the best economic conditions for the public interests

- It tries to assure the competitive tension in all the process.

- Normally in the Spanish model the open competition made in a single phase is preferred

- Criteria of awarding are transparent and quite objective: they looks for, between the projects of quality in reliable hands, the one that guarantees the best economic conditions for the public interests

- It tries to assure the competitive tension in all the process.

TENDERING OF CONCESSIONAL PROJECTS

TENDERING OF CONCESSIONAL PROJECTS

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– Time for maturity: 2 years (4 years to mature the ordinary projects)

– Time for bidding and awarding: 7 months - 1 year

– Beginning of the construction after the awarding: 4 - 6 months

- Costs of participation in a bidding process: 0,5 million €

– Time for maturity: 2 years (4 years to mature the ordinary projects)

– Time for bidding and awarding: 7 months - 1 year

– Beginning of the construction after the awarding: 4 - 6 months

- Costs of participation in a bidding process: 0,5 million €

TENDERING AND AWARDING RESULTS IN SPAIN (IN MEDIUM TERMS) (1)


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– Number of bidders: 6 - 10

– Number of alternatives by bidder: 3

– Internal Rate of Return offered by the

winner: 6,5 - 7,5%

– Cost of the risks assumed by the

concessionaires: 2,5 - 3,5%

– Number of bidders: 6 - 10

– Number of alternatives by bidder: 3

– Internal Rate of Return offered by the

winner: 6,5 - 7,5%

– Cost of the risks assumed by the

concessionaires: 2,5 - 3,5%



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– Closing of the financing by the

concessionaire: before the six previous

months to finish the construction

– Cost of the financing of the investment

by the concessionaire: 5,0 - 6,5%

- Time for execution: 3 years

– Closing of the financing by the

concessionaire: before the six previous

months to finish the construction

– Cost of the financing of the investment

by the concessionaire: 5,0 - 6,5%

- Time for execution: 3 years

TENDERING AND AWARDING RESAULTS IN SPAIN (IN MEDIUM TERMS) (3)

TENDERING AND AWARDING RESAULTS IN SPAIN (IN MEDIUM TERMS) (3)

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PPP FUNDING WITH EUROPEAN FUNDSSantiago de Compostela-Alto de Santo

Domingo Motorway

PPP FUNDING WITH EUROPEAN FUNDSSantiago de Compostela-Alto de Santo

Domingo Motorway

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RATE OF ERDF COFINANCINGRATE OF ERDF COFINANCING

–Investment 300 Million euros (2/3 sponsor; 1/3 public fund)

–Public investment 100 Million euros (2/3 Region; 1/3 State)

–ERDF contribution: 55% of public investment

–Investment 300 Million euros (2/3 sponsor; 1/3 public fund)

–Public investment 100 Million euros (2/3 Region; 1/3 State)

–ERDF contribution: 55% of public investment

Millions of Euros FOMENTO XUNTA

Total investment to

be granted

33,3 66,6

ERDF contribution 18,3 36,6

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TEN-T IN EU AND NEIGHBORING COUNTRIESTEN-T IN EU AND NEIGHBORING COUNTRIES

Investments foreseen TEN-Ttill 2020:• 600 billion € Priority projects:• 230 billion € To be executed as PPP:• 120 billion €

Priority projects in EU neighboring countries till 2020:• 45 billion €To be executedas PPP: • 9 billion €

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- Lack of a coherent long-term policy of

infrastructures financing

- Lack of continuity and broad political

consensus on the use of PPPs for roads

- Unclear and unstable laws, difficult to

interpret

- Lack of institutional stability

- Insufficient staff (number, capacities)

- Lack of a coherent long-term policy of

infrastructures financing

- Lack of continuity and broad political

consensus on the use of PPPs for roads

- Unclear and unstable laws, difficult to

interpret

- Lack of institutional stability

- Insufficient staff (number, capacities)

SOME EXPERIENCES IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

SOME EXPERIENCES IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

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- The whole project preparation process takes up to 10 years- Lack of a feasible project pipeline - Insufficient knowledge of expected results- Long tenders- Long negotiations- No competitive tension during the negotiation process- Tenders are not perceived to be transparent

- The whole project preparation process takes up to 10 years- Lack of a feasible project pipeline - Insufficient knowledge of expected results- Long tenders- Long negotiations- No competitive tension during the negotiation process- Tenders are not perceived to be transparent

SOME EXPERIENCES – CONCESSION TENDERS

SOME EXPERIENCES – CONCESSION TENDERS

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- Insufficient control in some cases by the Ministry of Infrastructure- Insufficient coordination between different departments in relation to implementation of policy- Lack of long term strategies and plans - Poor relationship between the administration and private partners- No structure for monitoring implementation and ongoing operation of projects

- Insufficient control in some cases by the Ministry of Infrastructure- Insufficient coordination between different departments in relation to implementation of policy- Lack of long term strategies and plans - Poor relationship between the administration and private partners- No structure for monitoring implementation and ongoing operation of projects

SOME EXPERIENCES – INSTITUTIONAL WEAKNESSES

SOME EXPERIENCES – INSTITUTIONAL WEAKNESSES

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As a consequence:

- Confusing signal for the market

- PPP are seen as a source of corruption

- PPP are seen as an ineffective way of

infrastructure provision and not applicable

in Central & Eastern Europe

However the problems with correct

implementation of Public Private

Partnership should not be confused with

the PPP instrument itself

As a consequence:

- Confusing signal for the market

- PPP are seen as a source of corruption

- PPP are seen as an ineffective way of

infrastructure provision and not applicable

in Central & Eastern Europe

However the problems with correct

implementation of Public Private

Partnership should not be confused with

the PPP instrument itself

PPP APPLICABILITY IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

PPP APPLICABILITY IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

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- Precise definition of the PPP mechanism by the administration- Use of open tendering procedure- Easy participation in the tendering process to increase competition for the contract- Simplified evaluation of proposals- Bidding proposals can not be negotiated- Financial closure not required before awarding- Fixed deadlines for awarding

- Precise definition of the PPP mechanism by the administration- Use of open tendering procedure- Easy participation in the tendering process to increase competition for the contract- Simplified evaluation of proposals- Bidding proposals can not be negotiated- Financial closure not required before awarding- Fixed deadlines for awarding

MAIN FEATURES OF THE RECOMMENDED SYSTEM

MAIN FEATURES OF THE RECOMMENDED SYSTEM

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A2 Konin - Stryków (Łódź) - Konotopa (Warsaw) motorway+ additional Warsaw bypass sections


A2 Konin - Stryków (Łódź) [103 km]• delivered by the State to the concessionaire as a payment in kind - a form of public support• O&M by the concessionaire• covered by tolls

A2 Stryków (Łódź) – Konotopa (Warsaw) [94 km]• built by the concessionaire • O&M by the concessionaire• covered by tolls

A2 Konin - Stryków (Łódź) [103 km]• delivered by the State to the concessionaire as a payment in kind - a form of public support• O&M by the concessionaire• covered by tolls

A2 Stryków (Łódź) – Konotopa (Warsaw) [94 km]• built by the concessionaire • O&M by the concessionaire• covered by tolls

RECOMMENDED PPP MECHANISMS

AND PILOT PROJECTS IN POLAND



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All sections:• built by the concessionaire • O&M by the concessionaire• cross-financed from A2 revenues.• free for users

All sections:• built by the concessionaire • O&M by the concessionaire• cross-financed from A2 revenues.• free for users

Additional sections:• S8 Konotopa – Powązkowska [11 km]• S8 Powązkowska – Piłsudskiego [12 km]• S7 Northern Exit from Warsaw [approx. 15 km]

Additional sections:• S8 Konotopa – Powązkowska [11 km]• S8 Powązkowska – Piłsudskiego [12 km]• S7 Northern Exit from Warsaw [approx. 15 km]





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Because of high financial profitability of the projectno public support is required.

Concession period may be used as the main bidding variable.

Because of high financial profitability of the projectno public support is required.

Concession period may be used as the main bidding variable.

Type of project real toll Total length 235 km

Toll section brought in by the State 103 kmToll section to be built by the concessionaire 94 kmFree sections to be built by the concessionaire 38 km

Total construction cost 796 € million0%

0 € million Concession period 30 Avearge toll per veh-km

Toll section brought in by the State 0,07 €Toll section to built by the concessionaire 0,07 €Free sections to be built by the concessionaire 0,00 €

Internal Return Rate 12,0%

Public support for construction





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Thank you

Antonio M. Lopez Corral

Professor of the Polytechnic University of Madrid

Tf.: (+34) 91 533 44 96

Fax: (+34) 91 533 44 96

E-mail: [email protected]

1 application on the spanish concessional model to central and estern europe world bank workshop on...

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