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041209-PPPs_The_Spanish_Experience-LinkedIn

  1. 1. EXAMPLES OF INFRASTRUCTURE PPPs PROMOTED BY SPANISH PUBLIC AGENCIES Carlos M tí C l Martínez García-Loygorri G í L i Project and Infrastructure Finance Division TYPSA cmartinez@typsa.es December 2004 PPPs – The Spanish Experience 1
  2. 2. Examples of Infrastructure PPPs Promoted by Spanish Public Agencies TABLE OF CONTENTS • Introduction: Criteria of Eurostat on PPPs • Study Cases in Spain – PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid – E.g.: New Puerta de Hierro Hospital – PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia – E.g.: Seville Underground – PPPs for the Construction and Operation of High-Speed Railways – E g : High Speed Railway Figueras Perpignan E.g.: High-Speed Figueras-Perpignan – PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways – E.g.: Rehabilitation of the M-30 – Madrid Calle 30 December 2004 PPPs – The Spanish Experience 2
  3. 3. Criteria of EUROSTAT on PPPs Objective and application of the criteria: • EUROSTAT: Official Statistical Office of the European Communities • Criteria in line with the European System of Accounts (ESA-95) • Objective: Defining the requirements to make possible the Debt deconsolidation • Scope of use: – L Long-term contracts b between Public and Private Entities for P bli dPi E ii f promotion and operation of Infrastructures – Investment in construction or rehabilitation + rendering of g services (operation) according to predefined standards – Payments to private operators coming almost entirely from the Administration, not from users December 2004 PPPs – The Spanish Experience 3
  4. 4. Criteria of EUROSTAT on PPPs Categories of risks defined by Eurostat: • Construction/completion risk: late delivery breach of quality delivery, standards, additional costs, technical deficiencies and negative externalities (external negative effects) ( g ) • Availability risk: breach of volume, safety or quality delivery service standards contractually agreed a da d o a ua y ag d These breaches must imply automatic and significant penalties in the periodic payments to the private partner • Demand risk: variability of demand irrespective of the behaviour of the private partner December 2004 PPPs – The Spanish Experience 4
  5. 5. Criteria of EUROSTAT on PPPs Conditions for not consolidating the investment as a g government asset: • The private partner must: – Bear the construction risk, and – Bear at least one of either availability or demand risk • A partner is considered to bear one of these risks if it bears “the majority” of the risk December 2004 PPPs – The Spanish Experience 5
  6. 6. Criteria of EUROSTAT on PPPs Implementation of this decision in practice: • This decision is applicable from March 2004 for all Member States and Acceding Countries • Responsibility of its application: National Statistical Offices • Eurostat is of the opinion that the risk analysis, identification and assessment can be extracted by expert statisticians from the Contract, and then be able to decide on the final allocation of the assets • I questionable cases: analyse the nature of both partners In ti bl l th t f b th t (especially if the partner is a public corporation), analyse the g government financing and the effect of government g g g guarantees December 2004 PPPs – The Spanish Experience 6
  7. 7. Examples of Infrastructure PPPs Promoted by Spanish Public Agencies TABLE OF CONTENTS • Introduction: Criteria of Eurostat on PPPs • Study Cases in Spain – PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid – E.g.: New Puerta de Hierro Hospital – PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia – E.g.: Seville Underground – PPPs for the Construction and Operation of High-Speed Railways – E g : High Speed Railway Figueras Perpignan E.g.: High-Speed Figueras-Perpignan – PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways – E.g.: Rehabilitation of the M-30 – Madrid Calle 30 December 2004 PPPs – The Spanish Experience 7
  8. 8. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (1) • Object: – Project – Construction – Equipment for concessioned services – Provision of general and clinical furniture – Operation and maintenance providing residential and complementary services –non-sanitary services– – Operation of complementary and commercial areas restaurant, newsstand, etc. December 2004 PPPs – The Spanish Experience 8
  9. 9. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (2) • Characteristics of Civil Works: – 162.000 m2 built with 879 beds, enlargeable to 120 more beds – Assembly Hall (400 seats), areas for investigation and studies, nursery, heliport, parking (4.000 vehicles) • I Investment: – Initial: € 300,5 million – Renewal and Replacements: € 64 6 million 64,6 • Attended Population: 675.000 inhabitants in 2011 December 2004 PPPs – The Spanish Experience 9
  10. 10. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (3) • Granting Authority: Consejería de Sanidad y Consumo de la Comunidad Autónoma de Madrid (Regional Authority of Madrid) • C Concessionaire: Public Limited Company to be formed with an bli i i d C b f d i h equity equal or superior to the 15% of the total estimated investment • Date of award: March 2005 • Period of Concession: 30 years. In service from October 2007 • Present situation: Bidding process • Financing: Not defined yet g y December 2004 PPPs – The Spanish Experience 10
  11. 11. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (4) The PPP Contract. Peculiarities (I): • Services to be provided by the Concessionaire: – Complete maintenance of the building – Waste management – Safety of the Hospital – Laundry service – Cleaning of the building – Management of clinical and administrative files – Management of Reception and Information staff – Maintenance of inner access roads and gardens M i t fi d d d – Complete sterilization service – Stock and distribution management – Cafeteria and Restaurant service December 2004 PPPs – The Spanish Experience 11
  12. 12. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (5) The PPP Contract. Peculiarities (II): • Operation of complementary and commercial areas - Income: – Parking g – Cafeteria / Restaurant service – Vending machines – Telephone and TV inside the rooms – Telephone booths – Bank branch, Hairdresser’s, Newsstand, Florist’s… • The Concessionaire can suggest, to its own risk, the operation of additional opportunities only if this represents lower costs for the Administration December 2004 PPPs – The Spanish Experience 12
  13. 13. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (6) The PPP Contract. Peculiarities (III): • Payments to the Concessionaire: – Basis: Maximum Annual Payment offered (MAP) – Fixed Annual Payment (FAP): • Maximum 40% over the MAP • Not exposed to penalties – Variable Annual Payment (VAP): • Minimum 60% of the MAP • Exposed on the whole to penalties • Liable to adjusts depending on the fluctuation of the volume of service provided (occupation reference level: 85%) December 2004 PPPs – The Spanish Experience 13
  14. 14. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (7) The PPP Contract. Peculiarities (IV): • Penalties: – Based on the definition of indicators that make possible an p objective evaluation of the performance – For each indicator three parameters are applied: - Availability failure (maximum penalty: 100% VAP) y ( p y ) • C t Category of f il f failure - Quality failure (maximum penalty: 30% VAP) • Reaction time • Correction time – Additionally, for each indicator both a frequency of control (daily, monthly, annual…) and a supervision method (surveys, audits, inspections ) audits inspections…) are set December 2004 PPPs – The Spanish Experience 14
  15. 15. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (8) The PPP Contract. Peculiarities (V): • Maximum theoretical penalty: 130% of the VAP model established attending to the criteria of Eurostat to allow assets involved to be classified as non-government assets (therefore for the Administration it is an off- non government (therefore, off balance finance) • Risks borne by the private partner: – Construction – Availability because payments are mainly variable (≥ 60%) • Provides budget stability and efficiency • 100% private funds • The Administration delays payments and these are considered annual spending instead of an isolated investment at the beginning of the PPP p g g g December 2004 PPPs – The Spanish Experience 15
  16. 16. PPPs for the Construction and Operation of 8 New Hospitals in the Region of Madrid E.g.: New Puerta de Hierro Hospital (9) Conclusion: • The Regional Government of Madrid is able to build a new hospital for its citizens, postponing its payment and advancing the citizens launching of the service • The investment is not accounted as Public Debt according to the criteria of Eurostat: – The private partner bears the construction risk, and p p , – The private partner bears the availability risk (60% of the payment depends on volume and quality standards) December 2004 PPPs – The Spanish Experience 16
  17. 17. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (1) • Object: j – Project and Construction – Supply of trains and installations – Maintenance – Operation • Characteristics of Civil Works: – 19 km long (9 km subterraneous and 10 km on surface) – 2,6 km of viaducts – 23 stations (9 on surface), and garages • Investment: – Infrastructure: € 443,2 million – Trains: € 54,0 million December 2004 PPPs – The Spanish Experience 17
  18. 18. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (2) • Granting Authority: Consejería de Obras Públicas y g y j Transportes de la Junta of Andalucía TUZ 5,00 (Regional Authority of Andalusia) RUSVEL 9,03 Dragados 27,83 27 83 • Concessionaire: Guadalmetro d l CAF 9,79 Tressam 10,00 • Date of award: June 2003 GEA 10 52 10,52 Sacyr 27,83 y , • Period of Concession: 35 years. In service from summer 2006 • Present situation: under construction • Financing: Capital: € 86,0 million Participatory Loan: € 6,4 million Grant: Operation Loan from the EIB: € 126 0 million 126,0 € 260 0 million 260,0 December 2004 PPPs – The Spanish Experience 18
  19. 19. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (3) • Diagram of relationships: g p Contribution to the tariff PPP REGIONAL Contract Concessionaire PUBLIC SPECIAL AUTHORITY Construction + Operation PURPOSE ENTITY Participatory Loan Initial I i i l contribution ib i Tariff Regional authority USERS BANKS Local Central Administrations Administration December 2004 PPPs – The Spanish Experience 19
  20. 20. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (4) The PPP Contract. Peculiarities (I): () • Risks borne by the private partner: – Construction – Demand (limited to 55% of the income during the initial years and to 80% afterwards) the majority of this risk is borne by the private partner in two different ways: tariffs and variable operating payments – Operational and maintenance risks p • This service of public transport must be operated according to social requirements defined by the Administration, but also attending to corporate criteria that allows cost reduction and efficiency criteria, December 2004 PPPs – The Spanish Experience 20
  21. 21. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (5) The PPP Contract. Peculiarities (II): ( ) • Sources of income for the private partner: – Grant from the Regional Administration (33% of the investment in infrastructure and installations): € 126 million – Tariffs for users of the infrastructure – Operating payments from the Administration (a significant part of them depending on traffic demand risk) – Earnings from advertising, vending machines, shops… December 2004 PPPs – The Spanish Experience 21
  22. 22. PPPs for the Construction and Operation of New Undergrounds in various cities of Andalusia E.g.: Seville Underground (6) Conclusion: • The Regional Government of Andalusia is able to construct a new underground for its citizens, postponing two thirds of its payment and advancing the launching of the service • The investment is not accounted as Public Debt according to the criteria of Eurostat: – The private partner bears the construction risk, – The private partner bears the availability risk (in the way that if the infrastructure is not available, users cannot use it), and h i f i il bl i) d – The private partner bears the demand risk (although it is limited, the majority of the risk is on the private s side) private’s December 2004 PPPs – The Spanish Experience 22
  23. 23. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: High-Speed Railway Figueras-Perpignan (1) • Object: Project, construction, operation and maintenance of the I t th International S ti Figueras-Perpignan of th N ti l Section Fi P i f the New Hi h S High-Speed d Railway between Spain and France • Characteristics of Civil Works: – Double track line: 44,4 km (19,8 km in Spain and 24,6 in France) – Single track lines connecting at Perpignan: two of 2,9 and 4,6 km – Double tunnel of 8,3 km; Two false tunnels of 180 and 190 m – 9 viaducts (5 in Spain): 2.240 m – 14 railway bridges and 11 highway bridges – 9 underpasses – Extreme security and environmental conditions December 2004 PPPs – The Spanish Experience 23
  24. 24. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: High-Speed Railway Figueras-Perpignan (2) • Granting Authorities: Ministerio de Fomento (Spain) and Ministère d l’É i Mi i tè de l’Équipement, des Transports et du Logement t d T t td L t (France) ACS 24,9 • Concessionaire: TP FERRO Eiffage 50,0 (bilateral equilibrium) Dragados Concesio- nes 25,1 • Date of award: February 2004 • Period of Concession: 50 years -including 5 for construction- • P Present situation: under construction; closing the financing t it ti d t ti l i th fi i December 2004 PPPs – The Spanish Experience 24
  25. 25. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: High-Speed Railway Figueras-Perpignan (3) • Investment: Construction € 952,0 million Others € 169 5 million 169,5 TOTAL € 1.121,5 million • Financing: Shareholders: Capital: € 51,4 million € 105,0 million Participatory Loan: € 53,6 million Grant: Direct: € 515,9 million € 576 6 million 576,6 Financing: € 60 7 million 60,7 Senior Debt: € 439,9 million • Re-financing: in 2015 g 25-year extra period y p – Limited-recourse to sponsors – For the whole amount of the remaining debt – Adjusted to the real demand December 2004 PPPs – The Spanish Experience 25
  26. 26. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: High-Speed Railway Figueras-Perpignan (4) The Concession Contract. Peculiarities (I): • Subject to the new French and Spanish Concessions Laws (2003) in their common aspects; its last interpretation is submitted to an Arbitration Court in Brussels • Risks borne by the Concessionaire: – Construction delay on the payment + severe penalties for delays (up to € 22 million for 16 months) + loss of significant guarantees (€ 60 million reducible to € 30 million when financing is closed) – Operation severe penalties for failures + loss of significant guarantees (up to € 1,5 million) – Availability if the infrastructure is not available: a) Operators do not pay any tariff, and also b) Operators penalize the Concessionaire tariff December 2004 PPPs – The Spanish Experience 26
  27. 27. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: Hi h S E d Railway Fi High-Speed R il Figueras-Perpignan (5) P i The Concession Contract. Peculiarities (II): • Risks borne by the Concessionaire (cont ): cont. – Demand (limited) the small limitation lies on the approved annual Canon Ceiling set to the Concessionaire for charging to Operators •This Ceiling is referred to the previous years Ceiling, and depends on: – Inflation (average of French and Spanish Inflations Indexes) – A ratio defined in the Contract for each year – A corrective ratio depending on traffic, only for years 4, 9 and 14 varying from 1,04 if the demand is a 20% lower than the foreseen one to 0,96 if it is a 20% greater •Therefore th D Th f the Demand Ri k i borne by the Concessionaire (th d Risk is b b th C i i (the maximum mitigation is equal to 4% and it is for a demand loss equal or greater than 20%) •Symmetric limitation Symmetric Risk and Venture of the Concessionaire December 2004 PPPs – The Spanish Experience 27
  28. 28. PPPs for the Construction and Operation of High-Speed Railways High- E.g.: Hi h S E d Railway Fi High-Speed R il Figueras-Perpignan (6) P i Conclusion: • Th French and Spanish Governments obtain a high-speed railway The F h dS i hG t bt i hi h d il connection paying a grant of € 576,6 million (51% of the total Construction Cost) and transferring the remaining cost to Operators canon • The whole investment is not accounted as Public Debt according to the criteria of Eurostat: – The private partner bears the construction risk, – The private partner bears the availability risk (in the way that if the infrastructure is not available, users cannot use it), and – The private partner bears the demand risk (although it is limited, the majority of the risk is on the private’s side) private s December 2004 PPPs – The Spanish Experience 28
  29. 29. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (1) • Object: Rehabilitation, Operation and maintenance of the j p urban ring road of Madrid M-30 • Characteristics of Civil Works: – Total: 21 actions – Construction of two by-passes, north and south – Putting underground the most j i d d h jammed and diffi l zones d d difficult – Adjustment of the main access interchanges • Estimated Investment: € 4.000 million • Estimated social benefit (Univ. Politécnica de Madrid): > € 5.000 million December 2004 PPPs – The Spanish Experience 29
  30. 30. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (2) • Entity Madrid Calle 30: mixed company with both municipal and private capital • Duration of the Entity: 35 years –with a buying and selling crossed option in year 20– • Present situation: under construction –the Entity’s structure is under consideration consideration– • Structure under consideration: City Hall 80% Capital 80% Private P t P i t Partner 20% Equity 20% Subordinated Debt 20% Debt 80% % December 2004 PPPs – The Spanish Experience 30
  31. 31. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (3) • Diagram of relationships: City Public Dividend Authority Operation and Capital Maintenance periodic M i i di Private Capital payments Partner Fee S b di t d D bt Subordinated Debt Dividend Interests and Repayment of the Constructors subordinated debt Payment for y Interests and Repayment of the debt the Work Banks Financing December 2004 PPPs – The Spanish Experience 31
  32. 32. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (4) The PPP Contract. Peculiarities (I): () • System: Special Purpose Mixed Company • Payments from the City Authority: – Basic Component fixed – Complementary Component variable according to availability and quality standards established in the Contract d lit t d d t bli h d i th C t t • The amount of these payments is offered by the private partner for the 1st phase of the project p p j for next phases –new investments– the p economic-financial plan will be adjusted so as the Internal Rate of Return (IRR) does not vary after the rebalance of the economic- financial plan p December 2004 PPPs – The Spanish Experience 32
  33. 33. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (5) The PPP Contract. Peculiarities (II): • The amount of these payments is offered by private bidders in a public tender market price is achieved p • Risks borne by the Mixed Entity: – Construction – Availability payments for services depending on quality standards related to attention to emergencies, maintenance of g , several elements of the infrastructure, etc. • Private Partner: operating expert for high-capacity highways p g p g p y g y December 2004 PPPs – The Spanish Experience 33
  34. 34. PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (6) Conclusion: the model, under consideration, will try to achieve: y • The City Hall of Madrid is able to rehabilitate the ring road M-30 for its users, postponing part of its payment and advancing the launching of the service • The investment is under discussion. For not being accounted as Public Debt, according to the criteria of Eurostat: – The private partner must bear the construction risk, and – The private partner must bear the availability risk (dependence of payments on quality and volume standards) • The question remains if the 20% of private capital is enough to bear the risk requirements mentioned by Eurostat q y December 2004 PPPs – The Spanish Experience 34
  35. 35. TYPSA – Engineering the Future TYPSA in Concessions and Services: • TYPSA gathers experts capable of accomplishing every work included in the Concessional Process • TYPSA has experience in: – Traffic and planification studies – Projects: modelling and financial evaluation – Structured financing studies (BOT, BOOT, shadow tolls, Project Finance) – D i and Construction Supervision Design d C t ti S i i • TYPSA has capacity for participating from the beginning of the process, contributing a complete and multidisciplinary point of view December 2004 PPPs – The Spanish Experience 35
  36. 36. TYPSA – Engineering the Future TYPSA in Concessions and Services: • TYPSA has, among its clients: – Public Authorities (national and international): • Technic-economical and financial feasibility studies • Preparation of the Concession Tender – Concessionaire companies/consortiums: • Preparation of the Bid • Technical assistance to the Project, Construction Supervision, Operation and Maintenance – C t ti companies: Construction i • Studies and Projects – Financial Entities: technical consultancy in: • Technical and economical feasibility – Investment and Operation Costs – Income • Surveillance of investments: Construction Supervision • Surveillance of operations December 2004 PPPs – The Spanish Experience 36
  37. 37. Thank you very much for your attention Teþekkür ederim Carlos Martínez García-Loygorri Project and Infrastructure Finance Division TYPSA Tel.: +34 917 227 300 – Fax: +34 916 517 588 e-mail: cmartinez@typsa.es December 2004 PPPs – The Spanish Experience 37

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