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THE RESOURCE BOOK Methodology and Case Studies

THE RESOURCE BOOK Methodology and Case Studies. Simon Murray Brussels 5 th July 2004 ISPA – PPP Framework Contract. Presentation. Background Methodology General conclusions Sector analyses Water and waste water Solid waste Transport infrastructure Recent developments. Background.

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THE RESOURCE BOOK Methodology and Case Studies

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  1. THE RESOURCE BOOKMethodology and Case Studies Simon Murray Brussels 5th July 2004 ISPA – PPP Framework Contract

  2. Presentation • Background • Methodology • General conclusions • Sector analyses • Water and waste water • Solid waste • Transport infrastructure • Recent developments

  3. Background • “Guidelines for the Development of Successful PPPs” • Seminars in Brussels and the Candidate Countries • Request for examples of real projects to complement the Guidelines • Three key sectors chosen • Case studies identified and analysed • Report published

  4. Methodology • The Resource Book supports the Guidelines • It provides detailed case studies of actual projects in three key sectors • Three sectors in which the EC has provided grant financing to the Candidate Countries through ISPA and the Cohesion Fund • Case studies are not statistically representative • But they do demonstrate structures, issues and problems that are commonly found • Case studies have been analysed against six criteria

  5. Criteria for Analysis of Case Studies • Value of the investment • Contract duration • Transfer of responsibility • Demand risk • Availability risk • Contract type

  6. Values Assigned to Criteria

  7. Results of the Analysis • Investment value – largest investments in water and transport. Smallest in solid waste. • Contract duration – water and transport sectors have the longest contract durations, often over 20 years. • Responsibility transfer – solid waste projects have the highest transfer of responsibility to the private sector. Sector Comparison

  8. Results of the Analysis • Demand risk – solid waste projects have the highest transfer of demand risk to the private sector. • Availability risk – generally determined by the characteristics of the project. • Contract type …………. Sector Comparison

  9. Distribution of Contract Types

  10. General Conclusions • Risk transfer lies at the heart of effective PPP design. Every project is unique but risks should be borne by the parties best able to manage them. • Need for sustained political support and commitment, in particular for large projects of long duration. • Demonstrate value for money for the project. Important for assessing that the project design is most effective.

  11. General Conclusions • Need for well defined legislative and regulatory environment to support project implementation. • Importance of rigorous analysis of costs and revenues undertaken by both parties as the basis for a sustainable contract.

  12. Sector Analysis – Water and Waste Water • This is a mature sector. Water concessions have been common for 40 years in EU countries. • This is a growth sector. Member States will have to undertake substantial investments in water and waste water treatment facilities. • There is considerable experience of the full range of PPP structures in this sector.

  13. Sector Analysis – Water and Waste Water • EC co-financing can improve the operational efficiency and fairness of a PPP. • PPPs can capture private sector expertise and new technologies. • There is a big difference between privatisation and PPPs

  14. Sector Analysis – Solid Waste • Four interdependent elements – vehicles and equipment, sanitary landfills, MSWM strategies and collection and transport services. • Private enterprise has been leading modern waste management in the Candidate Countries. • Service contracts, concessions and JVs are prevalent reflecting long-term stable contracts in this sector.

  15. Sector Analysis – Solid Waste • Affordability in terms of acceptable tariffs is the key issue in this sector. • High cost of compliance with EU Directives has a significant impact on project design.

  16. Sector Analysis – Transport Infrastructure • This is a mature sector and is seen as a viable opportunity for PPPs across the EU. • There is a long history of optimistic forecasts of costs and revenues on transport projects. Errors of up to 40% are typical on railway projects. • Simple connections like bridges and tunnels are well-suited to financing through user charges.

  17. Sector Analysis – Transport Infrastructure • More complex projects cannot exist in isolation and must form part of a regional development plan. • Considerable potential for public outcry. Committed and sustained political support is critical to the success of projects.

  18. RecentDevelopments • The EC has taken steps to promote, define and regulate the use of PPPs. • Recent publication of the Green Paper on PPPs and Community Law on Public Contracts and Concessions. • The EU rules governing the choice of a private partner have been coordinated so that a wide variety of approaches are still possible at national level. • Eurostat has published a decision defining the treatment of PPP investments in public accounts.

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