Ministry%20of%20Finance%20and%20World%20Bank%20PPP%20Seminar

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• Ministry of Finance and World Bank PPP Seminar
• Legal, Implementing and Economic Issues, Warsaw,
  17-18 June 2008
• Building and accomodation PPP projects
• The point of view of a financial investor
• Thomas Vieillescazes
• Director, DIF

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Introduction DIFDIF PPP, DIF Renewable Energy
DIF Infrastructure II

• Independent investment funds fund manager
• Operational as of September 2005
• Two infrastructure funds- DIF PPP (150m)
  DBFM/O investments W-Europe- DIF Infrastructure
  II (500m) Infrastructure investments EU27
• One renewable energy fund- DIF Renewable
  Energy (150m) Wind solar energy Europe
• DIFs investors consist of long term
  investors,including pension funds and the EIB
• DIF PPP invests in primary and secondary PPP/PFI
  infrastructure transactions
• Teams in The Netherlands/Schiphol, Paris and
  London
• Frankfurt will be opened in the coming months

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Introduction DIFInvestments projects in tender
(primary) in PPP
Danish acommodation project
5 UK PFI schools projects
2 UK PFI Healthcare projects
2 Dutch road schemes
3 UK PFI Leisure projects
2 UK PFI Detention projects (PB)
Belgian road scheme
3 French hospital projects, Rail infra
project, road/bridge project
Plus various CEE PPP roles in bidding
consortia(pipeline DIF Infrastructure II)
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Introduction to DIFA financial investor, whats
it in for?

• Well structured projects require competitive
  funding and are all about proper risk assessment
  risk allocation
• Financial investors can play a role in enforcing
  the finance side of a project / bid
• Added value in the following areas -
  providing equity funding (DIF cheque up to
  75m) and adding to industrial sponsors who
  wish to protect their balance sheet -
  represent alignment of SPV (Project company) and
  funders interests (bankability) - provide
  in-depth knowledge of finance markets/parties
  to the Sponsors table (team background)
• Alignment with the Public sectors interest
  investors want projects that deliver
  what is promised !

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Risk SharingPass-through of risks using
contractual structure
Efficient risk sharing is ensured by back to back
subcontracts transparent Project Company is
key to efficiency of the system

• Construction
• Risk transfer on construction price
• Penalties on delays, etc.
• Operation and Management
• Cost of OM
• Penalties for availability, performance, etc.

Public Authority
PPP contract
Risks
Project Co

• Operation and Management Contract
• Cost of OM passed to FM contractor
• Penalties for availability, performance, etc.
  passed through this contract
• If underperforming (penalties paid every year),
  FM contractor can be changed without the PPP
  contract modified

Not necessarily the same shareholders (role and
efficiency of financial investors)
Subcontracts
EPC contractor
FM contractor
Interface contract
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Performance indicatorsSome examples
Maintenance
 Soft  FM
Other Services
Energy

• IT/Telecom
• Commercial activities
• other public services
• Security

• Renewal plan
• Maintenance plan
• Technological upgrades

• Cleaning
• Catering
• Safety

• Energy
• Fluids

• Energy efficiency
• Fluids consumption
• As measured

• Implementation of plans
• Timely update of plans

• Reportings
• Measurements
• Panels

• Customer satisfaction
• reportings

Indicators could take the form of grades or ,
then used to calculate a mitigation on PPP
payments Availability is not straightforward !
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PPP schemes for buildings Size does matter

• PPP contracts are big, complex, costly to put in
  place, costly to monitor
• Think of the criteria and number of performance
  indicators beforehand, keeping in mind the size
  of the project (cost/benefit)
• Pragmatic risk sharing approach
• Long contract life, and contracts have to be
  understandable by new parties on the project
• try to keep documentation simple / light
• Contract modifications always happen
• During construction a PPP contract is a
  transfer of project ownership, and therefore the
  project is not fully in the hands of the public
  sector as with a standard public procurement
  project
• Design modification process has to be precise in
  the contract documentation
• OM/FM modifications also always happen 20
  year lifetime, how could it be different?
• try to keep documentation simple / light
• Alternative methods for tendering smaller scale
  projects?

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Project RigsarkivScope of services

• DKK 580m/78m Pilot Acommodation PPP, providing
  for archive storage depots for the Danish
  National Archives and the Royal Library (Phase 1)
• OPP Pihl Arkivet A/S (50/50 Pihl/DIF) selected as
  private contract partner by the Authority
• Project Company has 30 year title on the building
• Partly brownfield refurbishment of the
  ground-floor of a DSB building (KB32) 3,800m2
• Partly greenfield two multi-storey depots and
  an intermediate building running betweenthe DSB
  building (KB32) and the depots beneath a
  landscape bridge (open to the public) - 13,000m2
• First PPP in Denmark

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Project RigsarkivScope of services

• 370 shelf km of documents (half the way from
  Copenhagen to Amsterdam)
• Administration facilities, reception and
  workshops
• Technically advanced (coherent shelf concept
  with control systems)
• Actually moving in will take 18 months
• Payment based on functionality (availability
  performance), services and utilities

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Project RigsarkivMain Project milestones
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Other Example Caen Hospital PPP
(France)Project description

• 25 yr DBFM contract
• 100m project
• Tender launched in July 2004
• PPP contract ( financial closing) signed in
  March 2006
• Start of operation April 2009

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Other Example Caen Hospital PPP
(France)Performance indicators

• Performance guarantees for the following services
• Multi-technical maintenance (on non-medical
  equipments)
• Heavy maintenance/renewal technical adaptation
• Water treatment and control
• Cleaning of windows, common spaces, offices (not
  hospital rooms)
• Security and Safety
• Energy control and adjustment, volume warranties
  on
• Electricity for production of cooling
• Natural gas for production of heat in the
  building
• Medical services / equipment (including beds)
  were excluded from the PPP scope in both
  construction / provision and maintenance
• Performance indicators defined in the PPP
  contract item per item (150 pages of such
  descriptions!)
• Reported by the SPV
• Easily measurable form of reports agreed and
  defined in the contract

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Alternative model small PPP projectsDBMF
model (PMV Flanders) - background

• For small DBFM projects (like Rigsarkiv, or
  under), tendering costs and timing are always an
  issue
• Flanders (the Regions investment arm PMV)
  developed an alternative tendering
  modeldesignated for smaller DBFM (road)
  projects(lt 100m)
• Aiming to achieve full DBFM benefit- off
  balance sheet treatment (ESR95 neutral)- build
  in time and within budget- life cycle concept
  applied- reduced bid/tender costs- template
  for future similar projects and- contractual
  PPP model combined with participative PPP
  model
• One project closed (summer 2007) with a
  pipelineof four new projects to come

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Alternative model small PPP projectsDBMF
model (PMV Flanders) - mechanics

• Technics (DBM) and Finance (F) two separate
  tenders- DBM is paid by Project Company SPV- F
  is bidding on a (dynamic) risk allocation matrix
  and ultimately on the credit of the DBM
  consortium
• Finance regards equity and senior debt (in one
  tender)
• After selection DBM PB and F PB both parties
  aremarried into one classical DBFM scheme
• Payment on the basis of availability
• PMV (authority) mandates advisers for the F
  bidders,who price the cost thereof in their
  bids(ultimately winning consortium pays)
• Every consortium has one-to-one client dialogue
  meetings
• Contract based on (Dutch) standard road DBFM
  contract
• PMV takes a minority equity stake in the SPV (25
  49)

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Conclusion

• 1. PPP / DBFM is a superiour contracting method
• output specified (ideally)
• certainty of delivery (on time, in budget)
• forces parties (public private) to define their
  project beforehand
• provides long term OM cost certainty
• 2. Several Public Authorities make a good effort
  to deal with small size DBFM
• not over-complicate things
• try to keep documentation simple / light
• Consider alternative methods for tendering small
  size DBFM projects (Flanders roads?)
• Limit tender duration (2 years!)
• 3. Importance of building experience at a country
  level
• UK a very mature market documentation standard,
  projects go fast
• Other markets (France, Denmark, others) not
  marture yet
• PPP legal environment constantly adapted
• Pilot projects

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Contact details DIF PPP

• DIF Thomas Vieillescazes
• WTC Schiphol Airport Director (head of Paris
  office)
• Schiphol Tel. [phone]
• The Netherlands Mob. [phone]
• www.dif.eu E-mail t.vieillescazes_at_dif.eu