Natalja Formuzala

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• Natalja Formuzala
• Riga Forum 2006 Investment in the Baltic
  Metropolitan Regions

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Contents

• What drives the development of a city?
• What is Public Private Partnership?
• Why are PPP attractive for the State?
• Why are PPP attractive for Investors?
• What does the State need to do to attract
  investors?
• Recommendations and Conclusions

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What drives the development of a city?

• Transportation links
• Quality houses
• Reliable utilities
• Safety
• Education
• ? PPP can deliver the above services

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What is Public Private Partnership?

• Public Private Partnership (PPP) is a cooperation
  between the Public (central, regional or local
  government) and the Private Sector, where
• Delivery of public service
• Based on output specification
• Contracted to the private sector company
• On the basis of a fixed contract
• For a certain time period
• In return for risk based payment instalments
  (unitary charge)

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Typical PPP Contract Structure
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Why are PPPs attractive for the State? (1)

• PPPs can make projects affordable
• Infrastructure and investment gap in most
  European countries
• Governments have limited resources
• Allow injection of private sector capital
• Off balance sheet financing
• Increased investment levels promote employment /
  increases tax income
• Allow commercial pricing

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Why are PPPs attractive for the State? (2)

• Deliver value for money
• Use of private sector skills
• Risk Sharing Mechanism
• Incentive to deliver on time
• Incentive to provide maintenance and higher
  service quality during the whole life time of a
  project
• PPP can provide cost savings over traditional
  results
• Better facilities promote inward investment

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Why are PPPs attractive for investors? (1)

• Attractive revenue source
• High return rates
• Appropriate risk / reward ratio
• Stable and long term returns
• In some cases tax incentives
• Profit of the underlying project contracts
• Develop project knowledge
• Control over project

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Why are PPPs attractive for investors? (1)

• Compliance with companys strategy
• Diversification of portfolio
• Strengthen current market position
• Enter new markets

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What the state needs to do to attract investors?
(1)

• Keep stable political climate and stable
  financial system
• Develop public sector skills and institutional
  capacity
• Clarify local priorities
• Create a PPP friendly environment
• Ensure good legislation and appropriate
  legislative framework
• Reduce procurement complexity and times
• Availability of funding
• Open up for foreign investments

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What the state needs to do to attract investors?
(2)

• Availability of exit routes
• On project default
• Sell down to secondary market or refinance
• Project size / bundling projects together
• Appropriate risk transfer

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Conclusions and Recommendations

• PPP can provide benefits to governments and users
• Demonstrate clear and long-term government
  support
• Avoid high burdens for bidders
• Tedious and cost-intensive contractual
  negotiations
• High bid costs
• Complex structure of procurement
• Ensure that projects are better prepared before
  release to the market
• Appropriate regional public sector strategy

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Contact Details
Natalja Formuzala
 
Associate, Corporate and Structured Finance
Title
0044 207 972 6314
Phone
0044 207 248 4589
Fax
Natalja.Formuzala_at_nordlb.com
Email
71 Queen Victoria Street London EC4V
4NL UK
Address
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Richmond-Airport-Vancouver Rapid Transit Project

• Contracting Authority Great Vancouver
  Transportation Authority
• Project Description procurement, design,
  construction, implementation and operation of a
  19.5 km long rail-based rapid transit line (with
  18 stations), connecting central Richmond, the
  Vancouver International Airport, and Vancouver.
• Construction SNC Lavalin
• Shareholders SNC Lavalin, British Columbia
  Investment Management Corporation, CDP
• Operator InTransit Operations
• Project volume ca. LVL930m (1.4bn)
• Concession period 35 years, including 4.5 year
  construction period

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East Ayrshire Schools PPP

• Contracting Authority East Ayrshire Council
• Project Description Design, construction,
  finance and operation of 7 schools across 4 sides
  in Scotland. One of them is a partial
  refurbishment and partial new build extension
• Construction Hochtief PPP Solutions UK, with
  Barr Construction and McLaughlin Harvey as
  sub-contractors
• Shareholders Hochtief, NORD/LB, PFI
  Infrastructure
• Facilities Management Mitie FM
• Project volume ca. LVL90 (135m)
• Concession period 32 years, incl. 26 months
  construction period

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East Ayrshire Schools PPP
Shortlees Primary School
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Resolve 106

• Project Description finance and development of
  new completed residential properties for
  affordable housing through shared ownership
• Construction N/A
• Shareholders Harvest Housing Group, NORD/LB,
  Chaco Ltd
• Property management Harvest Housing Group, Chaco
  Ltd
• Project volume Initially LVL10.5m (15.5m)
• Concession period Long term lease, 30 years