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EUROPEAN PPP REPORT 2007
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Infra-News is the leading online real-time news and research provider for the global PPP infrastructure market, covering both greenfield and acquisition finance transactions. Infra-News has a global focus covering the UK PFI market, European PPP deals, US P3 transactions and infrastructure markets in the Middle East, Asia Pacific and Australia. We publish primary research and also provide a projects diary, tender alerts and a comprehensive global projects database. For more information visit www.infra-news.com
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European PPP Report 2007 |
CONTENTS THE HEADLINES
1
OVERVIEW OF THE EUROPEAN PPP MARKETS IN 2007
2
CENTRAL AND EASTERN EUROPE (CEE)
8
MEMBERS OF EUROPEAN UNION AUSTRIA
10
HUNGARY
18
CZECH REPUBLIC
28
POLAND
34
SLOVAKIA
38
BULGARIA
42
ROMANIA
46
NON-EU MEMBER COUNTRIES
Disclaimer: DLA Piper has sought to ensure that the details of projects
CROATIA
50
SERBIA
54
THE NETHERLANDS
58
BELGIUM
64
FRANCE
70
GERMANY
80
SCANDINAVIA
92
neither DLA Piper nor any of its partners or employees nor any other
DENMARK
93
person makes any promise, guarantee or representation (express or
NORWAY
95
FINLAND
97
SWEDEN
98
contained in this document have been accurately described. However,
implied) to any person as to the accuracy or completeness of the contents of this document, or of any other information or materials, whether written or oral, that have been, or may be, prepared or furnished by or on behalf of DLA Piper in connection with the DLA Piper European PPP Report 2007, including, without limitation, economic and financial
ITALY
100
projections and risk evaluation. No responsibility or liability is accepted
PORTUGAL
116
by any person to any person for any errors, misstatements or omissions in
SPAIN
124
or materials. Without prejudice to the foregoing, neither DLA Piper nor
GREECE
138
any of its respective employees nor any other person shall be liable for
REPUBLIC OF IRELAND
144
any loss or damage (whether direct, indirect or consequential) suffered
UNITED KINGDOM
152
ABOUT DLA PIPER
159
ABOUT DLA PIPER’S PPP TEAM
160
CONTACTS
161
this document, negligent or otherwise, or any other such information
by any person as a result of relying on any statement in or omission from this document. This document is confidential and personal to you. It is provided to you on the understanding that it is not to be duplicated or distributed, nor can its terms be disclosed to any other person, without DLA Piper’s prior consent.
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| European PPP Report 2007 | Overview
HEADLINES
DLA PIPER EUROPEAN PPP ROUNDTABLE, APRIL 2006, MADRID
• In 2006 the European PPP market size grew in double digits for the third year running
• Size of project pipeline for next two years in excess of €100bn
• Proportion of current and future projects (by value)
Mark Swindell, DLA Piper Sector Head, Global Infrastructure and Defence and Dick Gephardt, Senior Counsel, DLA Piper Government Affairs practice group
representing road infrastructure remains static since 2005
• High growth expected in rail, waste and water, healthcare and defence sectors
Dick Gephardt
Juan Picon, DLA Piper Regional Managing Partner, Spain
1
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Overview | European PPP Report 2007 |
OVERVIEW OF THE EUROPEAN PPP MARKETS IN 2007 MADRID For four years DLA Piper has been studying the development of the European PPP market across countries and sectors. Each year our local teams have met with a cross section of interested private and public sector parties to discuss and debate the current issues for PPP. In 2006 we returned to Madrid where we met in 2004. The host country has demonstrated once again in this year’s Report that it is a leading proponent of PPP at home and abroad in Europe and the US market where Spanish businesses and banks have had an early impact. In Madrid we heard from Dick Gephardt1 about the challenges of funding new infrastructure in the US and the opportunities for inward investors. Much of the information shared and conclusions drawn at the DLA Piper event in Madrid are included in this Report. A DOUBLE DIGIT GROWTH MARKET You just have to look at the chart in Figure 1.0 to recognise the scale of the PPP market
that has grown in Europe over the last three years. The current market size increased by 37% between 2005 and 2006. This was due to more countries putting projects into tender and (in the majority of cases) more projects being launched in each country. The rate of increase of projects reaching completion is a little slower (it’s easier to announce the project than to complete the deal). But, as we have seen in the UK, provided there is no political intervention to cool the market, the drive is for greater speed of procurement and this is likely to increase rate of completion in coming years. In the DLA Piper European PPP Report 2004 we quoted the figure of €95bn aggregate capital value (“ACV”) of projects as the size of the market over the coming three years. After almost three years we believe that the prediction was accurate with currently: • €73,492m ACV of projects in tender • €17,283m ACV of projects completed • €5,791m ACV of projects cancelled in 2006 (principally Messina Bridge, Italy)
GROWTH IN SIZE OF PPP MARKET 2004 to 2006 FIGURE 1.0 |
1
Dick Gephardt, is a senior counsel in the DLA Piper’s Government
Growth in size of PPP market over period April 2004 to December 2006 by: a) ACV of projects in tender at test date and b) ACV of projects completed in year prior to test date.
Affairs practice group. He retired in January 2005 after serving Missouri’s Third Congressional District for 28 years. He was the leader of the House Democrats for nearly 14 years, serving as House majority leader from 1989 to 1994 and minority leader from 1995 to 2003. In that role, he emerged as one of the Democratic Party’s chief strategists and spokespersons on many major issues. Mr. Gephardt became the first Democratic candidate to enter the 1988 presidential race, helping to frame the economic issues that dominated that election. In 2003, Mr. Gephardt again pursued the Democratic presidential nomination. He campaigned to work for universal healthcare, pension reform, more teachers in the classroom, energy independence, and a trade policy.
2
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| European PPP Report 2007 | Overview
YEAR ON YEAR LEAGUE TABLES BY COUNTRY Looking at the current tender league table, we see some interesting changes of position and clear indication that the mature markets are settling down to more conservative growth rates. Spain has tumbled from second to sixth. But the flip side of Spain’s low current tender value is its performance in terms of actual completion of projects by number and value. It outstrips its nearest rival by over 100%. It has another wave of road projects coming through and the sophisticated delivery side of contractors, concession companies and funders now has experience on healthcare projects and other social infrastructure.
TOP 10 COUNTRIES BY ACV OF PROJECTS 2006 FIGURE 1.1 |
Figure showing top ten countries, by ACV of projects completed in 2006 and number of projects completed in 2006. Country
By comparison, in the UK the ACV of projects completed in 2006 was €9,895m which represented 53 projects according to UK Treasury statistics. Italy stays top by value but with very little growth in size of current market. The change of Italian government has cooled the market but it still did well in terms of completing deals and there is little hard evidence yet (apart from the high profile Messina bridge casualty) that regional and municipal governments will stop developing new PPP projects. Germany and France both increased current market by over 50% on last year and did equally well on delivery of completed deals, with France having the edge on value per deal. Greece shot into the table delivering in one year a significant value of current projects and two of the largest value completed deals in the European market in 2006. At the bottom end of the top ten country markets by current tender value are the two new accession states – Romania and Bulgaria. This is no surprise with their need for capital investment – although the position may disguise delivery issues which will delay these current prospects.
ACV €m
Number
1
Spain
6,864
19
2
France
2,631
8
3
Italy
2,410
9
4
Greece
1,610
2
5
Rep of Ireland
1,036
4
6
Austria
800
1
7
Poland
660
1
8
Finland
300
1
9
Germany
278
8
10
Croatia
248
2
That’s the history, what about the future? Our figures predict a pretender pipeline of over €100bn projects. However, there will be a fall off rate from this headline figure. Almost €5.7bn ACV of projects were cancelled in 2006 and a further €8.6bn ACV of projects were put on hold. But these are now specified and announced projects which make them difficult to back away from as expectations have been raised.
YEAR ON YEAR LEAGUE TABLE BY COUNTRY FIGURE 1.2 |
Table ranking counties by tender volume (by capex) in 2005/06 compared with 2004/05 and 2003/4. The bracketed figure for 2005/6 and 2004/5 indicates the percentage rate at which markets have grown in 2006 and 2005, respectively. The highest growth is amongst those countries shown as €m
% Growth
€m
% Growth
1
2005/2006 Italy
25,9162
15%
Italy
22,4512
137%
Italy
9,4482
2
Germany
15,564
50%
Spain
10,341
95%
Spain
5,288
3
Greece
6,270
Germany
8,151
600%
France
1,280
4
France
3,964
65%
France
2,400
87%
Germany
1,163
5
Belgium
3,6353
244%
Portugal
1,830
335%
6
Spain
2,931
-71%
Austria
1,695
7
Rep of Ireland
2,895
93%
Rep of Ireland
8
Slovakia
2,600
9
Bulgaria
2,202
10 2
3
Romania
1,808
54%
2004/2005
2003/2004
€m
Rep of Ireland
707
Hungary
450
1,497
111%
Portugal
420
Netherlands
1,177
Croatia
372
Romania
1,173
Netherlands
193
3
Norway
125
Belgium
Includes values for some traditionally procured projects. 3Excludes value for EU Galileo project valued at €3.4bn.
1,055
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Overview | European PPP Report 2007 |
SECTOR ANALYSIS Road infrastructure (including bridges and tunnels) was the dominant sector in the market remaining at the 60% level for completed, current and pre-tender phases (although the proportion of total market was down slightly down on 2005). But looking at the other sectors there are more noticeable changes. The sectors which are now coming through for the future are: • Rail – covering both light rail and heavy rail. The increase is driven mainly by some very large scale announced projects in Portugal and France. • Waste and water – both heavily regulated across Europe, the western countries have a large scale backlog in waste treatment provision to meet their EC Landfill Directive commitments. Further east there are fundamental requirements in terms of the infrastructure for provision of domestic water supply (in addition to landfill issues which are a lower priority).
CURRENT AND PRE-TENDER PROJECTS INCLUDING ROADS, BRIDGES AND TUNNELS FIGURE 1.3 |
• Healthcare – this is now turning into a high growth sector with particular occurrence in the more southerly countries, including France. In Portugal and parts of Spain integration of the clinical services is being trialled. The bidder and funder groups on these projects tend to be almost exclusively domestic. This position contrasts markedly with the UK where healthcare in 2006 suffered a reduction in new tenders and completions. • Defence – this sector has maintained a low profile but it looks set to grow with some new garrison projects in Germany and the Netherlands and the French Ministry of Defence looking at equipment procurement by PPP.
CURRENT AND PRE-TENDER PROJECTS EXCLUDING ROADS, BRIDGES AND TUNNELS FIGURE 1.4 |
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| European PPP Report 2007 | Overview
EC POLICY The output from the EC in terms of new policy on PPP has been relatively low during 2006 as the feedback from the earlier EC Green Paper on PPPs was absorbed and ideas formulated. The implementation of the competitive dialogue (part of changes to the EC Procurement Directives made in 2004) is now coming through on current projects. Early experience shows that, certainly in the UK where previously an exclusive preferred bidder stage had been used and possibly elsewhere, the requirement for additional specification during the competitive period is leading to higher bid costs. At the end of 2005 the EC Competition Commissioner Charlie McCreevy announced his intention to postpone further legislative measures in relation to PPP (such as a set of regulations governing the grant of concessions) until the EC had carried out an Impact Assessment on the costs and benefits of such an initiative as well as alternative measures to address the problems at stake. Part of the process has been a wide ranging study of the way in which the EC countries (and the 2007 new joiners) implement procurement legislation in relation to PPPs. The results from this study are due back shortly. The stakes are high. The Commissioner quoted a figure of around €500bn needed to upgrade the infrastructure within the new Member States to the standard in the EU 15. In consultation towards membership the accession States in particular expressed interest in a stable regime for award of concessions. In the absence of EC rules on this subject, some have launched national legislation on the issue producing a piecemeal effect. Concession legislation looks likely to come, but not just yet. EUROPEAN FUNDING Whilst the EC is considering further policy on PPPs it is also making some strong signals that it will be actively involved and financially supporting PPP projects. A facility called JASPERS (Joint Assistance to Support Projects in the European regions) has been established by the EC, EBRD and EIB. JASPERS is a programme with funding to help governments design and prepare good quality projects and PPPs, which may need some form of European body approval or financial support. PPPs are central to the JASPERS initiative which is now looking for national projects to support. In the same vein the Board of the EIB recently increased the amount of funding available to the EIB's Structured Finance Facility ("SFF") by two thirds, from €750bn to €1.25bn. The SFF has a range of debt products available to PPP projects to compliment simultaneous commercial bank lending.
5
GALILEO The Galileo project is the biggest in the European market at the moment. The objective is to find a private sector party to take responsibility for the financing, deployment and operational phase of a European Satellite navigation system, equivalent to the American Global Positioning system. It is being procured jointly by the European Union and the European Space Agency in the form of the Galileo Joint Undertaking. However the size, complexity and national interest involved in the project have made it one of the longest running and most troublesome. The current sole bidder is a merged entity of the two remaining bidders. There are eight members of the Galileo Operating Company consortium: Aena, Alcatel, EADS Space Services, Finmeccanica, Hispasat, Inmarsat, Thales and TeleOp. With so many areas for divergence, this one looks like it will run and run. DIVERGENCE BETWEEN COUNTRIES Europe is not one market for PPP, with countries all going at the same speed or in the same direction in terms of the development of new green field projects. Each are at a different level of maturity the UK, for example, has a slowing market with more emphasis now from the private sector perspective on value in the operational end of projects. The government slows spending (maybe in response to seeing its net debt as a percentage of GDP increase to 36.2% in February 2007) and tries to refine even further its procurement processes. At the other extreme there are the accession states, including Romania and Bulgaria, which have high demand for new infrastructure but lack the skills and experience to procure in this manner and have called on European institutions to assist. In between there are the mass market delivery models in Spain, Germany and France which are now consistently replenishing their pipeline without a great deal of regulation. No Ministry of Finance has guarded the purse as tightly as the UK in this regard, which provides financial contractual commitment in exchange for compliance.
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Overview | European PPP Report 2007 |
BRIDGING THE GAP So what can the UK learn from the success of the continental markets? The success and speed with which Spain, France and Germany have built their PPP markets is primarily due to the existence of long-term concession operator groups who have existed and been accepted as an important part of the economic environment for many years. There exists a level of mutual trust between them and their governments and they understand the nature of long-term public asset ownership and its risks. PPP for the continental concession groups has been a natural extension of what they have been doing for a long time. This type of organisation did not exist in the UK prior to PPP (other than in the very young privatised utilities and rail). The UK government continues to maintain an approach which prioritises competition over private sector innovation and long-term growth of a domestic operator base. The focus is pursuit of ever tighter margins on restricted specifications for contractors, banks and equity providers. This will drive competition and quality players away from the market.
At the same time the growing number of projects in operation has led to the emergence of new products for equity and debt investments in an operational asset with government quality credit. The pension funds as holders of interests in operational assets spotted the investment opportunity early. Now as well as just sitting tight and (over recent years) watching the value of your investment grow, you can sell it to a wide pool of investors or you can securitise its value. Businesses have formed whose primary interest is the long-term operation of a portfolio of infrastructure assets. The corporate finance market has been quick to spot the opportunity to leverage these businesses and help them grow through M&A activity. These businesses are looking at a wide range of operational and greenfield assets for investment and are game for a challenge. The time is ripe for a bold step from the UK government to activate these new asset operator companies.
Historically the relationship between the UK private sector and the government on infrastructure has been poor leading to a claims culture. This was one of the drivers for putting the long-term care of the asset into the hands of the private sector and the government only paying for the service when it was delivered. This approach has been shown to have worked in objective audits and even the government’s own project reviews. It is time for the government to recognise the level of improved relationship and trust which has been facilitated by PPP and agree that the industry should now be allowed the opportunity to be involved with more aspects of service delivery – such as helping to shape the projects being procured (early operator involvement) and adding to the services they can provide. This should not just be for the benefit of the private sector, but, we believe, would help cut costs and reshape public services in a more consumer focussed manner. If the user paid concession model could be applied to more asset based services it would be more likely that the end product would be what the public wants rather than the highly specified current PPP model. The M6 toll road concession was a good example and in financial and delivery terms it has performed well – the public has a service it wants and the local government has reaped the rewards in terms of shared benefits.
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| European PPP Report 2007 | Central and Eastern Europe
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Central and Eastern Europe | European PPP Report 2007 |
CENTRAL AND EASTERN EUROPE (CEE) The CEE region’s PPP markets made good progress in 2006 delivering financial close on a number of projects, in a range of sectors.
For many PPP players the political risk and associated issues, such as currency exchange risk in non-Euro countries, lack of transparency, incomplete legal framework and procurement processes highly susceptible to challenge, make an unpalatable cocktail of risks. But for local contractors and banks and those from outside the region who have spent time undertaking more detailed segmentation of the overall market there are still opportunities which look both lucrative and, compared to western European PPP models, pretty low risk for the private sector in terms of the standard project risk.
Austria, Czech Republic and Hungary continue to lead the way and the outlook for each of those markets is an increase in the number of deals going into procurement but with a decrease in the average individual project value as PPP is applied to more sectors within civil government.
The ever-expanding membership of the European Union (which from 1 January 2007 saw Romania and Bulgaria join the club) will widen this market and increase the demand for additional infrastructure and resources to incorporate and secure political aspirations.
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| European PPP Report 2007 | Austria | Central and Eastern Europe
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Central and Eastern Europe | Austria | European PPP Report 2007 |
AUSTRIA There is a growing number of PPP Projects in the area of transport infrastructure.
There are a growing number of PPP projects in Austria. Most of these projects are in the area of transport infrastructure although the picture from the outside may be incomplete as information on PPP projects is not readily available due to the lack of a central governmental PPP body to monitor and support PPP activity. This section only provides an overview of the largest and most interesting PPP projects. Generally, the government has vowed to expand the role of the private sector and to endorse the PPP approach. However, in a move which seemed to be contrary to this plan, ASFiNAG the state-owned motorway operator, bought out EUROPASS, the Autostrade-owned contractor, which was in the process of delivering the HGV tolling system in Austria, for €208m. In the recently published “Programme 2007-2010” of the newly elected Austrian Federal Government, the implementation of a competence centre for PPP projects has been announced. According to this Programme, the aim of the competence centre is “to utilise the innovative power and efficiency of the private sector and the controls of the public sector in an optimum way, modelled on those in, for example, Germany, the Netherlands or the UK”. This initiative goes hand in hand with the intention of the Austrian Federal Government to foster a “nationally uniform streamlining, simplification and shortening of the road and rail construction planning processes, as well as in the energy infrastructure area (…) for more efficient and faster realisation of cross-regional infrastructure projects (…)” and to “facilitate the application of PPP models by appropriately amending relevant provisions governing tenders”.
ROAD By far the biggest news this year in Austria and, some would argue, in Europe has been the financial close of the Ostregion Package 1 or “Ypsilon” road scheme valued at €800m. In October, the Concession Awarder, ASFiNAG, selected the Bonaventura consortium (comprising Alpine Mayreder, Hochtief, Egis Projects, RREEF and Meridiam) as preferred bidder for the 30-year DBFOM contract. The Ostregion scheme is a programme of planned PPP road concessions which will form a network of highways to the north, east and south of Vienna, as well as between Vienna and the Czech border. The venture will see 133km of new road built and includes the operation and maintenance of other existing stretches of highway. The roads enhance the Gdansk Brno/Bratislava Vienna corridor, forming part of the Trans-European Network (“TEN”). Total construction costs for the whole programme will be around €3bn. Package 1 or “Ypsilon” includes the DBFOM contract of 51km of roads. These roads are: • S1 East: The S1 East development involves the construction of 12km of motorway from Eibesbrunn to the S2 junction. • S1 West: The S1 West development involves the construction of 12km of motorway from Eibesbrunn to the A22. • S2: The S2 development will deliver a 4km extension of the inner-city S2 between the S1 East and the A23, forming a bypass around Sussenbrunn.
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| European PPP Report 2007 | Austria | Central and Eastern Europe
• A5 South: The A5 South development will deliver the construction of 23km of motorway from Eibesbrunn to Schrick. The estimated capital value of this stretch is €185m. The procurement began in earnest with the issue of ITNs to five pre-qualified bidders in May 2004, bids being returned in September 2005. There followed a period of negotiation with the three remaining bidders and in May 2006 BAFOs were submitted. During this process three appeals against the process and final selection have been lodged – two by the Austrian AKOR consortium and one by the Bilfinger Berger consortium. The appeals have eventually been dropped. Financial close was reached in December 2006 on Package 1 (“Ypsilon”) of the €933m (net present value) first road PPP in Austria. The concession term of approximately 32 years extends over a three-year construction period plus a 29-year operation and maintenance period. The project’s funding requirement of €986m is being met by a combination of equity, subordinated debt, mezzanine bonds, €425m monoline-wrapped multiple drawdown senior bonds and a €350m monoline-wrapped EIB loan. The financing has a number of innovative aspects to it. It is also using the first ever multiple drawdown investment grade-rated and monoline-wrapped bond structure, together with an unprecedented shadow toll-banding mechanism and innovative payment schemes representing a mix of availability payments and shadow toll payments. AND MORE ROADS The successful completion of the Ypsilon project has established an important benchmark for the remaining five Ostregion road projects to follow. It has established a market, attracted a broad range of bidders and funders and most importantly delivered within a reasonable time frame. • Ostregion PPP: A5 North A: The A5 North A development involves the construction of 25km of motorway from Schrick to Poysbrunn. The estimated capital value of this stretch is €145m. • Ostregion PPP: A5 North B: The A5 North B development involves the construction of 9km of motorway from Poysbrunn to the Czech border. The estimated capital value of this stretch is €40m. • Ostregion PPP: S1 Vienna Ring Road-Danube-Crossing: The Donauquerung (Danube-Crossing) development involves the construction of a new 3km crossing of the River Danube, joining up with the S1 South. • Ostregion PPP: S1 Vienna Ring Road-Lobau-Crossing involving the construction of a new 16km link from the S2 to the new Danube-Crossing. • Ostregion PPP – A22: The A22 development involves a 7km extension of the A22 along the northern bank of the Danube from Kaisermuhlen to the new Danube-Crossing on the S1.
11
RAIL The Summerau-Spielfeld Railway was identified by SCHIG (the Austrian Railway Infrastructure Financing Association) as the first rail PPP project. The project involves the improvement of the route from Summerau, on the Czech border, to Spielfeld, on the border with Slovenia, and could potentially include work on the links further into these neighbouring countries. The €840m rail link is intended to be completed by 2012. But negotiations are still ongoing between the federal Austrian government and the provinces of Upper Austria and Styria on how to progress with this project. It is now more likely that these provinces will finance the project themselves, supported by the ÖBB (Austrian National Railways) and not adopt the PPP route. In the earlier stages of development there are two, possibly more, commercially viable rail projects. First, the Vienna-Bratislava Airport Link, which will deliver a rail link between Schwechat (Vienna International Airport) and Bratislava Steanik Airport. The project involves the extension of the City Airport Train (“CAT”) and is expected to be procured by 2012 as a PPP. Secondly, the Brenner Basistunnel. In 2004, the Brenner Basistunnel European Corporation was founded, following agreement between Austria and Italy to go ahead with the 55km tunnel. The project will be co-financed by the private sector. The BBT, the bi-national project company in charge of delivering the multi-billion euro Brenner Base Rail tunnel, had in 2006 selected an advisory team to assist with the legal and financial aspects of the Austrian-Italian project. A tender was launched in December 2006 for the construction of the pilot tunnel for the Brenner Tunnel rail link. The role tendered is preparatory/exploratory work which will provide useful geological information and remove unwanted material ahead of the main construction work. A full tender is due to be launched in 2007. Construction of the pilot tunnel is due to start in 2007. Finally, in the rail sector there is the Nordkettenbahn/Hungerburgbahn project in Innsbruck. The project involves the design, modernisation and operation of two mountain transportation systems. The Hungerburgbahn is a steep funicular built around 1900 to link lower and upper Innsbruck. The Municipality of Innsbruck and the tourism association have contributed €37.1m and the private partner, STRABAG, has invested €13.5m into this project. The first sections of the refurbished cable car system opened at the beginning of the winter season 2006/2007.
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Central and Eastern Europe | Austria | European PPP Report 2007 |
HEALTHCARE The Austrian government is also keen to develop private sector involvement in delivery and operation of healthcare facilities. There are a range of models of which the following are examples: • GESPAG – LKV Krankenhaus Errichtungs- und Vermietungsgesellschaft, Upper Austria A PPP model has been chosen for this project for the construction and expansion of the regional hospitals in Vöcklabruck and Steyr as well as for the Regional Gynaecological and Paediatric Clinic. The PPP model provides funding of around €600m through a private group of investors: VAMED, a company active in the health sector, and LAWOG, a non-profit residence cooperative which formed a joint venture company. A funding period of 18 years was agreed. At the end of this period the hospitals will become the property of GESPAG, an institution owning and running hospitals in Upper Austria. • Regional Gynaecological and Paediatric Clinic, Upper Austria Opened in 2006, the total volume of investment was €100m. In this major project, GESPAG’s partner was LKV Krankenhaus Errichtungs-und Vermietungsgesellschaft, an institution constructing and renting hospitals which was commissioned for the funding, planning, construction and implementation of the new Regional Gynaecological and Paediatric Clinic in Linz, Upper Austria. As general management contractor, it has taken over unlimited guarantee for costs and deadlines. • UKH Linz (Accident Hospital), Upper Austria Opened in 2006, the total volume of investment was €175m. For funding, construction, leasing and management AUVA, an accident insurance company, commissioned a joint venture company consisting of Alpine Mayreder, Raffeisenlandesbank and VAMED. The PPP model that has been enhanced by the joint venture company for this special purpose allowed for considerable cost saving as regards the project. Furthermore, this cooperation of the public and private sectors implies considerable advantages, namely an accelerated contract award procedure, tax optimisation and the bundling of know-how for construction and management.
• Psychosomatic clinic in Bad Aussee, Styria This project amounting to €21.2m was completed as a PPP model of the Medical University of Graz and the operator Dr Wolfhardt Rother (ROMED). ROMED Austria Klinik Consulting GrundbesitzgesellschaftmbH commissioned VAMED as general management contractor to build the psychosomatic clinic in Bad Aussee. The Province of Styria (“Land Steiermark”) will make a contribution of a maximum of €5.82m to this project. • Hospital of Deaconesses in Schladming, Styria The new Hospital of Deaconesses in Schladming was built on behalf of the Evangelisches Diakoniewerk Gallneukirchen which acts as legal representative and principal. The construction company was DKV Krankenhaus Errichtungs- und VermietungsGmbH. The construction costs were solely borne by the Province of Styria and were capped at €44.6m. In December 2006, the building was finished according to schedule, delivered and taken into operation. • Hospital, Vienna By 2011, a new hospital will be built as a PPP project in the north of Vienna; it will contain 850 beds and cost about €300m. Bidders from all over Europe were invited to lay offers for a role as general management contractor. The role will consist of the construction of a hospital, including the purchase of real estate, with good transport connections. The award for this project will take place in 2007. • Psychosomatic Centre in Eggenburg, Lower Austria The construction of this psychosomatic centre will cost about €14.52m. The hospital will be operated by a PPP company, namely by the Krankenanstaltenverband Waldviertel (a hospital association) 51 per cent, ROMED (a German clinic operator) 39 per cent and VAMED 10 per cent.
• Radiotherapy in Krems, Lower Austria Within the scope of “ARGE Strahlentherapie Krems” (Working Group for Radiotherapy in Krems), Siemens, together with the construction company Porr, acts as general management contractor. The PPP model is applied to the €21m project with VAMED. The regional hospital is the user within the scope of a leasing contract.
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IT/TELECOMS The Federal Ministry for Internal Affairs and the operator consortium Alcatel/Motorola (TETRON) are project partners for the Digitalfunk Bos project. In June 2004 the decision was taken to implement one digital radio system for the police and public safety organisations in Austria. This radio system transfers voice, data and signalling over the air in the same way with discrete symbols. Each public safety organisation can take part in this PPP project. Under normal conditions each organisation then has a “virtual” radio net closed in itself that makes trans-organisational communication and cooperation possible unnecessary. Since the beginning of 2006, a digital trunking network has been successfully operating in Vienna and Tirol and is being expanded to other parts of Austria. OTHER SECTORS Other sectors where the use of PPP is being explored are in other transport-related infrastructure such as the Freudenau Container Terminal. There are also early signs of social infrastructure projects such as: • The €20m St Pölten Vocational School The project involves the construction, operation and maintenance of a vocational college in St Pölten and is being procured by the lower Austria state capital of St Pölten; • Linz Music Hall A tender for the PPP development of a new music hall in the Austrian city of Linz is under way.
13
LEGISLATIVE ISSUES The Federal Procurement Act 2006 (Bundesvergabegesetz 2006), which entered into force on 31 January 2006, replaced the Federal Procurement Act 2002 and repeals the eProcurement Regulation 2004. The new Federal Procurement Act 2006 transposed the EU Public Procurement Directives 2004/18/EC and 2004/17/EC, including their provisions regarding e-Procurement, into national law. With the Federal Procurement Act 2006 some alterations regarding award procedures were introduced. Of particular interest in the field of PPP is the so-called competitive dialogue (wettbewerblicher Dialog) (§§ 34, 159 et seq). It is often used as a model procedure for PPP transactions. This new type of award procedure should be applied for very complex commissions eg in the field of infrastructure. The awarding of contracts must be carried out according to the best-bidder principle (Bestbieterprinzip). The procedure is divided into two stages: First the bidders are chosen, after that the number of bidders is reduced in the shortlisting process, then the bidders are invited to place their tender offers. After the valuation of all tender offers, the best one is accepted.
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AUSTRIA: COMPLETED PROJECTS IN 2006 FIGURE 2.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
Ostregion PPP: Package 1
800
Procuring Authority: ASFiNAG Sponsor group: Bonaventura (Comprising Alpine Mayreder / Hochtief / Egis Projects / RREEF / Meridiam) Funded by bond arranged by Deutsche Bank, wrapped by Ambac
AUSTRIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 2.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education
St Pölten Vocational School
20
Procuring Authority: state capital of St Pölten. The project involves the construction, operation and maintenance of a vocational college in St Pölten in Austria.
Leisure
Mozarthaus Vienna
Not available
Project involves the renovation of the Mozarthaus in Vienna. Sponsor: Mozarthaus Vienna Construction Ltd. Financed by private investors – to be completed in 2006.
Light Rail
Nordlettenbahn/ Hungerburgbahn Innsbruck
Not available
Procuring Authority: ASFiNAG. The project involves the design, modernisation and operation of two mountain transportation systems. The Hungerburgbahn is a steep funicular, built around 1900 to link lower and upper Innsbruck. Finance – city of Innsbruck and the tourism association to contribute €31.8m and STRABAG to invest €15m.
Technology
TECHbase Vienna
Not available
Construction of a technology centre. Project partners:Vienna Business Development Fund / Ecoplus / Economic Agency for Lower Austria / Economic Service Corporation of Burgenland / Raiffeisen Holding.
Technology
Tech Gate Vienna
Not available
Centre hosting telecoms / IT / software / medical technology companies and research centres. Project partners: City of Vienna / Federal Ministry for Transport, Innovation and Technology / Wiener Stadtische Insurance Company.
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AUSTRIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 2.2 |
15
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Healthcare
KAGes-Steiermarkische Krankenanstaltengesellschaft m.b.H.
Not available
Procuring Authority: District Hospital Bad Aussee. The project involves the design and build of a hospital in combination with a centre for physiotherapy.
Leisure / Accommodation
Linz Music Theatre
110
The project involves the construction of a new music hall in Linz, including the building of a new theatre as well as underground parking, possible street extensions, new shops etc. It has not yet been decided whether these will be procured as one project or several smaller ones.
Rail
Freudenau Container Terminal
Not available
Procuring Authority: SCHIG.
Rail
Summerau-Spielfeld Railway 840
Procuring Authority: SCHIG. Decision expected on whether the project will go ahead as a PPP following meetings between central government and the provinces of Styria and Upper Austria.
Rail
Vienna-Bratislava Airport Link
Not available
The project involves a rail link between Schwechat (Vienna International Airport) and Bratislava Steanik Airport. The project involves the extension of the City Airport Train (“CAT”) and is expected to be procured as a PPP.
Rail
Vienna-Marchegg-Bratislava Link
80
PPP approach being considered for the development of a Vienna-Marchegg-Bratislava rail link.
Rail (Bridges and Tunnels) Brenner Base Rail Tunnel
6,000
Procuring Authority: bi-national (Austria & Italy) project company, (“BBT”) – Brenner Base Tunnel. Financing: funds from the states of Austria and Italy, cross-financing and revenues from tolls and EU co-financing amounting to 20% of the project costs. Co-financing of balance of costs by private investors through PPP.
Roads
Ostregion PPP: A22
610
Procuring Authority: ASFiNAG. Estimated start of tender: 2007.
Roads
Ostregion PPP: S1 Vienna Ring Road: Danube-Crossing S1 Vienna Ring Road: Lobau-Crossing
1,370
Procuring Authority: ASFiNAG. Estimated start of tender: 2007.
Roads
Ostregion PPP: A5 North B
40
Procuring Authority: ASFiNAG.
Roads
Ostregion PPP: A5 North A
145
Procuring Authority: ASFiNAG.
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HUNGARY The most mature PPP market in the CEE region.
Hungary is the most mature PPP market in the CEE region. An interdepartmental committee (the “Committee”) was set up in June 2003 comprising representatives from the Ministry of Economy and Transport, the Ministry of Justice, the Ministry of Finance, the Prime Minister’s Office and Central Statistics Office. The major goal of the Committee was to create adequate conditions for the introduction of PPP to Hungary. The major activity of the Committee is to consider PPP plans prepared and submitted by the departments and local government. The Committee is also responsible for monitoring the implementation of PPPs. The Committee is chaired by the Minister of Economy and Transport, and is the Ministry responsible for determining the strategy for the use of the PPP structure and providing professional support related to projects. The introduction of PPP to Hungary was also supported by a special PPP Secretariat (“PPP Department”) within the Ministry of Economy and Transport. However, this PPP Department was integrated into the Asset Management Department of the Ministry of Economy and Transport headed by Mr Balázs Felsmann. According to the Ministry of Economy and Transport, currently around 85 per cent of the PPP projects are under preparation; despite this, Hungary has now got some PPP successes in the form of completed deals and programmes for further delivery and an increasing bank of knowledge on how to structure off-balance-sheet deals using an availability-based payment stream. The main areas of PPP in Hungary are education and sport. However, PPP is also used in prison, infrastructure (road, rail), waste/waste water and urban regeneration.
There is also significant activity on transport infrastructure privatisation with the sale of a 75 per cent (less one share) stake in the ownership in Budapest Ferihegy International Airport and the associated let of a 75-year asset management contract to Ferrovial. Ferrovial’s subsequent purchase of BAA has prompted consideration of disposal of their Budapest interests, possibly to one of the other bidders in the initial privatisation. The government is also in the process of disposing of their remaining 40 per cent stake in Állami Autópálya Kezelő Rt (“AAK”), the government motorway management company and the current operator of the M5 motorway. The disposal of the Budapest Stock Exchange listed shareholding should raise around US$150m. AAK will at the same time pay off around €320m of EIB debt. This activity has carried on against the backdrop of elections in April 2006 which returned the Socialist Liberal coalition government. But within six months of the renewed mandate there was further political unrest led by opposition parties protesting at the prime minister Ferenc Gyurcsany’s admission that he had lied to voters about government finances. Hungary’s deficit may reach 10 per cent in 2006/7 but the government is committed, with EU backing, to a stringent programme of tax rises and public spending cuts. What this means for PPP is uncertain. The austerity measures may push any infrastructure spending to off-balance-sheet methods or infrastructure spending may simply be put on hold. Alternatively, if the measures are unacceptable in application, it is not clear what the opposition’s view of PPP is but it is known that it opposes private sector involvement in healthcare and roads. 18
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EDUCATION Without any doubt the most active sector in the last two years has been the education sector through the higher education infrastructure development programme of the Ministry of Education (“Universitas Programme”).
HUNGARY: INVESTMENT CONSTRUCTIONS AND ESTIMATED COSTS FIGURE 3.0 |
Information supplied by
Ministry of Education, February 2006 Costs (HUFbn)
Construction / Resources The Universitas Programme involves 21 higher education institutions in 17 cities and 32 buildings with 336,000 sq.m of new areas. The total investment volume is HUF82bn (approximately €328m). The Universitas Programme concentrates on the following four areas: • the establishment of new hostel accommodation for a projected 10,000 students; • the renovation of existing accommodation for 20,000 students; • the delivery of new teaching and research facilities in 14 institutions; and • the renovation of teaching and research facilities in six institutions. The first project took place in Debrecen with the contract being awarded in 2004 and the construction already completed. Higher education institutions using PPP arrangements are as follows: • • • • • • • • • • • • • • • • •
Semmelweis University Budapest Technical College Budapest Eötvös Loránd University Budapest Liszt Ferenc Music Academy Budapest University of Economics Budapest, University of Miskolc University of West Hungary, University of Pécs University of Szeged, University of Veszprém College of Dunaújváros, Károly Róbert College College of Kecskemét College of Szolnok College of Nyíregyháza University of Industrial Arts (Budapest) Szent István University (Gödöllő) Berzsenyi College (Szombathely) College of Economics (Budapest) Eszterházy Károly College (Eger) Eötvös József College (Baja).
Traditional investment structure
64
National development plan
23
PPP structure
Student hostel building and renovation (2005-2007)
59
PPP structure
Higher-education 82 infrastructure development (2005-2008)
Completed and running investment projects
228
Projects under preparation
20
Development investments in total
246
HUNGARY: RENOVATION OF STUDENT HOSTELS BETWEEN 2002 AND 2007 FIGURE 3.1 |
Information supplied by
Ministry of Education, February 2006 2002-2007 (HUFbn)
Construction / Resources Traditional investment structure
300
PPP structure
Closed and running projects
300
PPP structure
Projects under preparation
17,694
Total development
20,994
HUNGARY: NEW STUDENT HOSTEL ACCOMMODATION BETWEEN 2002 AND 2007 FIGURE 3.2 |
19
Information supplied by
Ministry of Education, February 2006
Construction / Resources
2002-2006 (HUFbn)
2007 (HUFbn)
2002-2007 (HUFbn)
Traditional investment structure
3,434
–
3,434
PPP structure
4,671
5,136
9,807
Total development
8,105
5,136
13,241
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SPORT The Sport XXI National Sports Strategy is the overall, long-term concept for the development of sports facilities. In June 2004, a government decision was taken to allocate HUF53bn support for sports facility development plans. Accordingly, the Hungarian State will finance the sports property development projects with HUF6bn in the first two years and will invest a further HUF31bn until 2022 while encouraging municipalities and private investors to take part in the development envisaged as PPP projects. The private sector is expected to contribute 20 per cent of the total costs while municipalities and the State will share the rest equally. Altogether 170 small and medium-sized sports facilities (gyms, swimming pools and multifunctional sports halls) will be developed within the PPP framework. Within the framework of the current initiative the largest sum (HUF24bn) is allocated for the construction of gyms and swimming pools and HUF20bn is planned to be spent on the construction of multifunctional sports halls (at least one should be built in each of the counties by 2006). HUF3bn is earmarked for the reconstruction of a stadium (“UEFA”) which will be paid for by the State. PRISONS As a response to EU requirements to reduce the level of overcrowding in the Hungarian prisons, two 700-bed prison projects were identified in Tiszalök and Szombathely. After receiving positive feedback from the Committee, the proposal of the Ministry of Justice received the support of the Economic Cabinet and the Government in May 2004. The estimated value of the projects is currently €280m. KÉSZ Kft, a Hungarian private company, was awarded the Tiszalök DBFM contract. Construction has started on the 2,000 sq.m facility. The prison is scheduled to open on 1 June 2007. The company will receive HUF1.7bn (or €6.7m) a year from the central budget over the next 15 years for running the facility. The prison will employ a professional staff of 280 and there are plans to hire an additional workforce of 70-100 to supply catering, maintenance and repair work.
ROADS Hungary currently has two motorways operating under a PPP arrangement: the M5 and the M6. The M6 motorway constitutes a section of the V/c Helsinki corridor that connects southern and eastern Europe. The 252km road will be built in two phases: Phase 1 between Budapest and Dunaújváros (contract already let) and Phase 2 between Dunaújváros and the Croatian border (in procurement). In 2004, a 22-year DBFO contract for Phase 1 was awarded to the Duna consortium, comprising Bilfinger Berger, Porr and Surietelsky. In 2006, the Duna concession company refinanced its project debt by issuing the region’s first wrapped project Eurobond which, in a stroke halved the cost of borrowing for the consortium (to 50 bp over Euribor). Dexia was lead manager and FSA wrapped the bond. €212m was raised from the bond and at the same time EIB provided a €200m loan. The procurement process concerning Phase 2 of the motorway (approximately 195km between Dunaújváros and the Croatian border) is in procurement. The government has put in place the necessary legislation for the construction and operation of a section of M6 motorway between Szekszárd and Bóly and a section of the M60 freeway between Bóly and Pécs, using a PPP process by the end of 2007. Hungary also has access to substantial EU funding from the Cohesion Fund for the design and construction of the motorways. During 2006, the government cancelled the proposed €1bn Eurobond issue which had been planned to meet the cost of eight new road projects. There were concerns about the debt increasing the national deficit, so it appears that any new roads will be using off-balance-sheet financing techniques. RAIL There is a plan to develop a high-speed railway link between Budapest Ferihegy Airport and the city centre. The rail link will be built as a PPP project and will result in a direct connection between Budapest city centre and the airport terminals of Ferihegy. Details of the HUF25bn project is not yet finalised but include linking to the city’s suburban rail network.
In respect of Szombathely, after the first tender was declared unsuccessful by the National Prison Service Headquarters (“BVOP”), there was a second tender. All five consortia have qualified in the first round for the construction and a 14-year operating lease of a new penitentiary in the west Hungarian town of Szombathely. The bidding consortia were OTP Ingatlan Rt–Hérosz Rt–Magyar Építő Rt; KÉSZ Kft–Maszer Rt, ZÁÉV Rt–Future FM Rt, Wallis Ingatlan Rt–TWC Rt, and Kipszer Fővállalkozó Rt–Kipszer Elektromos Szerelő Zrt.
20
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URBAN REGENERATION/ DEVELOPMENT OF BUDAPEST The Podmaniczky Programme – the medium-term urban development programme of Budapest – contains the capital’s urban planning developments for the coming decade and is closely related to the vision for Budapest, the “Urban Development Concept of March 2003” – a document greeted with widespread political and professional approval.
LEGAL ISSUES It has now become clear that a special “PPP legislation package” will not be introduced in Hungary. The basis of PPP has been dealt with by amending existing legislation (such as the Public Procurement Act and the Act on Public Finances). Application of PPP will require further legislative changes in the future – at the moment none are outstanding.
In accordance with the values embodied in the Urban Development Concept, the Podmaniczky Programme contains medium-term action programmes for participants in city development. It defines the aims of the Municipality of Budapest, which areas it wants to see developed, and which programmes and major projects it wants to see executed in the period extending up to 2013.
Because of the changing political climate, private sector investors are trying to obtain easily enforceable political risk guarantees from the contracting authority, since they fear that in the long-term the project execution may be negatively affected by acts of the contracting authority. These “political” risks are, for example, nationalisation of the project assets, imposition of new taxes that could jeopardise the investor’s prospects of debt repayment and investment recovery, and introduction of more stringent standards for service delivery.
The Podmaniczky Programme thus forms the basis for a further seven-year round of development planning as well as for local authority sector-based planning. Over the course of nine years, 130 developments worth HUF2,100bn (HUF600bn of which will come from the Municipality of Budapest) will renew the city’s public transport system, buildings, environment, public sanitation, schools and hospitals.
At present, investors are forcing the authorities to provide adequate support upon which the project can be “smoothly” completed. For example, in two recent education projects we advised our clients to request a binding ruling from the Ministry of Finance, as to which costs are born by the investors, in order to minimise taxation risks.
In the last decade and a half, the private sector has become the most powerful force in urban development. More than four-fifths of investments are funded with private capital. The Municipality of Budapest is aware of the fact that PPP, if used in the correct way, is a combination of publicly-owned assets – land, property and property-related rights – and the strength of private sector capital, used in order to realise public works which meet the private sector’s demand for profit.
21
The Act on Public Finances enables the government to assume a payment liability that extends beyond the relevant year provided that such liability can be settled on the due date without endangering normal operation. Pursuant to the latest amendment of the Act on Public Finances i) in the case of any agreement in which the government or any other state body is willing to assume a payment liability that reaches or exceeds HUF50bn, the formal approval of Parliament is needed, and ii) in the case of any agreement in which the state or any person representing the state intends to assume a payment liability that reaches HUF10bn but does not exceed HUF50bn, the formal approval of the government is needed.
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HUNGARY: PPP ELEMENTS OF THE PODMANICZKY PROGRAMME (priority areas) FIGURE 3.3 |
Information supplied by
Ministry of Education, February 2006
Sector Public transport
Development of the intermodal business junction at Eastern Railway Station
Rehabilitation of residential and public areas
Rehabilitation in the Jewish quarter (Zsidónegyed)
Developing new urban residential areas
Preparing new residential areas at Mocsáros-dülő Preparing new residential areas at the tip of Csepel Island
Renew, decentralise and democratise cultural life in Budapest
Alteration of the former gasworks in PPP
Develop tourism
Development of the international pier
Major road projects
Kvassay crossing
Urban regeneration on brown-field sites
Preparation of the functional change in Óbuda Gasworks Revitalisation of Rákosrendező
HUNGARY: COMPLETED PROJECTS IN 2006 FIGURE 3.4 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education
Campus Hotel, Debrecen
16
Procuring Authority: Municipality of Debrecen. To be realised within the scope of the higher education infrastructure development programme of the Hungarian Ministry of Education (“Universitas Programme”) for the period 2005-2008. Universitas Programme involves the building and development of 21 higher education establishments in 17 cities in Hungary with PPP arrangements. Campus Hotel, a student hostel with accommodation for 900 students, will be delivered with the cooperation of the University of Debrecen and Húnép Universal Rt.
Education
Uni-Hotel, Miskolc
Not available
Procuring Authority: Municipality of Miskolc. Uni-Hotel (University of Miskolc), a student hostel with accommodation for 600 students, will be realised in a PPP structure with the involvement of OTP Ingatlan Rt. and Magyar Építők Rt.
Education
College of Dunaújváros
34.4
Procuring Authority: College of Dunaújváros. The project involves the building and development of student hostels with accommodation for 400 students and reconstruction of an educational centre. Sponsor: multi-partner consortium including Strabag Hungary Rt., Immorent-Hungary Rt. and Erste Bank Hungary Rt.
Education
Róbert Károly College, Gyöngyös
5.4
Procuring Authority: Róbert Károly College. The project involves the building and development of student hostels with accommodation for 600 students and reconstruction of an educational centre. Sponsor: multi-partner consortium including Strabag Hungary Rt., Immorent-Hungary Rt. and Erste Bank Hungary Rt.
Education
College of Nyiregyháza
9.2
Procuring Authority: College of Nyiregyháza. The project involves the building and reconstruction of student hostels with accommodation for 1,240 and 426 students respectively. Winner of the tender is a consortium including Strabag, Immorent-Hungary and Erste Bank Hungary.
Prisons
Tiszalök Prison
100.5
15-year DBFM contract for the construction of a 700 – inmate prison awarded to KÉSZ Kft. 22
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HUNGARY: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 3.5 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education
Semmelweis University
7.2
Procuring Authority: Semmelweis University. The project involves the building and development of student hostels with accommodation for 500 students and new educational centres.
Education
University of Kaposvár
6.8
Procuring Authority: University of Kaposvár. The project involves the building and development of two student hostels with accommodation for 530 and 350 students.
Education
University of West Hungary
28.8
Procuring Authority: University of West Hungary. The project involves the building and development of student hostels with accommodation for 460 and 400 students and new educational centres.
Education
University of Szeged
25.6
Procuring Authority: University of Szeged. The project involves the building and development of student hostels with accommodation for 1000 and 300 students and educational centres.
Education
Szent István University
42
Procuring Authority: Szent István University. The project involves the building and development of student hostels with accommodation for 900 and 450 students and educational centres.
Education
University of Veszprém
16
Procuring Authority: University of Veszprém. The project involves the building and development of student hostels with accommodation for 500 and 800 students and educational centres.
Education
University of Arts
8.8
Procuring Authority: University of Arts. The project involves the building and development of student hostels with accommodation for 500 and 800 students and educational centres.
Education
Berzsenyi Dániel College Szombathely
9.2
Procuring Authority: Berzsenyi Dániel College. The project involves the building and development of student hostels with accommodation for 300 students and a college library.
Education
Technical College Budapest
10
Procuring Authority: Technical College of Budapest. The project involves the building and development of student hostels with accommodation for 400 students and a educational centre.
Education
Eötvös József College Baja
10.8
Procuring Authority: Eötvös Jözsef College. The project involves the building and development of student hostels with accommodation for 100 and 200 students and a new educational centre.
Education
Eszterházy Károly College Eger
7.6
Procuring Authority: Eszterházy Károly College. The project involves the building and development of student hostels with accommodation for 200 students and a new educational centre. FIGURE 3.5 | Continued on page 24
23
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HUNGARY: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 3.5 (Continued) | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Leisure
Underground garage of the National Museum
0.9
Procuring Authority: Ministry of Culturale Heritage.
Prisons
Prison Szombathely
90
Procuring Authority: Ministry of Justice. The project involves a 15-year DBFM contract for provision of a new facility to accommodate 800 inmates. The responsibility for custody remains with state.
Road
M6 Phase II Szerkszárd-Bóly
Not available
Procuring Authority: Ministry of Transport. Next phase of M6. DBFO contract for next phase of M6 between Szerkszárd-Bóly plus 10km of M60 (Bóly-Pecs).
Sport
Sports Hall Kiskunfélegyháza
Not available
Procuring Authority: Municipality of Kiskunfélegyháza. The project involves the building of a multifunctional sports hall for 1,700 people.
Sport
Sports Hall Békés
Not available
Procuring Authority: Municipality of Békés. The project involves the building and development of a multifunctional sports hall for 1,500 people.
Sport
Sports Hall Gyöngyös
Not available
Procuring Authority: Municipality of Gyöngyös. The project involves the building of a multifunctional sports and entertainment hall for 2,300 people.
Sport
Skating Hall Jászberény
Not available
Procuring Authority: Municipality of Jászberény. The project involves the building of a skating hall for 600-800 people.
Sport
Sport Hall Veszprém
Not available
Stage: In tender. Procuring Authority / Awarder: Municipality of Veszprém. The project involves the building of a sports hall for 5,1000 people.
Sport
Sport Hall Mosonmagyaróvár
Not available
Procuring Authority: Municipality of Mosonmagyaróvár. The project involves the building of a sports hall for 1,112 people.
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| European PPP Report 2007 | Hungary | Central and Eastern Europe
HUNGARY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 3.6 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
National Television Building Budapest
299
Stage: Pre-tender. Procuring Authority: Ministry of Cultural Heritage together with the Prime Minister's Office. The project involves the construction of the new building for the Hungarian National Television. An informal bid was received earlier from the private sector.
Accommodation
Conference Centre Budapest
121
Procuring Authority: Ministry of Economy and Transport together with the Prime Minister's Office.The project involves the development of a 5,000 seat conference hall in the centre of Budapest.
Education
University of Technology and Economics Budapest
75.4
Procuring Authority: Ministry of Education. The project involves the building and development of student hostels with accommodation for 3,500 and 600 students.
Education
University of Debrecen
33.2
Procuring Authority: Ministry of Education. The project involves the building and development of student hostels with accommodation for 1,500 and 900 students
Education
Corvinus University Budapest
52.4
Procuring Authority: Ministry of Education. The project involves the building and development of student hostels with accommodation for 800 and 600 students.
Education
Eötvös Loránd University Budapest
25.6
Procuring Authority: Ministry of Education. The project involves the building and development of student hostels with accommodation for 600 students and an educational centre.
Education
University of Pécs
77.2
Procuring Authority: Ministry of Education. The project involves the building and development of student hostels and an educational centre.
Education
Liszt Ferenc Music Academy 16.8 Budapest
Procuring Authority: Ministry of Education. The project involves the building of a new educational centre.
Education
College of Economics Budapest
12.4
Procuring Authority: Ministry of Education. The project involves the reconstruction of an educational centre.
Leisure
Erkel Theatre Budapest
89
Procuring Authority: Ministry of Cultural Heritage.The project involves the reconstruction of the famous Erkel Theatre. FIGURE 3.6 | Continued on page 26
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HUNGARY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 3.6 (Continued) |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Sport
Sports Hall Bóly
Not available
Procuring Authority: Municipality of Bóly. The project involves the building of a multifunctional sports hall for 7,500 people.
Sport
Sports Hall Szigetszentmiklós
Not available
Procuring Authority: Municipality of Szigetszentmiklós. The project involves the building of a multifunctional sports and entertainment hall for 2,000 people.
Sport
Sport Hall Nagykanizsa
Not available
Procuring Authority: Municipality of Nagykanizsa. The project involves the building of a multifunctional sports and entertainment hall for 3,200 people.
Sport
Indoor Swimming Pool Keszthely
Not available
Procuring Authority: Municipality of Keszthely. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Balassagyarmat
Not available
Procuring Authority: Municipality of Balassagyarmat. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Ózd
Not available
Procuring Authority: Municipality of Ózd. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Mezőkeresztes
Not available
Procuring Authority: Municipality of Mezőkeresztes. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Heves
Not available
Procuring Authority: Municipality of Heves. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Kiskőrös
Not available
Procuring Authority: Municipality of Kiskőrös. The project involves the building of an indoor swimming pool.
Sport
Indoor Swimming Pool Szigetvár
Not available
Procuring Authority: Municipality of Szigetvár. The project involves the building of an indoor swimming pool.
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| European PPP Report 2007 | Czech Republic | Central and Eastern Europe
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CZECH REPUBLIC The sound foundation laid for the PPP market is now delivering results.
The careful preparations put in place in previous years to establish a sound foundation for the PPP market are now delivering results. Although no project has been completed yet, there are several major ones expected to get into the contractor selection stage. According to local sources there are many PPP projects in the Czech Republic which are developing below the PPP Centrum’s radar screen (which does not monitor regional or provincial PPPs). Sources estimate that there are around 300 small-scale projects in procurement. The prospects for 2007 look good with the market providing a range of sector opportunities. The legislative and central control structure will do a lot to boost confidence in one of the most significant markets in the region.
LEGISLATIVE CHANGE The long awaited Concession (or PPP) Act and Public Procurement Act came into force on 19 April 2006. The Concession Act is in effect a PPP-enabling Act which sets out the structures for PPP projects. Some of the significant features include the increase in the minimum concession size to ensure project viability and instituting a layered advertising requirement and approval process according to the size of the project. For example, larger projects will be required to be approved through a more complex process and their procuring authorities will also be required to advertise the terms of the procurement more widely than for smaller projects. PROGRESS ON PILOT PROJECTS Most of the procuring authorities for pilot projects have now appointed advisers to assist in bringing the projects to commercial tender.
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HEALTH The €15m military hospital project in Prague has a DBFO project to deliver a new building on the existing site. The objective is to deliver a hotel-type lodging house and a parking site for military and civil physicians. Concession tender documentation has been completed and approved. Behind the pilot there are two other hospital projects, one also in Prague being procured by the Na Homolce health board and Ministry of Health. This is a DBFO 20-year contract for a seven-storey new building. The tender for the role of principal adviser was, however, cancelled and will be probably repeated. Secondly, there is a project for modernisation through PPP of a regional hospital in Pardubice – this project envisages the inclusion of infrastructure, support services and technology. Advisers have been appointed. JUSTICE The two courts projects and the high security prison listed as Wave 2 pilot projects are also not yet in procurement but have appointed advisory teams and have almost finished feasibility projects. It looks likely that these will come to the market in 2007.
TRANSPORT The Aircon project which involves the upgrade of the Prague to Kladno rail line and the construction of a rail link to Ruzyne Airport valued at around €500m is shaping up although still not in procurement. A 30-40 year licence will be let on a BOT or DBFO basis. Demand risk will be shared between the public and the private sectors and at least 10 per cent of the project costs will be met by government. The Ministry of Transport is preparing the D3 road project for tender in 2007. Following the failure of the D47 project, it is important to get this one right. Further road projects are in development. The D3 project involves the construction of a four-lane 30km stretch of motorway from Tabor to Bosilec. In response to the private sector view that real toll roads in the region are too high risk, it is thought likely that this €370m project will be structured as a DBFM project with payment based on availability and performance. This is yet to be decided by the contracting authority. The electronic fee collection project for levying a charge on HGV vehicles using a specified network of roads has been envisaged as a PPP, but was finalised as a standard public procurement contract. OTHER SECTORS There is currently growing awareness of the possible application of PPP to the education sector and there is a €83m DBFO project for the construction of a new campus for Jan Evangelista Purkyně University in Ústí nad Labem. The concession should be for 25 to 30 years but advisers have not yet been appointed. There is also one sports stadium project to develop a 315-acre Ponava site in Brno using a DBFO structure based on availability and usage fees. The advisory team has started to work on the concession documentation.
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NO COMPLETED PROJECTS IN 2006 NO CURRENT PROJECTS AS AT JANUARY 2007 CZECH REPUBLIC: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 4.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education / Accommodation
Charles University Project Prague
Not available
Under consideration as a possible Pilot PPP Project.
Education / Accommodation
J.E. Purkyné University Campus
Not available
No timetable set yet by Ministry of Education,Youth and Sports.
Government Accommodation
Justice Courts PPP Project in: 1) Ústí nad Laben 2) Karlovy Vary
27
Procuring Authority: Ministry of Justice. Wave 2 Pilot Project.
Healthcare
Regional Hospital Pardubice
77
Procuring Authority: Czech Ministry of Health (and the PPP Centrum). DBFO contract including delivery of support services and technology.
Healthcare
Prague Hospital PPP
21
Procuring Authority: Na Holmolce Hospital (NNH) / Ministry of Health / Ministry of Finance / PPP Centrum. 20-year DBFO contract for 7-storey building and car park.
Healthcare
Prague Military Hospital
15
Procuring Authority: Ministry of Defence. Wave 1 Pilot Project selected by the PPP Centrum.
Leisure
Sports/leisure centre Ponava, Brno
Not available
Tender documents being prepared by City of Brno.
Light Rail
Prague Airport Link AirCon
500
Procuring Authority: Ministry of Transport. The project comprises two sections: Section A: Connection between the centre of Prague and Ruzyne Airport. Section B: Connection between Ruzyne Station and Kladno. Project selected as a Wave 1 Pilot Project by the PPP Centrum. Experiencing delays. The procuring authority is awaiting a zoning decision on the territory in question and it also wants to clarify tender terms. FIGURE 4.0 | Continued on page 31
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CZECH REPUBLIC: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 4.0 (Continued) |
31
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Prisons
Czech Prison PPP Project
37
Procuring Authority: Ministry of Justice and Prison Service. A Wave 2 Pilot Project A maximum security prison, accommodating 500 prisoners. To be located near Olomouc, Central Moravia. Ministry of Justice will provide warders and retain responsibility for security and prisoner welfare.
Roads
D3 Highway
370
Procuring Authority: Ministry of Transport. Wave 2 pilot project. DBFO contract for 30km stretch of D3 motorway between Tábor and Bosilec.
Roads
Brno Ring Road
267
Procuring Authority: Ministry of Transport. Project to construct, finance, maintain and operate a part of the north-western and northern segments of the large urban ring road in Brno.
Roads
Expressway to Prague Ruzyne Airport
Not available
Procuring Authority/Awarder: Ministry of Transport.
Roads
R10 Prague-Stara Boleslav Section
16
Procuring Authority/Awarder: Ministry of Transport.
Roads
R4 Prague-Skalka Section
480
Procuring Authority: Ministry of Transport.
Roads
R35 Olomouc-Mohelnice Section
15
Procuring Authority: Ministry of Transport.
Roads
Prague Inner Ring Road NE Section
700
Procuring Authority: City of Prague.
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| European PPP Report 2007 | Poland | Central and Eastern Europe
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POLAND The estimates of investment through PPP have been increased to €1.4bn.
At the end of 2005, a new right-wing government was elected and for a while it seemed that attitudes were cooling toward the concept of PPP (although to suggest that there was immense enthusiasm or activity under the previous government would be wrong). The new government and the President both expressed views which were hostile to international investment in the country, especially in industries and infrastructure considered to be strategic such as energy, coal mining and roads. However as 2006 progressed, this initial hostility waned and two more PPP road projects have been launched. This change of attitude could also be linked to provision of the match funding necessary to absorb more of the EU Cohesion Funds currently available to Poland.
ROADS There are two main road PPPs in Poland: the A1 (the main north-south TENS route) and the A2 which feeds into the A1. Both already have financially closed PPP deals on part of their length. During 2006, the pre-qualification process started for DBFO projects for further sections on each road.
Ministers have expressed the view that PPP investment and knowledge resources should be focused on strategic infrastructure gaps – such as roads (identified in the 2003-2017 National Road Network Reconstruction Programme) – and subsequently rail. Their view is that the market should be allowed to meet needs in other areas such as regional and municipal social infrastructure.
RAIL Rail is next for PPP investment and a number of projects have been identified including light rail links and additional network lines and new lines for the Warsaw underground.
The PPP legislation which came into force in October 2005 is being simplified and there is a central PPP division in the Infrastructure Financing Department of the Ministry of Infrastructure, which has a UK-style remit to develop and monitor projects and policy. The estimates of investment through PPP have been increased to €1.4bn.
The A1 has the €1bn Strykow–Konotopa project which is being let under an availability payment mechanism. On the A2 there is the €600m StrykowKatowice project which involves construction of a 140km section between Strykow and Czestochowa and a 40km section between Czestochowa and Katowice. This will be let as a real toll road.
OTHER SECTORS Sport is one of the smaller sectors where a project is in tender. A new national stadium for football and athletics is being procured by Warsaw city council. It is a large scheme valued at €117m being let on a 16-year DBFOT basis. Only one tender has been received – from a German consortium. The sponsor will be raising a significant proportion of the debt-based, anticipated commercial revenue. There is also a multifunctional 13,000 – 15,000 seat sports hall project in Wroclaw which is under development.
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POLAND: COMPLETED PROJECTS IN 2006 FIGURE 5.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
A1 Motorway Gdansk to Torun
660
Procuring Authority: GDDKIA (Highways Agency). Sponsor: Gdansk Transport Company (GTC) – consisting of: Skanska / Laing / Intertoll / NDI. Arranger: EIB / Nordic Investment Bank.
POLAND: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 5.1 | Includes any project in tender and in the process of being financed
35
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
A1 Strykow-Katowice section
200
Procuring Authority: GDDKIA (Highways Agency). DBFO shadow toll project. Project involves the construction of a section between Strykow-Czestochowa (140km) and one between Czestochowa-Katowice (approx 40km).
Roads
A2 Motorway Strykow-Konotopa section
1,000
Procuring Authority: GDDKIA (Highways Agency). Real toll project. A-2 section Strykow-Konotopa Applications to prequalify from: 1) J&P AVAX S.A.-FCC. 2) Autostrada Mazowiecka. 3) Acciona. 4) Autostrada Po’udnie S.A. (Budimex). 5) A-WAY Infrastrukturprojektentwicklungs-und-betriebs GmbH (including Hochtief, Mota, Egis, Kulczyk Holding). 6) Grupa A2 W. 7) DTP Terrassement S.A. 8) Autostrade S.p.A., Stalexport Autostrada Dolnoœl¹ska S.A., Stalexport S.A. 9) Vinci S.A./ Vinci Concessions S.A. 10) Autostrada Warszawska (Eiffage/Sanef).
Accommodation / Leisure
Lazienkowsda Street Stadium Project
117
Procuring Authority: Public Procurement department of the Warsaw Municipal Office. Sole bidder: HBM Stadien-und Sportstattenbau / Wayss & Freytag.
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POLAND: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 5.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Light Rail
Warsaw-Lodz Rail Link
310
Procuring Authority: Ministry of Infrastructure. The project should receive EU infrastructure development funds.
Rail
SKM Tri-City Rail Link
Not available
Procuring Authority: Ministry of Infrastructure. Development of a 52km rail link between the suburbs of Gdansk, Gdynia and Sopot, involving the modernisation, rolling stock exchange and operation of the infrastructure.
Rail
WKD Warsaw Commuter Rail System
Not available
Procuring Authority: Ministry of Infrastructure. Construction of a 35.4km rail commuter link in Warsaw, involving the modernisation, provision of rolling stock and operation of the infrastructure.
Roads
National Highway No. 62
220
Procuring Authority: GDDKIA (Highways Agency). Project involves the modernisation, maintenance and management of a 100km section of National Highway No. 62. Project to be tendered together with National Highway No. 19 with a combined value of €220m and will be part of the Polish Road Plan 2004-06.
Roads
National Highway No. 19
220
Procuring Authority: GDDKIA (Highways Agency). Project involves the modernisation, maintenance and management of a 150km section of National Highway No. 19. Project to be tendered together with National Highway No. 62 with a combined value of €220m and will be part of the Polish Road Plan 2004-06.
Healthcare
Wroclaw Hospital PPP
60
Procuring Authority: Ministry of Health. Construction of a new 500-bed hospital in Wroclaw.
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| European PPP Report 2007 | Slovakia | Central and Eastern Europe
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SLOVAKIA A pilot PPP project for Slovakia.
Slovakia is at the early stages of PPP. The government is in the process of reducing the budget deficit and simultaneously reducing the tax levy on citizens and business. Although the government expenditure is growing at a prudent one per cent per annum, within that total the amount spent on motorways and science has almost doubled, as has expenditure on university education (55 per cent) and justice (78 per cent).
ROADS The D1 Highway represents a pilot PPP project for Slovakia. It is part of the TENS system and runs from Bratislava to Košice. A renewed tender for the first D1 project was expected to be opened in March/April 2006; however, due to the elections, the announcement of the tender has been postponed and until now no new tender announcement has been issued.
The Ministry of Finance keeps tight control on the PPP initiative and although there is a policy in place for the realisation of PPP projects there is no PPP legislation in the pipeline just yet. As well as transport projects, education, health and justice, PPPs are also under consideration.
The overall length of the highway to be procured by PPP is 28.9km, with presumed investment in the amount of a €568m DBFO(T) contract.
A development may be viewed in the activities of the Ministry of Finance of the Slovak Republic which proposed approval of the document called “Proposal for Innovative Measures for National Strategic Framework for 2007-2013 (II. Phase)”. This document deals with some forms of indirect assistance including technical assistance for PPP projects (PPP guarantee scheme and PPP technical assistance scheme) whereas the implementation of the schemes is expected in the following year to year and a half. The National Strategic Framework was approved by the Slovak government on 8 October 2006.
SLOVAKIA:THE FIRST D1 PROJECT WILL COVER THREE PARTS OF THE HIGHWAY FIGURE 6.0 |
Beginning-end of the highway
Length (km)
Lietavská Lúčka,Visnove
4.5
Višňové to Dubna Skala
8.1
Dubná Skala to Turany
16.3
Total
28.9
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ELECTRONIC TOLL SYSTEM The Slovak government approved and adopted the draft Electronic Toll Law during 2006 which came into effect on January 1 2007. A tender for delivery and operation of an electronic toll is planned by the National Highway Agency for the second half of 2007. AIRPORTS During 2006, the Slovak government also announced the winner of its auction process for a 66 per cent stake in the Bratislava and Košice Airports. The winning bidder was the consortium Airport TwoOne which includes Vienna Airport. The winning bidder has acquired only Košice Airport, as the proximity of Vienna and Bratislava has drawn the decision into political and commercial controversy, and the auction for Bratislava Airport has been cancelled based on the governmental decision. This situation has led to a court action.
OTHER Given the current political environment in Slovakia, there is more space for local PPP projects of smaller size mainly based on partnerships of private sector and municipalities. The PPP projects which have already been introduced in Slovakia vary from construction of social housing (Bratislava), construction of renewable energy sources operations (Handlová), operation of water supply companies and outsourcing of public services (Šaľa) up to the operation of a hospital (Malacky). The spread of PPP projects in Slovakia is thus smaller in value but significant in potential.
SLOVAKIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 6.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
D1 Motorway
2,600
Procuring Authority: Ministry of Transport / Slovak Roads Admin (SCC).
SLOVAKIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 6.2 |
39
Information supplied by
Sector
Project name
Roads
Electronic Road User Not Charging System (SLOVAK) available
Value (€m)
infra-news.com
Details Procuring Authority: National Highway Co. Initially the system will be for HGVs and vehicles transporting over nine passengers. Law on electronic charging enacted. Tender to follow.
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| European PPP Report 2007 | Bulgaria | Central and Eastern Europe
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BULGARIA PPP models are to become standard for provision of public services.
Bulgaria joined the European Union with Romania on 1 January 2007. Although arguably at a more advanced stage of political and economic development than Romania, Bulgaria has been probably a few steps behind in terms of developing the PPP model. To a certain extent lack of transparency has been evidenced within the PPP market, but work is now in hand to rectify matters and a lot of effort has been made in order for PPP models to become standard for provision of public services. The Sofia-Bourgas toll road or Black Sea Highway is an example. The tender has been current for over two years. The bidder, a Bulgarian/Portuguese consortium, was selected without a competitive tender. As Bulgaria moved towards accession new issues were raised as to whether it was right to award the concession using that process and with little risk transfer. Over 2006 the government and the bidder tried to reach agreement on issues such as the allocation of traffic risk, with the government wishing to transfer to the bidder. The project may end up being re-tendered competitively. According to the statements of the Bulgarian minister of the Regional Development and Public Works, at the end of last year Bulgaria contacted the European Investment Bank (“EIB”) for the preparation of a tender procedure for Hemus Highway (Sofia-Varna toll road) and Struma Highway (PernikKulata toll road). Bulgaria is planning to use the EIB to do this so that the tender procedure for the new highway is transparent and compliant with EC Regulations. It is expected that the tender will start in spring/summer 2007.
The concession contract for refurbishment and operation of the Varna and Burgas Airports had an equally bumpy ride but because of the more open tender process, there were other bidders challenging the process and highlighting issues when mistakes were made. This has resulted in final contract award to a Fraport/BM Star consortium. In order to support the government going forward as a member of the EU, the EIB has committed €500m to €700m per annum for the period 2007-2013 to support Bulgaria in delivery of its national transport and infrastructure investment plans. Bulgaria has announced a €2bn fast track infrastructure plan and the EIB facility will ensure that the skill and know-how is delivered so that the appropriate EU central funds are used and the procurement methods are EC compliant. The national strategy for development of infrastructure anticipates investment of around €100m by business in the watersupply sector. The coalition government has given some thought to the sectors in which it may apply PPP and in a 2006 policy paper has identified transport projects, schools, environmental projects, prisons, hospitals and sports facilities as targets for investment. A positive move is the step taken by the government to establish a PPP Department at the Ministry of Finance and to strengthen the awareness of the administration by organising a series of PPP seminars.
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LEGAL FRAMEWORK In 2006 a new Concession Act was adopted in compliance with EU law and implementing the requirements of Procurement Directives 2004/18/EC and 2004/17/EC. The two Procurement Directives were transposed also in the new amendments to the Public Procurement Act in 2006. The newly created legal framework sets out a positive environment for the attraction of private investments for utilisation of the EU Structural and Cohesion Funds. There are a lot of opportunities for the PPP model to be used in Bulgaria as a vehicle for investment in the national infrastructure and services with wide public interest.
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NO COMPLETED PROJECTS IN 2006 BULGARIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 7.0 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Airports
Varna and Burgas Airports
526
Procuring Authority: Ministry of Transport. Thirty five year concession contract for refurbishment and management of two coastal airports. In finance: preferred bidder is Fraport/BM Star. Copenhagen Airports selected in April 2005, but decision overturned by courts after other bidders (Fraport and Vinci) contested decision in October 2005. Tender continued with Fraport and Vinci. In June 2006 Vinci challenge to Fraport appointment rejected.
Bridges and Tunnels
Danube River bridge at Vidin 236
Procuring Authority: Ministry of Transport and Communication. Construction of a road and rail crossing over the Danube from Vidin to Romanian town of Kalafat and adjacent infrastructure. Tenders invited from five consortia. €60.7m funding from government. €70m from EIB.
Ports
West Varna Port Terminal
Procuring Authority: Ministry of Transport. Greenfield concession entailing the refurbishment and management of the chemical terminal in the port of Varna.
Roads
Sofia-Bourgas Toll Motorway 720 Black Sea Highway
Procuring Authority: Ministry of Regional Development and Public Works. 450km real toll road linking Sofia with Bourgas on the Black Sea. In finance. Preferred bidder/SPV: Trakia Motorway AD.
Roads
Plovdiv-Turkish Border Toll Road
Procuring Authority: Ministry of Regional Development and Public Works. New toll road from central Bulgaria to Turkish border. Development of a new toll highway from Plovdiv in central Bulgaria to the border with Turkey.
Not available
720
BULGARIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 7.1 |
Information supplied by
Sector
Project name
Value (€m)
Details
Roads
Hemus Motorway
1,000
Target to be completed by 2012.
Roads
Struma Motorway
600
Target to be completed by 2012.
infra-news.com
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| European PPP Report 2007 | Romania | Central and Eastern Europe
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ROMANIA Developing cooperation between the public and private sectors in establishing PPPs in different areas of economic growth.
Romania joined the European Union along with Bulgaria on 1 January 2007. The legislative efforts to achieve full alignment with the acquis need to be continued. This includes the elaboration of a fully coherent and comprehensive legal framework for public procurement including harmonised rules on concessions and PPPs and a fully aligned framework for e-Procurement as well as an independent and efficient remedies mechanism. At the time of the Report the government is in the process of drawing up PPP legislation in line with European standards, following consultation with the European Commission. In autumn 2006 the government also took on additional technical advisers to bolster their knowledge of PPP as they created a PPP programme and pilot projects.
From the private sector side there is also a project issuing from the Chamber of Commerce and Industry of Romania to set up a Centre of Excellence for Public Private Partnership which will promote and support: • the implementation of PPPs and the setting up of project companies; • the organisation and maintenance of project companies; • the attraction and use of private funds, including grants; and • the operation of services concessions. Despite all this activity there is still little publicly available information on tendered projects. However, it is clear looking at the project tables that the two sectors attracting most attention at central government level are roads and healthcare.
Since the last Report, a new body for the promotion of the PPPs has been created, the Central Unit for the Coordination of the Activities from the Domain of Public Private Partnership within the Ministry of Public Finance, to define and coordinate the governmental policies in relation to PPPs.
In addition, Bucharest has a €6bn infrastructure investment plan. By value, half is allocated to upgrading the transport infrastructure, such as projects to:
In addition, during the last year, the Chamber of Commerce and Industry of Romania has shown interest in promoting and developing cooperation between the public and private sectors in establishing PPPs in different areas of economic growth, for example, social and economic dialogue; investments; education; business environment and competition policy; regional development and urban planning.
Additionally, the plan has projects for a new Lia Manoliu national stadium and eight new regional hospitals.
• upgrade the city ring road; and • replace old rolling stock on the subway.
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| European PPP Report 2007 | Romania | Central and Eastern Europe
NO COMPLETED PROJECTS IN 2006 ROMANIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 8.0 | Includes any project in tender and in the process of being financed
47
Information supplied by
Value (€m)
infra-news.com
Sector
Project name
Healthcare
Polizu Obstetric Gynecology Not Hospital available
Details Procuring Authority: Ministry of Healthcare. In finance. Project to build and manage a private clinic. Ambulatory, diagnostic and imagery services also included. Preferred bidder: Romar Medical Centre (May 2004). Others shortlisted: Sanador-Policlinic of Fast Diagnostic.
Healthcare
Timisoara Clinical City Hospital
59
Procuring Authority: Ministry of Healthcare. Partial refurbishment and development of the new city hospital in Timisoara – concessionaire to build, provide equipment and carry out several health services.
Roads
Bucharest-Pitesti Motorway
200
Procuring Authority: Ministry of Transport. In finance. Preferred bidder / SPV: Alpine Mayreder.
Roads
Odjula-Focsany Road
Not available
Procuring Authority: NAR. Preferred bidder / SPV: Soleh Boneh.
Roads
1) Bucharest to Brasov Motorway Predeal to Brasov Section
310
Procuring Authority: NAR. The three projects on the Burcharest to Brasov motorway were included within the seven priority transport projects in the Romanian €3bn infrastructure programme. Payment mechanism based on availability. Preferred bidder / SPV: Ashtrom & Roichmann.
Roads
2) Bucharest to Brasov Motorway Comarnic to Predeal Section
480
Procuring Authority: NAR. Preferred bidder / SPV:Vinci Construction. Following a review of procurement in May 2005 the government announced that preferred bidder status may be removed.
Roads
3) Bucharest to Brasov Motorway Bucharest to Ploiesti Section
500
Procuring Authority: NAR. 62km DBFO motorway projects. Preferred bidder/SPV: Strabag.
Roads
Constanta by-pass project
259
Project for construction of 23km of road. Retendered due to lack of bidder interest.
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Central and Eastern Europe | Romania | European PPP Report 2007 |
ROMANIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 8.1 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Healthcare
Bucharest Fundeni Clinical Hospital
90
Procuring Authority: Ministry of Healthcare. Project to refurbish, finance and operate medical services in existing Fundeni hospital in Bucharest.
Roads
Oraste-Sibiu Motorway
420
Procuring Authority: Ministry of Transport.
Roads
Ploiesti-Sculeni Motorway
1,485
Procuring Authority: Ministry of Transport.
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| European PPP Report 2007 | Croatia | Central and Eastern Europe
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Central and Eastern Europe | Croatia | European PPP Report 2007 |
CROATIA Looking for investor initiated projects, especially with regard to the agricultural and tourist sectors.
In July 2006, the Croatian government enacted the Guidelines for Application of Public Private Partnerships (Official Gazette No. 98/06). These guidelines aim to enable Croatian cities and municipalities to build hospitals, schools and other institutions in a short time as these guidelines, among others, allow the cities and municipalities to seek long-term loans of up to 35 per cent of their annual income and are expected to provide an incentive for greater decentralisation. The Guidelines prescribe principles on which a PPP project should be based, procedures of public and private cooperation within the PPP and rules on establishment and management of PPP as well as the authority of public bodies to execute PPP agreements. The Guidelines are meant as a tool for the application of PPP, for public and private sector alike.
The Croatian government is looking for investor initiation of projects, especially with regard to the companies from the agricultural and tourist sectors. The market is thin – the two road projects having completed. The one current tender relates to delivery of a new gymnasium for a school in Koprivnica. In the tourist sector, the privatisation of the complex of hotels “Sunčani Hvar” on the island of Hvar has been completed. It is a PPP between the Croatian Privatisation Fund and the company “Orco Property Group” from Luxembourg.
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CROATIA: COMPLETED PROJECTS IN 2006 FIGURE 9.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
Split-Dubrovnic Section
163
Procuring Authority: Croatian Motorways Ltd. Estimated end of construction: 2009. Financing secured from domestic banks (PBZ included) – loans to Croatian Motorways Ltd. (State company) backed by the guarantee of the Ministry of Finance.
Roads
A11 Zagreb-Sisak Motorway 85
Procuring Authority: Croatian Motorways Ltd Project: New 45 km motorway linking south outskirts of Zagreb with the economic and strategic centre of Sisak. Preliminary design contract awarded May 2004.
Tourism
Privatisation of the complex Not of hotels “Sunčanai Hvar” available on the island of Hvar
Public Private Partnership between the Croatian Privatisation Fund and company “Orco Property Group” from Luxembourg.
CROATIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 9.1 | Includes any project in tender and in the process of being financed
Information supplied by
Sector
Project name
Education
School building in the city of Not Koprivnica available
Value (€m)
infra-news.com
Details Procuring Authority: City of Koprivnica. Construction of a new school building.
CROATIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 9.2 |
51
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education
Varaždin district schools
Not available
The district has started using the PPP model by inviting various private partners to tender, who will then construct and manage a number of objects (mostly public schools) for a period of 20 years. The investment will be paid in monthly instalments, whereas the District will participate with the amount of 80% and local units with 20%. Currently there are 29 schools and 14 sports halls being built within the Vraždin District.
Leisure
Reconstruction of the district palace in Varaždin
1,240
Awarding authority / awarder: District Varaždin / company Meteor.
Leisure
Stadium in Zagreb
200
Awarding authority: City of Zagreb. Seven international, as well as local, construction companies have responded to the invitation to tender, among which are: the Alpine Mayreder, Porr, Tehnika, IGK consortium and Bögl – Tehnobeton.
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| European PPP Report 2007 | Serbia | Central and Eastern Europe
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Central and Eastern Europe | Serbia | European PPP Report 2007 |
SERBIA Has begun discovering PPP contracts, and there are many areas where it is possible to implement them.
The government announced that it is going to allocate 20 per cent of the estimated €1bn raised from privatisations to fund infrastructure projects. Serbia has a large-scale DBFO/BOT real toll road project in tender. The €1.300m project for the new motorway between Horgos and Pozega is a 25-year concession. FCC/Alpine consortium are scheduled to sign the concession contract with the Serbian government. This is the first concession in Serbia in the last 75 years, and it will be a crucial test for this emerging market. The government is also considering letting a concession to operate the Bor mine. There are some projects that are being implemented on the municipal level such as water and wastewater projects, especially in urban centres. The legal framework for PPP in Serbia is provided by the Concession Law, Public Procurement Law and Foreign Investment Law. The Concession Law provides for the possibility of giving private companies the right to perform activities in the public
interest, such as road and mine construction/ operation and others. One drawback of this law is the fact that only the government of Serbia may grant concessions, on behalf of the relevant ministry, thereby excluding provincial and municipal governments from the process. However, it may be possible for provincial and municipal governments to influence the relevant ministry to recommend that the government lets a contract on their behalf. On the other hand, opportunities for PPP exist under the generic Obligations Law that regulates all contractual relations. Of course, the tender procedure regulated by the Public Procurement Law must be complied with. Thus, Serbia has begun discovering PPP contracts, and there are many areas where it is possible to implement them: roads, mines, utilities, energy, water facilities, even defence under certain conditions.
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| European PPP Report 2007 | Serbia | Central and Eastern Europe
EBRD ACTIVITIES IN SERBIA In Serbia EBRD has a big influence on PPP projects. In the future, EBRD will invest more than €600m in Serbia. The majority of this will be invested in the modernisation of roads and rail infrastructure, reconstruction of hospitals, schools, local bridges and in the promotion of navigation on the river Danube. Biggest investments of EBRD in Serbia: • In collaboration with the city of Belgrade EBRD participated in building a bridge over the river Sava. Belgrade received a loan of US$69,600,000 by EBRD. The total value of the project is US$161m and Belgrade will finance the remaining sum. • EBRD granted a loan of €20m for the realisation of projects for the modernisation of a system processing waste in thermal power station Kolubara B and for the construction of a new dump for the same amount.
55
• EBRD will invest about €140m in Serbia’s rail infrastructure. The company “Rails of Serbia” received a loan of €60m from EBRD. Guaranties were given by the government of Serbia. • EBRD will grant a loan for reconstruction of 26km of the highway from Aeroport “Nikola Tesla” to Bubanj Potok and for reconstruction of 26km of the circle road, and also for renewal of the tunnel “Stara Strazevica”. • The works on the highway through Belgrade are part of the project for construction of a bypass around the city and renewal of the bridge “Gazela” which is valued at around €290m. The project will be financed by a loan of €80m from EBRD. €112m will be supplied by the company “Roads of Serbia”, €7.5m will be supplied by the city of Belgrade.
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NO COMPLETED PROJECTS IN 2006 SERBIA: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 10.0 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education / Accommodation
University Village Novi Belgrade
250
Constructiuon of accommodation for 6,000 residents for University Games in 2009 and thereafter for private occupation.
Leisure / Retail
Shopping Mall “Delta City 67” Belgrade
82
The Mall would have 87,000 sq.m, 1,700 parking spaces, 160 shopping units. Over the next three years Delta Holdings will build four more facilities like this one (two more in Belgrade, and one each in Novi Sad and Podgorica). Construction starting: March 2006.
Rail
Belgrade’s “Prokop” railway station
200
The executive board commission of Serbian Railways has decided to award the contract for authorising the legal right for using and building commercial space in Belgrade’s railway station to “Trigranit Holding Company Ltd” from Cyprus.
Road
Horgos-Pozega
300
DBFO/BOT real toll road to be let under a 30-year concession.
SERBIA: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 10.1 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Waste / Wastewater
Serbian Water PPP Project
Not available
Team appointed by the European Agency for Reconstruction to advise on developing a PPP water and wastewater project in Belgrade.
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| European PPP Report 2007 | The Netherlands
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The Netherlands | European PPP Report 2007 |
THE NETHERLANDS A gradual step-up in the level of activity and heightened appreciation of the benefits of PPP.
You could never say that the Dutch market was racing ahead but during the past year there has been a gradual step up in the level of activity and heightened appreciation of the benefits of PPP (not only to those in the construction and financial communities with a direct interest, but to politicians and the public). There was good publicity surrounding the opening of the A59 DBFM road which was delivered on budget and ahead of schedule. The Montaigne school project opened in 2006 and it is hoped that this will rekindle interest in the schools sector. But the control and funding of schools remains complex and it is unlikely, without a mandatory obligation to trial PPP, that this will develop further. Whilst all non-transport projects over €25m do have to be considered for PPP, an individual school is unlikely to trigger this. The government will either need to lower the bar or consider grouped schools projects. The general election in the Netherlands in November 2006 slowed progress but there is little doubt that the current trend will continue in 2007. The current transport policy document 2010 to 2020 contemplates a total investment in transport infrastructure of €80.5bn of which €30.5bn is to come from private sources. The main unknown is the impact of the regional and local governments on the decision-making process (typically adverse and driven by environmental concerns) (see Westerschelde and Schipol below).
There is a lack of a public sector champion as the Kenniscentrum, a Ministry of Finance knowledge centre for PPS (as PPP is known in the Netherlands), was wound down during the period and there is now no simple route for public sector procurement teams to network on best practice and know-how. The standard DBFM document has been produced but has been left without ownership. As a result, PPS Network Nederland, an information platform, was launched at the beginning of 2007 by representatives of a large number of participants in the Dutch PPP market. The objective is to increase awareness of and provide unbiased information to decision makers and municipal and provincial government departments of the advantages of PPP and to increase deal flow in the market. The Dutch market comprises roads/crossings and government/office accommodation. There has been no development into health or schools because of their complex funding structures. The huge €6bn Zuider Zee link project for delivery of a high speed rail link from Amsterdam to the north of the country was cancelled during the period in favour of a much cheaper local transport option. The cost could not be justified to open up a currently sparsely populated region of the country. Traffic congestion is a major feature of Dutch life in the densely populated and trafficked southern region. There is growing acknowledgement that building more roads should not be the only solution and that road user charging is approaching both as a method of managing usage and generating funds for further road network enhancement.
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| European PPP Report 2007 | The Netherlands
ROADS AND CROSSINGS The Second Coentunnel project is the largest project currently in procurement, valued at around €1bn. It involves the construction of a second tunnel under the River Ij for the A10 ring road around Amsterdam and the ongoing maintenance of the new and existing tunnel. The 30-year contract uses the standard form DBFM contract issued by government last year (which itself is largely based on the UK standard form contract in terms of risk transfer). The tender process has moved to three shortlisted consortia (see project table for details) and the award is likely to be in 2007. The current tunnel is not tolled and the payment mechanism has been structured as an availability payment with an element of the payment being guaranteed. This is relatively normal with Dutch projects and is a technique which has allowed for the development of what is known as the zero-solvency facility (similar to the financing structure used on French projects), which has no risk weighting requirement (it is also guaranteed to be repaid by the government in the event of termination of the contract for contractor default) and can be provided at a very low margin. The Westerschelde Tunnel was moving through a tender process this year for privatisation of this existing asset. N.V. Westerscheldetunnel was established in 1998. The national and provincial governments invested in the company and funded the construction of the tunnel. The national government owns 95.4 per cent of the shares and the provincial government owns the remaining 4.6 per cent. The loan, with profits, will be paid back to the shareholders within 30 years. The company maintains and manages the tunnel including collection of the tolls. After 30 years, the company will hand over the Westerschelde Tunnel to the state for a token sum, after which there will be no charge for use of the tunnel. From that point onward, the state will pay the operating costs. That was the default position but the government was trying to realise the value of its investment early by letting a long-term operating concession for the existing asset including the right to charge and collect tolls. All was going well until the minority shareholder blocked the proposal. The central government has paused the process for the moment but will probably return to this at a later date. Estimates of the value of the sale are around €1bn. Looking forward, the government has already identified a number of road projects suitable for the DBFM treatment (see 2005 Report) in line with its view that all transport projects over €112m in value should be considered for PPP and public sector comparators are now being developed for these projects. But since that announcement there is also news that the government has introduced a Nota (a governmental vision of the future) on mobility which contemplates introducing law for road pricing and tolling. That is being linked to new infrastructure as a means of raising revenue to pay for the cost, most likely through a long-term concession structure.
59
AIRPORTS AND PORTS The state government is the majority shareholder in the company which owns and operates Schipol airport outside Amsterdam. The Cities of Amsterdam and Rotterdam hold minority interests. For some time Schipol has been looking to access the capital markets to raise funds to invest in expansion of the infrastructure and services offered in order to compete with the other major northern European international air travel hubs, such as Frankfurt and Heathrow. During the period the possibility of the privatisation of the Schipol operating company was floated but was blocked by Amsterdam. Another one to watch - this was just round one. The port of Rotterdam also opened a tender for a right to use the first plot of land at Maasvlakte 2 (a new port area to be reclaimed from the sea) and construct, develop, equip and operate a new container terminal at that point. This development has knock-on effects for related transport links. The A15, which is the main route east from the port, is marked as the next road project to get the DBFM treatment and is also one of the routes where road pricing or tolling is under consideration. GOVERNMENT ACCOMMODATION In number, if not value, this is the sector that is generating the most interest. The projects are generally office accommodation with a few exceptions, being on the lower risk side of law enforcement – courts and a detention centre. The Dutch Ministry of Finance building refurbishment project in the Hague uses a form of DBFM contract that predates the standard form but incorporates most of the key concepts. It is a 25-year contract with payment structure based on availability with a guaranteed payment element, post-construction. Completion with the Safire consortium occurred right at the end of 2006. Behind the Ministry project are four other projects in early stages of tender - two tax offices projects, the Kromhout army offices and the Rotterdam airport detention centre. All will use the new DBFM standard form contract. Kromhout is of an equivalent size to the Ministry and is in many senses simpler as a new build rather than refurbishment project. The smaller projects are looking more difficult, experiencing the same issues which led the UK to stop using PPP on smaller-scale projects - the procurement costs are not proportionally smaller in scale. Indeed one of the issues so far on these projects has been the public sector's lack of experience and unwillingness to take external advice. Nevertheless in a small market the bidders will stick with it, whatever form the procurement takes. One of the improvements in process is that the new phase of projects has a developed public sector comparator showing the PPP/PPS benefits against traditional procurement.
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TRENDS FOR 2007
Dutch contractors are not greatly evident in overseas PPP markets with the exception of Royal BAM which has a wellestablished presence in the UK and Republic of Ireland. It is unlikely that this situation will change moving forward. There are also non-domestic bidders with positions on the larger road and crossing deals. But unless they can develop a long-term relationship and also extract the benefits of being the contractor provider on a project, the equity investment is not justified for a project management role. Procurement requirements for a local track record also hamper a non-domestic bidder with no local partner. Dutch banks on the other hand have been relatively successful
overseas. Traditionally experienced in project finance in the energy/oil and gas field, they have for a long time had infrastructure teams active across Europe. ABN Amro has had early success in France, Italy and Spain with its equity and debt model and this year has established a €1bn fund with Dutch pension fund investors to make equity investments in PPP projects across Europe. There is also the Dutch Infrastructure Fund valued at €150m and the NIBC European Infrastructure Fund with a value of between €300m and €400m which will be launched in 2007 for primary and secondary assets. NIBC Bank has also used its expertise in asset class securitisation to launch the first securitisation of its own and Sumitomo debt related to 32 PPP projects valued at £388m.
NETHERLANDS: CANCELLED PROJECTS FIGURE 11.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
TBS-institute in Almere
Not available
Project for construction of a prison for mentally ill inmates, cancelled in February 2005.
Accommodation
Ministry of Agriculture Building
Not available
Redevelopment of main building cancelled in February 2005.
Healthcare
Groene Hart Ziekenhuis (GHZ)
Not available
Project for building and renovation works at hospital in Gouda. GHZ decided not to use PPP on 22/02/2005.
Rail
ZZ Link – Zuiderzee Line Project
Not available
High speed rail link connecting Randstand with Groningen. Cancelled spring 2006.
NETHERLANDS: COMPLETED PROJECTS IN 2006 FIGURE 11.1 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Dutch Ministry of Finance Building
177
Procuring Authority is Agency for Government Housing. A DBFM contract for a period of 25 years to refurbish, operate and maintain the Ministry of Finance building in The Hague. Sponsor Group: Safire – ABN Amro / Burgers Egron BV / BTI NV / ISS Nederland BV / Strukton Groep BV. 60
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| European PPP Report 2007 | The Netherlands
NETHERLANDS: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 11.2 | Includes any project in tender and in the process of being financed
61
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Tax office Doetinchem
18
DBFMO project for new building to accommodate 450 employees. Contract period 15 years. Prequalification complete.
Accommodation
Kromhout Barracks
193
25-year contract for DBFMO project to build a new office building for the MoD at Kromhout Army Barracks in Utrecht to accommodate 3,000 employees.
Accommodation
Tax office Groningen
Not available
Procuring Authority is the Rijksgebouwendienst (Ministry of Housing, Spatial Planning and the Environment) planning to let DBFMO contract to construct a new tax office. Building will accommodate the Tax Administration and Information Management Department. Parking will also be provided.
Prisons
Rotterdam Airport Detention Centre
Not available
Ministry of Justice to procure a DBFMO of detention centre at Rotterdam Airport. Centre will accommodate 576 detainees in 320 cells. Catering, parking and administrative facilities are included. Concession period of 25 years.
Roads
Amsterdam Coentunnel Project (II)
1,000
Procuring Authority is Ministry of Transport, Public Works and Water Management. DBFM concession of 30 years being tendered for second Coentunnel under River Ij in Amsterdam. The project includes construction of a second tunnel on the A10 ring road of Amsterdam and renovation and maintenance of first tunnel. Shortlisted consortia:Verenigde Coen Campagnie: Fluor / BAM PPP; GATEwest – Strukton / Ballast Nedam / ABN Amro / GTI/ Van Oord; and Coentunnel Company – Vinci / Besix Group / Arcadis / Dredging International / Dura Vermeer / CFE / TBI.
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NETHERLANDS: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 11.3 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Zwolle Court redevelopment
Not available
Considering PPP for redevelopment and renovation. To go ahead as DBFMO.
Accommodation
Central Bureau of Statistics building
Not available
Currently undergoing PPP analysis on redevelopment in Heerlen.
Accommodation
Amsterdam Court Centre
Not available
Public Sector Comparator (“PPC”) analysis under way on redevelopment of Amsterdam Palace of Justice.
Accommodation
Ministry of Defence Building Not available
PPC analysis under way on redevelopment of MoD building in The Hague.
Prisons
Dutch Prison project
Not available
Currently undergoing PPC analysis in relation to construction of 3,000 prison cells. Project to go ahead as DBFMO.
Roads
A4 motorway South Section-Delft Schiedam
511
Procuring Authority is Ministry of Transport. The project relates to possible PPP project to extend A4 motorway.
Roads
A2/A12/A27 Ring Utrecht
Not available
Considering toll concession.
Roads
A15 Maasvlakte-Vaanplein
1,000
Roads
A27 Breda-Utrecht
Not available
Considering toll concession.
Roads
Corridor Schiphol-Almere A6/A9
Not available
Considering toll concession.
Roads
Zuidas-Dock
2,000
Project to involve private sector financing for redevelopment of docks area.
Roads
Project Mainport Corridor South PMZ
Not available
Project to improve quality of highway connections on A4/A15 between Rotterdam and Antwerp – consultation exercise under way.
Roads
A2 Maastricht Road Project
Not available
Procuring Authority is Ministry of Transport.
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| European PPP Report 2007 | Belgium
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Belgium | European PPP Report 2007 |
BELGIUM Now a vibrant market in the hands of the French, Belgian and Dutch contractor and funder base.
Belgium may not be the largest market, but when you bear in mind its relatively small population and transport network, it punches well above its weight. 2006 did not disappoint. The very large Oosterweel road tunnel project was already in tender and the first tranche of the Flemish social housing project was awarded. This period has seen the addition to the tender list of two more large transport projects in the rail sector (Diabolo rail link from the Brussels Airport to the north and east of the country and the Liefkenshoek rail tunnel under the River Schelde in Antwerp) and a massive schools refurbishment programme for Flemish schools. At the other end of the scale there are new tenders for a fire station in Antwerp, further tranches of social housing and even a scheme to procure vessels for ship piloting and supply of tender in the Flanders region. A mixed bunch, but the variety should not detract from the fact that this is now a vibrant market in the hands of the French, Belgian and Dutch contractor and funder base.
Some of the larger projects were originally conceived along a different model to those in the rest of Europe which combine the delivery function (design, build, maintain and operate) with the financing function. Basically, the reason for this was that it was believed that including the financing could have been a hurdle for medium-sized Belgian companies to participate. It has become clear that this is not the best solution and we see that the more recent projects use models that are very similar to models used throughout Europe. A tender competition for a joint venture partner to provide the finance (both equity and debt) is being carried out as a first step for the schools and Diabolo projects. The long-term joint venture vehicle between the public sector and the funders will then implement the procurement of sub-contractors to enter into long-term design, build and maintain contracts. Of the three Belgian regions, Flanders is the only one which has taken the PPP concept forward. The Walloon and Brussels-Capital region have both investigated PPP and want to take it further. Flanders has a well-organised knowledge centre and is developing its own standard form DBFM contract for road projects (inspired on forms of surrounding countries). Municipal elections took place in October 2006 but, apart from minor delay, had little impact on the projects in tender or development.
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ROADS AND CROSSINGS In order to deal with the mobility problems in and around Antwerp, the authorities launched a 10-year plan to improve access to the city of Antwerp and its port. It includes the closure of the ring road (Oosterweel project), improvement of light rail, locks on canals, etc. It should be able to let Antwerp fulfil its role as a major transport and logistics hub via its port to the Ruhr region in Germany and further to Italy, northern France and parts of the Netherlands. The estimated €1.5bn Oosterweel tunnel project is now at best and final offer stage with one bidding group remaining (for details see project tables). The project itself involves delivery of a second tunnel under the River Scheldt to complete the Antwerp ring road and also a bridge over part of the old harbour. The new tunnel will be tolled with toll levels expected to be around €13 per lorry which will generate the majority of revenues. Traffic risk has not been considered so high on this project as on other green field toll crossing projects as the procuring authority “BAM” has control over other river crossings and, on the opening of the new tunnel under the terms of the Antwerp Masterplan, will divert all lorries currently using the east ring road Kennedy Tunnel to the new tunnel.
65
BAM is looking for an integrated DBFM solution, so the selected consortium will raise debt and equity financing for the project amounting to €300m or around 20 per cent of the project costs. The balance of the costs will be met by BAM. Related to the Diabolo rail project (see below) is a road project that will be executed at the same time (the Zaventem road project). The Zaventem road project is to construct a road connection for the road traffic coming from the north of Belgium (connecting Brussels to Antwerp) directly to the airport without first having to join the Brussels ring road. The project has a relatively low value (around €60m) but is rather complex because of its interface with the Diabolo project. It is certainly seen as a test case and several “missing road links” will follow over the next two years with a combined value of around €500m. The Zaventem road project is included for construction in the contract awarded by the rail company Infrabel, but the financing is organised separately by the Flemish government and this is currently in its tender phase.
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RAIL Infrabel is the procuring authority for the Diabolo rail project which involves the overall improvement of the rail links from Brussels Airport. A private sector funding partner is being sought first as a delivery partner and investor in NV Diabolo. One element of the project which will be tendered as a long-term PPP build and maintain project will involve the extension of the station platforms and construction of a new tunnel. Infrabel will pay NV Diabolo €9m annually over a 35-year period and, to incentivise delivery and long-term service, Infrabel will also pay NV Diabolo a percentage of every ticket sold on the airport link and a smaller percentage of national travel revenues. Later in 2006 the larger €684m Liefkenshoek tunnel was put to tender by Infrabel. The DBFM project involves delivery of a 16.2km rail link including a 8km tunnel under the River Scheldt in Antwerp. This is required to relieve the existing rail link and to cope with the projected increase in freight on this line. This project is being linked with the upgrade of the rail terminal at Zeebrugge port.
SCHOOLS The speedy and decisive approach to updating the fabric of the schools in the Flemish region has to be admired – not for them a gradual evolution from single to grouped to area-based BSF contracts as in the UK. The Flemish solution makes use of the two-stage approach – first find your funding partner to provide the debt and equity required for the implementation vehicle (a joint venture between funding partner and local authority). The funding partner will provide a facility valued at 90 per cent of the estimated €1.1bn project costs and 7.5 per cent of the balance of costs as equity. The Flemish government, through its school infrastructure agency AGIOn, will provide the balance of the equity investment. The joint venture will then let build and maintain contracts to sub-contractors for the reconstruction and/or refurbishment of bundles of five to 10 schools. There will be many of these sub-contracts as the number of schools in the programme is around 200. There is wide interest from banks prepared to lend on this basis. The joint venture will be responsible for the realisation of the school projects and, in particular, will be responsible toward the authority for the design, construction, financing, availability and maintenance of the school infrastructure during a period of 30 years against payment of an availability payment.
TRENDS FOR 2007
There is no doubt that the Flemish market is sound in terms of delivery – Oosterweel should complete and the financing structures it uses to do so are going to be very innovative. But that’s using the integrated financing model. More interesting still will be the debates surrounding where the allocation of risk lies on the two-stage funding and delivery tender projects such as Diabolo and the schools project.
Flanders has seized PPP as a means to update its heavily used and under-resourced transport and schools infrastructure. It has not delayed and its approach on funding may lead to a revolution in the way funding and risk allocation for infrastructure projects is approached elsewhere in Europe. Wallonia will make substantial progress in the course of 2007 to develop PPP for social housing, schools and infrastructure. Wallonia is on the verge of delivering some very interesting PPP programmes.
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BELGIUM: COMPLETED PROJECTS IN 2006 FIGURE 12.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Flemish Social Housing Project
25
Project to deliver 450 social housing units in 7 municipalities. First two tranches awarded to NV Van Roey and Fortis.
BELGIUM: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 12.1 | Includes any project in tender and in the process of being financed
67
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Flemish Social Housing Project Brabant
20
To be awarded by the Flemish government (through PMV). Project to deliver 188 units in four locations, a mixture of flats and houses. This is the third tranche of the social housing project: The first two were awarded to NV Van Roey and Fortis. The concession period will be for 27 years.
Accommodation
Fire Station and offices Antwerp
31
Build and maintain project. 37-year lease of property to be awarded. Annualised payment. Preferred Bidder: Confinimmo.
Airports
Antwerp Deurne Airport
20.5
The Flemish government awarded the concession to a preferred bidder consortium consisting of AIM / VLM / Flying Group / Exmar / Jacobs / BOSAL. The preferred bidder is currently arranging finance.
Education
Flemish Education Project
1,100
Flemish government pilot project for renovation and possible construction of schools. Pre-qualified funding partners: KBC / Dexia / Fortis Bank / Fortis Real Estate / Confinimmo / Barclays Capital / Meridiam Infrastructure / NIBC Bank.
Rail
Diabolo Rail Project
280
Procuring Authority (Infrabel) to let a concession for 35 years, for improving rail links to Brussels Airport. The PPP project involves developing extra platforms and construction of a rail tunnel. Finance is being raised separately by Infrabel.
Rail
Liefkenshoek Rail Tunnel
684
Procuring Authority NMBS. Project to deliver a 16.2km rail link including an 8km tunnel for a second rail connection under River Scheide in Antwerp Harbour. Shortlisted bidders: Besix / Effiage (BNP Paribas advising) / Macquarie / Strabag / Jan de Nul /Bouyges / BAM / Vinci/ CFE (ING advising).
Roads
Oosterweel Tunnel
1,500
Specially created public company Beheersmaatsshappij Antwerpen Mobiel NV (“BAM”) to let a concession for a period of 25 years on a DBFM basis for construction of a 10km road and tunnel under the River Scheldt linking east and west Antwerp. Preferred bidder is: THV Noriant: CFE nv / Besix nv / Cordeel nv / Dredging International nv / Van Wellen nv / Victor Buyck Steel Construction nv / FABRICOM GTI nv / Vinci Concessions sa / Vinci sa.
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BELGIUM: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 12.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
City regeneration
Multifunctional city regeneration projects
Not available
Awarded by the Flemish government. A number of cities have been pre-selected to submit PPP projects for a specific part of that city and will receive financial aid.
Maritime
Ship piloting vessel
40-50
Procured by Nautinvest. DBFM contract for 3 vessels to carry out ship piloting services in Flanders.
Rail
Brussels Terminal
Not available
Feasibility study under way for use of PPP for modernisation of Brussels terminal.
Roads (DBFM project)
Antwerp Masterplan
Not available
Flemish governments plan for improvements to all road links around Antwerp, as well as public transport, upgrade of the Albert Canal and renovation of the harbour.
Urban regeneration
Willebroek Noord: Brownfield Project
40
Flemish government is to award concession for redevelopment of disused industrial sites of which Willebroek Noord is a pilot project.
BELGIUM: CANCELLED PROJECTS FIGURE 12.3 |
Information supplied by
Sector
Project name
Value (€m)
Details
Rail
Rail Link Brussels-Luxembourg
366
Cancelled February 2005.
Rail
Zeebrugge Station
72
Cancelled October 2005.
infra-news.com
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FRANCE Has moved its PPP market forward to become one of the most dynamic across a range of sectors.
France has moved its PPP market forward to become one of the most dynamic across a range of sectors in 2007. It has a degree of central control and planning which is a good compromise between the extremes of Italy (market led) and the UK (government controlled). There is a central PPP taskforce in the Ministry of Finance which oversees and authorises projects to move into tender. As the market is still growing with government support, the taskforce's foot is applied to the accelerator rather than the brake. The last centre-right government was keen to utilise PPP as a means to invest in social and transport infrastructure. It is likely that the new Sarkozy government will continue to support the use of PPP and will aim to improve delivery and levels of investment. The realisation of around €14bn by the last government through sale of the government stake in three road operating companies (APRR, Sanef and ASF) during the period provided around €4bn of funds with which to prime further investment projects. The Report period has seen a number of projects completed. There were four healthcare projects including the large scale Caen and Centre Hospitalier Sud Francilien (“CHSF”) hospital projects; the A19 and A41 real toll road concessions and Tranches I and II of the prisons programme. The structures used to deliver these projects vary considerably – the roads follow the user-pays concession structure, whilst the hospitals and prisons have been procured under the health and justice sector-specific legislation which predated the general PPP Ordinance of June 2004. The consequence is that these first non-road projects are structured as long-term administrative leases, limited in the range of services to be delivered. But
importantly they are a base on which to build. There is a movement towards use of the PPP Ordinance amongst the projects still in tender and being developed. See the DLA Piper European PPP Report 2005 for detail on the PPP Ordinance. The three big French construction/operation groups (Bouygues, Vinci and Eiffage) came through the period well, all showing a significant increase in profits for the first half of 2006. All have done well on their early deals. Vinci and Eiffage secured one privatised road operator each and, like their Spanish neighbours, they have managed to absorb all local opportunities. (It should be noted that Eiffage is 32 per cent owned by Spanish company Sacyr and that a legal battle is currently opposing both companies.) Eiffage announced they would look for growth in the Portuguese, German and Hungarian markets. Bouygues bought the government stake in Alstom during the year (with which they are teamed on the Reims tram project) and have also forged an alliance with Depfa to provide a tailored equity and debt solution for smaller scale (sub-€15m capex) local authority projects. To this end, Bouygues has established a €150m fund. At the other end of the scale, Caisse d’Epargne has launched a €170m fund to invest in higher-end projects over €100m. These are the French-led funds and equally there are many pan-European infrastructure funds also looking to the growing market in France. Bank funding remains the norm although there is a precedent in the roads sector for project bonds. At the moment the margins which can be achieved on the quasi public sector lending structures, see below, are so low that the alternative of bond finance is not so attractive. However, with the larger 70
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scale rail and road projects coming along there may be renewed interest in bonds. The leading banks in this field are the local project finance and public finance specialists – Société Générale, Dexia, IXIS and Depfa. In addition ABN Amro has made an inroad through use of the equity and debt model and EIB has lent on Caen hospital (a sector precedent set on UK hospital deals). LEGISLATIVE AND CONTRACTUAL ISSUES One of the most significant legislative changes during the period has been effected by the January 2006 law which allows the state-owned rail enterprise Réseau Ferré de France (“RFF”) to procure infrastructure projects under the Contrat de Partenariat formula using payment structures based on demand, availability or performance. This was the precursor to the announcement later in 2006 that RFF has four PPP projects moving to tender (see Rail below). The most significant feature of these completed deals and those in finance is the use of financial structuring techniques to de-risk the project from the funders’ perspective, which leads to cheaper cost of finance and overall cost to the public sector. This is achieved by providing a significant proportion of the project debt (up to 70 per cent for the prisons projects) under a “cession de créances” structure. The first tranche of debt is provided on risk during the construction period but thereafter is de facto guaranteed by the public sector contract party as a portion of the payments due to the project company (sufficient to repay this tranche of debt over the contract period) are made without deduction for non-availability or non-performance of the project asset and these receivables are assigned to the funders. The second tranche of the debt bears project risk. In addition the project company may provide the public sector with a separate indemnity for failure to perform during the operational phase. The reduction in cost comes through the better credit risk and lower capital adequacy requirements for the banks as the structure creates the illusion that the counterparty is actually public sector rather than private. This structure has delivered low-debt costs on the first projects. But does this structure deliver the necessary off-balance-sheet financing under Eurostat rules? It seems unlikely. Perhaps the French government has watched the gradual movement on off-balance-sheet treatment of the UK government and wants to go straight for value for money as the primary goal.
ROADS This remains a strong sector. The projects have followed a traditional user-pays concession structure, the A41 and A19 being the latest completed examples, with the A65 stuck awaiting regulatory approval of the final deal and the A88 and A65 in early stages. In development are projects such as the A4 – A86 dualling project which is being developed as a possible PPP following the Contrat de Partenariat model with payment by government based on availability and/or performance. RAIL Light rail projects are part of the transport landscape in France and this year has been no exception. The Reims tram project declared the Alstom/Bouygues consortium its preferred bidder for the €300m 30-year DBFO concession for a 10km line. Further south, the Vinci/ CDC consortium was appointed preferred bidder on the €100m rail station to airport link in Lyon. The tender for a DBFOM concession to link the Gare de L’Est and Charles de Gaulle Airport was launched. The tender has requested bids on the basis of delivery, operation and maintenance of both infrastructure on the line and rolling stock. The intention is that the project should be self-financing without recourse to public funds. But the main rail story is the announcement by the government that RFF will procure the following heavy rail infrastructure projects using a PPP mechanism: • A high-speed link between Tours and Bordeaux. This project is likely to be structured as a concession with demand risk being taken by the concessionaire (but given that the sole user will be the government-owned entity SNCF that risk does not look onerous). The project is divided into two tranches: • Bordeaux to Nord d'Angoulême valued at €1.79bn; and • Angoulême to Tours valued at €2.99bn. • A high-speed link between Nîmes and Montpellier. This project is more likely to be structured as a DBFO project with payment by RFF on the basis of availability and performance. • The modernisation of the sol-train radio communications system valued at €700m with payment by RFF. Also under consideration are a high speed link between the Rhine and the Rhône East region and the Roissy Express link.
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HEALTHCARE Away from transport, healthcare has been the main sector for delivery. There were around 30 healthcare projects identified as part of the 2005 inter-departmental exercise to identify suitable projects for PPPs. Some of these were drawn from the Hôpital 2007 programme. Those that went forward are now completing or in advanced tender stage. To date they have all been procured under the sectorial health ordinance and structured as long-term leases with few services other than maintenance of fabric and utility provision attached. The projects vary from large (over €100m), such as CHSF and Caen, to the small hospital units or care facilities for elderly people. Moving forward, the projects will have the ability to add additional services under the terms of the Contrat de Partenariat global contract and possibly move to transfer more performance risk to the private sector.
DEFENCE The defence sector has been disappointingly slow. The helicoptertraining school project is a large-scale project for delivery and ongoing maintenance of a fleet of helicopters for the military training school at Dax for a period of 20 years. It is in the very early stages of procurement. There is no evidence of many projects behind this – which could reflect the department's reluctance to change procurement patterns. Other sectors have little activity. There are a couple of waste management projects and school projects but these are mostly locally initiated such as the €13m Loiret school 10-year DBFM project which was awarded to Vinci/Auxifip under the 2004 Ordinance. One huge anomaly is the €2.9m canal project which proposes to link Paris to Lille by canal. Feasibility studies are in process.
PRISONS A similar story to hospitals – Tranche 1 and Tranche 2 projects have now been completed under the justice sector ordinance which will deliver seven new prisons. Tranche 2 did add services in the shape of Facilities Management (“FM”), catering and utility supply, but the second wave (not Tranche 3) which has just entered procurement, will also look at inclusion of more services such as training, laundry and transport. Given that the prison programme has plans for 18 new prisons there is some mileage left in this sector. As well as new build there is also a refurbishment project in development for the 1,300 inmate Santé prison in Paris. At a more local level the Gendarmeries are in need of large-scale investment. PPP has started to be used there and there are two current examples, Caen and Albi, but at a local authority level the scale of know-how and project costs in relation to project size make this an unattractive option. The local departments and municipalities need support from central government to make it happen but the current political division between central (right) and local (left) political control makes it unlikely under the current regime.
TRENDS FOR 2007
The French market is really moving on transport and social infrastructure. This comes from strong political commitment to PPP at the highest levels. The spring 2007 presidential elections and consequent distraction to high-level decisionmakers and the political executive is not to be discounted. 2007 is likely to be a period of finishing current tenders, reviewing and bedding down before another big push for expansion of PPP in autumn 2007. But PPP favours the patient and those who can wait will be rewarded.
The market is not yet mature enough to have developed a secondary market for project equity but the advent of the funds driven by the larger scale of projects coming forward and the potential scale of the market post-election could prompt some initial trading activity towards the end of 2007. One of the interesting things to watch for will be how French contractors react to any momentary hiatus in market activity. Will it expose them to further internal consolidation or nondomestic bids? Will this leave them more anxious to push into new markets such as the US? The banks, on the other hand, have other product areas and wider markets to turn to.
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FRANCE: COMPLETED PROJECTS IN 2006 FIGURE 13.0 |
73
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Healthcare
Douai Hospital
30
DBFM of logistical support platform for the hospital in Douai. Sponsor: Bouygues (via Norpac / Exprimm). Arrangers: ABN Amro / DEPFA.
Healthcare
Evian Retirement Home
13
30-year contract for DBFM project to deliver new retirement home using long team lease structure. Sponsor: Gespace France (Dalkia Group). Funder: Société Générale.
Healthcare
Caen Hospital
100
New 345-bed hospital department at Caen in Normandy. Sponsor: Bouygues / Quille / Exprimm / ABN Amro. Funders: ABN Amro / Royal Bank of Scotland / Société Générale.
Healthcare
Southern Ile de France Hospital PPP CHSF
300
New build hospital project near Paris. Sponsor: Eiffage.
Prisons
French PPP Prisons Tranche I at: Roanne: 600 inmates Nancy: 690 inmates Lyons-Carbas: 690 inmates Béziers: 810 inmates
380
This is the largest new prison-building programme in Europe. Structured as a 30-year DBFMO Project, excluding soft services. Tranche 1 will deliver 2,800 new spaces. Sponsor: Eiffage. Arrangers: Natexis / Calyon.
Prisons
French PPP Prisons Tranche II at: Le Havre: 690 inmates Poitiers: 600 inmates Le Mans: 400 inmates
350
DBFMO 30-year contract. Sponsor: THEMIS (Dexia (40%) / Royal Bank of Scotland (40%) / Bouyges (20%). Arrangers: Dexia / RBS.
Roads
A19 Motorway
618
100km toll road stretching from Artenay to Courtenay. 65-year DBFO Project. Sponsor: Arcour / Socaly / Cofiroute consortium.
Roads
A41 Motorway
840
19km toll road from Villy to Saint Julien. Sponsor group: Bouygues / Autoroute Rhone-Alpes / GFC Consortium / DTP Terrassement / Colgas / SETEC / Caisse d'Epargne / Prevoyance des Alpes / Losinger Construction. Arrangers: Calyon / HBoS / HSBC-CCF.
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FRANCE: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 13.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Helicopter Training School Project
Not available
The project involves the provision of a fleet of helicopters for a military training school in Dax. The private contractor will be responsible for the financing, maintenance and repare of a new fleet of helicopters for an estimated period of 20 years.
Accommodation
Caen Police Station
100
The project involves a DBFMO contract for a new police station in Caen.
Accommodation
Albi Police Station
12
The project involves a DBFMO contract for a new police station in Albi, Languedoc region.
Accommodation
Four French Police Stations
20
Design, construction, finance and maintenance of police stations in four French cities.
Accommodation/Leisure
National Sports Institute Renovation
72
Design, development, financing and partial maintenance and operation of INSEP, the National Institute for Sport and Physical Education in Paris for a period of 30 years. Procured using new Ordinance 2004 legal framework. Preferred Bidder: GTM / Barclays. MLA: Dexia.
Healthcare
CH de Saint-Nazaire
250
Design, build, finance and partial operation and maintenance of a new 750-bed structure that will combine a public and private healthcare institution onto one site in Saint-Nazaire, France. Shortlisted bidding groups: Bouygues / Eiffage
Healthcare
Bourgoin Hospital
120
The hospital reconfiguration project involves a DBFMO contract for the construction of a new complex joining the Centre Hospitalier Pierre Oudot Bourgoin Jallieu with a centre at Vion and the St Vincent de Paul clinic. Shortlisted bidding groups:Vinci / Eiffage / Bouygues / Dalkia
Healthcare
Nancy Hospital
70
DBFMO of a 261-bed building for medical specialities. Bidders include:Eiffage / Vinci / Bouygues
Healthcare
CHU Rennes
50
Design, construction, finance, and partial operation of a new hospital in Pontchaillou, Rennes.
Healthcare
Beaumong-Sur-Oise Les Oliviers Psychotherapy Centre
Not Available
Tender published for the DBFM of a 60-bed psychiatric unit, part of the government’s Hospital 2007 plan.
Healthcare
Annemasse Hospital
150
Short listed bidders: Vinci / Eiffage/Bouygues
Healthcare
Extension to Pitié-Salpétriére Hospital Paris
Not Available
DBFMO contract for extension of existing hospital to have endocrinology and diabetology departments.
FIGURE 13.1 | Continued on page 75
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FRANCE: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 13.1 (Continued) | Includes any project in tender and in the process of being financed
75
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Light Rail
Reims Tram
300
The PPP project offers a 30-year DBFO contract for a 10km tram line for the French city of Reims, in the region of Champagne-Ardenne. The EIB has proposed to contribute up to 50% of the total cost of the project. Preferred Bidder: Alstom/ Bouygues / Quille / Pertuy Construction / Colas / Transdev / Caisse des Depots / Ixis / Caisse d’Epargne et de Prevoyance de Champagne Ardenne / SNC-Lavalin / Pingat Ingenierie
Light Rail
Leslys Tramway Lyon
100
30-year DBFO concession for 9km tram link between Part-Dieu rail station and St Exupery Airport. Preferred bidder is: Rhone Express:Vinci (25.2%) / CDC (36.6%) / Vossloh / Cegelec / Veolia Transport
Light Rail
CDG Express
630
The project will connect Gare de l’Est in Paris to CDG Airport in Paris. A DBFOM structure for infrastructure and rolling stock is proposed. No public funding is available.
Prisons
French PPP Prisons, “Second Wave” (three new prisons near Lille, Nantes and Paris)
200
Launch of the “second wave” of the MoJ’s PPP Prison programme under DBFO scheme, including broader scope of services such as catering, laundry, transport and training.
Roads
A88 Road concession
190
The project involves the DBFMO of part of the A88 motorway between Western Falaise and Sées in Normandy. The project will deliver 44km of real toll road. Pre-qualification is under way.
Roads
A65 Motorway
1,000
The proposed 150km A65 project will link Langon in Gironde with the mid-Pyrenees region. Awaiting regulatory approval of scheme following award to the A’lienor consortium (Eiffage/Sanef). MLAs: Fortis / ING / IXIS / Natexis / Santander.
Roads
A63 Tolling Project
700
The project is in tender, awaiting selection of a shortlist.
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FRANCE: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 13.2 |
Information supplied by
infra-news.com
Sector
Project Name
Value (€m)
Details
Accommodation
Bourgoin-Jallieu Court Centre
Not available
The project involves extension / construction works to the court centre in Bourgoin-Jallieu.
Accommodation
Toulon Court Centre PPP
Not available
The project involves extension / construction works to the court centre of Toulon in the south of France.
Accommodation
Palaces of Justice
500
Feasibility study on redevelopment of Palaces of Justice under a PPP structure.
Accommodation
Chartres Fire Station & Training Centre
Not available
Construction of a fire station (7,000 sqm) and a training centre for firemen (6,000 sqm) in the city of Chartres.
Accommodation
Le Bourget European Air Space Museum Project
300
No relevant information available.
Accommodation
Toulouse University PPP Project
Not available
The project involves the renovation of teaching facilities at Le Mirail University in Toulouse.
Accommodation
City of Châteauneuf-du-Pape Not available
DBFM for the housing of military personnel.
Accommodation
Conservatoire national des Arts et Métiers
Not available
Construction/renovation of buildings under a DBFM contract.
Accommodation / Leisure
New Stadium in Lille
170
Project for new 50,000 capacity stadium on 27 HA site.
Airports
Nantes Airport PPP
Not available
The project involves the delivery of a new airport at Notre Dame des Landes in Nantes.
Defence
IT Communications Network for Air Force
Not available
Nominated by Ministry of Defence as PPP project.
Leisure
Département of Haute-Marne
Not available
Creation of a leisure resort (with animals) under a DBFOM contract.
Prisons
Paris Sante Prison
140
The project involves the refurbishment of the existing Sante Prison in Paris which accommodates 1,300 inmates.
Rail
Montpellier and Nimes link
1,200
Likely to be procured as PPP contract, paid on availability.
Rail
HSL Rhine-Rhone
2,200
The project involves the delivery of a high speed rail link between Rhine and Rhone. Likely to procure infrastructure under traditional procurement and equipment by PPP.
Rail
HSL Tours-Bordeaux
5,000
302km HSL line between Tours-Bordeaux in the southwest of France. A study is being carried out concerning the feasibility of certain legal and technical aspects of the project. Likely to be procured under a concession structure.
Rail
Lyon-Turin High Speed Rail Link
6,000
Advisers appointed and project in development.
FIGURE 13.2 | Continued on page 77
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77
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
A4-A86 Road dualling project
600
Preliminary studies underway for availability-based PPP DBFO contracts.
Roads
A585 Digne-Les-Bains
Not available
The Ministry of Transport intends to re-tender the project.
Roads
Strasbourg Ring Road
Not available
The project will be tendered.
Roads
Bordeaux Ring Road
Not available
No project information available.
Roads
Avignon East-West Connection
Not available
The project involves the delivery of an east-west connection in Avignon between the motorways A9 and A7.
Roads
L2 By-Pass Marseille
500
The project involves the delivery of the L2 by-pass in Marseille between the A7 and A50. According to the city of Marseille, €220m is needed to complete the eastern part of the by-pass. Completing the northern section, for which a route hasn’t yet been designed, would cost €300m.
Roads
RN 88 in Aveyron
Not available
The project involves dualling of 120km of the RN 88 between Albi and the A75 motorway in the southwest of France.
Roads
A24 Amiens-Lille
Not available
Concession contract for real toll road.
Waste Management
Tours Waste Treatment Project
Not available
No relevant information available.
Waste Management
Boulogne-Billancourt
15
The project involves the DBFOM of an underground pneumatic waste collector.
Other
Canal Seine-Northern Europe (to link Paris to Lille by canal)
2,900
Development of a 120km long canal between Compiegne, on the River Oise and Dunkerque-Escaut. Feasibility study being carried out.
Other
Fos 2XL (PPP expansion of publicly-owned port of Marseille)
400
Port expansion scheme to increase container capacity to 2.1m units.
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GERMANY PPP has now reached the more affluent south and south-west of Germany, a region which was believed to be closed for PPP.
In 2006 Germany’s economy started to pick up as tax revenues grew faster than expected and the deficit came within Eurostat limits. A change of federal government in September 2005 replaced the former government (SPD and Greens) led by Chancellor Schroeder with a new coalition government (CDU and SPD) with Angela Merkel as new Chancellor. Restoring the state of the depleted public finances was core to the CDU’s election manifesto. However, the internal dynamics of the coalition are proving difficult and the reform of the expensive national healthcare system was the first reform to be kicked into the long grass. Signals for a recovering economy and increasing tax revenues do not outweigh the structural underfunding of social and transport infrastructure. The poor finances and the huge demand for infrastructure spending (some estimate the federal and state requirement to be €70m per year) is driving PPP up the agenda. According to the German press, communal spending is about 40 per cent below the level of 1992. The new Finance Minister, Per Steinbrück, is a strong supporter of PPP and in a speech in 2006 he announced his intention to strengthen the role of PPP in Germany, increasing it from four to 15 per cent of public sector investment. He also announced legislation to allow private sector investment in social infrastructure. A second PPP Acceleration Act is on its way with the aim to fine-tune the legal environment towards PPP. The Federal Government also has a Growth Programme designed to leverage €25.2bn of investment into infrastructure over the next four years. The development of the Fehmarnbelt Crossing between Germany and Denmark will eat into a large part of that investment. The level of activity also increases on the regional or Länder level with renewed efforts inter alia in the
states of Hessen and Baden-Württemberg. PPP has reached the more affluent south and south-west of Germany, a region which was believed to be closed for PPP not a long time ago. But will PPP be able to deliver enough investment to make a difference? Some say no and have their eyes on bigger targets. Two assets remain in government ownership which could raise very significant funds – Deutsche Bahn and the road network. Deutsche Bahn is now back in profit after some lean years and looks a possible target for privatisation. But each step on the long and protracted way to privatisation is heavily embattled between Deutsche Bahn and its competitors, the politicians and the unions as has lately been proven with regard to the compromise on excluding the track from privatisation. The motorway road network is using the road toll system for HGVs to fund enhancement projects and there are a number of real toll crossing F-Model projects. But moving to a toll for cars, necessary for privatisation on the US model, is likely to be a step too far for this fragile government even if the figures do look attractive. While the Federal Government may be tied in political knots (although the established projects such as A-Model and the military barracks projects have enough momentum to progress) the action now seems to be at Länder or state level. The 15 Länder have responsibility for a large range of government functions including education and healthcare infrastructure. A growing number of Länder have task forces in place and live projects in tender and even the new Prime Minister in Baden-Württemberg, Günther Oettinger, is also a supporter of PPP and that state will soon deliver projects as well. 80
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LEGISLATIVE AND TAX CHANGES To date the negotiated procedure has been the preferred procurement solution for procuring PPP contracts. During the Report period the competitive dialogue procedure has been introduced into German law by “the Act to accelerate the use of public private partnerships” or the “Acceleration Act” dated 1 September 2005 (transposition of EU Directive 2004/18/EC). According to German law, the competitive dialogue procedure applies in complicated projects in which the procurement agency is not capable of naming the technical solution necessary for the project or if it cannot give information about the legal and economic requirements of the project. The role of negotiation in the German procurement process has, therefore, been strengthened. Tendering procedures based on output specifications and structured negotiation phases are not new to the German market. But there are some concerns amongst sponsors that the new tendering alternative may result in procuring agencies playing off bidders against each other. The requirements for the application of the competitive dialogue procedure are not clear, the competitive dialogue procedure will not lead to a reduction in costs of the proceedings and the Acceleration Act does not contain regulations with regard to the protection of data/information given by bidders during the first phase of the competitive dialogue procedure and so the intellectual property of the bidders is not protected. But these problems are not limited to Germany as the provisions of the PPP Acceleration Act merely reflect the Procurement Directive 2004/18/EC. There is particular concern about the cost of bidding. It is generally held that bidding costs are too high in relation to the number of available projects and competitors for each project and must be reduced. In case of the prominently failed project “StrelasundQuerung” (calculated project value of €92m) costs for each bidder to prepare a bid were calculated at between €1.5m and €2.0m. Procurement authorities are not used to paying reasonable compensation to losing bidders. Even with regard to the current A-Model projects compensation is said to be far less than €100,000. In particular medium-sized companies have difficulties in bearing the costs emerging from the preparation of bids for PPP projects. One of the big challenges to reducing bid costs is the practice of challenging procurement decisions which is commonplace in Germany. On the A8 A-Model road the OHL consortium failed to pre-qualify and challenged the legitimacy of this decision. The resulting delay can easily be up to three months. Along with introducing changes to the procurement procedures the Acceleration Act: • permits the main private sector contract party to sub-contract delivery of some of the services required by the main contract; • permits sale and leaseback structures for federal assets (it is assumed that state legislation will shortly follow to replicate this for Länder assets as well); and • has provided relief from tax on the acquisition and ownership of the underlying real estate asset if the ownership of the asset reverts automatically at the end of the contract.
81
A second Acceleration Act is currently being drafted to deal with a range of tax issues which are stalling progress on PPPs. This includes VAT (which was set for a three per cent increase in January 2007). One of the main issues yet to be resolved is the lack of a public sector comparator for projects, without which the government cannot be clear whether the private sector solution offered represents value for money spent. HEALTHCARE A major development has been the completion of the first healthrelated PPP – the Proton Therapy Centre at the Essen University Hospital. Proton therapy is a relatively new form of cancer treatment and the centre will be the first on a PPP basis in Germany. The project involves a 15-year DBFO contract for construction and maintenance of the facility and the medical equipment within it. The consortium is made up of Strabag Projektentwicklung (delivering the facility building) and IBA (delivering the proton technology). Payment is on availability of the facility but the relatively new technology is reflected in the higher than usual funding costs for a PPP. The financing of Essen was also a first as it was raised by Deutsche and Fortis arranging unwrapped bonds for €122m senior (14.5 years’ maturity), €7m mezzanine (construction plus 10 years’ maturity) and €7m of junior debt. The financing is raised through a Luxembourg domiciled orphan vehicle to benefit from the tax benefits of a forfeiting structure (selling the German receivables offshore). This structure is moving away from the municipal credit-backed financing which has so far been more typical of the German PPP market. Whilst the tax breaks associated with forfeiting remain there is a balance to be struck between taking those benefits and moving to a higher risk transfer model. One of the criticisms levelled at German procurement teams is that they do not acknowledge that transfer of risk to the private sector usually has costs associated with it. Behind Essen is another particle therapy unit in Kiel and new buildings/wings for existing hospitals in Bremen – Mitte, Viersen, Cologne and Münster. The budgets for these projects are held at Länder/municipal level. SCHOOLS This sector continues to develop. The projects are procured mostly at municipal level which is the reason why larger-scale projects bundling schools across municipalities within a Land have been limited so far. Larger projects are at pre-tender stage, eg Hamburg and Freiburg each have projects with more than 20 schools per bundle. However, the completed schools projects this year have one or two school sites being refurbished or new build keeping the overall project value size low, between €20m and €30m. The structures are the familiar property-style finance, long-term lease of the asset with associated FM contract and little risk transfer. Forfeiting of the (near guaranteed) project receivables by the project company remain the most common structure for financing. As the deal sizes increase with bundled projects next year the market may well start to move to greater risk transfer and concentration on the receivables rather than underlying asset value.
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ROADS It was a good year for the A-Model roads. The four first-wave projects, the A8, A4, A1 and A5 in that order, progressed through tender and shortlisting. The German Transport and Finance Ministries have reluctantly agreed that they should assume the risk of toll collection (tolls on HGVs using the project road in each case which are monitored and gathered through the Toll Collect project – see earlier DLA Piper European PPP Reports). There were blips in terms of pre-qualification criteria and subsequent challenge, but overall the process is moving and completions are likely in the first quarter of 2007 with regard to the A8 and the A4. The A-Model offers a start-up payment provided by the government to the project company during the construction phase depending on the HGV traffic volume. Although this is contrary to the payment on delivery of service philosophy the project economics of doing this are improved and the overall cost to the government reduced. This is a model used in road projects in other countries such as the Netherlands. There are five strong bidding groups: • OHL, Alpine Mayreder and Max Streicher advised by Hypovereinsbank; • Autobahn Plus – BAM PPP, Egis, Fluor, Trapp and Berger Bau advised by KPMG; • KONFAM – Strabag, Hermann Kirchner, Bickhardt Bau and Max Bögl advised by NIBC; • Eurovia Hochtief and Vinci Concessions advised by Deutsche Bank; • Bilfinger Berger, Laing Roads and Walter Heilit advised by Macquarie. In addition to the A-Model roads there are also three F-Model real toll crossings moving to tender, namely the Hamburg Harbour crossing, the A281 Weser crossing and the Albaufstieg in BadenWürttemberg. These are complex projects with difficult geological, environmental and financial issues and it cannot be ruled out that yet another year will pass without tenders being launched. Finally the Fehmarnbelt Crossing has government commitment but the cross-border cooperation and huge sums required to get this project even to the point of launching the tender adds another layer of complexity. PRISONS, GOVERNMENT OFFICE ACCOMMODATION AND MILITARY GARRISONS Like some of the hospitals and universities, prisons and local government offices are within the remit of Länder and there are now a few at tender, typically new build projects. The projects do not include transfer of the entire operational aspects of the prison as this is prohibited under constitutional law.
These local projects lend themselves to funding by municipal credit, a process by which a government-owned body, typically KfW (a bank owned by the federal state with a function similar to EBRD or EIB) lends funds for a project to a municipality or Länder which then lends the funds to the private sector partner, each lending being at low interest and on good repayment terms. The provision of municipal credit is often combined with forfeiting – the receivables mostly limited to the construction phase being sold to the lender, up front, in exchange for provision of funds. The public sector project counterparty is also required to waive all claims or defences to non-payment so that there is no risk attached to the receivables. Structured in this way the project funding becomes a government credit. The military garrison projects have been developed by a federal agency (“g.e.b.b.”) whose role is to optimise and/or outsource tasks currently performed by the German armed forces (“BW”) without forming part of core military services. g.e.b.b. also advises the German MoD on property management for BW. This covers conversion of sites no longer used as well as innovative concepts for sites that will still be required by BW. g.e.b.b. has identified three pilot projects for the refurbishment and operation of garrisons: • Fürst-Wrede-Kaserne Munich, investment volume €39m; • Kurmainz-Kaserne Mainz, investment volume €19.8m; • Emmerich-Cambrai-Kaserne Hannover, investment volume €58.7m. The Fürst-Wrede-Kaserne site is being developed for continued use by BW and was put out to tender in August 2006. It is not yet clear when and if further projects will follow. Fürst-Wrede-Kaserne in the north of Munich was built in the 1930s and is in a relatively bad shape. The German MoD took the decision to concentrate required sites in that area and market sites closer to the city of Munich (namely Bayern-Kaserne, 100 hectares). The current size of the Fürst-Wrede-Kaserne is 67.5 hectares, of which 42 hectares (the northern part of the area) will be cut off and also developed for non-military investment purposes. The net floor space is 71,000 sq.m. The services to be tendered include design, build, financing and operation of the garrison for 20 years and, upon expiry of that period, possibly realisation of the site. The costs of rebuilding/refurbishment of existing buildings are estimated as €38m. Initial plans for a new assembly hall are no longer being pursued. Structural and underground engineering (Hoch-und Tiefbau) will include administrative, housing, commercial and utility buildings and the technical development of the site (technische Erschließung). The operational tasks are being regarded as low-tech FM. Operation will include quasi-hotel services. Catering will not be in the package. The private operator will not be required to train soldiers or other staff.
The first true prison PFI, Burg prison, completed. Services to be provided include construction and maintenance and some operational responsibility, for example training and development.
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TRENDS FOR 2007
The coming year looks good for the German PPP market – like Spain it has established a reputation for delivery of projects at federal, state and municipality level. This has been assisted by task forces for PPP projects in federal government and some of the Länder.These task forces promote and accompany selected PPP projects.There is a great deal of information and expertise available and this is being applied to get the deals done. The accommodation projects may not follow the same models as elsewhere in Europe, but the likelihood is that this will
83
normalise as the domestic PPP market grows. Limits on municipal funding and further changes to legislation to adjust the current bias towards forfeiting techniques will assist this process and there are plenty of potential bidders in the market who can deliver on higher risk transfer structures. The financing which will be used for the A-Model roads (limited recourse debt secured on project revenues not assets) will also open the structured financing market in Germany and it is likely to become the rule rather than the exception as project values grow.
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GERMANY: COMPLETED PROJECTS IN 2006 FIGURE 14.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Frankfurt Student Accommodation
Not available
DBFO contract for 25 years for a student hall of residence on the Riedberg (science) campus at the Goethe University. Sponsor: Schneider Bau. Financial close reached on 1 April 2005.
Education
Lachendorf School Project
26
29-year contract for the construction of a secondary school and sports hall in the county of Celle. Sponsor: Hochtief PPP Solutions. Financial close reached in May 2005.
Education
Ritterhude School Complex
20
20-year contract for construction of new buildings at the Moormannskamp school complex in Lower Saxony, and the redevelopment of existing buildings. Sponsor: Lindner AG. Financial close reached in October 2005.
Education
Leverkusen Schools Project
26
Renovation, reconstruction, modernisation and operation of a vocational school centre in Leverkusen. Awarded to Hochtief. Financial close occurred in August 2005.
Education
Northeim Vocational School
10
Extension of Northeim Vocational School. Sponsor: Anethum consortium (including Kathmann Bauunternehmung GmbH & Co. KG).
Education
Cologne Schools Project
34
Renovation (including extension work), maintenance and operation of five school complexes in the Cologne area. 25-year DBFMO contract. Sponsor: Hochtief PPP Solutions. Financial close reached on 6 April 2005.
Education
Rockwinkel School Complex 10
Design, build, finance of new buildings. 20-year DBFO contract. Sponsor: Strabag.
Education
Bedburg Schools Project
16
25-year DBFO contract for New Schools and connected sports facilities. Sponsor: SKE GmbH. Funder: NRW Bank.
Healthcare
Proton Therapy Centre
136
15-year contract for design, construction, finance and operation of a proton therapy centre on the site of the University Hospital in Essen. Sponsor: Strabag, / ION Beam Applications. Arrangers: Deutsche Bank / Fortis.
Street Lighting
Hagen Street Lighting
Not available
Relatively small PPP street and traffic lighting project. Project awarded to Stadtlicht GmbH. Financial close reached in April 2005.
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GERMANY: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 14.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Esslingen Administration Building
20-25
DBFO of an administration building in Esslingen.
Accommodation
Schwerin Accommodation PPP
18
Accommodation
Wiesbaden Court Centre
Not available
ITNs issued.
Accommodation
Hamburg Elbphilharmonie
100
Development of a new concert hall. ITNs issued.
Accommodation
Kassel Finance Building
35
DBFO of the finance building. ITNs issued.
Accommodation
Chemnitz Court Buildings
74
20-year DBFO project involving new court buildings and prosecution facilities in Chemintz Saxony. Preferred bidder: Bilfinger Berger.
Accommodation
Olpe Fire Station
Not available
The project involves the construction of a new fire station in Olpe.
Accommodation
Potsdam Landtag Project
60
Refurbishment/new build of a building complex to centralise the administration of the city of Brandenburg.
Defence
Herkules IT Project
6,650
Upgrade the military’s phones and computers. 10-year contract with IBM / Siemens consortium signed in 2006. Government approvals expected in 2007 to allow project to move to financing.
Education
Seligenstadt School Project
22
Redevelopment of a secondary school and the construction of a new sports hall in the city of Seligenstadt. Preferred bidder: Züblin, appointed August 2005.
Education
Rodenkirchen School PPP
35
DBFMO of a secondary school in Rodenkirchen, Cologne.
Education
Halle/ Saale Schools and Day-Care Centres
50-100
Redevelopment of schools and day-care centres.
Education
Wetzlar Schools and Sports Centre PPP
15
New build of the Pestalozzi School to accommodate 200 pupils.
Education
Engelskirchen School PPP
18
Building of a school to accommodate 900 pupils.
Education
Twistringen School PPP
6
Design, build, finance and maintenance of a secondary school.
Education
Schwarzenbek School Building
20
25-year contract for DBFM of a new secondary school and sports hall. Preferred bidder: Müller Altvatter / Kind Gebäude Management GmbH. FIGURE 14.1 | Continued on page 86
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GERMANY: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 14.1 (Continued) | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Education
Bergnenstadt Schools
11
PPP project to refurbish and operate seven schools and gym facilities. May include a new build school.
Education
Frankfurt Schools
50
Financing and redevelopment of four schools.
Education
Lachendorf Schools
13
Preferred Bidder: Hochtief
Education
Hamburg HafenCity University of Architecture and Urban Planning
38
Rebuild of University premises to accommodate 1,385 students and 180 staff members.
Healthcare
Particle Therapy Centre Kiel
140
DBFO project for delivery of a Particle Therapy Centre. No medical services included. Payment by usage. Tender launched April 2006.
Healthcare
Bremman Mitte Hospital
771
30-year DBFO contract for refurbishment of the Bremmen Mitte Hospital.
Prisons
Burg Prison
100
25-year contract for DBFM prison to be built with capacity for 650 inmates.
Prisons
Munich Prison
Not available
DBFO prison for 220 female and youth prisoners.
Prisons
Freiburg Prison
Not available
Construction and financing of a new prison with a capacity to house 500 inmates.
Roads
A4 Eisenach-Gorlitz
200
One of 12 A-Model road DBFO projects – 24.5km stretch of the A4 around Eisenach.
Roads
A4 Horsëlberge
Not available
One of 12 A-Model road DBFO projects.
Roads
A5 Motorway (AS Baden-Baden to Offenburg)
280
One of 12 A-Model road DBFO projects.
Roads
A8 (Bubesheim to AS Augsburg/W)
230
One of 12 A-Model road DBFO projects. Preferred bidder to be announced late 2006.
Roads
A1 (AD Buchoiz to Bremer Kreuz)
539
One of 12 A-Model road DBFO projects. The project runs from Bucholz to Bremer Kreuz and will be 74.8km in length.
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GERMANY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 14.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
German Cultural Centre in Tokyo
Not available
Construction of German Cultural Centre in Tokyo to cover a surface of 7000 sq.m.
Accommodation
Fürst-Wrede-Kaserne
40-60
DBFO of army barracks for the Fürst-Wrede-Kaserne in Munich. To be Germany's first defence accommodation project.
Accommodation
Emmrich-Cambrai Army Barracks near Hannover
59
Accommodation
Kurzmainz Army Barracks
20
Accommodation
Greiz City Hall
15
Construction of a new city hall.
Accommodation
Hessen Land Office Building
Not available
DBFO Project of four public administration buildings. The authority has published PINs for each building as the projects are being tendered separately.
Accommodation
Lower Saxony Ministry of Finance Building
Not available
One of three PPP-type pilot projects in Lower Saxony.
Bridges and Tunnels
Hamburg Harbour Crossing
500
10km link between the A7 and the A1 in the east of Hamburg. Feasibility study being developed.
Bridges and Tunnels
A 281 (Weaser Crossing)
240
F-Model 30-year BOT project. The project will be 4.4km in length and is likely to be a tunnel.
Bridges and Tunnels
A20 (Elbe Crossing Hamburg)
511
The F-Model project will be 10km in length. The Elbe crossing will consist of 4.4km of roads and a 6km tunnel. A tender has been launched for the engineering services in April 2005.
Education
Kassel Schools
40
Redevelopment of 10 schools.
Education
Pforzheim Vocational School 50
PPP Centre of Baden-Württemberg to approve.
Education
Magdeburg Schools PPP
80
Final studies to be completed in March 2006.
Education
Kiel Vocational Schools
52
Design, build, redevelopment and operation of four sites in Kiel.
Education
Nürnberg School PPP
Not available
Redevelopment and building of four new schools and a sports hall.
Education
Hamburg Schools
Not available
Refurbishment of 26 schools in and around Hamburg.
Education
Freiburg Schools
60
Renovation, extension, modernisation and operation of up to 20 school buildings. FIGURE 14.2 | Continued on page 88
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GERMANY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 14.2 (Continued) |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Healthcare
Uni Klinikum Münster
Not available
Construction, redevelopment and modernisation of a university hospital.
Healthcare
Uni Klinikum Cologne
36
Construction of a new wing covering approximately 7,400 sq.m.
Healthcare
Viersen Hospital Project
Not available
New building to be added to existing hospital in North Rhine-Westphalia.
Leisure
Sports Centre Cottbus
16
25-year DBFMO project. Development of a sports and leisure centre.
Leisure
Kassel multi-functional leisure building
Not available
Currently reviewing project to see whether PPP approach suifigure.
Light Rail
Circle Line Project
426
Light rail project in Dusseldorf. A pilot project for North Rhine-Westphalia PPP Task Force.
Prisons
Ratingen Prison Project
100
Construction of a new prison. The Ministry of Justice has not yet made a decision about proceeding with the project.
Prisons
Hannover Prison Project
Not available
One of three PPP pilot projects in Lower Saxony.
Rail
Hamburg Railroad Project
Not available
A new railroad from Kiel-Hamburg Central Station.
FIGURE 14.2 | Continued on page 89
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GERMANY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 14.2 (Continued) |
89
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
A8 Muhlhausen-Hohenstadt Albaufstieg
400
F-Model 30-year BOT project. The 8km project will run from Muhlhausen to Hohenstadt.
Roads
A100 AD Neukoln to AS Lansberger Alle Berlin
809
F-Model project, 8.7km in length.
Roads
A7 AD Bordesholm to AS HH-Othmarschen
509
30-year BOT project. The road will be 70.7km in length and is in state of Scheswig-Holstein / Hamburg.
Roads
A2 AK Kamen to AS Beckum
225
30-year BOT project. The project runs from Kamen to Beckum, will be 31.2km in length and is in state of North Rhine-Westphalia.
Roads
A4/A1 AS Duren-AK Köln Nord
132
One of 12 A-Model road DBFO projects.
Roads
A57 AK Meerbusch to AK Cologne
269
30-year BOT project. The project runs from Meerbusch to North Cologne and will be 37.4km in length.
Roads
B1/A44 AK Dortmund to AK Werl
187
30-year BOT project. The project runs from East Dortmund to Werl and will be 26km in length and is in the State of North Rhine-Westphalia.
Roads
A1 AK Lotte/Osnab to AK Münster/S
357
30-year BOT project. The project runs from Lotte / Osnabruck to Münster and will be 49.6km in length.
Roads
A10 AD Havelland to AD Schwaneback
294
One of 12 A-Model road DBFO projects. 40.8km in length in state of Brandenburg / Berlin.
Roads
A24 AS Neuruppin to AD Havelland
225
One of 12 A-Model road DBFO projects. 31.3km in length in state of Brandenburg / Berlin.
Roads
A3/67/60 AS Frankfurt Airport to AD Mainspitz
143
One of 12 A-Model road DBFO projects. 19.8km in length in state of Hesse.
Roads
A61 AK Frankenthal to AD Hockenheim
274
One of 12 A-Model road DBFO projects. 38.1km in length in state of Baden-Württemburg / Rhineland Pfalz.
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GERMANY: PROJECTS ON HOLD FIGURE 14.3 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Mulheim an der Ruhr City Hall
10
Renovation of the Town Hall in Mulheim an der Ruhr.
Roads
A52 377 (connection of A40 and A42)
The A52 (connection of A40 and A43) is 8.7km in length and will be a real toll. DVB Bank is advising the German Federal Ministry of Transport. Dispute over how many lanes the tolling regime can support on this F-Model tunnel project.
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Scandinavia | European PPP Report 2007 |
SCANDINAVIA
The Scandinavian region has seen interesting changes in PPP activity in the Report period. Activity in Norway has eased up as the third pilot PPP or OPS road project draws near to financial close. Denmark is now looking promising with a couple of central government schemes in procurement and the government reorganisation (which will result in fewer, stronger regions with responsibility for healthcare and education) which came into force in January 2007. At the same time the Danish central government will take over responsibility from local government for delivery of some partially developed road PPP schemes. Finland is also reorganising local government to deliver larger local regions which should lead to stronger and better coordinated purchasing power. And finally the new government elected in Sweden this year embraces the concept of PPP and is currently looking at a PPP option for a section of the ring road around Stockholm. Although early days, the Scandinavian contractors and banks see this as a welcome opportunity as the Norwegian market cools down.
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| European PPP Report 2007 | Denmark | Scandinavia
DENMARK Improved opportunities for PPP in healthcare and environmental sectors.
The structural reform, which was due to be completed by 1 January 2007, is still stalling the activities in the municipalities and the regions. After the implementation of the reform, the municipalities will be fewer and bigger. The 14 counties will be replaced by five regions that will be primarily responsible for healthcare and environmental issues. This is likely to improve the opportunities for PPP in Denmark. Some PPP projects, which were initiated by the counties (particularly within the road sector), are to be handed to the state as part of the reform. Generally, this means that progress in these projects has been stalled until the projects are handed over. The E45 project in southern Jutland has already been transferred to central government. Other projects such as the “Masterplan for Hospitals in Aarhus”, due to be handed on to the future Region of Central Jutland, will be transferred at the end of 2006. The majority of municipal leaders are optimistic that, following this reorganisation, PPP projects will be initiated in their respective municipalities during the four-year election period which began 1 January 2006. The government's central PPP unit – the Agency of Enterprise and Construction – has revised the guidelines for the standard contract for PPP contracts in order to implement the changes brought about by the implementation of the new EC Procurement Directives (ref: 2004/18/EC). After the implementation of the directives, the government generally recommends competitive dialogue as the procurement procedure that is most suitable for PPP projects. This procedure has been used for all current tenders (the Trehøje School and the National Archives).
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Based on a question raised by the parties in the Vildbjerg School Project, the Danish Central Tax Administration established guidelines for the conditions which need to be met by the private partner in order to gain VAT rebate on investments made in PPP projects equal to municipalities’ access to VAT rebate on certain investments. But it is yet to be determined whether the deposit made by municipalities when initiating a PPP project, under the Danish municipal borrowing rules, should include the VAT charge on the investments made by the private partner within a PPP project. Another fiscal issue to be resolved between the public and private sectors is the fact that a consortium is still not allowed to make depreciations on buildings and facilities, within the PPP project. There has been activity on the Fehmarn Belt crossing project during the period. This is a proposed bridge crossing between Denmark and Germany and will be one of the largest transport infrastructure projects in Europe to date if it goes ahead. In June 2006 the new German and Danish transport ministers met and agreed that the solution to be taken forward would be a four-lane motorway and two-track rail cable stayed structure. An informal environmental hearing on the proposal will start shortly.
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DENMARK: COMPLETED PROJECTS IN 2006 FIGURE 15.01 |
Information supplied by
Sector
Project name
Education
Trehøje School PPP
infra-news.com
Value (DKKm) Details 116
Trehøje Municipality is procuring a DBFO contract for a period of 30 years. Consortium of MT Højgaard/Dan Ejendomme awarded contract. Nord-LB provided project debt.
DENMARK: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 15.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (DKKm)
Details
Accommodation
National Archives Building
549
This is the first governmental PPP. A DBFM contract for construction and maintenance is being let, with a concession period of 30 years for consolidation of the national archives.
DENMARK: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 15.2 |
Information supplied by
Value (DKKm)
infra-news.com
Sector
Project name
Details
Bridges and tunnels
Roskilde Fjord Fixed Link Not available
County of Frederiksborg is developing this crossing project. It has been stalled until the Ministry of Transport assumes responsibility in January 2007.
Bridges and tunnels
Fehmarnbelt crossing
Not available
Ministry of Finance is Procuring Authority. At pre-approval stage – planning and environmental evaluation ongoing.
Healthcare
Masterplan for hospitals in Aarhus
Not available
County of Aarhus (to be taken over by the Region of Central Jutland) is considering reconfiguration of hospital infrastructure. Studies of financial issues ongoing – result expected in 2006.
Light Rail
Copenhagen City Ring Metro (M3/M4)
4,000
Ministry of Transport, Copenhagen and Frederiksberg municipalities are Procuring Authorities. Consideration of the legal basis for the project ongoing.
Light Rail
Lyngby to Glostrup Ring line
4,500
Evaluation stage under way to decide whether will be procured using PPP.
Roads
Bypass road around Naestved
450
County of Storstrøm is Procuring Authority. Evaluation ongoing on 21km road project.
Roads
E45 road project
1,000
Ministry of Finance and Ministry of Transport and Energy are Procuring Authorities. The project was handed over to the Ministry of Transport in January 2007. Project for four-lane motorway will link E43 and Sønderborg. Evaluation is completed and timetable for preparation of tender is being made by the Ministry.
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| European PPP Report 2007 | Norway | Scandinavia
NORWAY Roads have been considered a success in Norway.
Norway has seen the completion of the last of its three pathfinder OPS road projects: the E18 Grimstad to Kristiansand section. These road schemes have an availabilitybased payment mechanism although they are tolled. The state sector road operator takes the traffic and consequent revenue risk on the new road. The OPS roads have been considered a success in Norway and although public cost reduction is not the primary objective, efficiency and the involvement of the private sector in major infrastructure projects remain important. Going forward, the government has announced that the private sector will be able to compete against Mesta, the stateowned highway company, to deliver on new road projects. It is not clear how this will work at the moment and the government is expected to expand this idea further.
95
There are plenty of opportunities for new road crossings with many fjords only crossable by ferry. Road users will pay a price to reduce journey time; the trick is working out what that price is. Two Oslo schools were delivered under a long-term arrangement between SG Finans SA and the local government. This was really a leasing arrangement with a sub-contract put in place underneath for long-term maintenance and operation of the sites. More projects are expected in the health, education and custodial sectors in 2007 at local government level.
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Scandinavia | Norway | European PPP Report 2007 |
NORWAY: COMPLETED PROJECTS IN 2006 FIGURE 16.0 |
Information supplied by
Sector
Project name
Value (NOKm) Details
Education
Persbråten and Hørbråten Schools PPP
600 / €64
infra-news.com
DBFM project for delivery of two Oslo schools. Sponsor: SG Finans SA. Skanske will build, maintain and operate for period of 24 years.
NORWAY: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 16.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (EURm)
Details
Roads
E18 Grimstad to Kristiansand
475
Directorate of Public Roads (Vegvesen) is Procuring Authority. DBFM for new 40km four-lane road in south west of country. 25-year contract awarded to Agder OPS Vegselskap consortium comprising Bilfinger Berger BOT / E.Phil & Son AS. Financing from EIB / Nordea / Nordic Investment Bank.
NORWAY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 16.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (NOKm) Details
Education
Moster Hávik School Eikeland
100
Procured by district of Bømlo, project for school including multi-user hall and swimming pool. Tender as a turnkey project but option to offer long-term private sector maintenance / operation as well.
Healthcare
Trondheim Hospital
Not available
Pre-approval – PPP being considered.
Rail
Sandnes-Stavanger rail link
€200
Norwegian National Rail Authority is Procuring Authority for upgrade of line and possible new terminal – to be developed on DBFO basis. Pre-approval design was expected in Spring 2004, but no details since then.
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| European PPP Report 2007 | Finland | Scandinavia
FINLAND The first country in the region to deliver a project using a PPP model.
Finland was the first country in this region to deliver a project using a PPP model and this year completed another road project: the E18 (Muurla-Lohjanharju). Following criticism of the perceived generosity of the payment mechanism on the first PPP road scheme it can only be assumed that the terms on this one are tighter. The process too has been refined and shortened, cutting out the BAFO stage. There are healthcare and light rail projects in development, but this is a small market with a focus on achieving the objectives of efficiency and partnership through a range of mechanisms, so PPP projects will always remain scarce.
NO CURRENT PROJECTS AS AT JANUARY 2007 FINLAND: COMPLETED PROJECTS IN 2006 FIGURE 17.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Roads
E18 Muurla-Lohjanharju Section
300
Finnish Roads Agency (FINNRA). DBFO project for construction of 51km of new motorway. Awarded 21-year contract to Tieyhtiö Ykköstie (Laing Roads / Skanska / Lemninkäinen). Debt providers: EIB / Nordic Investment Bank / RBS / Svenska Hand Nordea.
FINLAND: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 17.1 |
97
Information supplied by
Sector
Project name
Value (€m)
Details
Healthcare
Karis Hospital project
Not available
Pre-approval – no details provided.
Light rail
Helsinki-Espoo subway
Not available
Pre-approval – no details provided.
infra-news.com
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Scandinavia | Sweden | European PPP Report 2007 |
SWEDEN Development of PPP is likely to be applied to transport infrastructure projects only in the short term.
There has been only one genuine PPP project in Sweden, which is the railway between the centre of Stockholm and Arlanda Airport. The decision to carry out the project using a PPP solution was taken by the Conservativeled coalition government in the early 1990s. The railway came into operation in November 1999. The Social Democratic Party formed a minority government with the support of the Greens and the Left (former Communist) Party in 1994. From then until now no more PPP projects have been carried out in Sweden. Since the election in September 2006 the four centre-right parties have formed a new government. All four of the parties are in favour of PPP, and a PPP model is now being discussed for a ring-road project around Stockholm. The development of PPP in Sweden is likely to be applied to transport infrastructure projects only, at least in the short term.
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ITALY The hospital sector is continuing to grow and certainly represents one of the most developed sectors in the Italian PPP market.
Italy may not be one of the most productive countries in terms of completed PPP projects but it certainly delivers on drama. This year has been fascinating with the events surrounding the Messina bridge, AutostradeAbertis merger and the change of policy coming with the new centre-left coalition government of Romano Prodi in April 2006. Change of government always impacts on the local infrastructure market – even when there is no dispute about the underlying principles of the PPP approach (which appears to be the case in Italy) there will still be a difference in how it is applied and to which sectors. The events surrounding Messina and the Autostrade merger are both the result of this political change of direction. But the government's majority is slim and the coalition not so strong, therefore the sense of urgency with which they have acted is not surprising. They need to make an impact quickly with some vote-winning changes, as they may be facing another election in the near future. Messina bridge is a high-profile project set for extinction following the lower house’s support for the Prodi government’s proposal to halt development on the basis that the bridge is non-priority work. Not only was the timing of the commercial close (just prior to the election) in poor judgement, but the high cost of the bridge and the inadequacy of supporting infrastructure made it look like a Berlusconi legacy rather than a deliverable project. The decision was no surprise as the Prodi government team had been suggesting this view for some time through comment and action – they refused support for capital refinancing of the SPV through Fintecna as a preliminary measure. The outstanding issue is how the significant damages, in the
region of €300m, for breach of the General Contractor contract signed with the Impreglio/ Sacyr consortium will be settled. Some suggest that the compensation may come in the form of alternative smaller scale government contracts rather than straight payout. The new government views the Messina bridge as an extreme example of a system which promises a large pipeline (in excess of what the public purse can afford) and then fails to deliver. The newly appointed Infrastructure Minister, Antonio di Pietro, favours a slimmer, more deliverable pipeline of projects. ANAS, the roads authority, is currently viewing all road projects in procurement, focussing on those of real strategic importance, and will be off balance sheet. At the same time the concession charges paid by road concessionaires to ANAS are set to increase to reflect a return for concessionaires more in line with international practice. Although the last government did give some guidance as to its priorities by publishing the Legge Obiettivo list (currently valued at projects worth €52.7bn), this was really a politically negotiated wish list from the regions with little application of rigorous evaluation and comparison on issues such as feasibility, bankability or even affordability for the local purse. It is also notable that only around one fifth by value of the list represented central government projects. Coupled with the famous Art. 37 bis style procurement route under the Merloni Law, the private sector could develop project proposals, whether listed on the Legge Obiettivo or not, with little upfront expense or commitment on the part of the public authority and could win a preferred position with bid matching rights in relation to the subsequent open tender. 100
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| European PPP Report 2007 | Italy
LEGISLATIVE AND TAX CHANGES With the enactment of Legislative Decree no. 163/2006, effective from 1 July 2006, the Italian government implemented the European directives of the year 2004 in the matter of public contracts and, in particular, Directive no. 2004/18/CE concerning the coordination of procedures for the award of public works contracts, public supply contracts and public services contracts, and Directive no. 2004/17/CE regulating and coordinating the procurement of contracts relating to water, gas, transport and postal services. The main purpose of the Legislative Decree (“Public Contracts Code”) is to consolidate in a single piece of legislation the framework applying to (i) public works contracts, (ii) public supplies contracts and (iii) public services contracts. As a consequence, the Merloni Law (Law no. 109/1994 and subsequent amendments and supplements) was repealed and replaced by the provisions of the Public Contracts Code relating to the procurement and performance of public works. The two procurement routes for the awarding of concession agreements for the construction and management of public works under the Merloni Law (Art. 19, second para and Art. 37 bis) have substantially remained the same. Although Art 19, second para of Merloni Law, is now replaced by Art. 143 of the Public Contracts Code and Art. 37 bis of Merloni Law is now replaced by Art. 153 of the Public Contracts Code. In recent years the Italian government has brought various amendments to the Art. 37 bis procedure, in particular in order to comply with the opinion expressed by the EU Commission in relation to application of Art. 37 bis (now Art. 143 of the Public Contracts Code). The EU Commission criticised the right of first refusal given to the selected Promotore as the right gave them a more favourable position than their competitors during the second tender phase, thereby violating Articles 40 and 43 of the EU Treaty and reducing the level and quality of competition in those tender procedures. The European Union Law for 2004 (Law 18 April 2005, no. 62 or Legge Comunitaria), enacted by the Italian government in order to implement in Italy the EU directives and recommendations issued prior to 2004, set out certain amendments to the Merloni Law, amongst which the most relevant was brought to Art. 37 bis, para 2-bis (now Art. 153 para 3 of the Public Contracts Code).
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Pursuant to the new Art. 37 bis, para 2-bis of the Merloni Law (now Art. 153 para 3 of the Public Contracts Code), the indicative notice to be published by the awarding authority shall also indicate the “criteria … under which the proposals will be evaluated”, and specify that “it is provided the right for the sponsor (Promotore) to be preferred among the entities…..should the sponsor (Promotore) adjust its proposal to meet the most advantageous offers submitted by the offerors”. According to certain legal scholars who have opined on these new amendments to the Merloni Law, it seems that it might be difficult for the awarding authorities to set out the criteria under which a proposal will be evaluated without having had the opportunity to know exactly how the sponsors will develop the project (at the time of the issuance of the indicative notice, no preliminary design, for example, was already prepared by the sponsors and submitted to the awarding authority). At the same time bidders and public authorities are balancing the advantages of the flexibility of Art. 37 bis (now Art. 153 of the Public Contracts Code) procedure against the downsides of the longer procurement time involved and the lengthy challenges made to awards under Art. 37 bis (more prone to challenges due to the opaque nature of the first stage to select and appoint the Promotore). The consensus of opinion is that the Art. 19 procedure (analogous to most PPP procurement processes used elsewhere in the continent, now set out by Art. 143 of the Public Contracts Code) should be the best practice route for future projects. However, there is concern amongst the bidder and bank community that if this is the case, time and money will need to be invested in ensuring that the tender documentation and draft contracts produced do represent PPP best practice and that the structures are bankable – failure on both these grounds has been an issue on some Art. 19 procurements under way. The role of the Private Finance Unit (Unità Tecnica Finanza di Progetto or “UFP”) will need to be strengthened so that there is more control over contract process and terms, in exchange for budget approval.
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ROADS There were no PPP road completions in the Report period. Although the Mestre ring-road project was awarded to the Impregilo-led consortium as general contractor which involves a design and build obligation but with no ongoing operation and maintenance of the roads. Progressing more slowly through the procurement process (typically Art. 37 bis or under the local Lombardy regional law which has a process analogous to Art. 37 bis) are some large-scale, long-term PPP contracts for real toll motorways. One of the largest is the Cremona-Mantova real toll motorway which is being procured by the Lombardy region. Here the Spanish Cintra-led consortium has managed to supplant the local Promotore by bidding an aggressive construction programme which will deliver the new and upgraded sections of the road earlier than proposed by the Promotore’s developed plan. But, as expected, the award has been challenged and until this is resolved the financing led by Banco Santander cannot be put in place. Another 70km toll motorway is being procured by the Lombardy Region, the Broni-Pavia-Mortara. The Promotore has already been selected pursuant to a procedure provided by a regional law (the same applicable to the CremonaMantova) and similar to the Art. 37 bis one. The project, with a value of €950m, shows that undoubtedly the Lombardy region, through its procurement arm, Infrastrutture Lombarde S.p.A., is ahead of the majority of the Italian regions in the procurement of strategic infrastructures. A new chapter in the lengthy and troubled history of the €2.2bn Pedemontana Veneta highway has been added with the issue by the Veneto region of the call for bids in the second stage of the Art. 37 bis procedure, which is due to select the competitor for the Autostrade-led consortium which has been appointed as Promotore. The Cispadana Highway, 67km in length linking the Brennero and the Bologna-Padua motorways and valued at around €1.1bn, is being awarded by the Emilia Romagna region using the process under Art. 153 of the Public Contracts Code (former Art. 37 bis). An Autostrada del Brennero-led consortium, including constructors Coopsette and Pizzarotti, was expected to file a proposal by the 2 January 2007 deadline. But the government has broader changes on its mind. It has looked quite closely at the roads sector in its first period of government, prompted by the pre-election contract award on Messina bridge and the proposed merger of the privately owned Italian roads operator Autostrade and the Spanish roads operator Abertis. Following unanimous approval of the merger by the two companies’ shareholders, the Italian government moved to block it on two principal grounds. First, that Autostrade was already in breach of its obligations to invest in the network it operated in Italy and the merger may exacerbate that situation and, secondly, that Italian law and the terms of the concessions prohibited contractor interests in operating companies as this may reduce competition on award of roadwork contracts by the operator (the merged entity will be partly owned by ACS, a road contractor, currently a shareholder in Abertis). The European Commission firmly rejected both grounds for the block as illegal
under EU Merger Regulations and now the Italian government has withdrawn its objection and the merger should progress. It is unlikely that the Italian government really believed it could prevent the merger. It is more likely that the action was a shot across the bows (not of the road investors but to the roads sector in Italy as a whole) and there is more to follow. The government's view is that the return generated by current road operators from toll roads is out of line with the roads sector across Europe. They are looking to increase the concession charges paid as a percentage of net toll revenues by operators to ANAS, the state roads authority. Currently one per cent, they wish to double it to two per cent for future concessions. They are unlikely to try and renegotiate charges on current concessions. There is also an ANAS review on priority road schemes and, combining this with a move away from the private sector Promotore model for project development to a more controlled and governmentled process, the next period will see some project cancellations and the remaining projects going through on tougher terms. The major concern is that the liabilities for these projects do not impact on the government balance sheet and make the difficult economic situation worse. Fewer road projects will be initiated going forward and it is likely that the infrastructure spend will be focussed on the north of Italy which is responsible for delivering the majority of the country’s GDP. RAIL One of the headline projects the government has so far announced support for is the high speed rail link between Lyons and Turin. This is a TENS project for 254km of new track, clocking in at an awesome €6bn. Could this be the Prodi government’s Messina bridge? But apart from the announcement on the Lyons/Turin HSL link there has been no PPP activity on heavy rail as the sector remains in the ownership of the state and privatisation is not on the government’s agenda. Light rail schemes on the other hand are moving – both schemes which do not transfer operational/ridership risk, such as Florence which completed in mid 2005, and ones which do such as Milan Metro Line 5. Milan awarded the contract to the Promotore but financial close has been delayed by some last minute changes to specification raised by the authority. Rome's Line C (€2.5bn) is awarded to Astaldi as General Contractor and Line D (€3bn) selected a Condotte/Pizzarotti led consortium as Promotore under a Art. 37 bis procurement procedure.
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| European PPP Report 2007 | Italy
HEALTHCARE The hospital sector is continuing to grow and certainly represents one of the most developed sectors in the Italian PPP market. Thiene & Schio and SS. Giovanni and Paolo in Venice are under procurement in the Veneto region (where Mestre hospital and Castelfranco and Montebelluna hospital have been already awarded), whilst a number of hospitals are being procured or have already been procured again by the Lombardy region (Brescia II project, Sant' Anna in Como, Vimercate, Legnano, Niguarda in Milan). There are also a number of smaller sub-€60m healthcare projects coming through which may be questionable in terms of value for money as they will not be able to deliver the economies of scale in terms of development and procurement costs. But this has not been proven yet. There are also interesting mixed schemes leveraging the asset value and development potential of prime location city centre hospitals. This is the case with the proposed scheme to refurbish the Ospedale al Mare in Venice situated on the Lido. The long-term contract also includes the construction of a cinema and conference centre which will be used for the Biennial festival. Although it is not yet known what assets will remain within the sponsor ownership and operation post-construction, the combination should reduce the overall cost to the public purse. Hospitals are procured by the regional health authorities on their budget but still count towards the national debt if on balance sheet. Roads have attracted the initial attention of central government but the regions should beware that the liabilities growing under hospital projects may be next up. There is also the question of who on the public sector side ultimately assumes liability for the contract. What if the regional health authority cannot or will not pay out as per the contract? Without any central government guarantee of these liabilities the question for bidders and their banks is whether the local or regional authority itself is creditworthy and what is their rating. Regional rating typically reflects the north-south divide and therefore more schemes are likely to be seen in the north of the country.
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WATER/WASTE WATER The management and operation of water networks and the systems to remove and treat waste water is one of the growth areas for private sector investment in public infrastructure. Or rather it was developing nicely until, during the run-up to the election, the Berlusconi government passed legislation announcing its intention to fully privatise the water sector and terminate all current operating concessions by the end of 2006. This is not the policy of the new government and the legislation will be repealed quickly. In the meantime it has slowed some of the ATO procurements in tender. These are long-term concessions being let by an adjacent group of local authorities (ATOs) for the upgrade, management and operation of their water and waste water systems. These are real concessions with the concession company having the right to levy users directly. At the moment tariffs vary from region to region and a tariff review is needed to make these structures economically viable in all regions. COMMERCIAL AND TOURIST PORTS Commercial and tourist ports is a sector which has not yet taken off, although Italy should deliver a number of projects in this sector considering its strategic position at the heart of the Mediterranean sea from both commercial and tourist points of view. Currently projects are being procured, most of them under an Art. 37 bis procurement route and under the Legge Obiettivo provisions, in Savona (commercial – €180m), Ragusa (tourist – €70m), Taranto (commercial – €118m). New developments in the sector are expected in the near future.
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TRENDS FOR 2007
Many of the predicted trends for 2007 we have already touched on – such as a slimmed down project pipeline and a few cancellations of projects currently in procurement which are either nonpriority or likely to hit the public sector balance sheet. What looked like an initial anti-competitive intervention on the Autostrade-Abertis merger should be read as a quick opening attack on a sector which the government considers is overdue a review in regulation of profit level and performance. Although the merged company will be headquartered in Barcelona the main shareholder will be the Italian Benetton.The appointment of Cintra on the Cremona-Mantova road project is a significant milestone for Italian infrastructure. Our prediction is that, if anything, the new government will be less protectionist than the last. There will also be a trend for new procurement to move to the Art. 19 (now Art. 143 of the Public Contracts Code) procurement route as the Art. 37 bis (now Art. 153 of the Public Contracts Code) route looks unworkable given the long-term required for the procurement procedure. So where does this leave Italian infrastructure? Judging by the amount of infrastructure bank interest in the country at the moment, the changes are not being viewed negatively, and rightly so.The hospital market is heating up, roads will still be there as will light rail and water. An increased level of central control in this market would not be a bad thing and would give participants a sense that each project is not going back to first principles. Limited recourse finance for projects is the way forward, hence the investment of project finance banks in new offices and teams principally in Milan. This method of funding is actively contemplated in the Art. 37 bis Merloni Law (now Art. 153 of the Public Contracts Code). Art. 37 bis introduced a new concept granting lenders the ability to step into projects funded by them in the event of a sponsor’s default that would entitle the public authority to terminate the contract.The provision constitutes a remarkable innovation in a system which, save for the exception in question, is characterised in principle by an absolute prohibition on assignment of agreements with public parties.
What is still missing to make project financiers truly happy is the detail (due to be provided in secondary legislation) on the practicalities of how those step-in rights would work on enforcement, such as the method of valuing the project’s assets and liabilities and the effects of the assignment of the project contract on the existing sub-contracts. What the market has not seen is the development of the bond finance route, although again this means of funding was contemplated by Art. 37 bis.The legislation specified that a project company could raise finance by bond provided that the bonds were secured pro rata by mortgage and that they “clearly indicate and distinctly outline the investment’s high level of risk, in the manner established with decree by the Minister of Finance, in coordination with the Minister of Public Works”.The outline structure is there but its legal constraints (the requirement for mortgage backing) and the alternative sources of cheap and readily available funding make it an unlikely option for the time being. Finally, one of the most important developments which will increase during the coming period is the availability and use of third party equity and the potential development of a secondary market for PPP investments.There are some early entrants to this market: • Scala Capital: an Italian domiciled fund established to invest in projects throughout Europe; • Ragione: the Benetton-owned fund established with €4.5bn of Benetton group owned “seed” interests with a focus on investment in the road, airport and telecom sectors; and • Fondo PPP Italia: a €120m infrastructure fund backed by leading Italian banks and investors to focus on investment in the Italian accommodation sector. And these are in addition to the many primary and secondary funds already in existence which include Italy as one of their target markets.The size of the funds available may be a little overoptimistic in comparison with the predicted trend for project numbers and the fact that it is a relatively new concept for Italian sponsor groups. Nevertheless this is an exciting market which looks like it will grow in maturity, if not size, over the next period.
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| European PPP Report 2007 | Italy
ITALY: COMPLETED PROJECTS IN 2006 FIGURE 18.0 |
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Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Healthcare
Osimo Hospital Ancona
28
Construction of hospital. Procurement via Art. 37 bis. Promotore and Concessionaire: Consorzio Ospedale di Osimo.
Healthcare
Castelfranco & Montebelluna Hospitals Veneto
122
First project financing in Italian health sector whose financial documentation is wholly governed by Italian law. Procurement via Art. 37 bis. Sponsor: Consortium led by Guerrato SpA. Mandated Arrangers: Banca Medio Credito and MPS Banca per l’Impresa.
Healthcare
Felettino Hospital Le Spezia
83
Procurement via Art. 19,II. Sponsor: Bonatti-led consortium.
Healthcare
CTO/CRF Maria Adelaide Hospital Turin
32
27-year concession for construction of new spinal unit. Procurement via Art. 19,II. Sponsor: Cofathec . Mandated Arranger: Unicredit BMC.
Healthcare
Umberto I Hospital Mestre
230
Development of 680-bed PPP hospital. Procurement via Art. 37 bis. Sponsor: Astaldi-led consortium / Veneta Sanitaria SPV. Mandated Arranger: ABN Amro / Interbanca / Banca Intesa.
Light Rail
Florence Light Rail Project
296
Sponsor: RAT-P led consortium: Alstom / AnsaldoBreda / Ansaldo Transporti / Baldassini &Tognozzi / Architecna / CCC / CMB Carpi / Consorzio Toscana Costruzioni. Mandated Arranger: Calyon/MPS. Arranger:I-SpA.
Roads
Mestre Ring Road
750
Construction and operation of ring road. General Contractor: Impreglio-led consortium: Grandi Lavori Fincosit / Fipe Industriale / CCC / Covecoe / Serenissima Costruzioni.
Water
Arezzo Water Deal
Not available
Mandated Arranger: Dexia-Crediop / MPS / Banca Etruria.
Water
Sicilia Acque Sicily
614
Management of water service and refurbishment of water network. Concessionaire: Sicilaque SpA: Enel Hydro / Veolia Vivendi / Region of Sicily. Mandated Arranger: Banca Intesa / UMBC.
Water
Tuscany Water Project
255
20-year concession for upgrade, refurbishment, management and operation of water and waste water network in provinces of Pisa, Siena, Pistoia, Lucca and Florence. Sponsor: Acque SpA. Mandated Arranger: DEPFA.
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Information supplied by
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Sector
Project name
Value (€m)
Details
Accommodation
University of Pisa Accommodation Project
30
Design, construction and maintenance of new buildings and parking spaces for the university. Procurement via Art. 37 bis basis.
Accommodation
Region of Lombardy Office Building
240
Development of new headquarters of regional government. Procurement via Art. 19,II. Bids returned 6 January 2006.
Bridges and Tunnels
Messina Straits Crossing
3,880
Development of 3.3km Messina Bridge Crossing. Procuring Authority: Stretto di Messina SpA. eneral Contractor mandate awarded to consortium of Impreglio, Sacyr, Condotte, CMC, Ishikawajma-Harima Heavy Industries and ACI del Gario. Likely to be cancelled following vote of Italian Chamber of Deputies supporting Prodi Motion to halt the development.
Bridges and Tunnels
Vicenza Underpass
182
Construction and management of a 3.5km tunnel with open toll charging. Procurement via Art. 37 bis. Preferred Promotore: Co.Gen.Co.
Healthcare
Thiene & Schio PPP Hospitals
144
30-year DBFO contract for new PPP hospital. Procurement via Art. 37 bis. Sponsor Group: Gemmo / CMB / CCC /Mantovani/Palladio Finanziaria SpA / Serenissima Risto vazione SpA / Servizi di Fiducia / Servizi Italia /Studio Altieri SpA appointed Promotore in April 2006. Public Sector to provide €72m to cost of project.
Healthcare
Castelli Romani Hospital Rome
102
Dismissal of two existing hospitals and design, development and management of a new hospital. Procurement via Art. 37 bis. Four bidders submitted proposals.
Healthcare
Brescia Hospital II
140
Refurbishment/rebuild of Brescia hospital, second phase. Procurement via Art. 37 bis. Bovis Lend Lease-led consortium appointed Promotore.
Healthcare
Tuscany Hospitals PPP Scheme
330
Development of four hospitals. Procurement under Art. 37 bis. Promotore: Astaldi-led consortium (Astaldi / Techint / Pizzarotti.
Healthcare
Vallata Hospital Genova
68
Development of PPP hospital facility. Procurement under Art. 37 bis. Shortlisted bidders: Pirelli RE and Techint.
Healthcare
Legnano Hospital
60-70
550-bed PPP hospital project. Procurement via Art. 37 bis. Promotore: Techint. MLA: Dexia
Healthcare
Sant' Anna Hospital Como
175
Procurement via Art. 19,II. Preferred bidder: Stabile Pirelli Re Servizi SpA / Aster SpA G:D.M SpA / Nelsa SRL / Telecom Italia SpA. FIGURE 18.1 | Continued on page 107
106
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Information supplied by
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Sector
Project name
Value (€m)
Details
Healthcare
Niguarda Hospital Milan
237
Development of two new hospital blocks. Procurement via Art. 19,II.
Healthcare
Ospedale del Mare Naples
187
Procurement via Art. 19, II. Project Award: Astaldi-led consortium (Astaldi / Siemens Italia / Giustino Costruzioni / Giradi).
Healthcare
Vimercate Hospital Milan
119
Procurement via Art. 19, II. Project awarded to Inso-led consortium.
Healthcare
Omegna Hospital
129
Construction and operation of new hospital. Procurement under Art. 37 bis. Cofathec has submitted bid to become Promotore.
Healthcare
Alba-Bra Hospital Cuneo
120
Concession to construct and manage new hospital. Procurement via Art. 19,II. 16 shortlisted bidders.
Healthcare
Careggi Hospital Florence
22
Procurement via Art. 37 bis. PIN published in May 2005. Promotore: Siram-led consortium.
Healthcare
Regina Margherita Hospital Renewal Messina
47
Refurbishment and conversion of hospital. Procurement via Art. 37 bis. Promotore: Consortium led by Sigeenco and Tecnis Catania (including Hospital Management / Studio Fulchi-Archi Etna / Harvad Boston).
Healthcare
Santo Pietro e Paolo Hospital
45
Development of new hospital in Venice.Procurement via Art. 37 bis. Promotore: Siram-led consortium.
Healthcare
Lago/Città della Pieve Trasimeno Perugia
18
DBFO for new build hospital in Lago Trasimeno and upgrade of hospital in Città della Pieve. Procurement using Art. 37 bis.
Leisure
Multi Sports Centre in Catù Lombardy
21
Procurement via Art. 37 bis.
Light Rail
Metro Rome Linea C
2,500
Development of third metro line in Rome. Project awarded to Astaldi-led consortium. 70% of funding from public sector. A further 20% of cost will be met by pre-financing facility from publicly owned bank. Procurement under “general contractor” law.
Light Rail
Metro Rome Linea D
1,800
Development of fourth underground line in Rome. Using a 25-year DBFO contract. Procurement via Art. 37 bis.
Light Rail
Milan Metro Line 5
502
27 year contract for construction and maintenance of fully automated subway line. Final approval of line granted and project moving to finance. Promotore: Astaldi-led consortium Astaldi 23.3% / Ansaldo Trasporti Sistemi Ferroviari 26.4% / Alstom Ferroviaria 12% / Ansaldobreda, Torno Internazionale / ATM. Procurement under Art. 37 bis. MLAs: Dexia / Mediobanca / WestLB raising €240m of project finance debt. FIGURE 18.1 | Continued on page 108
107
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Information supplied by
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Sector
Project name
Value (€m)
Details
Light Rail
Modena Metro PPP Project
583
Development of two metro lines. Procurement under Art. 37 bis. Promotore: Modena Metropolitana.
Light Rail
Latina Light Rail
140
Development of new light rail line in Latina. PIN published on 5/12/2005 for the second phase public tender of a Art.37 bis procurement. Promotore: Metrolatina consortium (SACAIM SpA / Gemmo SpA / Constructions Iannini / Astral scarl /Montele).
Light Rail
Taormina Light Rail Link
31
Development of light rail link. Procurement via Art. 37 bis. Promotore: Fenit (Roma).
Ports
Savona Ports Project
180+
Construction of three new terminals for commercial port and management of container terminal. Procurement via Art. 37 bis.
Ports
Ragusa Tourist Port Sicily
70
Design, construction and management of tourist port. Preferred bidders: TECNIS-led consortium / Intercantieri Vittadello / Grandi Lavori Fincosit-led consortium.
Rail
Palermo Rail Pass
623
Design, purchase and build of new rail link. Bidders: Pizzarotti / Astaldi / IS Consortium (Sacyr Vallermoso, Inc / Sipal). General contractor: SIS Consortium.
Roads
Brebemi motorway
1,600
Toll road link between Milan and Brescia. Brebemi consortium discussing finance with Lombardy region, ANAS and the Italian infrastructure industry.
Roads
Cremona-Mantova motorway
944
55-year concession for construction and operation of a real toll motorway in the Lombardy Region under a 55-year DBFO concession. Procured under Lombardy Region Laws (similar to Art. 37 bis). Awarded to CINTRA-Ferrovial-led consortium. MLA: Banco Santander.
Roads
Pedemontana Lombarda Motorway
2,600
Development of new motorway. Procurement under Art. 37 bis. Promotore: Pedemontana Lombarda SpA.
Roads
Broni-Mortara Motorway
940
Delivery of new motorway in Lombardy region. Procurement via Lombardy Region Laws (procurement similar to Art. 37 bis). S.A.T.A.P. / Milano Serravalle / Grassetto Lavori provisionally selected as Promotore in May 2006.
Roads
Pedemontana Veneta
2,200
Development of toll highway. The concession will be for 40 years. Payment of €20.5m per year dependent on traffic flow by the authority. Authority will toll drivers. Promotore: Pedemontana Lombarda SpA. FIGURE 18.1 | Continued on page 109
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Information supplied by
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Sector
Project name
Value (€m)
Details
Roads
Asti-Cuneo Motorway
1,000
Rement under Art. 19, II. Preferred bidder: SIAS (Grassetto Lavori and Itinera). Mandated Arranger: RBS / Mediobanca
Roads
Catania-Siracusa Highway
564
Development of 70km highway. Procurement under Legge Obiettivo (general contractor). Pizzarotti SpA appointed as General Contractor for construction phase.
Roads
Quadrilatero Marche-Umbria
2,157
Legge Obiettivo project for development of 11 motorway links linking Marche and Umbria. General Contractor procurement. Sponsor Lot 1: Strabag / CMC / Grande Lavori Fincosit. MLAs Lot 1: BBVA /MCC / RZB / West LB. Sponsor Lot 2: Baldassini
Roads
S.S.106 Jonica highway
Not available
Upgrade of 490km highway. General Contractor: Astaldi-led consortium. Mandated Lead Arranger and Underwriters: Banco Bilbao Vizcaya Argentaria SA. / Fortis Banks SA / NV. / MCC SpA. / West LB AG.
Roads
Prato-Signa Link
242
Development of 9km motorway link. Procurement via Art. 37 bis. Awarded to the Preferred Promotore Autostrade-led SIT consortium (Autostrade / MPS Merchant / Chamber of Commerce of Florence / Baldassini Tognozzi / Ergon).
Roads
Cispadana Highway Emilia Romagna
1,000
60km left linking A13 from Forrara Sud to A22 at Reggioto Rolo.
Water
Sicily Water Project ATO Enna
290
Refurbishment and management of water network of Sicily. Procurement via Art. 20. Sponsor: Agac-led consortium (Agac / Smeco / Sicilia Ambiente / GGR).
Water
Sicily Water Project ATO Palermo
1,262
Refurbishment and management of water network of Sicily. Procurement via Art. 20. Sponsor: Falck. MLA: Unicredit / RBS.
Water
Sicily Water Project ATO Trapani
590
Refurbishment and management of water network in Sicily. Procurement via Art. 20.
Water
Sicily Water Project ATO Agrigento
502
Refurbishment and management of water network of Sicily. Procurement via Art. 20. Sponsor: Falck. MLA: Unicredit / RBS.
Water
Sicily Water Project ATO Caltanissetta
Not available
Refurbishment and management of water network of Sicily. Procurement via Art. 20.
Water
Lazio Water Project
Not available
Procurement via Art. 20. Sponsor:Veolia-led consortium. MLA: DEPFA
Waste
Siciliaenergia waste to energy plant
1,180
Project to develop three waste energy plants in Sicily. Sponsor: Falck. MLAs: Banca Intesa / RBS / Unicredit Infrastrutture / Casa di Depositi / Prestiti.
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ITALY: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 18.2 |
Information supplied by
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Sector
Project name
Value (€m)
Details
Accommodation
Municipality of Milan Building
94
Construction and management of two buildings for new headquarters for Municipality of Milan. Tender to pursuant Art. 19, II.
Accommodation
City of Milan Sports Centre
Not available
Development of new integrated sports centre. Procurement via Art 19, II.
Accommodation and Leisure
Monopoli Community Scheme Puglia
55
New offices, a new market and new sports facilities. Procurement via Art. 37 bis.
Healthcare
Busto Arsizio Hospital Lombardy
Not available
New hospital in Lombardy region.
Healthcare
Santa Corona Hospital Savona
Not available
Procurement via Art. 37 bis.
Healthcare
Alessandria Hospital Piedmont
100
Procurement via Art. 37 bis.
Healthcare
Udine Hospital
100
Procurement via Art. 37 bis.
Healthcare
Trieste Paediatric Hospital Friuli-Venezia Giulia
100
Procurement via Art. 37 bis.
Healthcare
Padova Hospital
Not available
Healthcare
Santa Eugenia/CTO Hospital 120 Rome
Brownfield refurbishment of Santa Eugenia hospital. Procurement via Art. 37 bis. Preferred Promotore: expected to be Siemens.
Healthcare
Trento Hospital
150
Procurement either via Art. 19, II or Art. 37 bis.
Healthcare
Monza Hospital
Not available
Procurement via Art. 19, II.
Light Rail
Parma Light Rail
306
Rail link to airport, railway station and university campus.
Light Rail
Pedemontana Metro Catania 850
Development of 18km light rail link. Procurement via Art. 37 bis. Promotore decision due to be made on 30 June 2005.
Light Rail
Naples Metro Project
No details available.
Not available
FIGURE 18.2 | Continued on page 111
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Information supplied by
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Sector
Project name
Value (€m)
Details
Light Rail
Venice Submerged Metro
340
Development of a submerged tunnel in Venice. Sponsor: consortium including: ACTV / Mantovani / Sacaim / Arsenale Venezia / Net Engineering / Studio Altieri / Save / Metropolitane Milanesi / BNL.
Light Rail
Palermo Underground Line 1 1,100 Metropolitana Leggera Automatica
Fully automated driverless system. Feasibility study under development.
Rail
Isola della Scala Terminal Verona
100
Development of a rail terminal. Procurement via Art. 37 bis. Formal proposal presented by undisclosed consortium in January 2005.
Roads
Roman Roads Maintenance Scheme
2,000
Updating Rome’s 5,000 km road network
Roads
Padova-Venezia Toll Road
Not available
Pre-feasibility study due to be completed on 30 June 2005.
Roads
Padova Ring Road (GRAP)
306
Development of 42 km ring road. Procurement via Art. 37 bis. GRAP SpA submitted a proposal to the Procuring Authority in December 2004.
Roads
Bologna North Pass
890
Development of new toll road link. Procurement via Art. 37 bis. Consortium led by Pizzarotti and Eiffage submitted a proposal to the Procuring Authority in December 2004.
Roads
Serenissima Highway Link
2,646
Construction and management of 196 km link. Procurement via Art. 37 bis. Societa Tangenziali Lombardo Venete submitted a proposal to the Procuring Authority in December 2004.
Roads
Grosseto-Fano Motorway (also known as E78 and Due Mari motorway)
450
Development of new mortoway through Marche, Umbria and Tuscany. Project awaiting ANAS approval before reaching tender stage. Consortium led by Gefip Holding and Egis Project submitted a proposal to the Procuring Authority in December 2003.
Roads
Milan Eastern Ring Road Tangenziale Est-Esterna de Milano (TEM)
1,700
Development of a new estern ring road in Milan. Preferrred Promotore: TEM SpA.
Roads
Cisterna-Valmontone Motorway Link
640
Development of 33 km motorway link. Procuring Authority for project would like to award ARCEA directly as General Contractor. FIGURE 18.2 | Continued on page 112
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Information supplied by
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Sector
Project name
Value (€m)
Details
Roads
Fiumicino-Formia Corridor
1,545
Development of a new motorway. Procurring Authority for project would like to award ARCEA directly as General Contractor.
Roads
Mantova-Mare Toll Road
1,280
Construction of 96 km motorway. Procurement via Art. 37 bis. Bidder: Confederazione Autostrade SpA
Roads
Pedemontano network: Varese Ring Road Camo Ring Road Bypass from Cassano Magnago to Osio SoHo/Dalmine
4,500
Long-term DBFO contract for existing road network in the Lombardy region including significant new build and refurbishment. Work required to establish one public sector decision-making body for project.
Roads
Mestre-Orte-Civitavecchia
10,000
Construction of motorway between Mestre to Orte and Civitavecchia. Will require €4.5bn of public funds. Procurement via Art. 37 bis. Preferred Promotore: Gefip/Ili/Mec. Agreement between Ministry of Transport and Region of Veneto, Emilia Romagna, Lazio and Umbria signed in November 2004 to consider project a priority.
Roads
Termoli-S.Vitytore Hospital
1,033
Redevelopment and upgrade of highway.
Roads
A4 Turin-Milan Motorway
485
Redevelopment and upgrade of motorway.
Roads
Naples to Salerno Motorway 320
Redevelopment and upgrade of motorway.
Roads
Salerno Avellino Ring Road
83
Redevelopment and upgrade of ring road.
Roads
Roma Ring Road
615
Redevelopment and upgrade of ring road.
Roads
A28 Scile-Conegliano Section
129
Redevelopment and upgrade of road.
Roads
Aurelia-RosignanoCivitavecchia Highway
870
Redevelopment and upgrade of highway.
Roads
A1 Bologna-Firenze Motorway
Not available
Redevelopment and upgrade of road.
Roads
Ancona Ring Road
302
New motorway.
Roads
Valtrompia Highway
739
Promotore: Autostrada Brescia-Verona-Vicenza-Padova. In May 2004 CIPE approved final design of project presented by Promotore.
Urban Regeneration
Marconi Interchange Project 39 Rome
Planning, realisation and management of the Marconi Interchange. A request for prequalification applications was launched in May 2005. FIGURE 18.2 | Continued on page 113
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Information supplied by
Sector
Project name
Value (€m)
Details
Waste
Treviso Waste to Energy Project
Not available
Two plants in Mogliano Veneto and Silea, 172.7 MW of thermal power. Refurbishment, construction and management of two waste to energy plants. Procurement via Art. 37 bis. Sponsors: Unindustria Treviso and Green Holding/REA.
Waste
Verona Waste to Energy Project
25
Refurbishment and management of a waste to energy plant. Procurement via Art. 37 bis. Bidding proposals due on 15 September 2005.
ITALY: CANCELLED PROJECTS
ITALY: PROJECT ON HOLD FIGURE 18.3 |
FIGURE 18.4 | Information supplied by
113
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infra-news.com
Information supplied by
infra-news.com Value (€m)
Value (€m)
Sector
Project name
S Maria Cupua Vetere PPP Court Scheme
92
Healthcare
Microcitemico Hospital Cagliari
60
Bridges and Tunnels
Appia Antica Underpass
390
Healthcare
Istituto Besta Hospital
160
Healthcare
Desenzano sul Garda Hospital Lombardy
100
Healthcare
Silvestrini Hospital Perugia
60
Healthcare
Bergamo Hospital
240
Healthcare
Umberto I Hospital Siracusa
95
Healthcare
Novara PPP Hospital
284
Prisons
Italian Prisons Development
Not available
Roads
E45 Orte-Cesena
594
Sector
Project name
Accommodation
Healthcare
Forlaning Hospital Rome
Not available
Light Rail
Bologna Metro Line
752
Light Rail
Cagliari Metro Line
450
Light Rail
Milano Metro Line 4
600
Roads
Sassuolo-Campogalliano 220 Toll Road
Roads
Genoa Ring Road
310
Roads
Nuova Romea Highway
2,200
Waste Management
Trani Waste to Energy Project
Not available
Water
Sicily Water Project ATO Ragusa
350
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PORTUGAL Enthusiasm for the PPP concept, given the infrastructure needs and high deficit level.
There has not been a lot of activity in this market in 2006, which is disappointing given the structures in place, political will and track record of delivery on previous shadow and real toll road deals. Only one project is nearing commercial and financial completion (the Azores SCUT shadow toll road) and the other projects in tender, such as Wave 1 hospitals and two real toll roads, are much delayed. Behind this outward appearance of inactivity there is a bigger debate occurring on some of the major transport projects required by the country in the medium term – the new airport for Lisbon, high speed rail links within the country and from Lisbon to Madrid (which form part of the EU TENS) and lastly the second bridge over the river Tagus in Lisbon. Not only can the Portuguese see the economic benefits that an enhanced infrastructure system has brought to their Spanish neighbours but if they fail to act quickly it is likely that the EU funding which could cover a significant proportion of the project costs will disappear. Hence this year has seen announcements on both the airport and rail links. These are vast and interrelated projects. Commercial tenders will not come quickly, but the process has begun.
Within government there is still enthusiasm for the PPP concept, given the infrastructure needs and high deficit level. There are also plans for new PPP prisons and government office buildings. At local level the municipality of Lisbon has looked at PPP for schools which may have better chances of success than the central government level projects which are lacking direction. The comparison between the roaring Spanish market and the Portuguese market is harsh, but it is not too late to inject some commerciality into the process even if this is done at the expense of best practice.
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IMPROVEMENTS NEEDED What underlies the problems the Portuguese market faces? Here are a few of the issues: • The existing long-term costs of the shadow toll SCUT roads are high, which limits further discretionary spending. Both the current and previous government have looked at the issue of converting shadow tolls to real toll projects. If there is any reduction in return the sponsor may call on the financial balancing provisions of the contracts. The options there include the government making supplementary cash payments, taking an equity stake in the sponsor or reducing the cost of debt in the project, all subject to the agreement of the sponsor and funders. Refinancings are on the cards with many of the roads now operational. Parties are currently negotiating on the West Toll road with the necessary expert commission in place to deliberate on how to share the gain. This is a toll road and more straightforward. Better news would be a renegotiation of a shadow toll project and simultaneous refinancing.
THE OTA AIRPORT PROJECT The government announcement on the new OTA airport for Lisbon came at the very end of 2005 and injected much needed optimism into the Portuguese PPP market. The background to the announcement was a final decision over how to plan for projected overcapacity in Lisbon’s existing Portela airport in 2017. For some time debate had raged over whether to develop a two-airport plan (maintaining Portela, alongside a new airport) and which new site to choose. Ota, as a single site, was the decision. Ota won out over the alternative Rio Frio location due to lower environmental impact, despite being 48km from Lisbon. After Sydney and Athens this is the largest greenfield airport project to be procured. The estimated cost of €3.6bn cannot be met from government sources and the government view on source of funds is below: OTA AIRPORT PROJECT SOURCE OF FUNDS FIGURE 19.0 |
• Lack of effective competition. The private sector feels that the tender rules have been very rigidly applied and there has been little room for recognising innovative solutions in project technology or management. In the health sector, the introduction of a new and complex model, involving delivery of both infrastructure and clinical services, has resulted in only four bidding groups and the programme has not attracted the international interest hoped for. The Loures hospital tender was annulled as the bids delivered were impossible to evaluate. It appears that the next wave of hospitals will drop the clinical services element but in the meantime the delay on the first four is damaging credibility. • Environmental standards. Many of the projects were tendered without the necessary environmental licensing which led to delay and cost overruns in delivery. Environmental standards are also rising and so some existing permits for schemes need to be revisited. These permits should be in place or at advanced stage of application during tender.
Source of funds
Value (€bn)
EU
0.6
Sponsor equity
0.4
Bank debt (commercial and EIB)
2.1
Other funds
0.5
Total
3.6
This valuation of projected costs has been based on the assumption that the project is let on a 30-year concession. There is the €0.5bn shortfall to be sourced and there are options such as increasing the proposed airport user tariff, extending the concession period offered or even building a development fund by taxing current Portela airport users. Another source of revenue which the government is considering is the partial privatisation of the Portuguese state-owned airport operator ANA which would raise funds. Airport assets are a hot potato at the moment due to high yields as witnessed by the takeover of BAA and privatisations of Milan, Budapest and Bratislava airports. The sale of the site of Portela on the edge of the city would also raise an estimated €1bn, but there will be significant claims on this pot from previous landowners. At the time of writing the government is putting in place advisory teams and will work with them to develop the tender and financial model, define the bidding rules and put in place a management structure for the procurement. A commercial tender is expected late 2007.
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HIGH SPEED RAIL Almost simultaneous with the airport announcement came government commitment on the high speed links. Details of these were featured in the DLA Piper European PPP Report 2005. The five lines identified constitute around €12bn of capital investment. The two front runner projects are the Lisboa-Madrid connection and the Lisboa-Porto lines. The advisory team is in place and business cases are being developed. However, management changes within the commission set up to deliver these projects (RAVE) have delayed progress. No definite dates for a formal tender have been announced. Meanwhile there is discussion at EU level as to whether the EU funding identified for these projects should remain committed, with particular uncertainty about fund application to the Lisboa-Porto line. ROADS Only the Azores shadow toll road, awarded to Cintra, was moving towards financing during this period. The two real toll roads, Grande Lisboa and Douro Litoral, rolled on through the process. As commented on above, until the issue of high cost shadow tolls is resolved and a mechanism for conversion from shadow to real toll and refinancing is worked through, roads are not going anywhere. But an airport 48km from Lisboa will also need a fast road link. This is the Lisboa-Norte (IC11) road which is currently in tender with two shortlisted bidders. This project is likely to be re-energised by the airport procurement. HEALTHCARE The four Wave 1 hospital projects are suffering, with the relevant bodies Parpública (Ministry of Finance) and Parcerias Saúde (Health PPP unit) unable to agree on how to move forward. Should they abandon the clinical services element or pursue the tenders on this basis? Two are now at shortlisted bidders stage (Cascais and Braga) and one, Loures, has been annulled, to be relaunched. But with 10
more hospitals waiting as Wave 2 a decision needs to be made that will send a strong message to the bidders before their confidence and commitment wane. A consequence of the innovative structure is that there are only four bidding groups active which are all domestic. Although not fatal this limit is unlikely to deliver the necessary competition to provide good value for the public sector. PRISONS The experience on hospitals has not discouraged the government from exploring the application of PPP to prisons and these may reach market in 2007, although more likely to be a 2008 tender. Here too the government is hiring an advisory team. Early work favours the French DCMF model which excludes any management, custodial or disciplinary activity by the private sector but does include maintenance, cleaning and catering. Portuguese prisons suffer from overcrowding and long-term underinvestment in the estate. However, most are sitting on valuable inner city sites. The proposal is to relocate the prison to outside the city centre and either allow the private sector to take the risk of development value or simply take sale funds back into the government purse. This idea was considered by the Italian government and not pursued. Initially the government is looking at three pilot projects: • Coimbra (likely to be the first tendered) • Lisboa • Pinheiro da Cruz
TRENDS FOR 2007 The coming years in the Portuguese market are difficult to call. The necessity to deal with the increased air traffic will drive through the airport project. Never has there been a better time to launch such a project; with huge market demand for airport assets and with ANA up its sleeve as well, the government has a good hand. But even great hands can be played badly. On the other hand the international airport operators and investors are a powerful lobbying voice and it is unlikely that they will tolerate government indecision. The airport will go to tender and ANA is likely to be partially sold down. In the interests of speed and retaining that all-important EU funding, RAVE will probably focus its ambitions on the link to Madrid with freight and passengers. And hospitals? Who knows? There is now a similar model, including clinical risks,
developing in Valencia in Spain. The experience there will show whether it is the structure or delivery mechanism that is at fault. Further afield, like the Spanish, Portuguese contractors and funders are looking for investment opportunities in the US and wider Americas. But, unlike the Spanish, the Portuguese also see potential PPP markets through their historical links with Africa. The government issued Resolution 196/2005 in December 2005, on a cooperation policy between Portugal and Portuguese-speaking countries in Africa. This resolution clearly states that PPPs are one of the schemes that should be used to promote foreign direct investment in these countries. The risks of dealing in Africa are higher but they are also understood well by Portuguese businesses with long-standing relationships. This could be a niche the Spanish cannot enter and which remains highly lucrative to those who can.
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NO COMPLETED PROJECTS IN 2006 PORTUGAL: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 19.1 | Includes any project in tender and in the process of being financed
119
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
NHS Call Centre
40
Involves the DBFOT of a call centre and other related services. Sponsor: EPS – Gestão de Sistemas de Saúde. MLA: Caixa. In finance.
Healthcare
Wave 1: Cascais Condes Castro Guimaraes Hospital
70
One of the ten Wave 1 hospital projects. Wave 1 projects structured to have two SPVs. One to deliver infrastructure under 30-year DBFO style contract. The second to deliver medical equipment, IT, clinical services and soft FM under a 10-year contract. Shortlisted bidders: HPP (Caixa Geral de Depósitos; Texeira Duarte) / Josè de Mello Saúde / Somague / Edifer.
Healthcare
Wave 1: Braga Hospital
75
One of the ten Wave 1 hospital projects. Shortlisted bidders: Consis (Mota Engil and Espirito Santo) / Josè de Mello Saúde / Somague / Edifer.
Healthcare
Wave 1: 75 Vila Franca de Xira Hospital
One of 10 hospital projects to be procured as DBFO PPP. Tender launched in November 2005.
Healthcare
S. Braz de Alportel Rehabilitation Centre
Not available
Proposals under evaluation.
Roads
Azores SCUT
325
Shadow toll road scheme in the Azores. Involves the 30-year DBFO contract for 93km of road, including around 48km of new road, the balance consisting of refurbishments. Sponsor: Ferrovial / Cintra.
Roads
Grande Lisboa (IC16/1C30) Real toll road
290
One of five real toll schemes that make up the second tranche of Portuguese road concessions. Involves the DBFO of 23km of new road from N. Lisbon to Sintra and maintenance of 80km of existing road. Preferred bidder: LusoLisboa consortium (Mota Engil supported by BES / Caja Madrid / ING / Mizuho / Banca Opi). Losing Brisa-led consortium has started legal action to annul decision.
Roads
Douro Litoral Real Toll Road 640
Involves the new build of 72km of ring road around Porto and the management of existing road. Bidders: Mota Engil / Somague / Sacyr / Brisa / Teixeira Duarte / Dragados / Soares da Costa
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PORTUGAL: PRE-TENDER PROJECTS AS AT JANUARY 2007 TABLE 19.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Airports
Lisbon International Airport Project
3,000
This project was put on hold in April 2004 but in November 2005 the government announced it would now be procured. Interested consortia: Teixeira Duarte/ESCOM / Edifer / Belgian International Airport Co.
Healthcare
The following six hospital projects are from the 10 hospital projects to be procured as DBFO PPP hospitals (Second Wave): • South Lisbon Hospital • Hospital Todos-os-Santos • Vila do Conde/P. Varzim Hospital • Gaia Manuel de Barros Hospital • Algarve Hospital • Evora Espirito Santo Hospital
Not available
The Ministry of Health has announced that the UK model (excluding clinical services) will be adopted for some of these projects, Todos-os-Santos currently most likely candidate.
Healthcare
S. João Hospital
Not available
Rehabilitation project in Oporto.
Healthcare
Santa Maria Hospital
Not available
Rehabilitation project in Lisbon.
Light Rail
Lisbon Circle Line Project
Not available
This project is at feasibility study stage.
Light Rail
Porto Light Rail Project (Phase II)
700
This involves a 40km extension to the existing Phase I and development of three or four new lines.
Rail
Lisbon-Madrid High Speed Rail Link
3,000
One of the two initial high speed rail links planned for Portugal. This high speed rail link would connect Lisbon with Madrid. RAVE is developing a business case.
Rail
Lisbon-Porto High Speed Rail Link
4,700
One of the two initial high speed rail links planned for Portugal.
Rail
Porto-Vigo High Speed Rail Link
1,400
Second Wave HSL project RAVE developing business case.
Rail
Lisbon-Faro High Speed Rail Not Link available
Second Wave HSL project RAVE developing business case.
Rail
Faro-Huelva High Speed Rail 2,600 Link
Second Wave HSL project RAVE developing business case.
Rail
Aveiro Salamanca High Speed Rail Link
Second Wave HSL project RAVE developing business case.
2,200
FIGURE 19.2 | Continued on page 121
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PORTUGAL: PRE-TENDER PROJECTS AS AT JANUARY 2007 TABLE 19.2(Continued) |
Information supplied by
Value (€m)
infra-news.com
Sector
Project name
Roads
IP8 Sines-Beja Real Toll Road Not available
Details Currently under evaluation for tender by Portuguese government.
Roads
IP4 Amarante - Vila Real Toll Road
Not available
Currently under evaluation. Classified as priority for the government.
Roads
Mafra-Malveira-Ericeira Real Not Toll Road available
Currently under evaluation for tender by the Portuguese government.
Roads
Mira-Mangualde (IC12) Real Toll Road
800
The scheme involves 63km of construction and 105km of operation of real toll road from the Costa de Prata to the middle of Portugal. Is expected to come to the market late in 2006.
Roads
Baixo Tejo (IC3/IC12) Real Toll Road
75
This involves the DBFO of 30km of new real toll road in Lisbon on the south bank of River Tagus.
PORTUGAL: PROJECTS ON HOLD FIGURE 19.3 |
Information supplied by
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Sector
Project name
Value (€m) Details
Healthcare
Wave 1: Loures Hospital
140
First of ten Wave 1 hospital projects to be procured using Portuguese model infrastructure and clinical services model. Tender process was annulled by the government and will be re-tendered.
Light Rail
Coimbra Light Rail Project
240
Involves the design, build, operate and maintain of a 40km three-line light rail web. Features 30-year infrastructure concession and six-year extendable operating concession.
Roads
Lisboa Norte (IC11) Real Toll Road
165
This project involves a 30-year concession to develop a 27km toll road under a DBFO scheme. Bidders: Brisa. Somague with ING. Project likely to be restarted simultaneously with Lisbon airport project.
Roads
Leiria (IC36) Ring Real Toll Road
60
This project is for a 10km real toll road. Portuguese road authority considers that it may need to be expanded in scope to be attractive to investors.
PORTUGAL: CANCELLED PROJECTS FIGURE 19.4 |
121
Information supplied by
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Sector
Project name
Value (€m)
Details
Healthcare
Guarda Sousa Martins Hospital
Not available
Excluded from the government’s project pipeline.
Healthcare
Sintra Hospital
75
Excluded from the government’s project pipeline.
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SPAIN One of the leading markets for delivery of completed and current PPP Projects.
The Spanish PPP market continued to grow and maintain its reputation as one of the leading markets for delivery of completed projects. PPP principles were applied successfully to hospital and airport projects, in addition to the road sector which grew in size and number of deals. The market remained dominated by domestic contractors, operators and funders. The non-Spanish businesses gaining a toehold have something unique to offer in terms of product or sector skills. Meanwhile the domestic market players have the strength and skill to globalise rapidly (see final paragraph). Given the relatively low equity returns seen on PPP projects in Spain there has been no influx of primary equity funds seeking investment. The two leading funds that exist in the market have, not surprisingly, been launched by Spanish financial institutions which understand the market and see synergies with their existing businesses. Ahorro Corporación (a vehicle of Spanish savings banks) launched its third infrastructure investment fund in 2006 and Banco Santander funds are expanding from domestic to global infrastructure investment. Given that equity typically works first on Spanish projects before the project financing is in place and that current cash reserves may start to be eaten into by overseas investment, equity returns may increase over coming years and contractors will have greater demand for third party equity.
The PPP model continued to be adopted by localised procuring bodies at municipal and regional level which became aware of the benefits of private sector financing techniques and value for money issues. More local health and road schemes are coming on line, with most regions, including Catalunya, having a programme of projects. At national government level the Ministry of Public Works (Fomento) also looked at application of PPP for road enhancement schemes and has detailed 16 such schemes that it will tender during 2007 with a total value of around €5bn. Apart from projects run by Fomento itself, what is lacking at all levels is any kind of quality control or best practice enforcement about the structure and risk transfer of these deals from the public sector side. A group of market leaders has formed a new PPP association “foropp” to provide a unified private sector voice.
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LEGISLATIVE AND TAX CHANGES The government is currently working on a new law for PPP contracts (Contrato de Colaboración Público-Privada). The new law will define the risk transfer and payment mechanism options for PPP contracts, thereby tightening the 2003 Concession Law. The law will set out the range of PPP structures possible. There is also a hint that the underlying purpose is to standardise the structures across the different procuring bodies. The law proposes an expert review committee to examine the appropriateness of the structure selected for a project. Will the structure deliver good value for money and will it be capable of delivering the infrastructure on time? The committee will have to have teeth to make its conclusions bite, but at time of publication no details are available. There was also a drive to compliance with EU policy on two tax issues which may take away some of the expansionary fuel. First, in spring 2006 the EU ruled that Spain should phase out, by 2010, domestic tax relief for Spanish companies on non-domestic acquisitions. This tax relief was ruled to be illegal state aid by the EU. The issue first came to prominence during the French road operator bidding rounds where Spanish bidders were looking very competitive on price assisted by this tax treatment. The Ferrovial acquisition of BAA should still get through with full benefit. Secondly, the EU proposed to adopt and enforce an International Financial Reporting Interpretation of international accounting rules which would require concession companies to account for the financial costs associated with the concession at the start of the long-term concession and not over its whole life. This would have an adverse short-term effect on the companies’ accounts. Spanish contractors would not be alone in feeling the pain as this would also change current practice in France, Italy and Portugal.
125
ROADS The roads market shows no short-term sign of slowing, although realistically there has to be a longer-term curb to the number of new projects being developed such as the public willingness to pay for an ever expanding toll road network or the ability of the regional governments to fund the longer-term budget implications of shadow toll structures (the “silting up” issue identified in the UK as future road payment liabilities constrained the authority from discretionary spend on other highway-related priorities). Both road contractors and operators did well in the period with EBITDA and net profits increasing. The only blip was the response of the markets to the announced merger between Abertis and Autostrade – road operators in Spain and Italy respectively. Whilst the European Commission made it clear that it had no issue with the proposed merger, the Italian authorities took a different view and the proposal is currently stalled (see Italian section). Abertis also managed to make an unexpected move into the French road operator market with the acquisition of a 75.7 per cent stake in Sanef as part of the French government privatisation programme. No headline road deal completed in 2006, but Fomento did announce a programme of 16 road schemes to be let under 20-year concessions. The schemes are for upgrade and maintenance of national routes and will be paid for using a shadow toll and performance based payment mechanism. These are all large-scale projects in terms of capital expenditure, going up to €415m. The tenders for these will provide a solid basis for the contractor and funder market for 2007.
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HEALTHCARE The healthcare sector showed good progress in 2006 with the financial completion of three of the eight Madrid hospital projects – Vallecas, Majadahonda and Coslada. These hospitals, being procured by the Comunidad of Madrid, have followed closely the UK model in terms of allocation of responsibility and risk between the public and private sectors with some local adaptions. Four of the remaining five now in tender have also followed this pattern. The eighth, Valdemoro, has also included provision of clinical services. This project was awarded to Swedish sponsor Capio AB and funded by sponsor equity. Given the delay on the Portuguese hospital programme, which has developed a model including clinical services, the restriction of this model to one pilot scheme looks like a good decision. 2007 is election year and Madrid's incumbent political team will have delivered what they promised in terms of improved health infrastructure. Other regions are applying PPP to healthcare. Mallorca and Valencia have schemes in advanced procurement, again using the model which excludes clinical services. Castilla y León awarded to an OHL-led consortium in January of this year the concession contract for the construction, maintenance and exploitation of the Burgos hospital. This project is the second largest in connection with PPP hospital projects (value €232m, 680-bed and 30-year concession) in which Banco Santander is sole MLA on the project. Castilla La Mancha awarded its first PPP hospital to Ferrovial and Acciona in Toledo in 2006. This project only comprised the construction of the hospital and it had a slightly different structure, keeping management of the hospital with a local public body. At a later point the private sector will be able to invest into that public management company. Behind this there are around 20 hospital schemes procured by regional authorities. Valencia has 13 schemes, which also include provision of clinical services, one Elche has now in tender. The new law for PPPs will bring some degree of consistency to the models applied and should be good news for this market.
AIRPORTS 2006 also saw the application of PPP to procurement of a new regional airport. Near Castellon in Valencia, the regional authority is planning expansion of tourism on the Costa de Azahar. To service the anticipated additional demand for access using budget airlines a new local airport is required. A 50-year concession was let to a consortium led by Luis Batalla S.A. and FCC to build a terminal, a runway and cargo and catering facilities, and to operate the airport. TBI is the selected operator. The senior financing arranged by Banco Santander delivered €34.2m, with the remaining cost being met by €33.55m from the equity sponsors and €44.2m of subordinated debt from the regional government. The low gearing reflected the usage risk on a greenfield airport, and there is additional comfort for lenders in that the government takes usage risk for the first eight years of operation. Another important project is the Murcia airport concession for the construction, operation and exploitation of all commercial areas, which it will award this year. This relevant project will be the third Spanish airport under private control and it will be a 40-year contract. In addition, this PPP project will receive €30bn in credits from the Murcia Autonomous Region. RAIL As last year there has been little sign of PPP being applied to heavy rail infrastructure and operation projects. However, greater involvement of the private sector continues in the rapid transit sector. The Parla Tram project reached financial close for the construction and longterm operation and maintenance of a 12km tram track. Malaga is procuring an 11.6km two-line light rail system which EIB will fund and Madrid is procuring a 2.5km extension to its current Metro system to the new Terminal 4 at Madrid Airport. The Madrid Transport and Infrastructure Department has also launched a tender for three new tram lines using a 30-year DBFO model. Pre-tender there are schemes in Alicante, Granada, Zaragoza and Cadiz. Where previous schemes would be kept as design and build only with the regional or municipal authority looking to funding from EIB (such as the Barcelona Metro line 9) there is now greater acceptance that private finance sources can deliver on this type of scheme particularly where the project is the extension of an existing system and ridership patterns can be more easily predicted.
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PRISONS AND SCHOOLS There has been some introduction of PPP to the prison and schools sectors, but in both cases these projects have been using asset-based lease finance rather than a traditional revenue-based project financing. In Barcelona the Sant Esteve Sesrovires prison was awarded a longterm contract to ACS. One of the models being used for schools is a long-term contract between the regional authority and a 100 per cent owned subsidiary; a lease is then awarded to the subsidiary and the subsidiary subcontracts the construction, operation and maintenance elements to the private sector. This is one model; although it will probably not achieve true involvement and risk sharing with the private sector. School projects, as was found to be the case in the UK, only start to look attractive to the kind of bidder the public sector want when the deals get larger. In this regard, the Aragonese Regional Government, via its construction group Suelo y Vivienda, is looking for a financier for the development of two new high schools, Chomón II and Parque Goya.The total financing required for these projects will be €20m which will be reimbursed via availability payments.
WATER Water, or lack of it, is a growing issue in Spain. Desertification is taken seriously and private sector investment is readily available. Spanish contractors are committed to being part of the solution on sustainability issues. The Navarra irrigation system was completed this year using a PPP structure, with payments based on availability and demand. The consortium was led by Acciona, which aims to be the first “green” multinational. This project followed last year’s €1bn project for a secondary irrigation network for Lleida in Catalonia. Navarra has greater risk transfer attached to the payment stream. Desalination plants are also on the agenda and a tender has recently been announced by Almuñécar in Granada for a 12-year contract for the design, build and maintenance of a new plant.
In this market, until there is some scale to the projects being procured, schools and prisons are unlikely to attract the interest and investment of large contractors that understand the issues associated with PPP.
TRENDS FOR 2007
After almost 10 years of continuous economic growth, heavy government investment in the country's shattered infrastructure and the benefits of EU funding and membership of the Spanish contractor groups are pre-eminent in Europe. Five out of seven of Europe’s largest contractor groups are Spanish. They are cash rich and with concerns that the growth phase within Spain may be coming to an end, they now have the burning platform necessitating their expansion into other markets. Although there were signs of this movement previously (such as Ferrovial’s acquisition of Amey in 2004), 2006 was the year when the strategy for expansion outside of their domestic markets was put to work. Ferrovial launched a successful £10.1bn bid for British Airports Authority, the owner and operator of seven UK airports including Gatwick, Heathrow and Stansted, and other airport-related assets internationally. In the US, Cintra, Ferrovial’s road concession arm, established itself as the leading player in the early P3 road infrastructure market adding the Indiana Toll Road concession to its interest in the Chicago Skyway. Texas is the next target. Already Cintra
127
has been awarded a long-term 50-year contract by the Texan Department of Transportation for the real toll Trans-Texas Corridor (TTC-35) which is estimated to require investment in the region of US$30bn. Dragados, Sacyr Vallhermosa and FCC have also established footprints in the US markets and FCC made a strategic acquisition for the Central and Eastern European region of Austrian contractor Alpine Mayreder. Where the contractors go, their funders go too.The community of interests was demonstrated by a new joint venture between Caja Madrid and FCC (temporarily named Alborada), established this year as the vehicle for holding concession investments from both parties, valued at €541m. Initially 32 concessions have been moved into Alborada.The long-standing organisational relationships with the contractor groups are taking funders such as Banco Santander, BBVA and Caja Madrid into the US infrastructure market. It benefits both sides – an introduction to possibly the biggest new infrastructure market for the banks and the availability of some razor-sharp margins which they have grown used to at home for their borrowers.
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SPAIN: COMPLETED PROJECTS IN 2006 FIGURE 20.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Barcelona Judicial Offices Cuitat de la Justicia
296
A new court complex of 11 buildings. Sponsor(s): FCC / Ferrovial / OHL / Copisa Arranger(s): SCH / Banco Sabadell XL Capital wrapped the debt.
Airports
Aeropuerto Coste de Azahar Valencia
112
50-year concession to contract and operate new regional airport in Valencia. Sponsor(s): Concessiones Aeroport-Urias SA (Luis Batalla Sociedad Ańo nima Unipersonal / FCC Construcción S.A. / Bancaja / SPPE Caja Madrid / PGP Asociados and Abertis Aeroports) Operation TBI. Grupo Santander was MLA
Healthcare
Vallecas Hospital Madrid
138
One of eight hospital schemes for Madrid. The new hospital will provide 300 new beds. Sponsor(s): Ploder / Iniciatira de Infraestructuras y Servicios / Begar Arranger(s): Banco Santander
Healthcare
Hospital de Valdemoro Madrid
60
Part of a programme of eight schemes in Madrid. The first project to include delivery of clinical services. Project awarded to Swedish-owned Capio AB. Funded by sponsor(s) equity.
Healthcare
Hospital Puerta de Hierro Majadahonda Madrid
250
The largest of eight hospital schemes in Madrid. New 794 - bed hospital in NW Madrid. Sponsor(s): ACS-Dragados / Bovis Lend Lease / SUFI Arranger(s): Dexia Sabadell / Aharro Corporacion / ING
Healthcare
Hospital de Henares Coslada Madrid
89
An 80,000 sq.m hospital in east Madrid. Project awarded to Sacyr, Testa and Valoriza Facilities. Arranger(s): Bank of Scotland
Healthcare
Hospital del Sur Parla Madrid
43
One of eight schemes in Madrid Sponsor(s): Sacyr / Testa and Valoriza Facilities Arranger(s): Bank of Scotland
Healthcare
Hospital de Sureste Arganda del Rey Madrid
62
A 29,500 sq.m project in south Madrid. Awarded to FCC Construcción / Obrascón Huarte Laín / Sociedad de Promoción y Participación Empresarial Caja Madrid Arranger(s): Caja Madrid
Light Rail
Parla Tram Madrid
138
The construction, maintenance and management of a 12km tram link between Parla East and city centre of Madrid. Sponsor(s): Acciona and FCC Arranger(s): BNP Paribas / Caja Castilla La Mancha
FIGURE 20.0 | Continued on page 129
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SPAIN: COMPLETED PROJECTS IN 2006 FIGURE 20.0 (Continued) |
129
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Prisons
Brians II Prison Catalonia
70
Construction and operation of new prison under 30-year agreement. Custodial services and maintenance remain with regional authority. Sponsor(s): Dragados / Proinosa / Construcciones Pai Arranger(s): SCH
Roads
Ibiza-San Antonio Shadow Toll Road Balearic Islands
260
25-year concession for widening of existing road. Procured by local region. Sponsor(s): FCC Arranger(s): RBS
Roads
M-30 Ring Madrid
4,000
Construction of 6km stretch of west M-30 ring road. Procuring authority is 80% owned by Municipality of Madrid and 20% owned by Ferrovial. Dragados and API. The Procuring Authority has let lump sum contracts for delivery of construction works. Arranger(s): Caja Madrid / Dexia Sabadell / SG / Instituto de Crédito Oficial
Roads
Autovía Santiago-Bríon C-543 Galicia
115
A 15.9km toll road involving widening of 16km of existing road and the construction of 18 viaducts. Sponsor(s): Dragados / Extraco / Francisco Gómez. Arranger(s): Dexia Sabadell / SG
Roads
Autopista de Alicante/ Alicante Highway
383
The construction of a 142.5km highway. Sponsor(s): ACS / Dragados / Abertis Arranger(s): Caja Madrid
Roads
Autopista del Mediterraneo Cartagena-Vera
532
The development of a 114km highway. Sponsor(s): FCC & Ploder Arranger(s): Banesto / ACF
Roads
M-407 Fuenlabrada-Griñón Madrid
93
30-year contract for delivery of an 11.6km shadow toll road. Procured by Communidad de Madrid. Sponsor(s): FCC Arranger(s): RBS
Roads
Valladolid-Segovia Shadow Toll Road Castilla y Leon Tranche I: Valladolid-Cuellar
96
Shadow toll road project to upgrade existing CL-601. Sponsor(s): Dragados / Cyopsa / Caja Duero Arranger(s): Caja Madrid
Roads
Valladolid-Segovia Shadow Toll Road Castilla y Leon Tranche 2: Cuellar-Segoria
100
Sponsor(s): Sacyr / Construcciones Lerma Arranger(s): Banesto / RBS
Water/Wastewater
Reoncin waste thermal drying plant Cantabria
27
20-year DBFMO contract awarded. Sponsor(s): Sisternas Medioambientales de Cantabria Arranger(s): Dexia Sabadell
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SPAIN: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 20.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Pamplona Bus Station Navarra
43
PPP tender issued for the construction and management of a new bus station in Pamplona.
Education/healthcare
Two new high schools and four health centres Aragon
40
Aragon regional government seeking private finance for this project involving regional government construction group.
Healthcare
Burgos Hospital Castilla y Leon
275
30-year concession for new build 680 bed hospital. Sponsor(s): OHL (20%) / Corsán-Corviam S.A. / Urbanizaciones Burgalesas S.L. / Grupo Norte / Caja de Ahorros Municipal de Burgos / Caja de Ahorros y Monte de Piedad del Circulo Catolico de Obreros de Burgos / Invergestión Sociedad de inversions y Gestión S.A. (Caja España) / Caja de Ahorros de Ávila / Caja Duero / Santander Infraestructuras / Gerens Management Group S.A Arranger(s): Banco Santander
Healthcare
Hospital Universitario de Son Dureta Palma Mallorca
234
30-year concession for the financing, construction, operation and maintenance of new 900 bed hospital in Palma. Preferred Bidder Group: Dragados / FCC / Construcción / Melchor Mascaró / Llabrés Feliu
Healthcare
Hospital del Tajo Aranjuez Madrid
43
A 164,000 sq.m project in south Madrid. Sponsor(s): Constructora Hispánica S.A. / Construcciones Sánchez Domínguez-Sando SA e Instalaciones Inabensa
Healthcare
Hospital del Norte San Sebastian de los Reyes Madrid
140
A 100,000 sq.m hospital north of Madrid. Sponsor(s): Acciona / Crespo y Blanco MLA: Calyon
Healthcare
Hospital General de Toledo Castilla La Mancha
300
The hospital will be managed through contract period by Esinsa, a public sector company. 20% of shareholding in management company will be sold by Esinsa to private investors. Sponsor(s): Ferrovial / Acciona
Healthcare
Elche-Crevillente & Torrevieja Hospital Valencia
100
One of 13 Valencian hospital projects. Long-term contract includes provision of clinical services.
Leisure
Palacio del Sur Conference Centre
163
Andalusian regional government has let a 28-year concession to build, maintain and develop the project. Sponsor(s): Ferrovial / Agromán MLA: Banco Santander
Light Rail
Malaga Metro Andalucia
260
35-year DBFO concession for 11.6km light rail system.The project comprises two lines and will deliver infrastructure and rolling stock. Sponsor(s): Metro de Malaga Funder: EIB
Light Rail
Madrid Metro extension to Terminal 4 of Burajas Airport Madrid
45
20-year concession to design, build and operate a 2.5km extension to existing Metro Line 8 Payment through use and availability. Sponsor/funder: FCC / Caja Madrid FIGURE 20.1 | Continued on page 131
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SPAIN: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 20.1 (Continued) | Includes any project in tender and in the process of being financed
131
Information supplied by
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Sector
Project name
Value (€m)
Details
Roads
El-Burgo-Villafranca Shadow Toll Road
60
30-year concession for 5.2km shadow toll road project near Zaragoza. Sponsor(s): Acciona – Brues / Fernandez CC / Arascon
Roads
Ibiza Airport Shadow Toll Road Balearic Islands
Not available
Development of a new access to Ibiza airport. Sponsor(s): Ortiz Construcciones / Matias Arrom Bibloni In finance.
Roads
Autovia Reus-Alcover Catalunya
65
32-year concession for 10.2km shadow toll road. Sponsor(s): Dragados / Benito Arnó awarded in Jan 2006 In finance.
Roads
Autovia Mançanet-Platja d'Aro Catalunya
63
A 27.7km shadow toll road. Sponsor(s): Cedinsa (Comsa / Copisca / Capiso) awarded in November 2005. In finance.
Roads
Desdoblameinto de la vía Rápida del Barbanza
108
This project is for a 42km highway and widening of existing road. Sponsor(s): Itinere-Caixa Galicia. In finance.
Roads
Desdoblamiento vía Rápida del Salnes Galicia
41
A 17km highway including the widening of existing road. Sponsor(s): Copasa / Puentes y Calzadas / Caixanova
Roads
M-203 Mejorada Madrid
79
An 18km real toll road project. Sponsor(s): Cintra In finance.
Roads
Autovia de Ademuz CV-35 Lliria-Casinos-Losa del Obispo Valencia
200
A 52.9km shadow toll road project. Financial close due spring 2006. Sponsor: Sacyr / Itinere / Secosa / Construcciones Nacare.
Roads
Autovia CV-50 Lliria to Alzira Valencia
125
Shadow toll road project awarded to a consortium of Sacyr, Nagares and Secopsa.
Roads
Alto de las Pedrizas-Torremolinos Toll Road
367
The construction of a new 24.5km connection from Malaga to the north (AP-46). Will include an elevated section and two tunnels. Sponsor(s): Itinere (Sacyr concessions) / Sacyr / Gea MLAs: Banesto / Calyon
Roads
Toledo Availability Payment Road Scheme Castilla La Mancha
Not available
Upgrade of road network in Toldeo. Sponsor(s): Antonio Miguel Gómez e Hijos / Juan Nicolás Gómez e Hijos Construcciones S.A. / Concisa Industrial Accopma S.A. / Construcciones Antolìn / García Lozoya S.A. / Contratas La Mancha E.C.S.A.
Water/Wastewater
Navarra Irrigation System
180
Development of an irrigation system in Navarra. Payment based on availability and demand. Sponsor(s): Acciona / Corporación Can / Isolux Corsán / Befesa / Irüna Construcción Obenasa / Arian
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SPAIN: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 20.2 |
Information supplied by
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Sector
Project name
Value (€m)
Details
Airports
Aeropuerto de Corvera Murcia
150
This will be Spain’s third airport PPP with construction, operation and all commercial activities awarded.
Healthcare
13 new hospitals in the Valencia region
Not available
The following are part of a €1.1bn scheme for 13 new hospitals in the Valencia region. All these projects include the transfer of clinical risk. • Hospital de Campanar • Padre Jofre Hospital • Gandia Hospital • Hospital Comarcal de l’Horta • Hospital de la Nueva Fe, Llíria, Campanar • Hospital de Dénia and Benidorm Hospital • Vall d’Uixó Hospital
Light Rail
Alicante Tram L2 Valencia
100
Extension to tram line in Alicante expected to come to tender late in 2006.
Light Rail
Granada Light Railway
230
The development of a 16km light rail network.
Light Rail
Zaragoza Light Rail
Not available
This project is at the initial stage.
Light Rail
Cadiz Light Rail
98
A 13km light railway whose tender is expected in 2006.
Light Rail
Malaga Light Rail Line 3
178
The third line of the Malaga Light Railway will be 5.5km and likely to be procured using a BOT structure.
Roads
CV-50 Algar del Palancia-Sueca Valencia
497
Road including a 7km tunnel on Lliara-Algar section.
Roads
Palamos-Palafrugell Road
Not available
This project would be the development of a 6.8km road and is being considered to be launched as a PPP.
Roads
Badalona-Mollet B-500 Catalunya
Not available
Roads
Eix de l'Ebre Amposta A-2 Lleida Catalunya
Not available
This project would be for the development of a 139km road between Amposta and Lleida.
Roads
Eix del Llobregat: Berga-Baga Catalunya
Not available
This project is the development of a 20km road between Berga and Baga.
Roads
Eix Transversal: Cervera – NII (Girona) Catalunya
Not available
This project would be the development of a DBFO 150km road.
FIGURE 20.2 | Continued on page 133
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PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 20.2 (Continued) |
Information supplied by
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Sector
Project name
Value (€m)
Details
Roads
Bus Lane Avda. Meridiana-Cerdanyola del Valles
Not available
The development of a bus lane which is being considered for launch as a PPP.
Roads
Autovia Vilanova-Manresa Catalunya
181
A 68.3km shadow toll road.
Roads
Autovia Vic-Ripoll Catalunya
221
Roads
Santomera-Mar Menor Highway
200
Roads
Autovía Ourense (A-52) – Celanova Sur Galicia
30
Roads
Autovía Carballo-Berdolas. Desde Berdolas a Cee Galicia
90.6
Roads
M-404 Serranillos del Valle-Cienpozuelos Madrid
60
A 17km shadow roll road project still under consideration by Communidad de Madrid.
Roads
M45-M501 MontepríncipeCuatro Vientos Madrid
65
An 8km shadow toll road project currently in pre-design phase.
Roads
Tunnel Olocau – N234 Valencia
Not available
This 6km real toll project is currently under study.
Roads
Eje Orihuela-Costa CV-95 Valencia
Not available
Roads
Eje del Segura Orihuela-Guardamar Valencia
Not available
Roads
Eje Viario Novelda-Agost-Alacant Valencia
Not available
Roads
Eje Transversal Villena-Muro de Alcoi Valencia
Not available
Roads
Autovia l'Olleria-Gandia CV-60 Valencia
Not available
Roads
Autovia e la PlanaLa Pobla Tornesa to Vilanova Valencia
53
Roads
Cariñena-Gallur Aragon
200
A 40km real toll highway in Murcia.
Feasibility study issued discussing possible toll structures scheme for 64km link between Corredor del Levante and Corredor del Ebro. FIGURE 20.2 | Continued on page 134
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PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 20.2 (Continued) |
Information supplied by
Sector
Project name
Roads
The Spanish Ministry of Public Works as the Procuring Authority has announced the following 20 year DBFO shadow toll road upgrades:
Value (€m)
Roads
A1 Motorway Santo Tomé del Puerto 89km
Roads
A1 Motorway 415.2 Santo Tomé del Puerto to Burgos 146km
Roads
A2 Motorway Madrid to PK62 (R2) 57km
196.2
Roads
A2 Motorway PK62 (R2) to LP Soria/Guadalajara 76km
222
Roads
A2 Motorway LP Soria/Guadalajara to Calatayud 95km
259.3
Roads
A2 Motorway Calatayud to Alfajarin 107km
306.5
Roads
A3 Motorway Madrid to LP Cuenca 68km
196.7
Roads
A3 Motorway 266.1 LP Cuenca to LP Albacete (A-31) 141km
Roads
A3 Motorway LP Albacete (A-31) to Bonete 94km
178.6
Roads
A3 Motorway Bonete to Alicante 111km
182.4
Roads
A4 Motorway Madrid to PK67.5 (R4) 65km
203.1
Roads
A4 Motorway PK67.5 (R4) to Puerto Lápice 70km
320.3
Roads
A4 Motorway Puerto Lápice to LP Jaen/Cuidad Real 107km
268.2
infra-news.com
Details
324
FIGURE 20.2 | Continued on page 135
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PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 20.2 (Continued) |
Sector
Project name
Value (€m)
Roads
A4 Motorway LP Jaen/Cuidad Real to LP Córdoba/LP Jaen 102km
293.7
Roads
A4 Motorway LP Còrdoba/LP Jaen to LP Sevilla/Córdoba 88km
223.9
Roads
A4 Motorway LP Sevilla/Còrdoba to Sevilla 105km
234.7
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Details
SPAIN: PROJECTS ON HOLD FIGURE 20.3 |
135
Sector
Project name
Value (€m)
Details
Light Rail
Madrid Light Rail extensions: Lot 1: a) Colonia Jardin to Pozuelo de Alarçon – 7.8km line b) Colonia Jardin to Boadilla del Monte – 14km line Lot 2: Pinar de Chamartin to Sanchinarro-Las Tablas
890 (598/292)
Madrid Transport and Infrastructure Department has launched one tender for a 30-year DBFO contract for three new tram lines.
Light Rail
Madrid Metro extensions: a) Metroeste Line – 7.5km line b) Metronorte Line
1,037 (440/637)
Rail
High Speed Spain Rail Network – AVE Project
Not available
The development of the high speed rail network which is currently on hold.
Roads
M-100 R2-A2 Madrid
30
A 7km real toll road project currently on hold to decide if it will be tendered as a PPP.
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| European PPP Report 2007 | Greece
137
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Greece | European PPP Report 2007 |
GREECE Continues to roll-out its programme for additional investment in public infrastructure.
2006 was a lively year for the Greek market. The government continues to roll-out its programme for additional investment in public infrastructure. After almost six years since the announcement of the €8bn highways investment programme, 2006 saw two of these projects reach completion with a few projects now at preferred bidder and not far behind. The government has also announced a €2bn investment plan for non-transport public infrastructure with a possible 250 (smaller scale) projects in the pipeline across a range of areas such as schools, police and fire stations and office accommodation. Of these the grouped schools projects in Attica and Macedonia (both over €100m in value) have attracted the most attention, although these are not yet at tender stage.
LEGISLATIVE AND TAX CHANGES The PPP law was passed in 2005 and also implemented the new EC procurement directives; since then there has been no further legislation. There has been concern amongst bidders in relation to the procurement process which has been used on the road projects. Strategic challenges under the procurement legislation left a situation on the E-65 where the only other bidder in the race was eliminated for failure to comply with process prior to the remaining bidder submitting a final bid. This is unlikely to happen again.
There is also an announced intention to introduce PPP to the health sector and a handful of potential pathfinder projects have been identified. There is an identifiable plan for the roll-out of PPP – transport, schools and then hospitals.
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ROADS In 2006 the major success was the completion of the first two major highway projects – the Ionia Odos Motorway and the Thessaloniki Submerged Tunnel. The Ionia Odos project was awarded to the Hellenic Autopistas consortium comprising Cintra, ACS, GEK and Terna and funded by a bank group led by BBVA, Fortis, SCH and EFG Eurobank. The 30-year DBFO contract will deliver upgrade and new construction on 378km of real toll road. Hellenic Autopistas has also been selected as preferred bidder on the E-65 central Greek motorway. The Thessaloniki submerged tunnel under the bay area is a higher risk project. It will deliver a six lane tunnel, 1.5km of which will be submerged, the remainder of the length in cuttings. A local Greek team (comprising Helleniki Technodomi, AKTOR, Boskalis, Themeliodomi and Archirodon Construction) was awarded this contract in 2006. To make the project commercially viable the government provided around €100m in state funding, the balance of the cost being met by commercial banks and EIB debt. The margins for commercial debt on these initial projects remain high in comparison to margins on projects in other more developed PPP markets in Europe, perhaps a reflection of a not yet settled approach to risk transfer. There remain four other major road schemes to reach completion in 2007 which are: • • • •
Corinth-Patras-Pyrgos-Tsakona Motorway E-65 central Greece Motorway Corinth-Tripoli-Kalamata and Lefktro; Sparta motorway Maliakos to Kleidi Motorway
TRENDS FOR 2007
2007 will see the completion of the roads programme and the roll-out of non-transport infrastructure PPPs in schools, courts and prisons. Hospitals may not reach tender in 2007. The non-transport projects will be procured on slightly shorter contract terms and at the moment the public-use amenities are being developed with an element of commercial opportunity attached – such as disposal of excess land and car park operation to ensure that the overall cost to the government is kept low.
139
The development of the Greek PPP market has come quietly and quickly. Its neighbour Bulgaria has adopted PPP policies and its non-EU neighbour Turkey also has plans for PPP and is currently establishing a new PPP law. There is potential for the South Eastern European regional PPP market to develop, and the early movers on the Greek roads such as Cintra,Vinci and Hochtief, as well as local Greek firms wishing to expand regionally, will have a head start.
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GREECE: COMPLETED PROJECT IN 2006 FIGURE 20.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Bridges / Tunnels
Thessaloniki Submerged Tunnel
460
Development of a partially submerged tunnel outside Thessaloniki. Sponsor Group: Thermaiki Odos (Helliniki Technodomi / AKTOR / Boskalis / Themeliodoi / Archirodon Construction). Arrangers: EFG / HypoVereinsbank / BCP. The Greek government has provided €100m in state funding.
Roads
Ionia Odos Motorway Project
1,150
30-year DBFO concession for real toll road project. Involves upgrade and new build of 378km of motorway. Sponsor: Hellenic Autopistas (Cintra / ACS / GEK /TERNA) Funders: BBVA / Fortis, SCH / EFG Eurobank.
GREECE: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 20.1 | Includes any project in tender and in the process of being financed
Information supplied by
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Sector
Project name
Value (€m)
Details
Roads
Corinth-Patras-PyrgosTsakona Motorway Project
2,700
30-year concession contract for construction and improvement of a 365km motorway. Preferred bidder: Apion Kleos (Vinci / Hochtief / J&P / AVAX / Helliniki / Techno Dorniki).
Roads
E-65 Central Greece Highway Project
1,100
Construction of 196km motorway. Preferred bidder: Hellenic Autopistas (see Ionia Odos above). MLAs: EFG / BBVA / Fortis / Santander / Caja Madrid.
Roads
Corinth-Tripoli-Kalamata and Leftktro-Sparta Motorway Project
900
Construction of 81km highway and upgrade of existing road. Preferred bidder:Moreas (Elleniki Technodoniki / Impreglio / Pantechniki).
Roads
Maliakos to Kleidi Highway
995
Construction of northern section of road. Includes three tunnels and one bridge. Preferred bidder: Aegean Motorway Group (Vinci / Elleniki Technodoniki / J&P AVAX / Aegek / Athena). The final preferred bidder group is a merger of two prior exisitng bidding consortia following an earlier award challenge.
Roads
Athens (Attika) Urban Projects
575
Development of 50km of roads projects in Athens. Bidders: Transport Thessaloniki / Poseidon / Siragga Thermaikou / Thescross / Bouyges-ASF-ALTE-Archirondon. Technical studies are now under way.
140
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GREECE: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 20.2 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Tax Offices PPP Accommodation Project
Not available
Modernisation and refurbishment of tax offices.
Accommodation
Central Fire Services Headquarters
32
Construction, modernisation and refurbishment of Central Fire Service Headquarters.
Accommodation
Cretan Courts project
100
Education
Attica Schools
150
Procuring Authority: Organisation of School Buildings. 25-year DBFMO project for construction of 27 schools in Attica
Education
Macedonia Schools
119
Procuring Authority: Organisation of School Buildings. 25-year DBFMO project for construction of 31 new schools in Macedonia.
Education
Four new faculty buildings at 100 university of Peoponnisos
Healthcare
Thessaloniki Paediatric Hospital PPP
80
Two new 400-bed children’s hospitals.
Healthcare
Preveza (Western Greece) General Hospital PPP
50
Construction only of greenfield 800-bed hospital.
Leisure
New conference centre in the Faliron Pavilion
56
Construction of new international conference centre within the Olympic site.
Prisons
Thessaloniki,Valos and Korinthos prison
100
One grouped prison scheme following French procurement model.
GREECE: PROJECTS ON HOLD FIGURE 20.3 |
141
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Sector
Project name
Value (€m)
Details
Accommodation
Coastguard Academy Accommodation Project
45
Modernisation and refurbishment of the Navy’s training Coastguard Academy.
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REPUBLIC OF
IRELAND Continues to be buoyant and is expanding from the high-profile toll toad programme into social infrastructure.
The PPP market in the Republic of Ireland (referred to in this section as Ireland) continues to be buoyant and is expanding from the high-profile toll road programme into social infrastructure such as accommodation, schools and healthcare. PPP will account for €5.5bn of the total five-year government capital investment programme of €43.5bn. There will also be a further €2bn allocation from government for PPPs where the majority of project costs are to be met by user charges. Early in 2007 the new National Development Plan 2007-2013 was launched as an overlay to the existing commitments on PPP. The plan is valued at around €175bn of which €150bn will come from tax revenue. Social infrastructure is high on the Plan priorities and by excluding the use of European funds the government aims to have more discretion as to how the money is allocated. The Plan also envisages co-funding exercises with the British government in relation to transport and social infrastructure in Northern Ireland.
ROADS AND TUNNELS As before the main show has been the National Road Authorities (“NRA”) road programme. The Waterford Bypass and Limerick Tunnel projects both reached completion. The Limerick Tunnel deal in particular was notable for the use of a highly structured conduit loan arranged by HBoS and wrapped by monoline, MBIA, together with wrapped EIB debt and mezzanine debt from AIB and Meridiam. On a simplified level, the project vehicle issues privately place bonds to an HBoS captive which then borrows from the shortterm CP market and lends the proceeds back to the project issuer. This is the first ever use of a project bond in the Irish market, although there is a possibility that the large M50 scheme, now at preferred bidder, may also pursue a bond option. The tail end of the NRA toll road programme should complete in 2007. Several projects already at preferred bidder stage are expected in the first half, the court challenge on the M3 Clonee- Kells project having been cleared. There will be further road PPP projects but these will not be brought forward in such a large batch or be exclusively real toll projects. An availability based payment mechanism may be the better value option on the less populated routes.
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DUBLIN METRO The long standing Metro project continues: will it reach the point of delivery? Those close to the project believe that 2007 will see the launch of the commercial tenders for an infraco (to build, own and maintain the rolling stock), rolling stock provider and operator. The infraco consortium selected will then have the choice of which rolling stock and operator option to work with (from a panel selected by the procuring body, the Railway Procurement Agency). The model, which separates the responsibility for the track and rolling stock from operation of the services, is not new. The scale, complexity and estimated cost of this greenfield project is more than has been tried before. The Railway Order still needs to be approved by Parliament and planning permission granted. With concerns over ridership on other systems and much of the process still to be completed, the risks attaching to this (potentially) €4bn project are significant.
SOCIAL INFRASTRUCTURE Away from transport, a number of other sectors are now moving forward. The Dublin International Conference centre for provision of a 2,000 seat conference centre completed in 2006. Although a project which is unlikely to be replicated, it showed application of PPP principles to new areas. There are projects now in tender for a new Dublin Criminal Court complex, a new greenfield prison and the first bundled schools project. These are each significantly sized projects which will attract a good range of international and local consortia. The overseeing body for PPPs, the National Development Finance Agency, has identified the problems associated with smaller scale projects as seen in the UK and aims to avoid them. Additionally there are a range of waste management projects to deal with the backlog in facilities for the growing population and at the same time to come within the EC requirements for landfill reduction. Later in 2007 we may see a healthcare project coming to tender. This will not be a large acute hospital project as in the UK. Projects identified so far involve delivery of local community care units and the flagship project, which is the reorganisation of regional oncology treatment centres for cancer patients which will involve delivery of facilities and medical equipment (but not the Portuguese model involving operation and clinical services).
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REPUBLIC OF IRELAND: COMPLETED PROJECTS 2006 FIGURE 21.0 |
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Bridges / Tunnels
Limerick Tunnel PPP
258
36-year concession for construction of 10km of dual carriageway and 900 m of immersed tunnel under River Shannon. Sponsor: Direct Route (Strabag, John Sisk & Son, Lagan Holdings and Roadbridge). Funded using monoline wrapped senior debt through conduit structure arranged by HBoS and EIB mezzanine loan.
Education
Cork School of Music
68
Construction of a new School of Music, with an area of around 10,500 square metres and accommodating over 3,300 students. Project Company to equip and operate the complex. Sponsor: Jarvis (taken over by Hochtief). Hochtief and Barclays Equity invested £7.8m on a 50:50 basis. Financial Close: 8 September 2005.
Leisure
Dublin International Conference Centre
350
25-year DBFO design, build and lease back arrangement for a 2,000-seat conference centre. Sponsor: Spencer Dock consortium (Treasury Holdings / Irish Rail / AIB). Arrangers: AIB and Depfa
Roads
Waterford Bypass
360
30-year concession forming part of Dublin-Cork route. N25 bypass of Waterford City. Sponsor Group: Celtic Roads Group (NTR / Dragados/ BAM PPP / Ascon). Arrangers: BVVA and Grupo Santander
Social Housing
Cherry Orchard Housing Project
Not available
Development of private and affordable housing on a four hectare site at Cherry Orchard by Dublin City Council. This is a high density scheme with a density of 93 units per hectare.The development will consist of 374 residential units and a childcare facility. 30% will be sold to Dublin City Council at cost, to be sold on as social affordable housing and the remaining 70% will be sold on the private market.
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REPUBLIC OF IRELAND: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 21.1 | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Dublin Criminal Court Complex
100
25-year DBFOM contract for construction of a new 22 courtroom Criminal Court Building in Dublin. Preferred Bidder: Babcock & Brown
Education
Irish PPP Schools Bundle 1
100
First bundle of 5 new schools projects.
Prisons
Thornton Hall Prison Development
200
Development of a prison comprising 1,200 prison cells.
Roads
M50 Upgrade PPP
500
Upgrade of motorway, to be developed in two phases. Five shortlisted bidders.
Roads
N7/N8 PortlaoiseCastletown- Culahill
405
Development of two routes from Portlaoise. 40km stretch of new motorway. Advanced technical package sent to five shortlisted consortia in February 2006: 1) Hibernia Roads (Acciona / Mota-Engil SGPS / Mota-Engil Engenheria / McNamara / BES / Coffey Construction) 2) Direct Route (Strabag / A-way Gmbh / Lagan Holdings / Roadbridge Ltd / John Siks & Son Ltd) 3) ICON (FCC / Itinere / PJ Hegarty) 4) EuroLink (Cintra / SIAC Construction Ltd.) 5) Celtic Roads Group(Dragados Concesiones de Infraestructuras S.A. / Dragados S.A. / NTR plc / BAM PPP bv).
Roads
N6 Galway to East Ballinasioe
400
Development of 57.6km road from Galway to Roscommon. Preferred Bidder: ICON (FCC Construction S.A / Itinere / PJ Hegarty).
Roads
M3 Clonee-Kells
600
45-year concession for a toll motorway including construction of 50km stretch of the M3 motorway/dual carriageway between Kells and Carnaross, and 11km of single carriageway. Scheme also involves construction of a further 24km of link road. Preferred Bidder: Eurolink (Cintra / SIAC Construction) Legal challenge to the project started in December 2005 due to concerns over archaeology. Challenge finally dropped in September 2006.
Roads
N7 Limerick Southern Ring Phase 11
270
Connection of Limerick with Dublin road. Preferred Bidder: Direct Route (KBR / Strabag / John Sisk & Son / Lagan Holdings Ltd / Roadbridge Ltd (Mulcair)).
Social Housing
Carney Housing PPP Project Not available
Development of a 2.1 hectare site at Carney, County Sligo for the provision of residential housing.
Urban Regeneration
O'Devaney Gardens Urban Regeneration PPP
Demolition of 278 flats in 13 blocks in North Dublin, to be replaced by about 820 units. Preferred Bidder: Michael McNamara & Company / Castlethorn Construction.
200
FIGURE 21.1 | Continued on page 148
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REPUBLIC OF IRELAND: CURRENT PROJECTS AS AT JANUARY 2007 FIGURE 21.0 (Continued) | Includes any project in tender and in the process of being financed
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Waste Management
Kilshane Biological Treatment Facility
100
DBFMO of Biological Treatment Facility in Kilshane that has construction costs worth approximately €15m.
Waste Management
Ballyogan Biological Treatment Facility
100
DBFMO of Biological Treatment Facility. Tender issued on 27 January 2006. ITNs issued 15 May 2006.
Waste Management
County Galway Landfill PPP
Not available
Development and operation of new landfill site and associated infrastructure.
Waste Management
Fingal Landfill PPP
20
Development and operation of new landfill and associated waste management infrastructure.
Waste Management
Gortadroma Landfill
Not available
Design, installation, commissioning and operation of landfill gas energy system in County Limerick on PPP basis. Shortlisted Bidders: Gas Technologies / Fingleton White & Co / Irish Power Systems
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REPUBLIC OF IRELAND: PRE-TENDER PROJECTS AS AT JANUARY 2007 FIGURE 21.1 |
149
Information supplied by
infra-news.com
Sector
Project name
Value (€m)
Details
Accommodation
Decentralisation PPP
Not available
Office accommodation (35,000 m2) for 1,400 staff from Departments of Agriculture and Food, Education and Enterprise, Trade and Employment.
Accommodation
Wicklow Courthouse
Not available
Development of a new courthouse on a greenfield site by way of a PPP.
Accommodation
Letterkenny Courthouse
Not available
Refurbishment of existing courthouse. Possibility of selling courthouse and constructing new court facility on greenfield site.
Accommodation
Swords Courts
Not available
Provision of new courthouse accommodation in Swords, Dublin.
Accommodation
North Kildare Circuit and District Courts
Not available
Provision of a purpose designed building to accommodate Circuit and District courts and offices to cover Maynooth, Celbridge and Leixlip.
Accommodation
Waterford Courthouse
Not available
Additional space in Waterford required which could be provided by way of a separate building adjacent to the existing building. Project envisages mixed development with office space for the Office of Public Works.
Accommodation
Cork District Court Building Not available
Provision of additional accommodation for the District Court in Cork.
Accommodation
Limerick District Court
Not available
Development of a new District Court to replace the existing inadequate District Court facility in Limerick. Prison Service to make a site available free of charge.
Accommodation
Drogheda Circuit and District Court Building
Not available
Creation of a new Circuit and District Court building for Drogheda.
Education
Post Primary and New Primary Schools PPP Programme
250
Procurement of 23 primary and four secondary schools as PPPs. Tender notices issued for advisers.
Healthcare
SHB 8 Community Nursing Units and Central Services Unit
100
The Southern Health Board proposes to develop eight 50-bedded CNUs.
Healthcare
ERHA Nine Community Nursing Units
110
The ERHA proposes to develop nine 50-bedded CNUs. Approval awaited from the Department of Finance.
Healthcare
Radiation Oncology Services 480 PPP
National revamp and reorganisation of radiation oncology treatment services for cancer patients comprising four large centres in Dublin, Cork and Galway.
Light Rail
Dublin Metro
2,000 -4,000
DBFO of a metro system for Dublin. Metro to be approximately 70km long, including about 14km underground.
Roads
N7 Nenagh to Limerick
Not available
Construction of a 38km stretch of road from Limerick to Dublin. Project currently under review of National Roads Authority.
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UNITED KINGDOM A DECADE OF DELIVERY ON PPP Most of the innovation and extraction of value in 2006 came in the secondary PPP market.
The UK market was busy in 2006, not necessarily with new projects completing but greater activity in the secondary market which made it feel more buoyant than it actually was. Partnerships UK figures show that in 2006 46 projects reached completion with a capital value of £6.6bn. This compares with the 2005 figure of 59 projects with a capital value of £4.1bn. Half of the 2006 value was accounted for by three projects: in the health sector, Barts (£1,072m), Birmingham (£627m) and St Helens (£343m) and one defence project, Allenby & Connaught (£1,462m). As this Report focuses on the PPP market, we will avoid the debate about what falls within and without the infrastructure asset class. From the Report’s perspective, interesting though airport, port and utility acquisitions are, they do not contain sufficient greenfield activity to come within the Report’s scope. However, the activity is interrelated and the important question for PPP is whether the wider asset class now brings additional money to the sector or whether the M&A leveraged deals are diverting funds and funder attention from the PPP market. As yet there still seems no shortage in the debt or bond market for PPP, the restraint being more in the number of deals coming through. On the bond side there was stiff competition amongst new entry monolines on the higher end deals also reducing cost. As margins have continued to move down, the risk/reward ratio is looking questionable. Is the market out of step? Clearly not yet, although if the economy started to falter with a few operational projects going into default this may change.
Most of the innovation and extraction of value came in the secondary PPP market. The NAO estimated that by March 2006 40 per cent of operational projects had changed ownership and in 50 per cent of the cases of changed ownership the debt had been refinanced as well. The consolidation of ownership continued, despite levels of return on secondary holdings down to around 7-8 per cent. SMIFF was sold with its 79 project portfolio to Land Securities Trillium for £927m. The acquisition gave LST a significant back catalogue of completed and operational deals to complement their relatively recent entry into the primary market in BSF and MoD real estate. Hendersons acquired the whole Laing business with PPP project investments for £1bn (including pension liabilities). There are 22 unlisted and 14 listed funds in existence which are active in the UK and European markets. Standard & Poor’s state that in 2006 alone 10 new funds were established and there are plans for 17 more to be raised. There is no doubt that there is enough interest from investors to raise the capital, but whether there will be sufficient investment opportunities for the funds is debatable.The blurring of the definition of infrastructure will help but will make the assessment of fund portfolios more complex.
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CHANGING POLITICAL LANDSCAPE Tony Blair, one of PPP’s strongest advocates, will leave office in June 2007 having been in power for 10 years, and it is likely that Gordon Brown will succeed him. Brown is publicly committed to the BSF programme but in other sectors his views are less well known. Relatively soon after the transition (assuming the succession does not prompt an election) the new leader will face an election. Our view is that the effect of this will be to significantly delay the PPP programme on all fronts even though Brown has always been intimately involved in PPP as holder of the government purse. The announced pipeline may be £26bn but the urgency to get it through will be gone for at least two years as the political focus will be on winning the election and imprinting a new Brownite vision. 2007/8 are unlikely to be memorable years in the UK PPP market. This seems like a gloomy prognosis but the proverbial elephant so big you may not notice it is the Olympic infrastructure procurement. Huge figures are quoted and already the political row has started over escalating costs. The successful London bid for the 2012 Olympic games envisaged the construction of five new stadia and ancillary buildings. Team McAlpine, comprising Robert McAlpine, Rod Sheard, M-E Engineering, HOK Sport and Buro Happold, are preferred bidders to deliver on the 80,000 seat capacity main stadium valued at around £3-400m. Given the problems surrounding recent stadia procurement in the UK (Wembley) and the National Stadium in Wales the Olympic stadia procurements will be a challenge. There is a thin market in contractors and operators willing to get involved and given that football clubs Liverpool, Everton and West Ham also have building plans for the next five years, how will that affect price and ability to deliver? This is a headache for the Olympic Delivery Authority and primarily the government which is bankrolling the event. For the supply side it’s a huge opportunity. POLICY In March 2006, the Treasury published “PFI: strengthening long-term partnerships”. The document sets out the government’s approach to the PFI investment programme and made a number of suggestions for improving the process and the market including making funding competitions more widespread and the continued roll-out of the Credit Guarantee Finance product now being trialled in the education sector on Knowsley’s schools. Preferred bidder debt funding competition guidance was published in 2006 and a pilot is being run at St Luke’s Middlesbrough. The benefits of the funding competitions for financing terms have been marginalised by the degree of liquidity currently available on good terms. They also have not shown a positive impact on timing. Currently the Treasury policy unit is working on guidance for inclusion of periodic break points during the life of the contract, giving the authority greater operational flexibility. This is expected in the first half of 2007. In January 2006 the Public Contract Regulations 2006 came into force introducing competitive dialogue. Of those three bidders one will be selected to go forward with a post-preferred bidder competition for funding.
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DEFENCE The defence sector has been characterised in recent years by a small number of extremely large projects, proceeding slowly. This is unsurprising given the complexity of the projects in procurement. Nevertheless, the defence sector saw the largest project to close in 2006, Allenby & Connaught. In addition the RAF Northolt MoDEL property-based project completed in 2006. The project partner in MoDEL is contracted to dispose of surplus MoD land sites in London on a flexible timetable. The partner will also deliver upgraded facilities for the anchor site at RAF Northolt. The finance is more a real estate/asset finance structure than limited recourse to the income stream. In November 2006, Ascent (VT Group/Lockheed Martin) was named preferred bidder on the 25-year £6bn Military Flying Training Systems (“UK MFTS”) scheme overcoming competition from two other consortia. UK MFTS followed the Project Delivery Organisation model, described below, and will provide a flight training programme across the three armed services. In January 2007 the Metrix consortium was named preferred bidder on Package 1 and provisional preferred bidder on Package 2 of the £16bn Defence Training Review (DTR) programme, again with a term of 25 years. A joint partnership between Interserve and John Laing (Inteq consortium) was named preferred bidder for the MoD's £90m scheme to rebuild, refurbish and manage the “state of the art” communications centre at Corsham in Wiltshire. It is expected that these schemes will close in the course of 2007. Moving forward the MoD is now pursuing two models for PPP. First the Strategic Partnership model which is a joint venture between the public and private sectors. The long-term partnership has the benefits for the private sector of a skilled public sector partner. For the public sector there are economies of scale in this approach. Examples of this type are so far found in other sectors, such as Partnership for Schools (see below). Secondly the Project Delivery Organisation, or Integrator, model which comprises a long-term contractual relationship. The structure is designed to incentivise the private sector to deliver to time and cost and requires that they take a significant share of the integration risk which affects the operational performance of the project itself. UK MFTS is structured in this way. Larger projects under either structure are the way forward for defence projects and this sector will continue to deliver – slowly but surely.
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EDUCATION The Building Schools for the Future (“BSF”) programme remains the flagship of the government's PPP programme. Under it the government aims to renew or rebuild every school in the UK over a 15-year period. Waves 1-3 are currently in procurement with Waves 4-6 waiting to OJEU. The BSF differs from the historical PFI model insofar as the authority appoints a partner to procure jointly a pipeline of projects rather than a single project. While directed principally at secondary education, the local education partnership vehicle can be used to procure primary and other forms of project. BSF is currently behind schedule but the Chancellor of the Exchequer, Gordon Brown, has made it clear that, should he succeed Tony Blair as Prime Minister, he will extend the programme. The government has also committed to the creation of 600 City Academies but it is not clear how these will fit with the programme and what will be the fall-out from the extension of trust schools. The BSF programme is being led by Partnerships for Schools (“PFS”), a non-departmental public body established by the Department for Education and Skills. PFS is operated closely between DFES and PUK and considerable investment has been made in resourcing PFS to meet the challenge of delivering this massive programme. Recently PFS recruited former Norfolk County Council Chief Executive, Tim Byles, to act as its new Chief Executive. Through a combination of new build and refurbishment, the programme will involve over £40bn of investment, delivered through a combination of PFI and more traditional design and build contracts, ICT contracts and facility management contracts. BSF also seeks to integrate IT into the upgraded schools to recognise the fundamental impact of IT on modern education. The standard BSF model includes a Strategic Partnering Agreement (“SPA”) between the Local Education Authority and a Local Education Partnership (“LEP”). The LEP itself is a joint venture and the local education authority and PFS are minority shareholders in the LEP. The LEP will provide partnering services under the SPA to assist, where required, in the identification and strategic prioritisation of new projects in the authority's geographical area and to develop and deliver those projects, including PFI projects entered into between the authority and a separate project SPV at least part owned by the LEP. Initially not every BSF scheme followed the same strategic partnering model. Some local education authorities did not anticipate a sufficient flow of future projects to justify engaging a partner to develop new projects. A further variation involves the authority engaging a strategic partner but one that is independent from the supply chain, Greenwich being the pathfinder scheme testing this approach. Going forward, it is anticipated that most local education authorities will follow the strategic partnering model. The importance of the partnering element to the bids, with less of an emphasis on the ability to simply construct a new or refurbished facility, is expected to change the approach and potentially even the make-up of the bidding consortia.
The opportunity to benefit from upwards of £200m investment in a BSF scheme through strategically planned projects arising over a 10-year exclusive partnering period has seen new entrants to the schools PPP market. Significantly, the scope of the partnerships is extending so as to deliver other community facilities including primary schools, leisure centres, local health centres and libraries. 2006 saw the first BSF projects reach financial close. Starting with the Bristol scheme, which was signed in June 2006, five projects have now reached contractual completion and a further eight have selected preferred bidders. Scotland has an equivalent to BSF known as Scottish Schools PPP and there too were a couple of completed deals during 2006 – Angus and Aberdeen schools. Although it is recognised that the speed and the number of projects coming to the market has been below expectations of both the public and private sectors, 2007 is expected to be much busier, particularly south of the border. The year should see many more projects reaching financial close. Further, in terms of bidding, some of the projects which were delayed from the earlier phases will come to the market along with those that were originally scheduled to do so. HEALTHCARE In 2006 healthcare PPP collided head on with healthcare policy. For several years, healthcare was the motor behind the UK PPP market. Healthcare PPP was the earliest to standardise and the government is well on its way to achieving its target of 100 new hospitals by 2010, having signed contracts for 85 of these. But priorities in health are also changing. In March, the government published its White Paper, “Our health, our care, our say” (Cm 6737), which recommended a transfer of resources away from the acute sector to the primary sector. A further wave of trusts, the local bodies which provide healthcare, became foundation trusts which provides them with a wider range of powers. The payment by results (“PbR”) system which has changed the way acute trusts are paid is now bedding down but has made it more difficult to predict income and activity especially when combined with the Independent Sector Treatment Programme (see below). The PbR tariff appears to work against trusts with major capital projects.
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HEALTH CUTS In January 2006, the Department of Health put a hold on all PFI hospital schemes until they had been reappraised to ensure that they are affordable. Six projects were subsequently given the green light to proceed in August (North Staffs, Tameside, Salford, Walsall, Leicester and Devon, the first five of which were already at preferred bidder) with one project, Essex Three Rivers, being terminated. A further announcement was due in October 2006 but did not emerge. In the course of 2006, only seven health PFI projects closed (compared to 22 in 2005 and 44 in 2004). The capital value of schemes, however, increased as the closed projects included Barts (£1,072m), University Hospital Birmingham (£627m) and St Helens (£343m). In the case of the first two of these, financial close only occurred after a significant reduction in the capital cost of the scheme. Schemes must now show that the unitary charge will not exceed 15 per cent of the Trust’s turnover in any year. No significant new project was launched in 2006; OJEUs for Bristol, Sandwell and Torbay are due in 2007. The government remains tight-lipped when faced with questions as to the fate of the £7.9bn worth of health schemes announced previously. In October, the DoH launched a consultation exercise on what new schemes should contain and how the new competitive dialogue procedure might work in the healthcare PPP market. LIFT The fourth wave of LIFT schemes seems likely to be the last. One of the largest schemes, the £120m Kent scheme, was scrapped in September. This leaves 42 LIFT companies in existence but without a deal flow. The problem has been exacerbated by the reorganisation of primary care trusts mentioned above. The future of Partnerships for Health (the public sector joint venture partner for LIFT) also appears in doubt. In September 2006, Brian Johns, the Chief Executive of NHS LIFT, resigned abruptly. At the same time, DoH acquired the interest of Partnerships UK in Partnerships for Health. Under the deal DoH will assume responsibility for PfH’s 20 per cent stake in each of the 42 LIFT companies. The problem with LIFT is that it is not popular with GPs. LIFT is expensive and GPs do not want to lease facilities. LIFT has provided surgeries in deprived areas but otherwise has had a limited impact.
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ISTC The first four of the Department of Health’s groundbreaking Phase 2 Independent Sector Treatment Centre (“ISTC”) schemes were signed in December 2006. These form part of the overall £3.75bn Phase 2 ISTC programme, and the remaining 21 schemes involved are expected to close in 2007. A third phase may not come, with the result that the ISTC sector will be capped at the point at which it provides 15 per cent of NHS-funded care (as the government suggested). Over the summer of 2006, the House of Commons issued a damning report on the programme stating that the centres were taking capacity from Trusts rather than adding capacity. With the introduction of PbR, ISTCs are making the preparation of business cases in the acute sector even more difficult. NORTHERN IRELAND Healthcare opportunities in Northern Ireland and Scotland by contrast look more optimisitic. Scotland has its own version of LIFT, HUB, which has not yet started but hopefully will not experience the same resistance as LIFT. In Northern Ireland, the Strategic Investment Board has started implementing the £2.2bn programme of investment announced in 2005. This includes more than a dozen schemes including early schemes in Enniskillen, Omagh, Ulster and Belfast. The £229m Enniskillen project shortlisted three bidders in November 2006. However, the second project, Ulster, failed to emerge in October and may struggle to attract bidders. Several of the major players in English health PPP are active in Northern Ireland together with Dragados and FCC. There is also a programme of primary and community care projects with plans for 42 facilities.
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PROGNOSIS Capital investment in healthcare is undergoing a rethink. Part of this is a new emphasis on treatment in the community. In time new models for capital investment will emerge. These may include the Project Delivery Organisation model (as in defence) which would manage every aspect of a scheme's life cycle taking over the client role. 2007 is likely to see schemes which have been around for many years close, but even fewer schemes will move into procurement.
STREET LIGHTING AND HIGHWAYS MAINTENANCE The street lighting sector has grown from strength to strength, now one of the most active sectors with a confirmed pipeline of projects in procurement. Technological innovation means that local authorities can now deliver safe, accessible streets sustainably. Of the 20 schemes previously approved for funding, 12 are operational and the government is now rolling out another major wave of PFI street lighting projects.
SOCIAL HOUSING The market for social housing PPP continued to develop in 2006 on the back of the Housing PFI Standardisation Pack, which was released at the end of 2004 and the government’s commitment to provide all social housing tenants with decent homes by 2010. New projects continue to focus on new build over refurbishment and have proved more popular with a wider range of players. The largest project to date, the Islington PFI II, completed. Thought to be around £300m in value the project involved the refurbishment and delivery of 4,000 units over 16 years (a shorter contract period than usual in the sector). Projects in Coventry (£20m), Sandwell (£130m), Camden (£65m), Croydon (£50m) and Oldham (£104.7m) reached financial close, the Croydon scheme being the first to use the pack and the quickest to close at 26 months from OJEU. A further raft of schemes is expected to close in 2007. The government also gave the go-ahead for the £95m Leeds Little London PFI scheme in December which involves the regeneration of the deprived area north of the city centre. The fifth round of the government's housing PFI allocation sees Salford and North Tyneside sharing up to £200m of PFI credits while bids from Leeds City Council and the London Borough of Barking and Dagenham will be subject to further discussions in 2007.
Fifteen English local authorities have had tenders for street lighting services issued on their behalf by the Public Private Partnerships Programme (4Ps). The Department for Transport has confirmed approximately £694m in PFI credits to 14 of the councils and Sheffield City Council is currently conducting its own PQQ. There is expected to be a total of 10 separate contracts as authorities may procure jointly and estimates of capital value for each project range from £20m to £230m. Concessions will be 20 to 30 years’ duration and will involve the removal, replacement and maintenance of between 20,000 and 150,000 columns for each council. The 4Ps have issued a further edition of the Street Lighting Procurement Pack which contains model documentation on all aspects of the procurement process. This has proved to be a useful starting point, into which project-specific issues can be introduced. Highway maintenance represents one of the most exciting challenges for the year ahead. The Birmingham City Council scheme is moving forward towards BaFO with Amey and the Birmingham Street Services consortium (consisting of Vinci and Laing Roads) in a run-off for the £2.2bn project which is one of the largest in the sector and has pathfinder status. Portsmouth City Council's scheme is already operational. The Department for Transport is expected to decide in early 2007 which applications, made by 11 local authorities for Highways Maintenance PFI credits, have been successful. The local authorities that applied were: London Borough of Hounslow, Hull, Isle of Wight, Leeds, Newcastle, London Borough of Redbridge, Sheffield, Southampton and York. Those authorities that are successful in their submissions will be expected to submit OBCs in December 2007.
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TRANSPORT ROADS AND CROSSINGS The main story on roads is the advancement on the Highways Agency's massive £2bn DBFO project to widen 63 miles of the M25 from three lanes to four. Completion of this project may squeeze into 2007. The Agency has not gone for a traditional PFI model for this scheme. Due to the size and complexity of the project they considered it unlikely that they would receive good value bids on that model – or indeed any bids at all. The base financing model sketched out by the Agency (to raise the estimated £2bn debt and equity required) asks the three bidders to deliver a financing plan endorsed by a senior funder. At preferred bidder stage there will be a full funding competition, with the senior funder which backed the preferred bidder at the earlier stage having rights to match the winning terms on at least a portion of the debt. Alternatively the funders can submit, and the preferred bidder promote, variant funding bids at the second stage. Outside England there is road activity in Scotland where the M80, north-east of Glasgow, is in tender and the second Forth crossing has attracted significant political support. In Northern Ireland the A1/A4 DBFO road was awarded to the Amey/Lagan/Ferrovial consortium. The New Tyne Crossing project is expected to close in 2007. A preferred bidder is due to be selected early this year. It is expected that the £378m Thames Gateway Bridge project will be advertised in early 2007. The new Mersey crossing should come to tender as well. The government remains committed to the introduction of road pricing within a five-year horizon. This would be a system that catches all road users and acts as an alternative to road and fuel tax. This could be Labour’s poll tax but the long-dated promise suggests there is plenty of room for manoeuvre before commitments turn into action. The real debate has yet to start.
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RAIL In the rail sector, the Department for Transport granted planning permission and legal powers to rebuild the Thameslink Route which is estimated to cost approximately £3.5bn. Although a decision has not yet been made as to how it will be funded, a PPP option is still on the table. The CrossRail Hybrid Bill is still making its way through Parliament and may gain Royal Assent in 2007. The project is huge – it envisages a new tunnel under London to connect mainline services between Paddington station in the west of the city and Liverpool Street station in the east. In light rail, the DfT gave the go-ahead for the extension to the Nottingham Express Transit (“NET”) tram project, announcing it will contribute £437m of PFI credits to the scheme. In Scotland the relative activity is higher with the Edinburgh tram scheme and the Edinburgh Airport Rail Link both going well. There is also very early stage discussion about a new Borders rail link, south of Edinburgh.
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WASTE In May 2006, no fewer than three new reports were published by central government (the Office of Government Commerce (OGC), The Office of Fair Trading (OFT) and the Department for Environment, Food and Rural Affairs (Defra) all examining a common theme, namely how to safely accelerate waste infrastructure development within the United Kingdom without overheating the market and jeopardising value for money). One of the findings of the OGC Report was that the funding and procurement model adopted for a project should be appropriate to the nature of the service or facility being procured. Small scale facilities should be procured under design and build contracts, with prudential borrowing to be considered as a primary option for capital expenditure. Large-scale projects should be procured under PFI. The OFT Report looked at waste disposal services provided by local authorities and concluded that the local authorities should arrange sites and planning permission prior to putting contracts out to tender where possible or share the risk with the suppliers and that they should consider carefully what services are aggregated. Making the contracts large in scope may attract more bidders but also exclude smaller suppliers. Further, in the aggregation of waste treatment with landfill services risks giving regional dominance to those contractors that own landfill void. Finally, Defra produced a set of waste-specific derogations from HM Treasury's Standardisation of PFI Contracts (Version 3, April 2004). Concentrating on issues such as change in law, deferred capital expenditure and compensation on termination, issues are discussed but a hard-line approach is taken and the significant derogations are few and far between. In the second half of the year, four waste PFI deals reached Financial Close. Nottinghamshire signed in June 2006, Cornwall and Central Berkshire closed in October 2006, and Northumberland made it past the line in December 2006. It is tempting to suggest a causal link between all the central government activity earlier in the year and the subsequent contract signings, and it is certainly the case that in formulating its derogations Defra did take particular notice of the Nottinghamshire and Cornwall projects, which were heavily into their procurements at the time the derogations were being drafted. However, Nottinghamshire and Central Berkshire each still ended up taking three years to close from the date of issue of the ITN, whilst Northumberland and Cornwall took two years apiece. It therefore remains to be seen whether the next batch of PFI deals reach financial close more quickly.
The Greater Manchester (cited as the largest waste services contract in Western Europe), Shropshire, Wakefield and Southwark PFI deals should all close during the course of 2007, and as such will act as a useful benchmark on whether the delay problems historically associated with waste PFI have now been overcome. Cumbria, Derbyshire, Oxfordshire, Somerset and Telford & Wrekin have all rejected PFI and are procuring under the PPP, which gives them (theoretically at least) greater flexibility to move more quickly. One council is quoted as stating that using PFI for its waste project would have added two years to its procurement timetable. During this time, it would need to endure landfill tax rates going up by £3 per tonne per annum, and bear the cost of buying landfill allowances (currently trading at roughly £20 per tonne) on that proportion of its waste that exceeds its annually reducing landfill quota. Any PFIassociated delay would therefore quickly eat away the benefit of receiving PFI credits. Derbyshire is the first local authority to try to use prudential borrowing in the context of a waste PPP, combined with a model based on Building Schools for the Future to allow it to defer capital expenditure and develop infrastructure piecemeal as it is required. If it proves to be a success, then this may well represent a preferred route for local authorities going forward, since it should prove to be cheaper and more affordable than building all the assets in one go and before all of them are actually needed. That is not to say that old-style waste PFI is dead – far from it. Looking forward, up to 11 UK local authorities are expected to announce waste PFI deals over the next three years. These include Merseyside, Leeds, Essex, York and North Yorkshire, Norfolk and Cheshire. The market continues to expand, with new entrants from other more mature PFI sectors eager to get a piece of the action. Bid costs remain cripplingly high, however, and waste as a sector is inherently complicated. It is therefore not ideally suited to the faint-hearted or those in a hurry.
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| European PPP Report 2007 | About DLA Piper
ABOUT DLA PIPER FAST FACTS DLA Piper is the second largest legal services organisation in the world in terms of number of lawyers. • Over 8,000 staff across 24 countries and 63 offices worldwide. • Over 3,400 lawyers, including more than 1,200 partners, globally. • DLA Piper’s joint CEOs are Nigel Knowles (Europe and Asia), Frank Burch (US) and Lee Miller (US). The chairman is Senator George Mitchell. • DLA Piper was named Global Law Firm of the Year at The Lawyer Awards 2006.
DLA PIPER GROUP DLA Piper Group is an exclusive alliance of law firms that share a common vision to provide comprehensive and coordinated legal services to clients, locally and globally. We are the founding and largest member of the alliance. Other members include DLA Nordic with offices in Denmark and Sweden, DLA Matouk Bassiouny in Egypt, Cliffe Dekker in South Africa, Chibesakunda & Co in Zambia, IMMMA Advocates in Tanzania, Reindorf Chambers in Ghana and DLA Phillips Fox in Australia and New Zealand.
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About DLA Piper | European PPP Report 2007 |
ABOUT DLA PIPER’S PPP TEAM Wherever you go, globally, regionally or nationally, we offer you local lawyers who take time to get to know you, your company and your markets.
DLA Piper has consistently been involved in PFI/PPP projects since the inception of the Private Finance Initiative in the UK and our lawyers have experience of acting on some of the first PPP deals worldwide, pathfinder projects in new sectors and new types of relationships between public and private organisations. Our PPP team are part of DLA Piper’s Finance & Projects Group which has over 200 specialist infrastructure and project finance lawyers advising clients across the world. Our work has covered complex infrastructure, transport, defence, social, environmental, process plant and energy projects for more than 30 years. Our clients include funders, project developers, utilities and their non-regulated affiliates, vendors, governmental entities as hosts as well as co-investors under BOT, BOO, PPP and related models.
The financings for these projects have included non and limited-recourse arrangements, sale-leasebacks, capital market and other innovative financing structures for commercial banks, equity and debt, institutional investors, monoline insurers and public financing sources such as export credit agencies and non-governmental organisations. We are also well versed in secondary market acquisitions and subsequent refinancings. Our team has helped to deliver groundbreaking project finance agreements and has first-hand experience of the structures that meet the needs of international financial institutions.
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CONTACTS Mark Swindell Sector Head for Global Infrastructure and Defence Tel: +44 (0) 20 7796 6200 Email:
[email protected] Stefan Eder Group Head Finance and Projects EMEA Region Tel: +43 1 531 78 1601 Email:
[email protected] Angela Brewis Report Editor Tel: +31(0) 20 541 9811 Email:
[email protected] AUSTRIA Thomas Hechl Tel: +43 1 531 78 1721 Email:
[email protected] Wolfgang Freund Tel: +43 1 531 78 1401 Email:
[email protected] Barbara Novosel Tel: +43 1 531 78 1060 Email:
[email protected]
CIS – RUSSIA Olga Litvinova Tel: +7 (812) 703 7801 Email:
[email protected]
NETHERLANDS Bart Joosen Tel: +31 (0)20 5419 905 Email:
[email protected]
OMAN Bruce Mullins Tel: +971 (0)4 363 6900 Email:
[email protected]
CIS – GEORGIA Ted Jonas Tel: +(99532) 93 6422 Email:
[email protected]
Rutger Oranje Tel: +31 (0)20 5419 810 Email:
[email protected]
EGYPT* John Matouk Tel: +202 792 0075/795 4228/795 8179 Email:
[email protected]
CIS – UKRAINE Oleksandr Kurdydyk Tel: +380 (44) 490 95 70 Email:
[email protected] CZECH REPUBLIC Joerg Nuernberger Tel: +4202 22 817 600 Email:
[email protected] DENMARK* Lise Groesmeyer Tel: +45 77 30 42 61 Email:
[email protected] Andreas Christensen Tel: +45 77 30 42 26 Email:
[email protected]
Peter Solt Tel: +43 1 531 78 1941 Email:
[email protected]
FRANCE Fabrice Rué Tel: +33 1 40 15 24 00 Email:
[email protected]
BELGIUM Yves Brosens Tel: +32 (0)2 500 1509 Email:
[email protected]
GERMANY Frank Roth Tel: +49 (0)221 277 277 271 Email:
[email protected]
Bob Martens Tel: +32 (0)2 500 1503 Email:
[email protected]
HUNGARY Péter Györfi-Tóth Tel: +36 1 325 3020 Email:
[email protected]
BULGARIA Peter Valert Tel: +420 222 817 366 Email:
[email protected]
Rita Hoffmann Tel: +36 1 487 7319 Email:
[email protected] ITALY Federico Sutti Tel: +39 02 80 618 1 Email:
[email protected] Francesco Ferrari Tel: +39 02 80 618 1 Email:
[email protected]
*
NORWAY Espen Moe Tel: +47 2413 1571 Email:
[email protected] Stein Hegdal Tel: +47 24 13 16 43 Email:
[email protected] PORTUGAL** Alberto Galhardo Simões Tel: +351 21 781 48 55 Email:
[email protected] SPAIN Javier López Antón Tel: +34 91 319 1212 Email:
[email protected] Javier Santos Tel: +34 91 319 1212 Email:
[email protected]
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Joz Coetzer Cliffe Dekker* Tel: + 27 (0) 11 290 7109 Email:
[email protected] AMERICAS John Cusack Tel: +1 312 368 4049 Email:
[email protected] Mike Barz Tel: +1 212 335 4796 Email:
[email protected] Dean Colucci Tel: +1 212 335 4794 Email:
[email protected]
SWEDEN* Peter Ihrfelt Tel: +46 8 701 78 56 Email:
[email protected]
Richard Ornitz Tel: +1 212 335 4811 Email:
[email protected]
Mikael Kovamees Tel: +46 8 701 78 60 Email:
[email protected]
Nicolai Sarad Tel: +1 212 335 4642 Email:
[email protected]
UK Colin Wilson Tel: +44 (0)20 7796 6206 Email:
[email protected]
Ken Willig Tel: +1 212 335 4640 Email:
[email protected]
Nick Painter Tel: + 44 (0)113 369 2470 Email:
[email protected] UAE Brian Clark Tel: +971 (0)4 363 6925 Email:
[email protected] Oliver Agha Tel: +971(0)4 363 6971 Email:
[email protected]
DLA Piper Group
** DLA Piper Focus Firm – committed to a close working relationship and to develop business together. Our Focus Firm in Portugal is Miranda Correira Amendoeira & Associados.
AFRICA Charles Morrison Tel: +44 (0)20 7796 6444 Email:
[email protected]
ASIA John Yeap Tel: +852 2103 0824 Email:
[email protected] Lance Miller Tel: +65 6512 9595 Email:
[email protected] AUSTRALIA/NEW ZEALAND* David East Tel:+61 2 9286 8340 Email:
[email protected]
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With more than 3,400 lawyers in over 60 cities across the globe, DLA Piper is ideally positioned to help meet all the legal needs of businesses whenever and wherever they arise.
DLA Piper Group is an alliance of legal practices, the members of which are separate and distinct legal entities. For further information please refer to www.dlapiper.com/structure COM/06.07
EUROPEAN PPP REPORT 2007
