Transcript REFORME DU FINANCEMENT ET DE L'ORGANISATION DU

Highways: cost and regulation in Europe
HIGHWAYS IN EUROPE
Concession & PPP, toll
Alain FAYARD
[email protected]
November 2004
The views expressed in this presentation are those of the author and not necessarily those of the organizations which the author belongs to
EU 25
ROAD TRAFFIC FLOWS IN
WESTERN EUROPE
Source : Fédération routière internationale (IRF) - 1995
BLUE BANANA
&
RED BANANA
Source:
EUROPEAN PARLIAMENT
STOA working document 2002
Integration of the TINA network
into an enlarged (TEN-T)
by Alain Fayard and Michel Gaspard
www.europarl.eu.int/stoa/publi/pdf/
stoa112_fr.pdf
69
550
629
1 450
629
16
973
34
580
3 476
12 000
4
1,4
7 840
6
1 729
4
: Total length of the motorway network
1 342
10383
2 610
2271
10500
2000
2 000
8,85
5 593
1771
: Motorway network under concession
2 300
6 840
916
916
EUROPEAN MOTORWAY
NETWORK DENSITY (in 2000)
of inhabitants
Comparison EU 15 and USA: passengers
transport for the year 1998
Source eurostat
Comparison EU 15 and USA: freight
transport for the year 1998
Source
Eurostat
OVERVIEW OF EUROPEAN PRACTICES IN
HIGHWAY CONCESSIONS (with or without toll)
14000
12000
km
12000
10500
10383
10000
7840
8000
6840
5593,3
6000
4000
3476
973
916,5
Length of the motorway network
2271
1771
0
130
Fr
an
ce
G
re
ec
e
1,4
la
nd
a
De
nm
ar
k
Be
lg
iu
m
Au
st
ri
U.
K.
G
er
m
an
y
0
34
4
603
69
Fi
n
580
2300
916,5
Sp
ai
n
2000
2610
1729
629
550
4
1450
1341,9
16
Ita
Lu
ly
xe
m
bo
ur
g
No
rw
ay
Ne
th
er
la
nd
s
Po
rtu
ga
l
Sw
ed
en
Sw
itz
er
la
nd
2000
2000
Length of the motorway network under concession
8,85
Practice of higway concession in Europe
(in terms of kms under concession)
1%
8%
3%
3%
9%
U.K.
12%
Austria
Spain
France
25%
Greece
Italy
Norway
Portugal
4%
Other countries
35%
y
xe Ital
m y
bo
u
No rg
Ne rw
th
a
er y
la
n
Po ds
rtu
g
Sw al
Sw ed
itz en
er
la
nd
Lu
er
m
an
U.
K
Au .
s
De tria
nm
a
Be rk
lg
iu
m
Sp
a
Fi in
nl
an
Fr d
an
G ce
re
ec
e
G
Km
CONCESSIONAIRE COMPANIES
(public/private)
8000
7000
6000
5000
4000
Public
Private
3000
2000
1000
0
INFRASTRUCTURE AND
DEVELOPMENT


INFRASTRUCTURE versus SERVICES
– Major projects
– Basic services de base ( water, sanitization,
« capillary » road network, NTIC…..)
– Maintenance
Economic growth
Competitiveness
INFRASTRUCTURE and SERVICES
– Symbiosis between infrastructure and services
– Importance of operation
– life long cycle cost
– Distinction infra/services for regulation
Evolution of operating expenses
Euros
(discounted aggregate total in
M€)
5000
Operating
expenses
represent about
75% of
construction costs
after 35 years
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70
Years
Hypotheses : concession of 35 years, traffic : 10,000veh/day, and construction cost : 5 M€
A TRANSPORT POLICY
IN A MARKET ECONOMY

A POLICY
– To choose : socio-éco. / financial profitability
– Un system
» Synergy between transport modes
» Significance of interchange points
» Significance of information (data & processing)

A MARKET ECONOMY
– Incentives / regulations
– A unavoidable fact: User chooses
USER CHOICE
THE EU LEGISLATION (1/2)
Council Directive 71/305/EEC of 26 July 1971 concerning
the co-ordination of procedures for the award of public
works contracts
excluding concession but a optional procedure:
Declaration by the Representatives of the Governments of the Member
States, meeting in the Council, concerning procedures to be followed in
the field of public works concessions (26 July 1971)
Council Directive 89/440/EEC of 18 July 1989 amending Directive
71/305/EEC concerning coordination of procedures for the award of
public works contracts
(contracting authorities & concessions)
Council Directive 93/37/EEC concerning the co-ordination
of procedures for the award of public works contracts
concerning the coordination of procedures for the award of
public works contracts
THE EU LEGISLATION (2/2)
Commission Interpretative Communication on
concessions under Community law of 12 April 2000 (risk
mainly of operation)
SEC 95 and Eurostat: debt consolidation rules
EU commission green paper on PPP announced, Green
Paper on public-private partnerships and Community law
on public contracts and concessions/* COM/2004/0327
30/04/2004
Directive 2004/18/EC of the European Parliament and of
the Council of 31 March 2004 on the coordination of
procedures for the award of public works contracts, public
supply contracts and public service contracts Official
Journal L 134 , 30/04/2004 P. 0114 - 0240
PUBLIC PRIVATE PARTNERSHIP :
THE USUAL SITUATION





Procurement contract
General contractor
Performance or specification-based contract
Turnkey contract
Build – Operate - Transfer, concession
Back to the future : a centuries old story
The key issue : co-operation / competition
A CONTINUUM OF
ALTERNATIVES
Works &
Services
Contracts
low
General
Contracts
Turnkey Concession
Contracts
B.O.T.
Extent of Private Sector Participation
Full
Privatisation
high
Labels used in PPP jargon such as Turnkey contracts, BOT,
DBFO or performance-based maintenance contract have no
single and clear definition. Each PPP solution is too complex
and too unique to be characterized in one word or acronym.
PPP equalizer
Scope of work : tasks assigned to the private sector
Autonomy : initiative left to the private actors
Pooling : number and type of projects concerned by the
agreement
Risks : how to share them among actors
Cost recovery : how to pay back,mainly users/tax payers
Finance : project/corporate finance ; Gvt involvement
World bank Toolkit: http://rru.worldbank.org/toolkits/highways
PUBLIC PRIVATE PARTNERSHIP :
RATIONALE (1/4)
– PARTNERSHIP  “ CORPORATIZATION ”
» Autonomous public or quasi public body
» Delegated management
 More efficient organization of service
Earmarking of resources
Benchmarking
Discipline of management with/without
privatization
Public-private-partnership
public-public partnership
– A COMPREHENSIVE & LONG RANGE APPROACH
» Performance criteria / means obligations
» A set of tasks including services
/
PUBLIC PRIVATE PARTNERSHIP :
RATIONALE (2/4)
– RISKS reasonably and a priori shared
» Political and legal risks
» Economical and financial risks
» Technical risks: construction and operation
» Commercial risks (tariff x traffic) (?)
One indicator: balance of profits and losses account
(commercial risk is only a part of it)
» Risk for the Gvt in case of default of the private partner
» Acceptance of profit (<=> risks)
Private financing seems more expensive but public financing
hides the risk
« Reasonable » level of profit => concession fee, flexible
duration...
 PPP: as an organisation process
as a financing mechanism
PUBLIC PRIVATE PARTNERSHIP :
RATIONALE (3/4)

A possibility: toll
– User pays
– Supplementary resource
– Leverage effect by backing by collateral
(after competition and inside a package or the whole sector and not an
existing cy alone)
– Diversion of traffic (lower economic profitability)

Shadow toll is not a toll
– No user’s charge (and no new resources)
– Slight or no traffic risk (traffic band, availability payment….)

Shadow toll added to a toll
the German A Betriebermodell
PUBLIC PRIVATE PARTNERSHIP:
RATIONALE (4/4)
To award the contract in partnership
Competitive dialogue
Payment of expenses for bidding
To perform the contract in partnership
Result objectives and not
process
obligation
« Rendez-vous » provision
A MATRIX APPROACH OF THE
TOLL AND THE PPP
No Toll
Toll
Risks not
shared
Govt. Administration
Autonomous Org.
Govt. Administration
Autonomous (e.g.,
so called
concessionaire)
Risks
shared
’’Concession’’
Construction and/or
Operation
*
With Traffic Risks :
Shadow Toll
Without Traffic
Risks : Lease
’’Concession’’
Construction and/or
Operation
A THIRD DIMENSION : A COMPREHENSIVE VIEW FROM INVESTMENT TO
SERVICES TO USERS THROUGH MAINTENANCE
ROLE OF THE GOVERNMENT




To protect the general interest
Planner
Legal and administrative framework provider
Financial facilitator
– Economical / financial profitability
Choosing : economic profitability
Feasibility: financial profitability
– Risks out of market
A
changing role
not a weaker one
A PPP : IN SEARCH OF A BALANCE
GOVERNMENT

GOVERNMENT
– long term vision and protection of
users and citizens :
 distinction between interest
for the community and
financial feasibility
CONTRACT
 minimize public subsidies

CONCESSION CONTRACT
– reflects the share of risks
– an adjustment process

CONCESSIONNAIRE
CONCESSIONAIRE
– efficiency
– remuneration
CONCESSION :
IN SEARCH OF A BALANCE
A BALANCE BETWEEN SUBOPTIMA :
– Wrong allocation of resources by earmarking (taxes, tolls...)
 Scarcity of resources
 Increase of transaction costs
A BALANCE BETWEEN :
 Transaction costs
 Cooperation
– Eviction effect  Need of infrastructure
– Profit  Risk
 Public utility
– Regulation  Contract
– Competition
SOME LESSONS

MORE THAN PRIVATIZATION, CORPORATIZATION »
IS KEY TO SUCCESS
 Efficient way to earmark funds
 Discipline of management
 Benchmarking between concessionaires
 A better balance between investment and maintenance
 A way for innovation

ONLY TWO PAYERS :
TAXPAYER AND / OR USER
THANK YOU