Transcript No Slide Title

Public-Private Partnership in
developing municipal
infrastructure
EBRD
25th September 2009
Sarajevo
Agenda
2

Introduction to the EBRD

PPP – definition and rationale EBRD

EBRD Experience in PPPs
Introduction to EBRD

International financial institution, promotes
transition to market economies in 27 countries
from central Europe to central Asia

Owned by 62 countries and two intergovernmental institutions including countries of
operation

3
Capital base of €20 billion
Introduction to EBRD


4
Mandated to finance projects in Central and Eastern
Europe and former Soviet Union
AAA rated by Moodys and Standard & Poor’s

Provides debt and equity financing to state and private
projects

>London headquarters

>30 Resident Offices in 27 countries
EBRD Differs from Commercial Banks
5

Mandate to foster transition from planned to market
economies

The EBRD promotes environmentally sound and
sustainable development in all its activities

Can finance projects without bank guarantees or sovereign
guarantees

Willingness to try new products/structures

Broad market knowledge
Municipal and Environmental Infrastructure
MEI Investment Portfolio
Water and
Sewerage
72%
MEI covers all forms of
PPP related to
municipal infrastructure:
Water/Wastewater
Urban
Transport
6%
MultiSector
4%
Solid Waste
Solid
Waste
2%
Other
Municipal
16%
Urban Transport
District Heating
6
Selected Water and Wastewater Projects
7
Zagreb Waste Water
Treatment Plant
Tallinn Water Limited
Privatisation
Sofia Water System
Concession
Brno Waste Water
Treatment Plant
Croatia
€55.2 million syndicated
loan
Estonia
€31 million syndicated
loan
Bulgaria
€31 million syndicated
loan
Czech Republic
€47.5 million syndicated
loan
December 2001
October 2001
Construction and operation of
wastewater treatment plant
December 2000
December 1999
Partial privatisation of AS
Tallinna Vesi
Privatisation of Sofiyska Voda
Operation wastewater treatment
plant
Maribor Waste Water
Concession
Budapest Wastewater
Services Privatisation
St Petersburg South-West
Wastewater Treatment
Plant
Apa Nova Water
Treatment Plant
Slovenia
€14.8 million
loan
Hungary
€13.1 million
equity investment
Russian Federation
€105 million
loan
Romania
€188.4 million
loan
April 1999
December 1998
Construction and operation of
wastewater treatment plant
Partial privatisation of wastewater services companies
November 2002
Construction and operation of
wastewater treatment plant
December 2002
Modernisation of the Crivina
Treatment Plant
How do we Define a PPP?
8

A PPP is a contractual agreement between a public agency (i.e.
municipality) and a private entity

Through this agreement, the skills and assets of each sector (public
and private) are shared in delivering a service or facility for the use of
the general public

Each party also shares in the risks and rewards potential in the delivery
of the service and/or facility

Agreements between the public and private entities differ in their
allocation of risks and responsibilities, in the ownership of the assets
and their duration
Main Options for PPP and Degree of Risk Transfer
Degree of Private Sector Risk
Privatisation
Build-Operate-Transfer
Concession
Lease
Management Contract
Design-Build
Government
Degree of Private Sector Involvement
9
PPPs in Transition Economies

PPPs meet the transition test
– Utilisation of the private sector
– Transparency and competition
– Priority infrastructure investments
– Efficiency and lower costs (public sector comparator)
10
Typical Concession Structure
Government
Concession
Contract
Loan
Agreement
Construction
Contract
Contractor
11
Equity
Concessionaire
Operation
Contract
Operator
Shareholders
Pros and Cons of Different PPP Structures
12
Structure Service
Contract
Management Lease
Contract
Concession
BOT
Description
Private sector
performs specific
service. Public
sector remains
responsible.
Operation and
maintenance of
utility transferred
to private sector.
Private sector
leases assets of
utility and
operates and
maintains them.
Private sector has
right to use assets,
and responsible for
operation,
maintenance, and
investments. Public
sector owns assets.
Private party builds
and owns asset,
then transfers it to
public sector.
Pro
Private sector
expertise for
technical tasks.
Public sector
keeps control.
Allows
improvement in
management and
cost control.
Prepares for
greater private
involvement
Strong incentive
for private sector
to perform.
Prepares for
greater private
involvement
Passes full
responsibility for
operations and
investments to
private sector.
Wholly private
funding.
Con
No private sector
investment.
Limited risk
sharing.
No private sector
investment. Little
incentive to reduce
costs and improve
services.
No private sector
investment.
Administratively
demanding on
public sector.
Limited to stable
political and
economic contexts.
Lengthy process
and high
development costs.
How are PPPs in EU Markets Evolving?
Time
(Years)
9
Widespread Use of PPPs
Spain
Czech Rep Hungary 7
Greec
Slovakia
Poland
Some Projects Implemented
Slovenia
e
Bulgaria
Romania
5
Italy
Croatia
Estonia
Pathfinder or Single Projects
Latvia
Lithuania
Russia
Ukraine Kazakhstan
Interest
Kyrgyz Rep Albania Bosnia/Herz
FYR Macedonia Serbia/Montenegro
Belgium
Moldova
Belarus
Armenia
More difficult
Azerbaijan Georgia
Tajikistan
Turkmenistan
Uzbekistan
13
4
2
0
Water supply and wastewater treatment
Investment challenges
14

Meeting EU water and wastewater standards

Need to increase investments in maintenance
EBRD water and
sewerage Projects
and asset renewal

Improve water supply standards

Improve collection and treatment of sewage

Improve operational and financial performance
of municipal water and sewerage companies
EBRD in waste management projects
Investment challenges

Meeting EU waste standards

Efficiency and frequency of collection
of waste

Improve adequacy of waste disposal

Prevent groundwater contamination
due to inadequate treatment of
leachate

Need to organise waste management
systems
EBRD is experienced in structuring waste management projects
15
EBRD in urban transport projects
Investment challenges
16

Key factor in promoting economic growth

Rehabilitation of public transport in urban
areas and need to replace ageing and
operating equipment

Improve financial performance of
transport operators to allow access
financing

Need to introduce public service
contracts between transport authority
and operator

Investment in public transport needed to
counter the negative effects of rapid
motorisation
EBRD offers Several Financing Structures
EBRD will structure each product according to project needs
17
Loans
Limited or non-recourse project financing to
public or privately-owned project companies;
senior or subordinated debt
Equity
From pure to portage equity in project company
Leasing
Various forms of leveraged leasing structures for
creditworthy entities
Partial guarantees
Partial risk, credit and specified event guarantees
EBRD investment selection criteria

Financial, economic, legal and technical viability

Creditworthiness of borrower, sponsors and guarantors

Project would need to contribute to structure and extent of
markets, institution building, and/or market-based skills
and innovation

Legal framework would need to allow PPP arrangement
and enforceability of contracts

Technology would need to be appropriate for site and
service/performance required
18
Some Lessons
What our experience has taught us…
Establish
Dedicated Team
Motivation of Public
Sector to “champion”
commercially
oriented approach
Realistic
Expectations
Financial and
Contractual Basis
Understand “user
pays” and “cost
recovery” concepts
Establish clear project
parameters up front
Accept possible need
for tariff adjustments
19
Establish all timing
obstacles
Contact details
Giulio Moreno
20
Davor Inđić
Head of Sarajevo Resident Office
Unitic Towers, 15th floor, Tower B
Fra Andela Zvizdovica 1, 71000 Sarajevo
Principal Banker
Zagreb Resident Office
Miramarska 23/111, 10000 Zagreb
Tel: +387 33 667 945
Fax: +387 33 667 950
E-mail: [email protected]
Tel: +385 1 6000 310
Fax: +385 1 6197 218
e-mail: [email protected]