public and public-private partnership (ppp) funding of ......funding of transport infrastructure –...

Public and Public-Private Partnership (PPP) Funding of Transport Infrastructure – Best

practices and common challenges

25 February 2013

Long experience in public funding – the experience of the

Russian Federation

Mr. Dmitry TVARDOVSKIY, Adviser to the Minister,

Ministry of Transport of the Russian Federation

2

АВТОМОБИЛЬНЫЕ ДОРОГИ:

Федеральные

Зимники

Основные региональные

Участки автомобильных дорог с уровнем загрузки более 0.7,

имеющие протяженность более 5 км

Характерные участки автомобильных дорог с уровнем

загрузки более 0.7 протяженностью 5 км и менее с локальными

включениями участков между ними, имеющих уровень загрузки менее 0.7

Участки автомобильных дорог с уровнем загрузки менее 0.7,

имеющие протяженность более 5 км

R U S S I A N F E D E R A T I O N

НОРВЕГИЯ

ШВЕЦИЯ

ФИНЛЯНДИЯ

ЭСТОНИЯ

ЛАТВИЯ

ЛИТВА

ПОЛЬША

БЕЛАРУСЬ

УКРАИНА

АЗЕРБАЙДЖАН

УЗБЕКИСТАН

КАЗАХСТАН

ГРУЗИЯ

ИРАН

АРМЕНИЯ

МОНГОЛИЯ

КИТАЙ

SYSTEM OF HIGHWAYS

3

INVESTMENTS IN TRANSPORT

0,95 1,03 1,10 1,12 1,16 1,20 1,19 1,22

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

2005 2004 2003 2006 2007 2008 2009 2010

BUDGET CAPITAL INVESTMENTS

EU , % GDP

2,0%

2,9%

3,0%

6,1%

Россия

ЕС

США

Китай China

USA

EU

Russia

Investments in transport, % GDP

2,10 1,96

2,09 1,97 2,16 2,22 2,19 2,24 2,38 2,42 2,49

0,00

0,50

1,00

1,50

2,00

2,50

3,00

2010 г. 2011 г. 2012 г. 2013 г. 2014 г. 2015 г. 2016 г. 2017 г. 2018 г. 2019 г. 2020 г.

Investments in transport complex , % от GDP

0,63

0,72 0,80 0,80 0,79 0,78 0,78 0,78

0,47 0,44

0,40 0,44

0,47 0,52

0,57 0,63

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

2013 г. 2014 г. 2015 г. 2016 г. 2017 г. 2018 г. 2019 г. 2020 г.

BUDGET CAPITAL INVESTMENTS RUSSIA, % GDP

Инновационный вариант (Inn) долгосрочного прогноза

ГП "Развитие транспортной системы"

SCENARIO 1

SCENARIO 2

4

INVESTMENT DEFICIT FOR TRANSPORT INFRASTRUCTURE

PROPORTION OF TRANSPORT EXPENSES, % GDP

Источник: Mintrans, Boston Consulting Group

Losses of economy because of infrastructure underdevelopment Limited participation of private investors participation in infrastructure projects because of low level of

return Big number of private investors, including foreign equity funds to infrastructure projects with the support of

state budget

* Including oil and gas infrastructure Источник: OECD, HIS Global Insight, McKinsey

Infrastructure expenditures, % GDP

Russia

Eastern Europe , Eurasia

East, Africa

Other industrial countries

India

Japan

China

Investment

deficit comparing

to countries with

DEVELOPING

infrastructure Investment

deficit comparing

to countries with

DEVELOPED

infrastructure

5

FINANCING OF FEDERAL TRANSPORT PROGRAM 2013 – 2020

Total volume of financing the Program 2013-2020 y. is

394,7 bln. $:

Federal budget: 243 bln. $

Regional budgets: 1,7 bln. $

Private: 150 bln. $

Federal 61,7%

Regional 0,4%

Private 37,8%

Total amount of investments 394,7 млрд. $

6

INVESTMENT PROGRAM IS BASED ON PPP PRIORITY

PRINCIPLES

FEDERAL PROGRAMS

Projects with federal budget

finance

Implementing new technologies,

financial instruments and

management resources of the

private sector using PPP

mechanism

Planning the development of the

infrastructure according to the

principles of balance and

coordination

Concession law

Investment

agreements

Three year planning

Budget

Inv

es

tme

nts

in tra

ns

po

rt

infra

stru

ctu

re

7

PPP UNITS ARE IN ALL TRANSPORT INDUSTRIES

MINTRANS

ROAD AGENCY RAILWAY AGENCY

MARITIME AGENCY

AVIATION AGENCY

AIRPORT ENTERPRIZE

ROSMORPORT ENTERPRIZE

JSC RZD SC RUSSIAN HIGHWAYS

STRUCTURE

8

INSTRUMENTS

ADDITIONAL TAXES AND TOLLS FOR USERS

BONDS AND LOANS WITH FEDERAL GUARANTIES

CONCESSIONS

STATE FUNDS (INVESTMENT FUND, ROAD FUND, RDIF)

CURRENT INSTRUMENTS FOR PRIVATE FINANCE IN TRANSPORT INFRASTRUCTURE ARE ALREADY ON

9

PROJECT FINANCING ISSUING INFRASTRUCTURE BONDS AS AN ADDITIONAL SOURCE OF FINANCING IN THE SITUATION OF STRONG DEFICIT

Rising financial leverage Attracting financial and strategic

partners Technical and financial project

control Project results partly influencing

financial stability of mother company

Advantages of project financing

Payback period should be appropriate for investors and lenders

Guarantee of cashflows No consolidation at mother

company balance o IFRS 10: no control and <50%

share in SPV

Major terms

Equity financing

P r o j e c t s 1, 2, 3, 4 Corporate financing Multiplicative effect

equity

strategic investor Investment funds

debt financing

10

Concession gives the opportunity to invest private funds in state owned

infrastructure

MECHANIZMS OF DEVELOPING STATE OWNED TRANSPORT INFRASTRUCTURE

Privatization

Selling the stake to a

private owner

Concession

Procurement with

innovative specifics

Standard

procurement

MARKET RULES,

private

investments

STATE CONTROL,

budget investments

PPP Models Applied

Concession contacts

Direct toll concession

Availability payments concession

Long-term agreements

O&M contracts Investment

agreements at pre-project stage

Su

bje

ct

- Construction (reconstruction) - CAPEX investments - Maintenance & operation, toll collection arrangement - Optional: project design, site preparation

- Automated traffic mgt system (ATMS) set up

- Maintenance and operation

- Toll set up collection system

- Feasibility study - Project design

Term

s

Depending on asset lifecycle: 20-30 years 10-15 years Up to 4 years

Re

turn

on

in

ve

stm

en

ts

Toll

Concession fees: - Availability payments - Investment payments (return on investments, performance payment)

Compensation by the Concessionaire

11

TENDER TYPES

Contract

Regular procurement (supply contract,

contractual agreement, service agreement)

Investment related

Investment agreement

Concession agreement

Legal basis

procurement activity policy

Federal Law №223-FZ

Avtodor internal tender regulation

Federal Law #223-FZ

Russian Government regulation issued for the

project

Federal Law #115-FZ

Tender type Auction

Big request 1-stage tender

1 stage tender

2 stages tender

2 stages tender

Tender terms 30-40 days 2-6-12 months 6-12 months

12

13

POSSIBLE WAYS OF RISING INVESTMENT ATTRACTIVENESS OF TRANSPORT INFRASTRUCTURE PROJECTS

• Investment component in tariff and principle «user pays» • Stimulating investments of potential users

o Complex projects where transport infrastructure is additional to the project with high level of revenue (any type of production or other)

• Stimulating investments of construction companies as co-investors • Minimizing expenditures along the whole contract period by means

of: o Outsourcing expertise and technologies o Project control

• State support of the project o Budget grants as co-financing project cost o Budget guaranties for SPV bonds issuing o Guarantee of minimal revenue

14

TRANSPORT PPP PROJECTS IN RUSSIA

Total number of PPP projects in Russia is about 270

The biggest number of projects in housing and communal services, the biggest volume of investments is in transport infrastructure

Investment fund of the Russian Federation is financing 47 projects with the total volume of investments 33 bln.$ from all sources: o Investment fund 7,4 bln.$ o Regional budgets 0,39 bln.$ o Municipal 0,05 bln.$ o Investors/concessioners 17,2 bln.$

For developing road infrastructure and stimulating private investors in toll roads was created state company Russian Highways. During next 17 years Avtodor is planning to get >12 bln.$ of private investments

Main tendencies PPP projects in Russia Housing and

communal services

Transport

Production

Territory development

Energy

Education

Healthcare

Real estate

Tourism

Sport

PPP projects in transport

PPP projects in transport PPP projects in transport complex

highways

airports

bridges

railways

ports

PROSPECTIVE HIGHWAYS

№ Highway Terms Length

1 М-1 Belarus Federal Highway 2013-2025 457 km

2 М-3 Ukraine Federal Highway 2013-2022 517 km

3 М-4 Don Federal Highway 2012-2019 1,522 km

4 Moscow – Saint-Petersburg Highway 2012-2018 669 km

5 Central Ring Road (Moscow region) 2015-2025 521 km

15

ROAD INVESTMENT PROJECTS PIPELINE

№ Project

Length, toll sections (km)

PPP Model Tender terms

Construction terms

Investments in total, EUR bln. *

Private capital share

1 М-1 Belarus km 33 – km 456

347,4 Availability payments concession

2013 1 phase: 2015-2018 2 phase: 2019-2025

4.94 35%

2 М-4 Don km 21 – km 225

150.5 O&M contract 2013-2014 2014-2015 0.19 45%

3 М-4 Don km 633 – km 715

84 Availability payments concession

2014-2015 2015-2017 0.83 25%

4 М-4 Don km 1,091 – km 1,319

207.4 O&M contract 2013-2014 2014-2016 0.35 50%

5 Moscow – Saint-Petersburg km 58 – km 149

90.1 Direct toll concession 2013-2014 2015-2017 1.63 40%

6

Moscow – Saint-Petersburg km 543 – km 684

141 Availability payments concession

2013-2014 2014-2017 2.96 25%

7

New M-7 Volga exit from Moscow Ring Road (MKAD) (Balashikha and Noginsk bypass)

69 Direct toll concession To be adjusted 1.21 50%

8 Central Ring Road (section 3)

104.5 Availability payments concession

To be adjusted 1.83 35%



2015-2017 2017-2020 1.73 35%



2015-2017 2017-2020 1.88 35%

*2012, incl. VAT, ex rate EUR / RUB = 40.79 16

MINISTRY OF TRANSPORT MOSCOW, RUSSIA [email protected] +7 495 626 9721

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