Ppps and trans european networks in transport
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PPPs and Trans-European Networks in Transport. Jean-Eric Paquet, DG MOVE Director for Trans-European Transport Networks & Smart Transport. . 11/03/2014. Advantages of PPPs in Transport projects. More efficient Planning. Public policy planning is changing structurally

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PPPs and Trans-European Networks in Transport

Jean-Eric Paquet,

DG MOVE Director for Trans-European Transport Networks & Smart Transport


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Advantages of PPPs in Transport projects

More efficient Planning

Public policy planning is changing structurally

Approach is evolving from a focus on input specification to a focus on output specification

Improvement of design and preparation of projects

Through tapping the private sector’ competences and improving the public sector’s ability to negotiate with the private partner

Calculation of total costs

Integration of maintenance and operating costs in the public sector’s evaluation

Modernisation of public approaches and development of administrative capacity

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Advantages of PPPs in Transport projects

Economic and Budgetary Efficiency

Better control of costs

Negotiated transfer of risks allows for optimisation of private partner’s intervention: infrastructure is realised on time/on budget

Better use of public resources

Through the leverage effect of PPPs, the public sector can finance at the same time more projects.

Better quality of service

Public sector can define the service requirements and the private sector can use its capacity to innovate

Higher leverage and

best value for money

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Advantages of PPPs in Transport projects

Risk sharing…

Evaluation and transfer of risk

Quality of a PPP rests on a proper assessment of risk and the negotiated transfer of the various risks towards the partner best suited for shouldering these risks

… with its complexities

Contract complexity

Find the adequate level of specification in contract : rights and obligations, risks and rewards, termination conditions, etc.

Long and demanding process

The setting up of a PPP takes generally more time than traditional procurement and consumes more financial and non-financial resources in both the public and private sectors

Need to increase des public sector’s administrative capacity

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DG MOVE’s actions in favour of PPPs

Improving public sector’s administrative capacity

  • Cooperation with EIB: EPEC

  • Creation in 2008 jointly with EIB of the European PPP Expertise Centre – EPEC

  • Dissemination of best practices

  • Advisory capability

  • Analysis of legislative and political obstacles to development of PPPs

  • Creation of a network of EU PPP taskforces and helpdesk services

  • Monitoring of the development of PPP market in Europe

  • Production of comprehensive guidance documents (Guide to Guidance)

  • Production of specialised documents on key issues of interest to PPP taskforces (Eurostat treatment of PPPs, Procurement of PPPs and the use of Competitive dialogue in Europe)

  • Cooperation to continue in 2011-2012

    DG MOVE will continue to provide funding to EPEC through a contribution agreement jointly established with DG REGIO

  • Identification of obstacles in design of future funding instruments for transport

  • Use of EU funds with PPPs (blending)

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DG MOVE’s actions in favour of PPPs

Blending EU funds with PPPs

  • Real opportunities

  • Co-financing with Cohesion and Structural Funds as well as with the TEN-T Programme

  • High-speed rail project in PortugalPoceirão – Caio

  • Motorway E18 in Finland

  • Still some elements to be improved

    EU funding constraints are not always ideally suited to PPP projects

  • Duration of EU budgetary cycle and duration of PPP contracts

  • TEN-T funds must be allocated 3 years maximum after the financing decision

  • Confidentiality issues : EU reimburses real costs incurred, which create problem for private partner

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DG MOVE’s actions in favour of PPPs

Innovative financial instruments

  • Loan Guarantee instrument for TEN-T projects – LGTT

  • Created in 2008 jointly with EIB to support demand-based PPPs with transfer of traffic risk

  • €1 billion (€500 million from TEN-T programme and €500 from EIB)

  • All TEN-T projects eligible (TEN-T Guidelines 1692/96/EC)

  • Cannot exceed 20% of senior loans

  • Amount of guarantee cannot exceed €200 million

  • To be used by project promoters to ensure the servicing of the senior debt if traffic revenues generated by the project are lower than forecast during the initial operating phase of the project

  • Guarantee period of 7 years (ramp-up phase)

  • Pipeline of 17 projects

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DG MOVE’s actions in favour of PPPs

Innovative financial instruments

  • The 2020 European Fund for Energy, Climate Change and Infrastructure («Marguerite Fund»)

  • Created in 2009 several other sponsors (EIB, Commission, CDC, KfW, CDP, ICO, PKO) to invest in minority participations with other strategic investors greenfield infrastructure projects in TEN-T, TEN-E and renewable energy

  • Goal of the Fund to reach €1.5 billion by the end of 2011

  • Associated loan facility of €5 billion

  • Investment period of 4 years

  • Duration of the Fund: 20 years

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DG MOVE’s actions in favour of PPPs

TEN-T Review process

Within the TEN-T review process, an Expert Group was convened to look at funding and financing issues for TEN-T projects.

Main conclusions:

LGTT could be amended to extend the guarantee period

To cover risks of difficult revenue scenarios after the initial ramp-up period

Creation of a specific instrument for availability-payment schemes

To cover risks both in construction phase and operational phase

Possible use of escrow accounts

In order to better support PPPs on the entire duration of the contract concession and to avoid the constraints of the EU budgetary cycle

Possibility to launch an EU initiative on project bonds

Credit enhancement instruments to facilitate bond issuance at appropriate rating (at least single A) to attract interest of institutional investors and pension funds

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European Projects and PPPs

Concrete examples

  • In transport projects:

  • Road projects (M6, M Hungary, E18 in Finland, A5 in Germany, etc.)

  • Rail projects (High-speed rail Poceirão – Caio Portugal, High-speed rail Tours Bordeaux France, etc.)

  • Complex projects (Fixed link on the Øresund Danmark-Sweden, Tunnel Perpignan Figueres France-Spain, etc.)

  • Inland waterways (Canal Seine Nord)