Current situation and future opportunities for PPP in CEE region


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  • Current situation and future opportunities for PPP in CEE region

    1. 1. AgendaIntroductionPPP in Central Eastern Europe – updatePPP in PolandSummary
    2. 2. AgendaIntroductionPPP in Central Eastern Europe – updatePPP in PolandSummary
    3. 3. PPP in CEE in particularly needed due to:• Great scale of negligence in the field of public services during real socialism,• Strong and increasing public deficits and public budgets limitations,• Increasing expectations of the societies regarding the infrastructure and public services,• Poor qualifications of public officials in regarding the infrastructural projects management and operation,• Politicisation of privatisation process as a part of political games – negative connotations,• The challenges, which public authorities in EU countries are facing, regarding the consumption of EU funds.
    4. 4. AgendaIntroductionPPP in Central Eastern Europe – updatePPP in PolandSummary
    5. 5. Czech Republic • In September 2011 Ministry of Regional Development concluded a concession contract with 5 concessionaires who were commissioned with creating and operating the so-called electronic marketplaces (EMP) – first PPP project on the central level, • On municipal level, a number of PPP projects in operation phase – water management, football stadium, pool, bus-stops, city-lightning and three senior houses. Demand for PPP on the municipal level is increasing: e.g. PPP project of public transport in Pilsen are under preparation. Most of these projects are based on availability fee, • The only project under preparation on central level is 19 km long part of highway D3 • Changes in the Public Procuement Act has been adopted by the Czech Parliament in November 2011. New rules on the transparency of contracts and subcontractors in the public tendering procedure entered into force 1st April 2012.Special thanks to Mr. Vladimír Sloup, Asociace PPP, Czech Republic
    6. 6. Hungary There is no specific PPP legislation, PPP Projects are implemented through Public Procurement Act, Municipal Act and Civic Code, Public Finance Act determines if the value of the PPP project is exceeding 180 mln euro there has to be an acceptance from the Parliament, below 180 mln euro – acceptance form the Government is necessary, Update of the Public Finance Act in 2010 regulated the issue of off-the-balance sheet treatment of PPP projects, On the state level, PPP projects are implemented mainly by:• Ministry of Economy and Transport (M5, M6 highways),• Ministry of Justice (2 prisons),• National Sports Office (swimming pools, sport halls),• Ministry of Education and Culture (students hostels, Palace of Arts).Majority of the projects are implemented as DBFO model, Future PPP sectors:• National railway network – high speed rail,• National toll payment system,• Education – secondary schools,• Court buildings – reconstruction and operation,• Healthcare – hospitals,• Sport facilities – stadiums, watersport centre.
    7. 7. Bulgaria • A draft of a PPP Act was developed in 2011. The draft was approved by the Council of Ministers in September 2011 and is currently being considered by the National Parliament. By the end of April 2012 the PPP Act will be adopted, • The aim of the Act is to give clear definition and set clear rules for doing PPP, • 2007-2010 there was on average only one infrastructure concession contract signed per year – all of them for relatively small river ports, • One concession contract was signed in 2011 - for port infrastructure on the Black Sea - Concession for Port Bourgas East 2, contract period is 35 years, starting from 01.01.2012, the value of the project is app.100 mln euro, • The transport ministry, in cooperation with the ministry of finance, continues its work on preparation of several more concessions in the area of airports, sea and river ports as well as railway stations, • Pleven is currently undertaking a water PPP with IFC acting as transaction leader, • The EIB alongside a banking consortium (Societe Generale Expressbank, Elana Holding, Elana Investment, Balkan Advisors) has established a €56.4 million Urban Development Fund to invest in PPPs and infrastructure in 6 Bulgarian cities (Burgas, Pleven, Plovdiv, Ruse, Stara Zagora, Varna).Special thanks to Mr. Galin Zhelev and the Ministry of Finance of Bulgaria, Real Sector Finance Directorate (PPP unit)
    8. 8. Romania •Till the end of 2010 – did not have any legal act dedicated directly to PPP, •PPP Act had been resolved by the Parliament in September 2010 and came into force in October 2010, however the European Commission was not satisfied with the framework as it did not mesh with European procurement laws and encouraged Romania to redraft it – necessary changes were introduced in October 2011, •Central Unit for Coordination of the PPP was established in 2011, •Regardless the legislation, the National Strategy for PPP (in regarding PPP project pipeline, good practices, risk structures, mechanisms of payment, ect.) has been implemented by the Government, (the Strategy was prepared in cooperation with European PPP Expertise Centre JASPERS initiative), •EBRD has adopted a new 3-year strategy for Romania with a key objective being the greater use of PPP and privatisations in the country. Key sector interest: water, waste, roads, rail, district heating, •Implemented PPPs: road infrastructure, waste management, airport modernization, construction of Metroline 7 in Bucharest, •PPP opportunities in the following sectors: healthcare, prisons, energy, environment, transport, road infrastructure (Bucharest Bypass South Section & Comarnic-Brasov Motorway)Special thanks to Mr.s. Antonina Petrescu, PPP Coordinator, Louis Berger - PPP Unit. Regional Office for Central and Eastern Europe
    9. 9. Slovak Republic• Slovakia’s centre-left opposition SMER stormed to an unprecedented (the best result for any party since the independence in 1993) victory in parliamentary elections in March 2012 and will rule alone,• The new goverment seems to be enthusiastic in terms of PPP and restart some of the PPP projects scrapped by the outgoing government,• One project is about to be finished on the central level – Highway R1,• On the municipal level: 2 water management projects in operational stage (Trencin and Banska Bystrica),• Plans for projects: construction of broad-gauge rail from Kosice to Bratislava. (probably it will be part of new governments program), road projects (many plans in the national level, but it depends on new government). Republic of Slovenia •Public-private partnerships are regulated by PPP Act adopted in 2006, •PPP has been used mainly at the local level (municipalities) in e.g. social housing, kindergartens, waste management, sports infrastructure, cultural buildings, parking garages, public lightning and photovoltaic, •step-by-step PPP good practice has been developed, •On the central level there have been no significant PPP projects, •PPP projects pipeline should be developed, •Due to a small size of PPP projects on local level and absence of central PPP projects, Slovenia has not been an interesting case for foreign investors so far.Special thanks to Mr. Michal Považan, Slovak PPP Association, Slovak Republic and Mrs. Petra Ferk, Institute for PPP, Slovenia
    10. 10. Moldova •In 2008 the Law on public-private Partnership has been adopted, •PPP projects pipeline prepared by the goverment and PPP Unit is about to be introduced in the first half of 2012, •The National Council of PPP (deputy prime-minister, ministers, NGO’s, investment banks) first meeting is about to be organized in the first half of 2012, •The city of Chisinau has approved a €11.7 million loan from the EBRD to fund various PPP projects for the modernisation of the citys street infrastructure (roads, parkings, pavements, street lighting). The tender for the project is expected to begin after May 2012 with works planned for the second half of 2012, •Implemented PPP projects: 2 on central level (healthcare, ICT) and 12 on local level (healthcare, waste management, culture), •PPP projects in preparation: 33 on central level (carparks, social infrastructure, airport, sport infrastructure, ICT, road infrastructure) and 57 on local level (healthcare, waste management, road infrastructure).Special thanks to Mr. Ion Potlog, Head of the PPP Unit, Public Property Agency, Ministry of Economy of Republic of Moldova
    11. 11. Lithuania Concession Law adopted in 1996, PPP Law in 2009, PPP Unit established in 2010, In 2010 there was a program introduced by the Government to boost PPP in priority sectors: transport, education, social housing, public order and safety, 5 PPP Pilot Projects have been initiated in 2010 – social housing, education (secondary school), transport (bypass), safety (prison) and public order (police station). Pilot PPPs are slow in process, but they creates concrete background with minimum risk; More than 40 PPP projects so far (mainly service concessions), 4 prison projects are under discussion to be procured as 25 year DBFOT contracts:• Vilnius €34 million (£28m $45m) holding 1,620 inmates• Klaipeda €21 million (£17,5m $28m) holding 800 inmates• Panevežys €17 million (£14m $22,5m) holding 400 inmates• Šiauliai €35 million (£29m $46,5m) holding 1,180 inmatesEach prison will be procured separately in the late 2012. The Capital, Vilnius is preparing tender documents to procure a €25 million upgrade, operation and maintenance for its street lighting through a PPP. 19-year DBFOM contract is to cover 691km of city streets. Project is supposed to be launched at the end of Q3 2012, Vilnius – Utena 61,8 km road reconstruction to launch IVQ 2012, DBFO, 35 mln EUR, 25 years, Expansion of 34,5 km of 1st Trans-European Corridor E65 to launch in I Q 2015, DBFO, 100 mln EUR 25 years, 15 potential PFI-type projects for social infrastructure - scheduled for min 15 - max 25 years.Special thanks to Mr. Tadas Jagminas, Invest Lithuania
    12. 12. Estonia There is no specific PPP Law, all PPP are done according to Public Procurment, Lack of clear PPP policy framework/strategy or PPP Project Pipeline, No centralized PPP development - public authority has autonomy to decide on PPP, PPP sectors of interest: education (project in Tallinn – 18 schools renovated), municipal administrative buildings, social housing. PPP project on the central level – headquaters for: State Tax Authority and Statistical Bureau, There have been discussion mainly from the private sector discussing opportunities associated with PPP in other sectors, but public authorities are rather passive in this issue Latvia  There was PPP Action Plan 2006-2009, created in 2005,  PPP Law came into force in 2009,  Latvia is currently emerging from the deepest recession,  There have been few PPP projects but public authorities are prudent,  Concessions are allowed but for other types of PPP there should be accept from Ministry of Finance,  There have been more than 60 PPP agreements in force (80% concessions),  Main PPP sectors: transport, education, healthcare, water/waste, justice/courts,Special thanks to Mr. Lauri Henno, U.S. Real Estate Management, Estonia
    13. 13. Ukraine • PPP Law was adopted in 2010 and the by-laws on its implementation – in 2011, but till present there were no project started using these procedures; In March 2012 the draft law on incorporation of changes to the PPP law was registered in the Ukrainian Parliament, • Opportunity to initiate PPP projects by the private sector, • PPP sectors: transport, social housing, water management, solid waste, sports & leisure, • Most active regions: Kyiv region, Donetsk region, Zaporizhzhia, Mykolayiv, • Competition between operators/investors is relatively low, • Among the positive moments that witness about speeding up of PPP in Ukraine is announcement of competition for consultant selection for implementation of metro construction in form of PPP. Belarus• There is a clear message from the President and the Government to establish and develop effective PPP mechanism in the country,• Belarusian PPP Law had been drafted and it has been assessed by UNECE Experts of the UN Economic Commission for Europe, action plan will be prepared on a basis of preliminary report,• Necessary conditions for implementing PPP projects in Belarus are being considered, including the establishment of a center of PPP expertise and training of qualified experts,• Current needs in the economic and social sectors are enormous – PPP could be applied,• PPP Pilot Project is also considered to be introduced.Special thanks to Mrs. Irina Zapatrina, Chairman of the Board at Ukrainian PPP Center and Mr. Dzmitry Berazouski, Executive Director of the Coordinating Unit for theEuropean Unions Tacis Programme in the Republic of Belarus
    14. 14. Croatia • Croatia hopes to gain full EU membership in 2013, • PPP projects implemented in road infrastructure, education, sports and utility, • Only one signed PPP project in last 4 years – Zagreb airport (200 mln euro), • Sector of interest: energy, healthcare, ports, energy efficiency in public buildings, justice, Kosovo •Infrastructure gap for approximately 3 billion euro (in the next 3-5 years), •Main sectors in which private sector could participate: transport, energy, ICT, •PPP Law is investor-friendly in accordance with intenrational PPP best practice, •PPP Inter-ministerial Steering Committee and Centralized PPP Unit -Partnerships Kosovo have been created,Special thanks to Mr. Saša Marenjak, at PPP Centar, Croatia and Mrs. Nora Bakali Legal Advisor, Public Private Partnership Unit, kosovo
    15. 15. Serbia • In 2011 there was a new Law on PPP and Concessions introduced, (e.g new law distinguishes between institutional and contractual PPP), • The Government seeks to attract €4 billion of investments into local infrastructure through PPP over the next decade. Macedonia •Special Law on PPP and Concessions adopted in 2007, •Few positive experiences with PPP in the past (e.g. airports underconcession), •Several PPP projects in Skopje: amusement park, administrative facility and carpark, waste facility.
    16. 16. Albania• EBRD alongside the city of Tirana in Albania is preparing a feasibility study on procuring a new public transport terminal on a DBFOT basis,• The terminal will be situated on an 85,000m2 plot provided by the city and will consist of: bus terminals, tram/train station, parking and retail,• The contract will have a 20-year plus concession and will be opened as an international tender. The EBRD will look to help finance the project with the winning bidder. Bosnia and Herzegovina • PPP Law adopted in 2009, the cooperation model between public and private sector is a relatively new model, where market is still in the early stages, • PPP sectors of interest: power facilities, recycling facilities, water and waste management, education, healthcare,transport. Montenegro• PPP is regulated by Law on participation of private sector in the procurement of public services and the Law on Concessions in 2009,• Sectors of interest: tourism, energy, roads.• Local municipalities interested in PPP: Podgorica, Budva,
    17. 17. AgendaIntroductionPPP in Central Eastern Europe – updatePPP in PolandSummary
    18. 18. First PPP Act  Public-Private Partnership Act June 2005No PPP projects implemented!Reasons for failure: bad political climate, lack of knowledge about PPP, strict regulations? New PPP regulations – came into force in February 2009  The Public-Private Partnership Act 19 December 2008  Concession for construction works and services Act ; 9 January 2009
    19. 19. Number of PPPs and Concessions announcements in Poland 2009, 2010, 2011 + 47 % +47% PPPs – 31 %• The number of announcements, on a basis of PPP Act and concession for works and services Act, is 41 in 2009, 61 in 2010 and 42 in 2011 – summing up 144 announcements.• The number of actual projects in 2009, 2010 and 2011 was 33, 51 i 36 – summing up 120 projects.
    20. 20. PPP announcements 2009 – 2011 + 47 % Municipal Elections at the end of 2010 could be the reason…
    21. 21. Number of announcements, number of projects and contract signed PPP in Poland 2009 – 2011 number of announcements number of actual projects number of contracts signed• 24 projects were commerially closed (agreement signed) during 2009-2011:  18 out of 24 was also financially closed,  Signed contracts accounts for app. 15-20% of the initial number of announcements. • Approximately 50% of the announcements were cancelled – often due to lack of oficially submitted bids by the private partners.
    22. 22. PPP announcements in sectors (2009-2011) The most popular sectors: Sports & Leisure (34%) Communal infrastructure (15%) Transport & Carparks (18%) Education (5%)
    23. 23. PPP announcements in sectors (2009-2011)Source: on a basis of Investment Suppor reports on polish PPP market in 2009, 2010 and 2011
    24. 24. PPP announcements in sectors with values (2009-2011) E s t im a t e d v a lu e o f t h e p r o je c t ( m ln P L N n e t t o ) S e c to r 2009 2 0 10 2 0 11 E d u c a t io n 17 500 000 – 29 369 032,5 b.d. 4 500 000,00 – 18 599 955,00 IC T 23 000 000 b.d. b.d. H e a lt h c a r e 1 500 000 – 145 000 000 2 800 000 – 4 295 127,99 3 300 000,00 C o m u n a l in f r a s t r u c t u r e 29 369 032,5 – 70000000 25 000 000 b.d. S p o r t & L e is u r e 12 406 720 – 375 000 000 600 000 – 220 000 000 320 000,00 – 300 000 000,00 Wa te r ma na g e me nt 3 000 000 – 333 000 000 1 150 000 – 24 571 778,8 b.d. C a rpa rks b.d. 570 000 – 52 500 000 18 599 955,00 – 115 000 000,00 Wa s te ma na g e me nt b.d. 16 500 000 – 17 500 000 8 929 514,00 – 700 000 000,00 Tr a n s p o r t b.d. 20 287 732,56 b.d. P u b lic in f r a s t r u c t u r e b.d. 80 000 000 b.d. C u lt u r e b.d. 6 461 396,63 – 24 400 00 b.d. U r b a n r e g e n e r a t io n b.d. 215 000 000 b.d. F ue l s e c to r b.d. 17 760 000 b.d. E ne rg y b.d. 3 250 000 – 3 750 000 b.d. C o n fe re n c e s b.d. b.d. 671 825 S o c ia l h o u s in g b.d. b.d. 23 645 000 S h o p p in g c e n t r e b.d. b.d. 20 000 000Source: on a basis of Investment Suppor reports on polish PPP market in 2009, 2010 and 2011
    25. 25. Value of PPP projects (in sectors) in Poland 2009 – 2011• The value of the polish PPP market for the last 3 years, taking into consideration announced projects, is estimated* to 5 bln PLN (app. 1,2 bln EUR),• Strong variation of PPP projects does not allow the use the term of average value ​- e.g. in Sports & Leisure projects 0,6 mln PLN - 375 mln PLN,• The highest vaule of PPP projects have been is the sectors: Sports & Leisure, waste management, water management and carparks,• In comparison to the european** PPP projects – polish PPPs are relatively small. It is mainly due to a fact that majority of PPP projects have been implemented by municipalities, which are resposible locally for activities in particular regions and as a consequence those projects are not that big,• One of the reasons of the PPP projects low value is the lack of the central government involvement in the implementation of PPPs. There are several central goverment projects that could and should be implemented using PPP: courts and prisons, road infrastructure (highways), rail infrastructure (High Speed Rail), air infrastructure (Airport and MRTT) and many many others…* The vaule of the planned PPP projects in the next 2 years in Poland is estimated to 15 bln PLN (3,7 bln EUR)** the average value of PPP project commercially and financially closed is 163 mln EUR in 2010 and 213 mln EUR in 2011
    26. 26. PPP announcements in regions (2009-2011)• PPP leaders in voievodships are: małopolskie (Cracov), wielkopolskie (Poznan), dolnośląskie (Wroclaw), mazowieckie (Warsaw) pomorskie (Gdansk, Sopot, Gdynia) i śląskie (Katowice).
    27. 27. Planned PPP projects 2012 There have been more than 130 projects identified that are at the initial stage of development – in which PPP/concession has been considered. Some of the projects are about to be launched in 2012.Source:
    28. 28. Results of announcements 2009-2010, Centrum PPP Survey In general with advisors without advisors• 24% of the all announcements in which external advisors were involved, ended up with signing a contract, 31% was cancelled,• In announcements where external advisors were not involved – only 10% were signed contracts and more than 60% were cancelled, Including external advisors in PPP projects is even more important than in traditional procurement due to a fact that: PPP project are far more complicated than the traditional procurement, There is a need to secure public interest in PPP projects, PPP projects are long-term investments.
    29. 29. Common mistakes in preparing PPP projects in Poland: Lack of proper analysis (economic-financial, legal, technical), Improper way of selecting private partner (concession vs PPP – payment mechanism), Unrealistic expectations of public authority regarding private partner, Lack of market testing before the announcement, Improper criteria for selecting best bid, Lack of flexibility during the negotiations, Lack of knowledge in regarding PPP, Public Procurement and other Law.
    30. 30. AgendaIntroductionPPP in Central Eastern Europe – updatePPP in PolandSummary
    31. 31. PPP in various sectors across the Europe Sector Social Education Water Town halls Airports Defence Health care ICT Ports Prisons Rail Roads Sport & LeisureCountry housing Schools managementAustria                                       Belgium                                       Bulgaria                                       Croatia                                       Czech Republic                                       Denmark                                       Estonia                                       France                                       Greece                                       Spain                                       Netherlands                                       Ireland                                       North Ireland                                       Lithuania                                       Latvia                                       Malta                                       Germany                                       Poland                                       Portugal                                       Russia                                       Romania                                       Slovak Republic                                       Slovenia                                       Scotland                                       Switzerland                                       Hungary                                       United Kingdom                                       Italy                                        Executed,done Under preparation
    32. 32. Conclusions• CEE PPP market has been still at the initial stage of development although there has been several PPP experiences across the region,• Financial crisis affected PPP market,• There are few big projects on the horizon in the CEE region:? A1 Highway and High-Speed Rail, Poland,? D3, Czech Republic,? D4, Slovak Republic,? Bucharest Bypass and Comarnic – Brasov Motorway, Romania,? Milot-Morine, Albania,• Costruction companies have become infrastructure operators,• Key International infrastructure operators move to CEE region.
    33. 33. Thank you for your attentionBartosz Mysiorski Centrum PPP is an independent unit and its aim is to significantly accelerate private investments in meeting these public needs, for whichBartosz Mysiorski, Chief Specialist in PPP the state lacks financing. More investment in public infrastructure, together with simultaneous improvement in the quality of its positive impact on the economic growth will improve the quality of everyday life.E-mail:   Centrum PPP was founded in 2008 by more than 40 public and privateMobile: +48 519 138 517 entities including banks, law firms, consulting companies, firms, regional development agencies, foundations, associations, chambers and business agencies. The Centrum is given government support from Ministry of Finance, Ministry of Economy, Ministry of Infrastructure, as well as the local authorities.