Project OverviewBusiness and Procurement Model Presentation
13th Informal PPP Exchange
Lisbon, 6th July 2007Brussels, 1st June 2010
Portuguese High Speed Rail ProjectPortuguese High Speed Rail Project
High Speed Projects and Public Private PartnershipsHigh Speed Projects and Public Private Partnerships
Institutional Framework
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Institutional Framework
Portuguese State
CPPublic Operator
REFERInfrastructure Manager
Private Operators•Fertagus•Freight Operators
IMTTNational Railway Authority
RAVE
Spanish Kingdom
ADIFInfrastructure
Manager
AVEP
Created for the development and co-ordination of the necessary work and studies to implement a high speed rail network in Portugal.
Created for the development of the necessary studies for the international axis concerning Portugal and Spain.
Historical Milestones
2000
2003
2001
Creation of RAVE
Creation of AVEP
Portuguese/Spanish Summit
2002 Start of Feasibility Studies
Cross border HSR axesJourney Time Objectives
2006 Start of the Environmental ImpactAssessment
Jun/2008 Beginning of the Procurement Process (1st PPP Tender)
Porto-Vigo
Aveiro-Salamanca
Lisboa-Madrid
Faro-Huelva
Lisboa-Madrid
Aprox. 2h45m
Porto-Madrid
Aprox. 2h45m
May/2010 Signature of the 1st PPP concession agreement
Jun/2007 Presentation of the Business Model
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Why did Portugalconsider high speedrail?
Structuring the European Atlantic south-west front – bonding the region and contributing to its competitiveness
Integration of the national rail network in the Trans-European Rail Network – assuring the interoperability both in the passenger and freight transport
Release of capacity in the conventional rail network –improving suburban, regional and freight rail services
Sustainable Mobility – improve the competiveness of the rail transport while reducing sinistrality, emissions and the country’s dependence of oil based energy
Increase the competitiveness of the port, airport and logistics systems – improving their articulation and making their area of influence broader
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Main Objectives
Norte Line - % of utilisation(peak hour)
High Speed Line Norte LineOeste Line
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PORTO
LISBON
PORTO
LISBON
1667 mm
Special Features of the Project: Rail Gauge
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Development of ahigh speed rail
project
Technical & Planning Questions
1. What should be the network shape and which cities should be served?
2. What should be the travel time and therefore the design speed?
3. How should the articulation with the conventional rail network be made?
4. How should the articulation with other transport modes be made? (airports, ports and roads)
1. How should the Public Sector develop and coordinate the project? (Public Sector’s Role)
2. Type of involvement from the private sector & level of Risk transfer?
3. What type of procurement?
4. How should the project be financed?
5. How to break down the value chain of the project?
Financial & Management Questions
BUSINESS MODEL
Development of a High Speed Project
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THE PROJECT
The Project
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Technical & Planning Questions
Main Results:
PORTO-VIGO AXIS
Lenght: 125 km (100 km in Portugal)
Travel time: 1h00m → (250 km/h)
Investment: € 1,8 billion
LISBOA-MADRID AXIS
Lenght: 640 km (206 km in
Portugal)
Travel time: 2h45m (350 km/h)
Passenger and Freight Traffic
Investment: € 1 8 billion
LISBOA-PORTO AXIS
Lenght: 290 km
Travel time: 1h15m (300 km/h)
Passenger Traffic
Investment: € 4,5 billion
Cost Benefit Analysis
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PORTO-VIGO AXIS
Economic IRR 2,4%Source: Sener, Ferconsult
Economic IRR 2,4%Source: Sener, Ferconsult
Economic IRR 10,8%Source: VTM, Steer Davies Gleave
Economic IRR 10,8%Source: VTM, Steer Davies Gleave
LISBOA-PORTO AXIS
Economic IRR (HS) 5,90%Source: Epypsa, Exacto e Booz Allen Hamilton
Economic IRR (HS) 5,90%Source: Epypsa, Exacto e Booz Allen Hamilton
LISBOA-MADRID AXIS
Business Model
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What is the Business Model that better allows
to reach these goals?
Business Model Strategic Goals
AFFORDABILITY FOR THEPORTUGUESE STATE
Minimization of Risks
High Level of Service / Quality
Delivery of the Project on
Time
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What should be the role of both Public and Private Entities?
How should the breakdown of the value chain be made?
Main issues to develop the BUSINESS MODEL
Trad
ition
alTr
aditi
onal
(Lar
ge co
ntra
cts)
Mix
ed p
rocu
rem
ent
Trad
ition
al+DBF
MDBFM
+ O
DBFOM
Private Sector involvement- +Traditional Procurementvs
Public Private Partnership
Horizontal segmentationand
Vertical segmentation
how should the project be divided into parcels?
what specialities should each parcel contain?
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Traditional Procurement
State
State
State
Production risksconstruction,
maintenance, etc.
Financing
Market risksdemand, charging, etc.
Term Short or Medium
PPP(Wide range, major flexibility)
Private
State, private or mixed
State, private or mixed
Medium or Long
Privatization
Private
Private
Private
Lifetime
What should be the role of both Public and Private Entities?
Defining Business Model
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Defining Business ModelBenchmark Analysis
Private(PPP)
Public
Public
Public
Holland2005
Public
United KingdomDecade 90
Public
Private(PPP)
Bordeaux-Tours(France)2007
Public
Perpignan-Figueras
(France-Spain) 2005
Public
Trend (Reduction of Public Sector risk exposure)
Strategic RoleRegulationPlanningEstablishment of RequirementsArticulation of the System
Financial Role
Operational RoleDesignBuildMaintainOperate
France1980/90Spain
1980-actual
Brazil2009
Public
Private(PPP)
Public and Private
Private(PPP)
Private(PPP)
Private(PPP)
Private(PPP)
Public and Private
Public and Private
Public and Private
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Key Aspects1. Output focus (design, build and maintenance risks with private partner)
2. Results/quality award (performance based payments)
3. Life cycle approach (long term contracts)
4. Public finance as much as possible (but keeping private partner with money at risk)
5. Transfer risks that private partner can control
Defining Business ModelPPP Concept
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Large investments
Major Challenge
Suitable Applications Technical stability environmentGreen field projects
Cultural change both in public and private sector
Breakdown of a High Speed Project
Defining Business Model
Size determinant to model efficiency and project attractiveness
Specificity beware suppliers dependence of some components
Risk major risk in one component may affect all project
Lifecycle contract term should be linked to assets lifecycle
Interfaces difficult to deal by public partner
Market condition projects should be made attractive for the market
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Capacity Allocation and Traffic Management
Superstructure
Signalling and Communication
Passengers Operator
ServiceRolling Stock
Substructure
Stations
Freight Operator
Infrastructure
Station
Operator(Passengers,
Option: Freight)Rolling Stock
Infrastructure
Signalling / Communication(in connexion with the Control Centre)
Breakdown of a High Speed Project
Defining Business Model
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Capacity Allocation and Railway Traffic Management (State/REFER)
Signalling / Telecommunications (PPP6)
Substructure /Superstructure
(PPP1)
Substructure /Superstructure
(PPP2)
Substructure /Superstructure
(PPP3)
Substructure /Superstructure
(PPP4)
Substructure /Superstructure
(PPP5)
• National & International experience• Lifecycle / Useful Life• Level of national involvement• Keep the strategic role within the Public Sector
• Dimension of the investment• Technological risk• Assure high level of competition• Horizontal and vertical interface risks
€500 Million
€1.4 – 2.0 Billion each
The Portuguese Business ModelInfrastructure – breakdown of the value chain
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PPP4 Coimbra-Porto
PPP3 Lisbon-Coimbra
PPP1 Poceirão-CaiaSigned
PPP6Signaling / Telecommunication
PPP2 Lisbon-PoceirãoTender Launched
PPP5 Braga-Valença
The Portuguese Business ModelPPP Signaling / Telecommunication
Scope: Design, Supply, Installation and MaintainConcession Period: 20 yearsPayment Mechanism: Availability
PPP Substructure / Superstructure
Scope: Design, Built, Finance and MaintainConcession Period: 40 yearsPayment Mechanism: AvailabilityMaintenance Demand
OperationRolling StockState acquires and leases it back to the
Operator(s)Operation ServiceProcurement Process to be defined in
2010, articulated with the EU directive on
OperationRolling StockState acquires and leases it back to the
Operator(s)Operation ServiceProcurement Process to be defined in
2010, articulated with the EU directive on
Operation
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Principles for risk allocation:
1st Minimization
2nd Efficient Allocation
Risk Allocation
PPP Substructure / Superstructure
Scope: Design, Built, Finance and MaintainConcession Period: 40 yearsPayment Mechanism: AvailabilityMaintenance Demand
Public Private
Political
Planning
Financing
Design / Project
Expropriation
Construction
Environmental
Archaeological
Maintenance
Availability
Safety
Demand
Force Majeur
Lisboa
To be developed directly by the State (REFER/RAVE)
Évora, Oeste, Leiria, Coimbra, Aveiro, Porto, Braga and Valença
Integrated in the 5 PPP’s for infrastructure
New Lisbon Airport Station
To be developed by the NLA Concessionaire
Elvas/Badajoz
To be developed directly by Portuguese and Spanish Governments
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Business Model Selected: HS Stations
LISBOATo be developed directly by the State (REFER/RAVE)
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Business Model Selected: HS Stations
CoimbraTo be developed directly by the Concessionaire of PPP3 (Lisbon-Coimbra)
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Business Model Selected: HS Stations
Implementing PPP
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Technical Studies
The early release of the technical studies revealed major advantages and is one of the most successful factor of the Portuguese Model
Technical Studies aim Strategic decision support Optimization Environment approval Financial analysis support:
o Construction costso Maintenance costso Revenues
Solid base for bidders
Early studies release More time for bids Correct asymmetric information Keep studies outside tender scope
Contribute to transparency Tender attractiveness
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Public announcement
Submission of proposals
Negotiating with two bidders
Short listing two bidders
BAFO by two bidders
Evaluating two BAFOs Final Jury report Awarding the concession
Contract Signing
Day 0
3 mon
ths
2 mon
th
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Month 18th
4 mon
ths
3 months
Procurement process for the infrastructure PPPAdopted Model
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Grantor
Banks
Maintenance company
Contractor
Works Contract
MaintenanceAgreement
Direct Agreements
Security Agreements
Financing Agreements
Joint Venture Agreement
Direct Agreements
Direct Agreement
Concession Agreement
ConcessionaireShareholders
By-laws
Subscription Agreement
Shareholders Agreement
Contractual structure
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Bidders are free to optimize and innovate in areas that do not compromise the strategic goals of the project
Technical Requirements
• FOCUS ON OUTPUTS
• High-level requirements:
• Applicable norms
• Safety and security requirements
• External interfaces requirements
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The Performance regime should be effective, simple and proportional
OutputsOutputsInputsInputs
Design and build
Maintenance
PerformanceExclusive
responsibility of the
Concessionaire
Performance model
Payment to the Concessionaire
Minimum standards
Performance RegimeConcept
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ppt CDD
Deductions by assets conditions
Deductions by non-availability
Performance RegimePayment Deductions
Reward a Concessionaire who makes the
railway assets available with full line
capability, for the whole operational
day; and
Reward a Concessionaire who
maintains in good condition
other assets that do not
directly affect the availability.
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The story so far:
Lisbon-Madrid AxisPoceirão-Caia
signed
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Estimated Cost: 1,93 billion €Tender launch: 30th March 2009Operation start: 2013(1) Includes conventional rail component and road
component of the TTC and HS and conventional rail connection to the New Lisbon Airport
(2) Includes conventional rail component between Évora and Caia
Estimated Cost: 1,34 billion €Tender launch: 2nd June 2008Operation start: 2013
Estimated Cost exclusively for High Speed: 1,97 billion €Estimated Cost of the Project (4): 3,64 billion €
LISBON - CAIA LINE
(4) Includes all the integrated projects part of PPP1 and PPP2
Traditional Procurment Portugal-Spain shared launch
HIGH SPEED STATION OF LISBON
INTERNATIONAL HS STATION OF CAIA
Estimated Cost: 500 million € (3)
Tender launch: 2010
(3) 228 million € for the Lisbon-Caia line
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Lisbon-Madrid Axis
7%3%
29%
12%
13%
36%
49%
PPP1 – Poceirao – Caia Finanncial Structure
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EU Grants 41%
RTE-T
Cohesion Fund
REFER Portuguese State
Investors and Commercial Banks
EIB
Private Finance (49%)
State Support (10%)
The HSL Poceirão-Caia (165 km), with a construction cost of € 7,5 million per km and a maintenance cost of € 116 000 per km.year, is one of cheapest ever built
(M€, prices of 2008)
Dec 2005
2 260
Jun 2007
1 756-504
Jun 2008
1 473-2831 359
Jun 2009
-114 -40%
-901
Public Session
Business Model presentation
Tender Launch BAFO
PPP1 (Poceirão-Caia)
Evolution of the Construction Investment (M€)
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The Portuguese Business ModelThe story so far
Life Cycle Costs
+169%
-33%
-58%
-39%
2975
2243
1814
PSC was based on benchmarking data from high speed lines in service
PPP1 (Poceirão-Caia)
The Portuguese Business ModelThe story so far
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Project OverviewBusiness and Procurement Model Presentation
13th Informal PPP Exchange
Lisbon, 6th July 2007Carlos FernandesCarlos Fernandeswww.rave.ptwww.rave.pt
Thanks for your attentionThanks for your attention