Alternative Financing of Infrastructure in Denmark

Transkript

1 Alternative Financing of Infrastructure in Denmark Special Session 1 Aalborg University, Annual Transport Conference, 26 August 2013 Copyright 2013 Grontmij A/S CVR

2 Agenda 2 Introduction: Brian Mogensen, Grontmij A/S Presentations by: Debate: CFO Kaj V. Holm, Sund & Bælt Partner Jonathan Beckitt, CMS Cameron McKenna LLP Lawyer Frederik Ø. Kristiansen, Bech - Bruun Moderator Ute Stemmann, Grontmij A/S Copyright 2013 Grontmij A/S CVR

3 Discussion Advantages and disadvantages of the finance and contracting models used in DK and in UK? Alternative financing in the public debate: are there lessons to learn for DK? Differences between different types of infrastructure projects as to choice of financing and contracting model? Specific obstacles for using a private finance and contracting model in DK? Experiences from UK and DK: Typical mistakes and how to avoid them? 3 Copyright 2013 Grontmij A/S CVR

4 1 ALTERNATIVE FINANCING OF INFRASTRUCTURE IN DENMARK DEPARTMENT HEAD OF TRANSPORT ECONOMICS MR. BRIAN GARDNER MOGENSEN, GRONTMIJ A/S Copyright 2013 Grontmij A/S CVR

5 Purpose 2 The purpose of the session is through presentations and debate to discuss alternative forms of financing of future infrastructure projects in Denmark Copyright 2013 Grontmij A/S CVR

6 How do we finance infrastructure today? 3 Tax funding User charges (Fixed links - Oeresund and Stoerbaelt ) and use of alternative forms of organising infrastructure projects: PPP (Kliplev-Sønderborg Highway) Copyright 2013 Grontmij A/S CVR

7 Projects currently investigated within the strategic analyses 4 Projects Minimum - billion DKK Maximum - billion DKK Extension of the East Jutland Motorway north of Vejle 7 7 Expansion og Vejlefjordbro 1 2 Extension of the East Jutland Motorway south of Vejle 6 6 Midtjysk motorway eastern Midtjysk highway west New track Aarhus Galten-Silkeborg 4 4 New connection at the Little Belt 6 12 Bogense-Juelsminde the Hinterland Kattegat connection with the hinterland Copyright 2013 Grontmij A/S CVR

8 Projects currently investigated within the strategic analyses 5 Projects Minimum - Billion DKK Maximum Billion DKK Realization of hourly model Odense and Århus by the Little Belt Ring Ring Port tunnel S-train to Elsinore 2 2 S-train to Roskilde 1 1 Automation of S Trains 3 3 Light rail in Ring Full development of new metro lines and light rail Total Copyright 2013 Grontmij A/S CVR

9 And there are even more projects 6 For example: Fixed HH Link (32 billion DKK) Fixed Link between Fyn and Als (ca. 20 billion DKK) Copyright 2013 Grontmij A/S CVR

10 How should we finance future infrastructure projects? 7 Welcome to our special session! Let me introduce our speakers: - CFO Kaj V. Holm, Øresundsbron - Partner Jonathan Beckitt, Infrastructure & Project Finance Group - Lawyer Frederik Østergaard Kristiansen, Bech-Bruun Copyright 2013 Grontmij A/S CVR

11 Sund & Bælt Holding A/S Aalborg Trafikdage 26 August 2013 Alternative Financing of Future Infrastructure Kaj V. Holm, Finance Director, Sund & Bælt

12 Infrastructure Financing in General 4 Clean Models Public Financing Private Financing Tax Paid Public Procurement PPP-model User Paid State Guarantee Model Concession-model Different combinations are seen in the real world

13 User Payment / tolling An obvious way to raise new funds Has some drawbacks: Reduces economic benefit of investment due to lower traffic Continuing/increasing use of free alternatives. Uncertain traffic forecasts High transaction costs (toll changing) Political resistance

14 Private Financing (PPP-/Concession models) Do not raise new funds! Both public and private financing create commitment to future payment by: Tax payers in the case of public procurement and PPP-model Users in the case of state guarantee- or concession models Public versus private financing must be evaluated on the basis of economic advantages in each case

15 The PPP-model The model is also known as DBOF (Design, Build, Operate, Finance) The Danish State Availability Payment Lenders Loans Private Project Company Equity Investors Contractual payments Contractor (design and build) Contractors, Operations & Maintenance

16 The Pro s and Con s Efficient tender strategy, life cycle approach to the project etc. are not unique to PPP Balance between financing cost and risk transfer is the key question The balance has to be analysed project by project

17 State Guarantee Model is an Alternative Reaps many of the benefits from both public and private models Low financing cost Life cycle approach etc. Only relevant in user-paid projects

18 The State Guarantee Model The Danish State Eqiity + state guarantee Lenders Loans State Owned Limited Company User payment Users Contractual payments Contractor (design and build) Contractors, Operations & Maintenance

19 Comparison of the different clean models Public Procurement State Guarantee PPP/Concession Final payers Tax payers Users Tax payers/users Cost on state budget (EMU debt) Yes No Yes/no Financing cost Low Low Ultimate risk carrier State Organisation Project control (toll-levels etc.) Public State State Private (though state owned) State High (dependent on risk) PPP-investor/ Concessionaire/ State? Private PPP-investor/ Concessionaire (within limits) Legal structure Simple Simple Complicated

20 General Conclusion User Payment (tolling) creates new funds to infrastructure Private financing (PPP etc.) creates no additional funds Both instruments have pro s and con s and must be analyzed in a specific context (i.e. project by project) The state guarantee model may in some projects be a better alternative Combinations of the clean models can be interesting

21 Private Finance UK Transport

22 Private Finance UK Transport Risks Contract Structures High Speed 1 Tramlink M6 Expressway Mersey Gateway Common themes 2

23 Private Finance - Risks Political risk Construction risk High capital cost Demand risk Patronage revenues Availability of finance 3

24 Private Finance - Contract Structures Authority PROJECT AGREEMENT Shareholders JUNIOR DEBT DIRECT AGREEMENT Project Company SENIOR DEBT Senior Lenders DIRECT AGREEMENT Sub-Contractors DIRECT AGREEMENT 4

25 Rail - High Speed 1 100km high speed line linking St. Pancras International to the Channel Tunnel HS1 procured as a privately financed project - process started in 1993 Two phases - Section 1 completed in September 2003 and Section 2 completed in July 2007 Capital cost US$10 billion Sale of 30 year concession to Borealis Infrastructure / Ontario Teachers Pension Plan consortium for US$3.3 billion in November

26 Light Rail - Tramlink Existing Tram System linking areas outside Nottingham to the city centre NET Line One Extension to network with construction of two new lines New concession including Net Line One NET 2 NET 2 procured through a PFI process Tramlink Nottingham consortium awarded 22 year concession Capital cost GBP 520M Availability charge with revenue sharing

27 Road M6 Expressway Connects two junctions of existing M6 motorway north of Birmingham Toll road - 27 miles with 6 lanes Midland Expressway consortium awarded 53 year concession to build, operate and maintain in 1992 Construction completed in 2003 Capital cost GBP 750M No concession fee Development of service station areas

28 New River Crossing - Mersey Gateway

29 Mersey Gateway New estuarial crossing for the Mersey estuary with capital costs of approximately GBP 450M PPP project for the design, construction, operation and maintenance of the bridge and approach roads with journey time payment mechanism based on maintaining the average speed of traffic Separate contract for the free-flow tolling of the bridge and a further bridge in the area with associated obligations relating to collection of minimum toll revenue 9

30 Common themes Risk allocation Project management Flexible contract structure Government support 10

31 Contacts CMS Cameron McKenna LLP Mitre house 160 Aldersgate Street London EC1A 4DD Jonathan Beckitt Infrastructure and Project Finance Group Tel:

32 TRAFIKDAGE AALBORG, DEN 26. AUGUST 2013 Alternativ finansiering af fremtidens infrastruktur

33 OPP SOM ALTERNATIV FINANSIERINGSFORM /ORGANISATIONSFORM Danske erfaringer: Efterhånden mange OPP-projekter solidt erfaringsgrundlag Skoler, retsbygninger, kontorlokaler, arkivbygninger, parkeringshuse, plejecenter, svømmehal/leisurecenter Kliplev-Sønderborg Motorvejen eneste danske OPPinfrastrukturprojekt ikke privat finansiering Forskellige modeller

34 KLIPLEV-SØNDERBORG Vejdirektoratets evaluering: Prisen er umiddelbart bedre end referencecasen, men En større del af ansvar og risiko placeres hos den private part end i andre udbudsformer Hurtigere projektgennemførelse Entreprenørernes udfordring med at stille garanti i driftsfasen Entreprenørernes incitament til at være ansvarlige for kvaliteten ud over det normale fem års mangelansvar Fordeling af risici mellem OPP-selskabet og Vejdirektoratet

35 Maj 2013 Anders Eldrup og Peter Schütze ATP, PFA, PKA, SamPension og PensionDanmark Ernst & Young, Bech-Bruun, Copenhagen Economics og professor Bent Flyvbjerg

36 KORT UDDRAG FRA RAPPORTEN Transportinfrastruktur: Transportinfrastruktur (f.eks. tunneler, broer og veje) kan ofte (med- )finansieres af brugerne, hvorfor det kommercielle potentiale kan indgå som en central del af aktivets anlæg. Således er transportinfrastruktur ofte velegnet som OPP. En lang række internationale erfaringer understøtter dette udsagn. Finansieringsomkostninger: Vores konklusion er, at såfremt den private partner ikke overtager risici fra det offentlige, vil finansieringsomkostningerne typisk være lidt højere i OPPprojekter, end hvis staten finansierer eller garanterer lånene. Den i omegnen af 1 % højere finansieringsomkostning udtrykker den illikviditetspræmie, som en privat investor vil kræve for at investere i OPP-projekter sammenlignet med at investere i likvide statsobligationer.

37 KORT UDDRAG FRA RAPPORTEN (FORTSAT) Behov for professionalisering af den offentlige bygherrerolle baseret på klare vejledninger. Anbefaler: at den offentlige bestiller benytter funktionskrav og konkurrencepræget dialog, når det er muligt at den offentlige bestiller konkurrenceudsætter projektets risici, således at risicienes omkostninger minimeres at den totale levetidsøkonomi anvendes som udvælgelseskriterium ved offentlige infrastrukturprojekter

38 KONTAKT OFFENTLIG VIRKSOMHED FAST EJENDOM FAST EJENDOM Navn Johan Weihe Partner København T M E jhw@bechbruun.com Torben Brøgger Partner Aarhus T M E tb@bechbruun.com Frederik Ø. Kristiansen Advokat Aarhus T M E fkr@bechbruun.com

39 København Langelinie Allé København Ø T Aarhus Frue Kirkeplads Aarhus C F Shanghai 83 Loushanguan Road, suite 2635, 26/F Shanghai E info@bechbruun.com