Public private partnerships: French and European cases - PowerPoint PPT Presentation


Title: Public private partnerships: French and European cases


1
Public private partnershipsFrench and European
cases
  • Wagner School, Rudin Center, NYU
  • New York City, March 25, 2008
  • Sebastien GOURGOUILLAT
  • Transportation and Construction Attaché
  • Embassy of France in the USA
  • sebastien.gourgouillat_at_missioneco.org

2
Outline of the presentation
  • PPPs in France historical and modern examples in
    transportation
  • Main frameworks and key issues
  • Enlarging the focus
  • PPPs outside the transportation field
  • European examples

3
France ( Texas)
550 000 km² - 342 000 sq. miles 63 millions
inhabitants 22 regions 96 departments 36600
municipalities 30 millions cars 6 millions trucks
4
  • 1/3 -French PPPs in transportation

5
A very long tradition of PPPs in France
  • Canal de Craponne (Southeast) 1554
  • Canal du Midi (Southwest) 1666

6
Main rail network development in the XIXth
century through PPPs
  • 1832-1870
  • 10 600 miles
  • By private companies, with State regulation and
    many State engineers !
  • Private companies merged in a national publicly
    owned company (SNCF) in 1937

7
Since 1955 The building of a 5000 mile,
high-quality highwaynetworkthrough
PPPs (concession)
75 of the French highways are toll highways
8
Urban public transportation A major field for PPPs
Private sector Public sector Mixed
9
Since 2006 railPPPs, anopportunityfor HSR
HSL EE 2007
  • In the upcoming years, RFF will build at least 3
    HSLs at the same time
  • Constraint on public spendings
  • Availability of private capital
  • Historical practices of PPP
  • Public support remains necessary for rail
    infrastructure

HSL Britany
HSL RR 2011
HSL SEA 2013-2016
L N.M. by pass 2012
10
Recent examples of PPP railways
  • LGV Sud-Europe Atlantique (South East Atlantic
    High Speed Line)
  • 300 kilometers from Tours (240 km Southwest from
    Paris) to Bordeaux.
  • Paris-Bordeaux 2 hours and 5 minutes instead of
    3 hours
  • 7.2 billion euros, opening 2015, with a part of
    public investment.
  • 40 years concession (design, build, maintain
    and finance at its own risks).
  • Charles de Gaulle Express link
  • 32-kilometer fast rail link between the centre of
    Paris and Charles de Gaulle International
    Airport.
  • 640 million euros (120 for the rolling stock).
    100 financed by the private partner (use of
    existing right of way, expected high
    profitability).
  • 40 years total concession.
  • RFI in July 2006, construction to begin in 2008,
    operation starting in 2012.
  • New cross-border HSL Perpignan-Barcelona (Spain)
  • 45-kilometer new high speed rail way crossing the
    Pyrenees.
  • Paris-Barcelona 5h and 30 minutes since 2009 (9h
    today).
  • 952 million euros (60 States, 40 private
    partner).
  • a 50-year concession granted to a Franco-Spanish
    venture.
  • Operation starting 2009.

11
(No Transcript)
12
  • 2/3 - PPP schemes and key issues

13
(Almost) every country faces the same dilemma !
  • Urgent need for infrastructures and services
  • Congestion, delays
  • Pollution
  • Economic competitiveness
  • But
  • Limited public funding
  • No political will to raise taxes
  • Find the money where it is, but with respect of
    the public interest
  • PPPs
  • decision of balance between tax and users money
  • Allow innovation and add competition
  • The public authority keeps the control but lifts
    the stress on its budget and benefits from the
    performance of the private sector (time and money
    saving)

14
The concession model
  • The public authority entrusts by contract a
    private partner to design, finance (even partly),
    build, operate and maintain the system
  • The partners revenue directly depends on the
    incomes of the service provided (gets tolls from
    the user)
  • The system remains publicly owned and regulated
    (level of service, price, safety, accountability)
  • The private partner assumes the operating risks
    but has a right to a balanced contract risk
    related to ridership, quality of service and
    dynamic of revenues from users (customers)
  • Risk allocation and performance goals are
    specified by the contract
  • The public authority remains the latest guarantee
  • The (limited) duration of the contract is
    determined by the public authority, depending on
    the time requested to pay the investment off
  • In case of a public subsidy, this one must be
    predefined and inclusive.
  • A reasonable profitability (balance between
    public money and private financial management)

15
The shadow toll model
  • Created to face the cases where perceiving a toll
    is impossible or inefficient
  • The public authority pays a lease which level
    depends to the quality of service
  • Risk is technical more than commercial the
    private partners income is related to the
    efficiency of operations
  • The public effort is spread on the whole contract
    duration

16
Rail PPPs
  • Partnership contracts or concessions
  • Consortia that include civil engineering, rolling
    stock manufacturer, operator, bank
  • 3 types Infrastructure only, Operations and
    maintenance only and Infra operations
  • The contract includes four major phases
  • Precise definition of the object, preparation of
    the terms of reference
  • Design and building of the infrastructure and the
    rolling stock,
  • Operation and maintenance
  • Transfer to the public authority
  • The operators role important since the beginning

17
No French Model but an experience based on many
projects (successes and failures) around the
world. And some lessons learnt
  • About the contract risk allocation, a critical
    issue
  • The contract must try to address as many possible
    events as possible
  • The contract must also permit updates for events
    that have not been forecasted
  • What happens if the PPP is very successful or not
    so successful ?
  • The project needs to be attractive to private
    consortiums and to bring socio-economic benefits
    to the community benefit to everyone!
  • The public authority can increase the
    attractiveness (subsidies, assets, loans,
    extended duration of the contract)
  • PPP is not always the best option a PPP will
    not compensate the lack of profitability and a
    bad project does not become a good one thanks to
    PPP
  • PPP is not necessarily cheaper, but often faster
    and more innovative
  • Always keep the user in mind (service, price)
  • The consortium must be chosen for the whole
    duration of the contract, not only for the short
    term.
  • Price is not the only issue - The experience and
    the reputation of the members of the consortium
    are crucial

18
Lessons learnt about risk Management
  • The risk analysis is crucial each risk must be
    supported by the partner most likely to better
    deal with this very risk
  • Private sector is better at
  • managing technical and financial risks
  • Controlling the costs and the schedules
  • Providing a good quality of service
  • Innovating
  • Public sector is better at
  • Managing demand and fares risks
  • Managing legal and political risks The public
    authority has to secure the regulatory and
    political framework
  • Communicating with the users, citizens and
    taxpayers
  • The public authority must elaborate a good
    project
  • It has to make accurate decisions, requiring
    human resources to negotiate and follow-up the
    contract
  • It may not substitute to the partner as a project
    manager

19
  • Enlarging the focus

20
European examples
  • Every country has its own experience of PPPs in
    transportation. For instance
  • Italy highways
  • United Kingdom rail system
  • Spain urban public transit

21
The Chunnel technical success, financial
failure
  • A 31 mile tunnel under the English channel, since
    may 6, 1994
  • HSR, freight, crossing services (cars and trucks)
  • Eurotunnel gt TransMancheLink (builder, 5 French
    5 British companies)
  • Works 1987-1993
  • 33 minute crossing platform to platform, 2h15
    trip Paris-London
  • After many attempts (since 1801), a demand from
    both French and British governments for a private
    financed project in 1986
  • Assessed cost 4.6 billion euros (bridge solutions
    about 10 bEuros)
  • Eurotunnel group
  • private French-British company, concession holder
    for 99 years
  • European leader in rail-road transportation
  • Quoted in Paris, London and Brussels stock
    exchanges
  • Business model gets tolls from operating
    companies (SNCF, EWS)

22
The channel tunnel the concession
  • 1984 study (French and British banks) the
    concession is viable
  • Not a public penny the Feb. 12 1986 treaty of
    Canterbury
  • Eurotunnel Group 700 000 small shareholders
    65 of the equity
  • Final cost 16 billion euros.
  • 7 years of works without revenue
  • Fast financial worsening risk of bankruptcy in
    1997.
  • Underestimation of costs, overestimation of the
    traffic (6,8m travelers in 2003 instead of 30m
    estimated in 1986), overestimated assets
  • Outcomes 10 years of financial chaos
  • Stockholders equity 1.7 billion euros
  • Yearly turnover 838 million euros (2003)
  • Debt 9 billion euros, yearly interests 500
    million euros
  • The share reached 13.5 euros in 1989, is now less
    than 1 euro. Quotation stopped in 2003
  • A salvation procedure and debt restructuring
    saved the company in 2007

23
The Barcelona light rail a typical PPP project
  • 2 lines 1514 km
  • Investment around 600 m, subsidy 60
  • Fare decided by local authority, operation
    subsidy every year in order to reach a technical
    fare structure determined in the contract
  • Risk sharing mechanism on revenue
  • Huge commercial success (20 million passengers
    per year), good reliability

24
Barcelona main feedbacks
  • A lot of changes at the early stage political
    support was not granted for the whole system
    before design was initiated
  • Once a consensus was achieved, very efficient and
    fast construction and commissioning
  • No problems with unions decision to appoint and
    train new and young drivers.
  • Importance of the use of proven technology
  • The efficiency of the system integrator (Alstom)
    was a key factor
  • Cooperation between the Operator and the
    Municipality has been an asset

25
PPPs Project Operated by French Companies around
the world Airports Management
  • Airports Management in Phnom-Penh (Cambodia),
    Abidjan (Ivory Cost)

26
PPPs Project Operated by French Companies around
the world Bridges, tunnels, highways
  • Rion-Antirion Bridge in Greece
  • Vasco de Gama Bridge on the Tagus River in Lisbon
    (Portugal) - 7.5 Miles
  • Confederation Bridge between the continent and
    Prince Edwards Island (Canada) 8 Miles
  • Millau bridge, tunnels in the Alps (France)
  • SR 91 in Orange County, CA

27
PPPs can be useful in many fields of public
interest
28
Water and Sanitation in France
Private sector Public sector
of the population
29
Waste Management in France
Private sector Public sector
of the population
30
Energy in France
31
Thank You !
Sébastien Gourgouillat Transportation and
Construction Attaché Embassy of France in the
USA sebastien.gourgouillat_at_missioneco.org
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Public private partnerships: French and European cases

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Title: Public private partnerships: French and European cases


1
Public private partnershipsFrench and European
cases
  • Wagner School, Rudin Center, NYU
  • New York City, March 25, 2008
  • Sebastien GOURGOUILLAT
  • Transportation and Construction Attaché
  • Embassy of France in the USA
  • sebastien.gourgouillat_at_missioneco.org

2
Outline of the presentation
  • PPPs in France historical and modern examples in
    transportation
  • Main frameworks and key issues
  • Enlarging the focus
  • PPPs outside the transportation field
  • European examples

3
France ( Texas)
550 000 km² - 342 000 sq. miles 63 millions
inhabitants 22 regions 96 departments 36600
municipalities 30 millions cars 6 millions trucks
4
  • 1/3 -French PPPs in transportation

5
A very long tradition of PPPs in France
  • Canal de Craponne (Southeast) 1554
  • Canal du Midi (Southwest) 1666

6
Main rail network development in the XIXth
century through PPPs
  • 1832-1870
  • 10 600 miles
  • By private companies, with State regulation and
    many State engineers !
  • Private companies merged in a national publicly
    owned company (SNCF) in 1937

7
Since 1955 The building of a 5000 mile,
high-quality highwaynetworkthrough
PPPs (concession)
75 of the French highways are toll highways
8
Urban public transportation A major field for PPPs
Private sector Public sector Mixed
9
Since 2006 railPPPs, anopportunityfor HSR
HSL EE 2007
  • In the upcoming years, RFF will build at least 3
    HSLs at the same time
  • Constraint on public spendings
  • Availability of private capital
  • Historical practices of PPP
  • Public support remains necessary for rail
    infrastructure

HSL Britany
HSL RR 2011
HSL SEA 2013-2016
L N.M. by pass 2012
10
Recent examples of PPP railways
  • LGV Sud-Europe Atlantique (South East Atlantic
    High Speed Line)
  • 300 kilometers from Tours (240 km Southwest from
    Paris) to Bordeaux.
  • Paris-Bordeaux 2 hours and 5 minutes instead of
    3 hours
  • 7.2 billion euros, opening 2015, with a part of
    public investment.
  • 40 years concession (design, build, maintain
    and finance at its own risks).
  • Charles de Gaulle Express link
  • 32-kilometer fast rail link between the centre of
    Paris and Charles de Gaulle International
    Airport.
  • 640 million euros (120 for the rolling stock).
    100 financed by the private partner (use of
    existing right of way, expected high
    profitability).
  • 40 years total concession.
  • RFI in July 2006, construction to begin in 2008,
    operation starting in 2012.
  • New cross-border HSL Perpignan-Barcelona (Spain)
  • 45-kilometer new high speed rail way crossing the
    Pyrenees.
  • Paris-Barcelona 5h and 30 minutes since 2009 (9h
    today).
  • 952 million euros (60 States, 40 private
    partner).
  • a 50-year concession granted to a Franco-Spanish
    venture.
  • Operation starting 2009.

11
(No Transcript)
12
  • 2/3 - PPP schemes and key issues

13
(Almost) every country faces the same dilemma !
  • Urgent need for infrastructures and services
  • Congestion, delays
  • Pollution
  • Economic competitiveness
  • But
  • Limited public funding
  • No political will to raise taxes
  • Find the money where it is, but with respect of
    the public interest
  • PPPs
  • decision of balance between tax and users money
  • Allow innovation and add competition
  • The public authority keeps the control but lifts
    the stress on its budget and benefits from the
    performance of the private sector (time and money
    saving)

14
The concession model
  • The public authority entrusts by contract a
    private partner to design, finance (even partly),
    build, operate and maintain the system
  • The partners revenue directly depends on the
    incomes of the service provided (gets tolls from
    the user)
  • The system remains publicly owned and regulated
    (level of service, price, safety, accountability)
  • The private partner assumes the operating risks
    but has a right to a balanced contract risk
    related to ridership, quality of service and
    dynamic of revenues from users (customers)
  • Risk allocation and performance goals are
    specified by the contract
  • The public authority remains the latest guarantee
  • The (limited) duration of the contract is
    determined by the public authority, depending on
    the time requested to pay the investment off
  • In case of a public subsidy, this one must be
    predefined and inclusive.
  • A reasonable profitability (balance between
    public money and private financial management)

15
The shadow toll model
  • Created to face the cases where perceiving a toll
    is impossible or inefficient
  • The public authority pays a lease which level
    depends to the quality of service
  • Risk is technical more than commercial the
    private partners income is related to the
    efficiency of operations
  • The public effort is spread on the whole contract
    duration

16
Rail PPPs
  • Partnership contracts or concessions
  • Consortia that include civil engineering, rolling
    stock manufacturer, operator, bank
  • 3 types Infrastructure only, Operations and
    maintenance only and Infra operations
  • The contract includes four major phases
  • Precise definition of the object, preparation of
    the terms of reference
  • Design and building of the infrastructure and the
    rolling stock,
  • Operation and maintenance
  • Transfer to the public authority
  • The operators role important since the beginning

17
No French Model but an experience based on many
projects (successes and failures) around the
world. And some lessons learnt
  • About the contract risk allocation, a critical
    issue
  • The contract must try to address as many possible
    events as possible
  • The contract must also permit updates for events
    that have not been forecasted
  • What happens if the PPP is very successful or not
    so successful ?
  • The project needs to be attractive to private
    consortiums and to bring socio-economic benefits
    to the community benefit to everyone!
  • The public authority can increase the
    attractiveness (subsidies, assets, loans,
    extended duration of the contract)
  • PPP is not always the best option a PPP will
    not compensate the lack of profitability and a
    bad project does not become a good one thanks to
    PPP
  • PPP is not necessarily cheaper, but often faster
    and more innovative
  • Always keep the user in mind (service, price)
  • The consortium must be chosen for the whole
    duration of the contract, not only for the short
    term.
  • Price is not the only issue - The experience and
    the reputation of the members of the consortium
    are crucial

18
Lessons learnt about risk Management
  • The risk analysis is crucial each risk must be
    supported by the partner most likely to better
    deal with this very risk
  • Private sector is better at
  • managing technical and financial risks
  • Controlling the costs and the schedules
  • Providing a good quality of service
  • Innovating
  • Public sector is better at
  • Managing demand and fares risks
  • Managing legal and political risks The public
    authority has to secure the regulatory and
    political framework
  • Communicating with the users, citizens and
    taxpayers
  • The public authority must elaborate a good
    project
  • It has to make accurate decisions, requiring
    human resources to negotiate and follow-up the
    contract
  • It may not substitute to the partner as a project
    manager

19
  • Enlarging the focus

20
European examples
  • Every country has its own experience of PPPs in
    transportation. For instance
  • Italy highways
  • United Kingdom rail system
  • Spain urban public transit

21
The Chunnel technical success, financial
failure
  • A 31 mile tunnel under the English channel, since
    may 6, 1994
  • HSR, freight, crossing services (cars and trucks)
  • Eurotunnel gt TransMancheLink (builder, 5 French
    5 British companies)
  • Works 1987-1993
  • 33 minute crossing platform to platform, 2h15
    trip Paris-London
  • After many attempts (since 1801), a demand from
    both French and British governments for a private
    financed project in 1986
  • Assessed cost 4.6 billion euros (bridge solutions
    about 10 bEuros)
  • Eurotunnel group
  • private French-British company, concession holder
    for 99 years
  • European leader in rail-road transportation
  • Quoted in Paris, London and Brussels stock
    exchanges
  • Business model gets tolls from operating
    companies (SNCF, EWS)

22
The channel tunnel the concession
  • 1984 study (French and British banks) the
    concession is viable
  • Not a public penny the Feb. 12 1986 treaty of
    Canterbury
  • Eurotunnel Group 700 000 small shareholders
    65 of the equity
  • Final cost 16 billion euros.
  • 7 years of works without revenue
  • Fast financial worsening risk of bankruptcy in
    1997.
  • Underestimation of costs, overestimation of the
    traffic (6,8m travelers in 2003 instead of 30m
    estimated in 1986), overestimated assets
  • Outcomes 10 years of financial chaos
  • Stockholders equity 1.7 billion euros
  • Yearly turnover 838 million euros (2003)
  • Debt 9 billion euros, yearly interests 500
    million euros
  • The share reached 13.5 euros in 1989, is now less
    than 1 euro. Quotation stopped in 2003
  • A salvation procedure and debt restructuring
    saved the company in 2007

23
The Barcelona light rail a typical PPP project
  • 2 lines 1514 km
  • Investment around 600 m, subsidy 60
  • Fare decided by local authority, operation
    subsidy every year in order to reach a technical
    fare structure determined in the contract
  • Risk sharing mechanism on revenue
  • Huge commercial success (20 million passengers
    per year), good reliability

24
Barcelona main feedbacks
  • A lot of changes at the early stage political
    support was not granted for the whole system
    before design was initiated
  • Once a consensus was achieved, very efficient and
    fast construction and commissioning
  • No problems with unions decision to appoint and
    train new and young drivers.
  • Importance of the use of proven technology
  • The efficiency of the system integrator (Alstom)
    was a key factor
  • Cooperation between the Operator and the
    Municipality has been an asset

25
PPPs Project Operated by French Companies around
the world Airports Management
  • Airports Management in Phnom-Penh (Cambodia),
    Abidjan (Ivory Cost)

26
PPPs Project Operated by French Companies around
the world Bridges, tunnels, highways
  • Rion-Antirion Bridge in Greece
  • Vasco de Gama Bridge on the Tagus River in Lisbon
    (Portugal) - 7.5 Miles
  • Confederation Bridge between the continent and
    Prince Edwards Island (Canada) 8 Miles
  • Millau bridge, tunnels in the Alps (France)
  • SR 91 in Orange County, CA

27
PPPs can be useful in many fields of public
interest
28
Water and Sanitation in France
Private sector Public sector
of the population
29
Waste Management in France
Private sector Public sector
of the population
30
Energy in France
31
Thank You !
Sébastien Gourgouillat Transportation and
Construction Attaché Embassy of France in the
USA sebastien.gourgouillat_at_missioneco.org
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