Multimodal Transport and Trade FacilitationSoutheast European Forum 2004The EIB and the Financing of PPPsAlexandroupolis, 5-7 December 2004

Defining PPPsThe 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.

Policy Developments and PrioritiesTENs / PPP Growth Initiative

Public Sector Accounting (ESA 95)

Public Sector Procurement (Green Paper)

Market Evolution

Single market and monetary unionCritical role of TENs & TINA networkBudget constraints required by Maastricht EMU conditionsIntegration of peripheral regions

Need for increased efficiency in public investment New challenges for both the public and the private sectorsCompetition and transparencyDeregulationPrivatisation

* Public-Private Partnerships (PPPs)

TransEuropean Networks Projects financed by the EIB (1993-2003)

Oil/Gas platform

Priority TENS

Section financed

Other TENS

Transport corridors, CEC

Section financed

Road/Rail

Airport

Electricity

Gas

Air traffic management

Port

Inter-modal freight centre

Projects of multi-regional character

Main Characteristics of PPPs Risk-sharing between public and private sectors

Long-term relationship between parties

Public service and ultimate regulatory responsibility in public sectors hands

Contracts for services, not procurement of assets

Output, not input, specifications

Payments related to service delivery

Whole life approach to design, build and operationUtilising private sector skills for public sector services via: Main Characteristics of PPPs (cont.)

Public Sector: value for moneyCriteria for PPPs

Financially viable for the Private Sector Appropriate Risk and Reward Balance for Public and Private Sector Economially viable for the Public Sector

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

Public Sector Political CommitmentPPP Task Force - Leadership Forum by focused, dedicated and experienced public sector teamClear legal and institutional frameworkTransparent + competitive procurementRealistic risk sharing Government PartnershipMust for successful PPPs

EIB role in PPPsAdvisor to Public Authorities, Member States and EU Institutions Supporting all players Sharing experience from other PPP environmentsApplying best practice of successful PPPEIB risk sharingEIB benefit passed to Public Authorities

EIBs approach to PPPsPolicy 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 investmentFacilitating greater private sector investment Focus on strategic public services with clear value added

Key PPP sectors for EIB

TENs and modernising transport infrastructureEnvironmental improvementsPrimary and acute healthcare servicesPrimary, secondary and tertiary education

Supporting PPPs in areas of critical policy significance:

EIB PPP financing principlesCompetitive 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

TIF-TENs Investment FacilityStrengthen and, where possible, accelerate the investment in TENsIncrease 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

Typical PPP structure Procuring Authority

Special purpose project companyConstructionInvestorConstructionContractorOperatorOperator investor3rd party equityDebt fundersGovernment customerOperationFinanceServicesUnitary paymentsDebt financeEquity and sub-debt

Will government make most payments to the partner?

No

PPP is private investment

ESA 95 / Public Sector Accounting Decision TreeYes

Will the partner bear most construction risks?

No

PPP is government investment

Yes

Will the partner bear the availability risk?

No

Will the partner bear the demand risk?

No

Yes

Yes

Motorway DevelopmentsPrivate 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

Private Concessions: DBFO shadow tolls (UK, FIN, P, ESP...) Other off-budget methods:German method: DBFDutch method (D&B and F)Belgian Intercommunales Public Traditional Financing Road Fund: NL, B, L. and/or Vignette : (CH), APure traditional method: D, UK, ESP autovias, I sud, DK, SWE...

With Tolls (user-pay)PRIVATE PUBLICToll Free (tax-payer)

Learning ProcessExtra costsValue addedBenchmarkingRisk-sharingProcurementExtra costsValue added

EIB: PPP signatures (in EUR billion)

Chart1

51.79

31.16

232.31

443.12

355.42

718.53

1545.31

1055.23

1560.81

2260.54

3001.26

2728.07

1616.67

2700

E I B: PPP Signatures Per Year(MEUR)

Sheet1

YearPPP

199051.7951.79

199131.1682.95

1992232.31315.26

1993443.12758.38

1994355.421113.8

1995718.531832.33

19961545.313377.64

19971055.234432.87

19981560.815993.68

19992260.548254.22

20003001.2611255.48

20012728.0713983.55

20021616.6715600.22

2003270018300.22

Sheet1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

EIB & PPP: Signatures Per Year(MEUR)

0

0

0

0

0

0

0

0

0

0

0

0

0

0

EIB & PPP: Cumulative Signatures(MEUR)

EIB loans for PPP/Concession projects - Approvals

TOTALTRANSPORTWATERHEALTH/EDUCATIONMEURMEURMEURMEURTOTAL28 84524 8831 1462 549

AUSTRIA170170BELGIUM805805DENMARK35923592FRANCE18381838GERMANY10481048GREECE25032503IRELAND482377105NETHERLANDS818693125POLAND275275PORTUGAL3615353184SPAIN4680462060SWEDEN749749UNITED KINGDOM82705487732444

PPP : Loan Maturities

PPP financing by sector

UK 1995 - 2003

PPP 1995 - 2003

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