Ref. Ares(2015)1171645 - 17/03/2015
EUROPEAN COMMISSION EUROSTAT
Directorate D: Government Finance Statistics (GFS) and quality
Luxembourg, 17 March 2015 ESTAT/D-2/EBC/LFO/LPU/lt D(2015) 1314225
Mr Jean-Marc Delporte Chairman National Accounts Institute City Atrium C Rue du Progrès 50 B-1210 Brussels Belgium
PPP Tram de Liège
Your letter T/ICN/2015/000026 of 13 January
Dear Mr Delporte, Thank you for your letter dated 13 January requesting Eurostat's opinion on the Tram de Liège project. Eurostat has closely examined the arguments put forward in your request and the documentation provided and is now in a position to express its view on this matter. 1. THE ACCOUNTING ISSUE FOR WHICH A CLARIFICATION IS REQUESTED The issue to be analysed is the allocation (on or off government balance sheet) of the infrastructure assets to be built in the framework of a contract between the Société Régionale Wallonne du Transport (SRWT) and the special purpose vehicle (SPV) Mobiliège SA. Description of the case The case relates to a contract to be signed between the SRWT and the SPV Mobiliège SA for the design, building, finance and maintenance (DBFM) of a tramway transport system in Liège. In national accounts, the Société Régionale Wallonne du Transport (SRWT) is classified as part of the regional government of Wallonia (S.1312). The construction phase will last three years and will include configuration elements on one hand (assets such as rails, tramways, a building for the maintenance of the tramways and P+R (parc-relais)) and non-configuration elements (other assets linked to the tramway system) on the other hand. Commission européenne, 2920 Luxembourg, LUXEMBOURG - Tel. +352 43011 Office: BECH D4/733 - Tel. direct line +352 4301-35402 - Fax +352 4301-35199 http://epp.eurostat.ec.europa.eu [email protected]
After construction, the partner will maintain the configuration assets for 27 years during which there will be an availability fee paid by the SRWT to the SPV in quarterly instalments. However, the assets will be operated by TEC, a public corporation classified in general government that operates public transport in the region of Wallonia. As with other assets operated by TEC, Eurostat understands that users will be charged for the use of the tramway. The cost of the configuration assets is assumed to be around EUR 380 mn and the financing is expected to be provided as follows: - 90% will be senior debt provided by the EIB (45%) and four commercial banks (45%). - 10% will be subordinated debt in the form of equity and shareholder loans. On the other hand, non-configuration assets will be paid by the SRWT as they will be built during the construction phase and they will not be maintained by the partner. The cost of nonconfiguration assets is expected to be around EUR 50 mn. Documentation provided The NAI has provided the following documents: - A draft of the contract to be signed between the SRWT and Mobiliège SA, in French; - The statutes of the SPV and the shareholders agreement - Different documents contained in the BAFO of Mobiliège (for instance the financial model plan and the formulaire d'offre among others) It is to be noted that some documents that may contain relevant information for the analysis are not yet available (for instance the financial close and the final financing conditions, the offre finale, the cahier des exigences, etc.).
2. METHODOLOGICAL ANALYSIS Eurostat has carried out its analysis according to the rules of ESA2010 and the MGDD version of 2014 “implementation of ESA2010”. Contracts with non-government units related to fixed assets and PPPs are covered by chapters VI.3 and VI.4 of the MGDD, respectively. Eurostat agrees with the analysis of the NAI that the non-configuration assets are to be recorded on the government balance sheet. Such assets will not be maintained by the SPV, but by the SRWT. They will be paid by the SRWT as they are built instead of being paid by the availability fee over 27 years. Given that there is no disagreement on the economic ownership of non-configuration assets, Eurostat's analysis provided below will focus on the economic ownership of the configuration assets. 2.1 Analysis of the SPV The SPV Mobiliège SA is owned by three different shareholders. 50% is owned by BAM PPP PGGM (a Dutch private corporation active in the PPP market), 15% is owned by Alstom Transport Holdings BV (a Dutch private corporation specialised in railway transport systems) and 35% is owned by Mobiliège Invest (an SPV owned by a joint venture of Belfius Bank and Gimv NV). Belfius Bank is 100% owned by the Federal Government and the Flemish Region is the reference shareholder of Gimv, with 27% of the shares. The board of directors of the SPV Mobiliège SA is composed by four members appointed by the general assembly as follows: two members will be appointed among the candidates proposed by BAM PPP PGGM, one member will be appointed among the candidates proposed 2
by Alstom Transport Holdings BV and one member will be appointed among the candidates proposed by Mobiliège Invest NV. Decisions are taken by simple majority. However, most important decisions (such as the signature or the modification of the DBFM contract or the financing) have to be taken by unanimity. In addition, for a set of other 17 important decisions, the vote of the unit participated at different levels of the Belgian government is mandatory. This proves that the public unit has powers beyond those which would be granted by the simple ownership of the 35% of the shares and has in fact real veto rights on the main decisions to be taken by the SPV. Due to these veto rights, the SPV can be considered as jointly controlled by Mobiliège Invest, i.e. (indirectly) by government. 2.2 Benefits associated with the use of the configuration assets In ESA 2010 15.06, the economic owner of an asset is defined as the institutional unit entitled to claim the benefits associated with the use of the asset in the course of an economic activity by virtue of accepting the associated risks. In the Tram de Liège project, the SRWT has the right to buy or rent extra tramways outside the current contract (and with other partners) in order to increase the frequency of the tramway lines, extend the line or construct new lines complementing the line object of the contract. In this case, the SPV is committed to allow the use of the infrastructure assets (rails, maintenance centre, etc.) by the extra vehicles bought or rented by the SRWT and to take care of their maintenance. The SRWT seems in fact to be entitled to use the rails at will. Moreover, all advertising by the SPV is forbidden in the configuration assets. On the contrary, the SRWT has the right to install, manage and exploit publicity and advertising in the tramways and in the rest of configuration assets. In addition, TEC will charge the users for the use of the tramway via single tickets and different abonnements and will also charge users for the use of the P&Rs built in the framework of the contract (4 parkings are foreseen with more than 1,500 parking spaces). In practice, the SRWT has the right to decide on the use and the frequency of the rails and the tramways as well as the price of the tickets or abonnements that users will pay. The same applies to the use and the prices charged for the P&Rs. The revenues obtained by the sale of tickets, publicity or the use of the parkings are set and kept by the regional government of Wallonia. Given the above, it seems that the regional government of Wallonia (via the SRWT or via the operator of the assets, TEC) is entitled to claim the benefits associated with the use of the configuration assets and can be considered as partly owning the asset from an economic point of view. 2.3 Penalties In the contract it is specified that if the number of penalty points in a quarter is equal or below five, the reduction for penalty points is set at zero. Also, for penalty points linked to the management of the project, penalties below 5 points are not automatic. The partner is warned before being penalised and has the chance to correct the event giving rise to the penalties. In addition, if the total penalties to be applied in a quarter are higher than the availability payment, the penalties are set equal to the availability payment. Under no circumstance will the partner make payments to government linked to the penalties. 3
The fact that penalties are not automatic if below 5 penalty points plus the fact that penalties are capped to the size of the availability fee represents a reduction of the availability risk of the SPV. 2.4 Early termination In case of early termination due to the partner or in case of immediate termination, an “estimated market value” is calculated on the basis of financial models and corresponds with the differences between the discounted values of expected future payments to the old contractor minus expected payments if there would be a new private partner who would take over the contract. Eurostat considers that this estimated value is not necessarily linked to the market value of the asset. 2.5 Allocation of the assets at the end of the contract At the end of the contract the configuration assets are transferred to the SRWT for free. It is to be recalled that, according to the MGDD, the fact that the pre-determined price is lower than an expected market value at the time of the transfer (or even nil) strongly indicates recording the assets as government assets. 2.6 Correction for number of km A correction is applied to the availability fee in case the number of km undertaken each quarter differs from the estimation used in the final offer. Eurostat understands the following from the contract: - No correction is applied if the difference is 7% above or below the estimation in the final offer. - If the correction is comprised between 7% and 15% above or below the estimation, a correction of 3 € per km is applied (upward or downward). Eurostat understands that this is not the real cost incurred by the partner. - If the correction is more than 15% above the estimation, the SRWT will compensate the partner with the actual expenditure incurred. - If the correction is more than 15% below the estimation, the downward correction of the availability fee paid by the SRWT will be capped to -15%. A number of km undertaken higher than expected is due to a deliberate action from government to increase the frequency or the number of the tramways in circulation (the exploitation of the tramways is decided and undertaken by the regional government of Wallonia). As this government action would increase the maintenance cost for the partner, it should be normal that the partner has a right to be compensated. As a remark, it should normally be the case that the partner is fully compensated from the first additional euro diverging from the estimation. However, government would also be rewarded via a decrease in the availability fee if the number of kilometres would be lower than expected. This symmetry poses a problem as concerns the risk and reward allocation. If the estimations of traffic made by government are erroneous and government has oversized the assets, the risk should be taken by government and not by the partner. A decrease in the frequency or the number of the tramways in circulation would decrease the maintenance cost for the partner, increasing its rewards. The 4
fact that government is rewarded due to a deliberate decision of government means that the partner would be reducing its rewards. 2.7 Correction if abnormal increase/decrease in the insurance premiums The fact that the availability fee is corrected upwards (or downwards) in case of abnormal increase (or decrease) in the insurance premium represents a way to reduce the risk of the partner (or for government to share the rewards). 2.8 Force majeure The list of force majeure is not exhaustive. Due to the last bullet point it cannot be considered as a closed list, which should normally be the case. 2.9 Risks du donneur d'ordre An exceptional perturbation of the financial market is identified in the contract as a risk to be borne by the SRWT. This constitutes a reduction of the risk for the partner. 2.10 Financing risk From the documentation provided it is not possible to confirm that there are no government guarantees related to the financing provided by the EIB. 2.11 Advanced payment from the SPV to the SRWT (indemnité de projet) At financial close, the partner will make a fixed payment to the SRWT of EUR 44.3 mn. This amount will be reimbursed by the SRWT by its inclusion in the availability fee paid during the operation phase. The amount is intended to cover the following: - research and studies linked to the project - cost of expropriations - compensation paid to non-selected candidates - the preliminary works needed to move cables and canalisations (water, electricity, gas, telephone…), which are the responsibility of the SRWT and which are paid by the latter. Eurostat considers that this payment from the partner to government should be treated as a loan. In addition, it could happen that the preliminary works to move cables and canalisations would have a cost higher than foreseen. Given that the initial cost is paid by government, the payment by the partner being fixed with no possible revision implies that an eventual increase in the cost would be supported by government. This would mean that government would be bearing part of the construction risk, which, according to the MGDD rules, should be fully borne by the partner. 3. CONCLUSION Eurostat agrees with the conclusion of the NAI as concerns the recording on government balance sheet of non-configuration assets. As concerns configuration assets, based on the elements underlined above, Eurostat is of the opinion that the regional government of Wallonia is entitled to claim part of the benefits associated with the use of the assets and that the risks associated to the project are not 5
sufficiently borne by the partner. Moreover, some rewards would be also taken over by government. Therefore, Eurostat considers that configuration assets must also be recorded on the balance sheet of general government. The gross fixed capital formation expenditure and the related flows, including the imputed debt, are to be recorded in the accounts of general government. Eurostat also considers that the fixed payment of EUR 44.3 mn from the partner to the SRWT has to be treated as a loan, increasing government debt. 4. PROCEDURE This view of Eurostat is based on the information provided by the Belgian authorities. If this information turns out to be incomplete, or the implementation of the operation differs in some way from the information presented, Eurostat reserves the right to reconsider its view. In this context, we would like to remind you that Eurostat is committed to adopt a fully transparent framework for its decisions on debt and deficit matters in line with Council Regulation 479/2009, as amended, and the note on ex-ante advice, which has been presented to the CMFB and cleared by the Commission and the EFC. Eurostat is therefore publishing all official methodological advice (ex-ante and ex-post) given to Member States on its website. In case you have objections concerning the publication of this specific case, we would appreciate if you could let us know before 30 March 2015.
Yours sincerely, (e-Signed) Eduardo Barredo Capelot Director