EBRD Experience and best practice in PSC. 27 May 2015

Transcription

1 1 EBRD Experience and best practice in PSC 27 May 2015

2 EBRD Experience and Best Practice in PSC 2 Municipal and Environment Sector at EBRD Funding instruments Summary of EBRD experience PSC Best practice principles PSC Model template for bus and metro projects Leasing options EBRD helps local authorities meet their infrastructure needs 7 July,

3 3 1. Municipal and Environment Sector at EBRD 3

4 EBRD s objectives achieved through financing the private sector 4 AAA/Aaa rated multilateral development bank, promotes transition to market economies in 35 countries from central Europe to central Asia and the Southern and Eastern Mediterranean SEMED region) In 2014, the EBRD welcomed Cyprus and Libya as a recipient country and member respectively. Owned by 65* countries and two inter-governmental institutions. Capital base of 30 billion. Invested over 95 billion in more than 4000 projects since 1991 Results in 2014: 8.85 billion invested in 377 projects Private sector accounted for 70% share Cumulative business volume of 95bn billion 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, *Libya is yet to become a fully ratified member of the EBRD Note: Unaudited as at 31 December 2014 ABI (reported rate) Number of operations (#) 7 July,

5 EBRD s role in the municipal sector 5 Structuring the financing of municipal infrastructure, equipment and services to improve service levels Promote commercialisation and corporatisation of services Development of regulatory structures Promotion of private sector involvement, where appropriate Environmental, social, health and safety improvement Facilitate donor grant and commercial loan co-financing EBRD helps local authorities meet their infrastructure needs 7 July,

6 EBRD: A catalyst for change 6 Key Objectives To support restructuring and enhance municipal services to improve people s lives To encourage sustainable development (financial, environmental and energy efficiency) To promote transition market based economies optimising public sector support to service delivery 7 July,

7 Annual Business Investment, million EBRD and municipal finance 7 Activity started in 1994 Turkey started in SEMED started in 2012 Over 320 projects signed and almost 5.2billion invested by EBRD 54% municipal (sub-sovereign) 20% private clients/ PPPs 26% sovereign Over 7 billion of cofinancing mobilised 2014 a record year with over 700million invested Net Cumulative Business Investment, million Voted Best Multilateral Team2013 by World Finance Infrastructure Investment Awards Annual Business Investment Net Cumulative Business Investment Note: Unreconciled as at 31 December

8 EBRD s presence in Municipal and Environmental Infrastructure Sector 8 Active Portfolio by Region Note: Unaudited as at 31 December 2014 Projects financed in over 25 countries of operation 7 July,

9 EBRD s presence in Municipal and Environmental Infrastructure Sector 9 Net Cumulative Bank Investment by Sector (in project numbers) Net Cumulative Bank Investment by Funding Type (in project numbers) The Bank supports municipal infrastructure, investing a total of EUR 5.2 billion to date as of end of December 2014 across all sectors to support over 320 projects Note: Net cumulative Bank Investment as at 31 December July,

10 Key sectors covered 10 Water & Wastewater New and rehabilitated water and waste water treatment plants, network rehabilitation and extensions as well as pumps and metering to improve the quality of service and environmental compliance; investment in both maintenance and asset renewal Urban Transport Solid Waste District Heating/ Other Municipal Services Fleet and rolling stock renewal, metro, LRT, buses and trams, public transport infrastructure, including track, power supply and signalling, deport refurbishment, e- ticketing and automated fare collection; traffic management and vehicle information systems, and rehabilitation of municipal streets Investment in new landfills, recycling and collection equipment to improve both the efficiency and frequency of collection and well as to prevention of groundwater contamination District heating/cooling, parking, ESCOs and facilities management to promote efficiency gains and new ways of service delivery 7 July,

11 EBRD in urban transport sector is active in urban transport projects 11 24% of MEI cumulative portfolio, with investments in over 78 projects to date for 1.7 billion across 19 countries Key factor in promoting economic growth Rehabilitation of public transport in urban areas and need to replace ageing and operating equipment Improve financial performance of transport operators to allow access financing Need to introduce public service contracts between transport authority and operator Investment in public transport needed to counter the negative effects of rapid motorisation 7 July,

12 12 2. Funding Instruments 12

13 EBRD requirements: The project 13 Operations to comply with both national and EU standards Financially self-supporting project (debt repaid from cash flows with adequate cover ratios) Objective of operational improvements supported by pre-defined investments Energy and other efficiencies Commercialisation and management overhaul Objective of support to reform Demonstration effect Tariff and collection reform 7 July,

14 EBRD loan financing parameters 14 Size 10»» 200+ million (EBRD account) Local currency, where possible Long maturities Up to 15 years (public sector) and years (PPPs) including 3-4 years grace Repayment profile sculpted against projected cash flows Market pricing linked to risk and tenor Currency reference rate + margin Fixing possible (swap, caps) or CPI-linked instruments Security and other project support Sovereign guarantees Municipal Guarantees Project Support Agreements Assets/revenue pledge Debt Service Reserve Account 7 July,

15 15 3. EBRD Experience 15

16 50+ UT projects and EUR 900m invested 16 Poland Warsaw (metro & tram), Krakow, Gdansk; Lodz; Sopot Romania Bucharest (Multisector); Iasi; Sibiu; Arad; Brasov Bulgaria Sofia (tram), Plovdiv Turkey Bursa, Istanbul Ferries, Gaziantep Serbia Belgrade (tram) Croatia Pula; Dubrovnik; Velika Gorica/Zagreb (buses) Ukraine Kiev (Metro & Bus); Lviv (Trams) Armenia Yerevan (Metro) Kazakhstan Almaty (CNG & Trolleys) 7 July

17 17 4. PSC: Best practice principles 17

18 Typical EBRD Structure for UT Operator (metro/lrt/bus) Financing 18 CITY/STATE COMPENSATION BASED ON OPERATIONAL PLAN GUARANTEE OR OTHER SUPPORT AGREEMENT PASSENGERS FARE REVENUE SERVICES PUBLIC SERVICE CONTRACT LOAN INSURANCE COMPANY TRANSPORT OPERATOR BUS INSURANCE 18

19 Roles and Responsibilities within PSC 19 Public Sector as the Client: Defines network, policy, service standards, tariffs Sets & enforces regulatory framework Formally agrees amount and quality of services Makes compensation payments using gross-cost PSC (payment/km formula) to cover difference between tariff revenues and full operational costs Operator as Service Provider: Takes on operational and managerial risks Provides services according to key PSC performance levels (reliability, punctuality, safety, cleanliness, customer satisfaction); Operates & maintains new and improved rolling stock 19

20 Advantages for City 20 Operational & commercialised focus: Payment for quality controlled services only Gives incentives to public transport company to focus on operational efficiency Simplifies public sector budgeting by linking payments to PSC payment formula -- smooth & predictable over many years Penalties and remedies for failure to provide required quality International experience shows per cent savings initially on price/km basis Integrated smart-card ticketing introduction has an additional per cent improvement on the sector s finances 20

21 Advantages for Public Transport Operator 21 Provides multi-year stable revenues per contractual formula in PSC very similar to availability payment stream in PPPs Sharp operational focus: public payments based only on delivered services as per PSC agreed operational plan and KPI compliance similar to UK PFI approach Passenger demand risk transferred to City within the PSC Annual indexation formula linked to key cost inputs (labour, fuel, inflation, etc..) Incentives and penalties for performance quality Increases ridership over time as quality improves 21

22 22 5. PSC : Model template 22

23 European and National Regulatory Requirements 23 Adopted by European Parliament and Council on 23 October 2007 Regulation entered into force in 3 December 2009; 10-year transition period ending 3 December 2019 for all Member States to adopt regulation-compliant award procedure Regulation only fixes a framework. Every Member State is free to decide which entity is best suited to be the competent authority for the various public transports

24 PSC Template - Summary 24 Based on need to develop best practice model to consolidate experience and lessons learned Development of PSC template for rail and bus sectors: applicable for bus, trolleybus, tram, light rail, metro and possibly cable car and lift transport Fully compliant with EC Reg No 1370/2007 Contract with Arup UK from 2014 for PSC template and up to 10 specific PSCs (currently Sisak, Croatia) Final PSC template mid-2016 with guidelines for implementation

25 PSC Template - Summary 25 PSC template based on best practice review from PSCs developed under EBRD funding, eg Romania, Almaty.. International best practice (i) TfL s quality incentive contracts; (ii) Dublin s PSCs; (iii) Scotland Clyde Hebrides Ferry Services; (iv) Malaga Metro Applicable for gross cost and net cost contracts

26 PSC Template- Content 26 PSC structure PSC contract body for contract provisions Schedules in annex for all specifics of contract provision Key provisions Clear definition of rights and obligations of each party, including ownership and usage of assets Length of contract Geographic area of operation Quantum of services to be operated Nature and extent of exclusive rights, along with parameters of compensation formula and allocation of costs incurred. Also, penalties are set out clearly Subcontracting terms Monitoring and reporting requirements

27 PSC Template- Content 27 Other critical sections of PSC: Clear outline of roles and responsibilities Compensation and indexation formulae Handover and hand-back clauses of assets in use Clear change management process (i.e. change in operating conditions, obligations and even the contract terms and conditions) Reporting requirements by all parties Technical schedules specifying key performance indices (KPIs), etc.

28 PSC Template - Schedules 28 SCHEDULE A SERVICES AND SERVICE LEVELS TO BE PROVIDED SCHEDULE B OPERATING PLAN AND PERFORMANCE OBLIGATIONS SCHEDULE C COMPENSATION SCHEDULE D TARIFFS (YEAR1) SCHEDULE E SALES OUTLETS FOR TICKETS/PASSES SCHEDULE F REPORTING REQUIREMENTS SCHEDULE G ANNUAL SETTLEMENT ACCOUNT SCHEDULE H LIST OF ELIGIBLE OPERATING EXPENSES SCHEDULE I PRICE INDEXATION SCHEDULE J TECHNICAL SPECIFICATIONS FOR VEHICLES SCHEDULE K VEHICLE FLEET INVENTORY SCHEDULE L INVESTMENT PLAN SCHEDULE M TERMS AND CONDITIONS OF USE OF VEHICLES SUPPLIED BY AUTHORITY/MUNICIPALITY SCHEDULE N OPERATOR S ASSET INVENTORY

29 29 6. Leasing options 29

30 Leasing model for urban transport* 30 Export Credit Agency Possible support through bus supplier s home country Payment upon delivery of buses /and other commercial banks Bus Supplier Loans Repayment of bus financing Bus supply Urban Transport Regulator Monitors operator compliance with quality and safety standards Owner Municipality/ Government Bus Hold Co Lease contract Bus provision Lease Repayment (quarterly) Bus maintenance carried out by Operator and Bus Supplier Routine and Heavy Maintenance Operational Concession Contract Support payments as needed to Operator to supplement passenger revenues; Operator reports all O&M costs to Govt./Regulator Private Operator(s) Fare revenue Passengers *This structure is adapted from HSBC s Graham Smith, and other similar structures found in Western Europe (e.g., France, UK) and US. 30

31 Preliminary proposal 31 New Buses could be wholly owned by new Holding Company created by the public sector (e.g., municipality) New buses should operated by private sector operator(s) to achieve direct efficiency and management focus Private sector operator to lease buses from new Bus Hold Co Bus Hold Co is asset holder and takes financing from EBRD (and other banks depending on size and financing sources like Export Credit Agency [ECA] financing) Bus Hold Co provides buses to operator by virtue of a concession contract, and in exchange has first rights over a portion of operators income sufficient to make loan repayment to EBRD Tariffs to be regulated but set to strike optimal balance between maximising ridership and maximising revenues i.e., a commercial focus coupled with environmental/congestion focus Operator receives and collects revenues from passengers and any government support payments (subsidies) Lease payments made to Bus Hold Co quarterly, matching loan repayments to EBRD/banks Maintenance of buses is joint responsibility of operator and bus supplier Heavy engine maintenance to be done at bus supplier s facilities 31

32 Preliminary proposed financing structure: cash waterfall 32 Govt Support/Subsidy Passenger Fares /and other commercial banks All O&M costs 1) Contractual obligation to cover loan repayment 2) O&M cost Ticketing System Electronic Fare Box Operator(s) Lease 3) Lease payments Bus Hold Co 4) Any remaining funds (net profit) Operator A Operator B Operat or... Operator *This structure is adapted from HSBC s Graham Smith, and other similar structures found in Western Europe (e.g., France, UK) and US. 32

33 Key Risks: Initial Assessment 33 This type of structure includes the following risks: 1) Operational risk for private sector 2) Regulatory risk for Regulator to ensure that performance standards are complied with 3) Payment/accounting risk related to accuracy of flow of cash from passengers through operator s ticketing system 4) Bus fleet maintenance risk for operator and supplier 5) Demand risk placed with public sector given regulated tariff and heavy modal competition on streets Mitigants: 1) Must select seasoned operator preferably a mix of international and national operators as consortium/jv 2) Capacity building of Regulator a must 3) Preparation/implementation of robust ticketing system a must 4) Concession contract must include detailed regular inspection s regime of fleets with real penalties for poor maintenance performance 5) Acceptable risk allocation as operator will have incentive to maximise operational cost efficiency with prospect of retaining any net profits 33

34 Thank You 34 Ian Jennings Senior Specialist, Urban Transport Tel: Matthew Jordan-Tank Head of Infrastructure Policy 34

35 35 For info or further questions on the JASPERS Networking Platform, please contact: Massimo Marra JASPERS Networking and Competence Center Senior Officer ph: