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EXAMPLES OF INFRASTRUCTURE
PPPs PROMOTED BY SPANISH
PUBLIC AGENCIES

Carlos M tí
C l Martínez García-Loygorri
G í L i
Project and Infrastructure Finance Division
TYPSA
cmartinez@typsa.es
December 2004 PPPs – The Spanish Experience 1

Examples of Infrastructure PPPs
Promoted by Spanish Public Agencies

TABLE OF CONTENTS

• Introduction: Criteria of Eurostat on PPPs
• Study Cases in Spain
– PPPs for the Construction and Operation of 8 New Hospitals in the Region of
Madrid – E.g.: New Puerta de Hierro Hospital
– PPPs for the Construction and Operation of New Undergrounds in various cities
of Andalusia – E.g.: Seville Underground
– PPPs for the Construction and Operation of High-Speed Railways
– E g : High Speed Railway Figueras Perpignan
E.g.: High-Speed Figueras-Perpignan
– PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways
– E.g.: Rehabilitation of the M-30 – Madrid Calle 30


Criteria of EUROSTAT on PPPs

Objective and application of the criteria:
• EUROSTAT: Official Statistical Office of the European Communities
• Criteria in line with the European System of Accounts (ESA-95)
• Objective: Defining the requirements to make possible the
Debt deconsolidation
• Scope of use:
– L
Long-term contracts b between Public and Private Entities for
P bli dPi E ii f
promotion and operation of Infrastructures
– Investment in construction or rehabilitation + rendering of g
services (operation) according to predefined standards
– Payments to private operators coming almost entirely from
the Administration, not from users


Categories of risks defined by Eurostat:
• Construction/completion risk: late delivery breach of quality
delivery,
standards, additional costs, technical deficiencies and negative
externalities (external negative effects)
( g )

• Availability risk: breach of volume, safety or quality delivery service
standards contractually agreed
a da d o a ua y ag d
These breaches must imply automatic and significant penalties in
the periodic payments to the private partner
• Demand risk: variability of demand irrespective of the behaviour of
the private partner



Conditions for not consolidating the investment as a
g
government asset:

• The private partner must:

– Bear the construction risk, and
– Bear at least one of either availability or demand risk

• A partner is considered to bear one of these risks if it
bears “the majority” of the risk



Implementation of this decision in practice:
• This decision is applicable from March 2004 for all Member States
and Acceding Countries
• Responsibility of its application: National Statistical Offices
• Eurostat is of the opinion that the risk analysis, identification and
assessment can be extracted by expert statisticians from the
Contract, and then be able to decide on the final allocation of the
assets
• I questionable cases: analyse the nature of both partners
In ti bl l th t f b th t
(especially if the partner is a public corporation), analyse the
g
government financing and the effect of government g
g g guarantees

Examples of Infrastructure PPPs
Promoted by Spanish Public Agencies

TABLE OF CONTENTS

• Introduction: Criteria of Eurostat on PPPs
• Study Cases in Spain
– PPPs for the Construction and Operation of 8 New Hospitals in the Region of
Madrid – E.g.: New Puerta de Hierro Hospital
– PPPs for the Construction and Operation of New Undergrounds in various cities
of Andalusia – E.g.: Seville Underground
– PPPs for the Construction and Operation of High-Speed Railways
– E g : High Speed Railway Figueras Perpignan
E.g.: High-Speed Figueras-Perpignan
– PPPs for the Construction/Rehabilitation and Maintenance of Urban Highways
– E.g.: Rehabilitation of the M-30 – Madrid Calle 30


PPPs for the Construction and Operation of
8 New Hospitals in the Region of Madrid

E.g.: New Puerta de Hierro Hospital (1)
• Object:
– Project
– Construction
– Equipment for concessioned services
– Provision of general and clinical furniture
– Operation and maintenance providing residential and
complementary services –non-sanitary services–
– Operation of complementary and commercial areas
restaurant, newsstand, etc.



• Characteristics of Civil Works:
– 162.000 m2 built with 879 beds, enlargeable to 120 more
beds
– Assembly Hall (400 seats), areas for investigation and
studies, nursery, heliport, parking (4.000 vehicles)

• I
Investment:
– Initial: € 300,5 million
– Renewal and Replacements: € 64 6 million
64,6

• Attended Population: 675.000 inhabitants in 2011



• Granting Authority: Consejería de Sanidad y Consumo de la
Comunidad Autónoma de Madrid (Regional Authority of
Madrid)
• C
Concessionaire: Public Limited Company to be formed with an
bli i i d C b f d i h
equity equal or superior to the 15% of the total estimated
investment
• Date of award: March 2005
• Period of Concession: 30 years. In service from October 2007
• Present situation: Bidding process
• Financing: Not defined yet
g y


The PPP Contract. Peculiarities (I):
• Services to be provided by the Concessionaire:
– Complete maintenance of the building
– Waste management
– Safety of the Hospital
– Laundry service
– Cleaning of the building
– Management of clinical and administrative files
– Management of Reception and Information staff
– Maintenance of inner access roads and gardens
M i t fi d d d
– Complete sterilization service
– Stock and distribution management
– Cafeteria and Restaurant service


The PPP Contract. Peculiarities (II):
• Operation of complementary and commercial areas - Income:
– Parking
g
– Cafeteria / Restaurant service
– Vending machines
– Telephone and TV inside the rooms
– Telephone booths
– Bank branch, Hairdresser’s, Newsstand, Florist’s…
• The Concessionaire can suggest, to its own risk, the operation of
additional opportunities only if this represents lower costs for
the Administration


The PPP Contract. Peculiarities (III):
• Payments to the Concessionaire:
– Basis: Maximum Annual Payment offered (MAP)
– Fixed Annual Payment (FAP):
• Maximum 40% over the MAP
• Not exposed to penalties
– Variable Annual Payment (VAP):
• Minimum 60% of the MAP
• Exposed on the whole to penalties
• Liable to adjusts depending on the fluctuation of the volume of
service provided (occupation reference level: 85%)


The PPP Contract. Peculiarities (IV):
• Penalties:
– Based on the definition of indicators that make possible an
p
objective evaluation of the performance
– For each indicator three parameters are applied:
- Availability failure (maximum penalty: 100% VAP)
y ( p y )
• C t
Category of f il
f failure
- Quality failure (maximum penalty: 30% VAP)
• Reaction time
• Correction time
– Additionally, for each indicator both a frequency of control
(daily, monthly, annual…) and a supervision method (surveys,
audits, inspections )
audits inspections…) are set


The PPP Contract. Peculiarities (V):
• Maximum theoretical penalty: 130% of the VAP model established
attending to the criteria of Eurostat to allow assets involved to be classified
as non-government assets (therefore for the Administration it is an off-
non government (therefore, off
balance finance)
• Risks borne by the private partner:
– Construction
– Availability because payments are mainly variable (≥ 60%)
• Provides budget stability and efficiency
• 100% private funds
• The Administration delays payments and these are considered annual
spending instead of an isolated investment at the beginning of the PPP
p g g g



Conclusion:

• The Regional Government of Madrid is able to build a new hospital for
its citizens, postponing its payment and advancing the
citizens
launching of the service

• The investment is not accounted as Public Debt according to the
criteria of Eurostat:
– The private partner bears the construction risk, and
p p ,
– The private partner bears the availability risk (60% of the
payment depends on volume and quality standards)


New Undergrounds in various cities of
Andalusia

E.g.: Seville Underground (1)
• Object:
j
– Project and Construction
– Supply of trains and installations
– Maintenance
– Operation
– 19 km long (9 km subterraneous and 10 km on surface)
– 2,6 km of viaducts
– 23 stations (9 on surface), and garages
• Investment:
– Infrastructure: € 443,2 million
– Trains: € 54,0 million

PPPs for the Construction and Operation
of New Undergrounds
in various cities of Andalusia

• Granting Authority: Consejería de Obras Públicas y
g y j
Transportes de la Junta of Andalucía
TUZ 5,00
(Regional Authority of Andalusia) RUSVEL 9,03 Dragados
27,83
27 83
• Concessionaire: Guadalmetro
d l CAF 9,79
Tressam 10,00

• Date of award: June 2003 GEA 10 52
10,52 Sacyr 27,83
y ,

• Period of Concession: 35 years. In service from summer 2006
• Present situation: under construction
• Financing: Capital: € 86,0 million Participatory Loan: € 6,4 million
Grant: Operation Loan from the EIB:
€ 126 0 million
126,0 € 260 0 million
260,0

of New Undergrounds

• Diagram of relationships:
g p
Contribution to the tariff
PPP
REGIONAL Contract Concessionaire
PUBLIC SPECIAL
AUTHORITY Construction + Operation PURPOSE ENTITY
Participatory Loan
Initial
I i i l contribution
ib i
Tariff
Regional authority
USERS
BANKS Local Central
Administrations Administration


of New Undergrounds

()
• Risks borne by the private partner:
– Construction
– Demand (limited to 55% of the income during the initial years and
to 80% afterwards) the majority of this risk is borne by the
private partner in two different ways: tariffs and variable operating
payments
– Operational and maintenance risks
p
• This service of public transport must be operated according to social
requirements defined by the Administration, but also attending to
corporate criteria that allows cost reduction and efficiency
criteria,

of New Undergrounds

( )
• Sources of income for the private partner:
– Grant from the Regional Administration (33% of the
investment in infrastructure and installations): € 126 million
– Tariffs for users of the infrastructure
– Operating payments from the Administration (a significant
part of them depending on traffic demand risk)
– Earnings from advertising, vending machines, shops…


of New Undergrounds

Conclusion:
• The Regional Government of Andalusia is able to construct a new
underground for its citizens, postponing two thirds of its
payment and advancing the launching of the service
• The investment is not accounted as Public Debt according to the
criteria of Eurostat:
– The private partner bears the construction risk,
– The private partner bears the availability risk (in the way that
if the infrastructure is not available, users cannot use it), and
h i f i il bl i) d
– The private partner bears the demand risk (although it is
limited, the majority of the risk is on the private s side)
private’s

PPPs for the Construction and
Operation of High-Speed Railways
High-

E.g.: High-Speed Railway Figueras-Perpignan (1)
• Object: Project, construction, operation and maintenance of
the I t
th International S ti Figueras-Perpignan of th N
ti l Section Fi P i f the New Hi h S
High-Speed
d
Railway between Spain and France
– Double track line: 44,4 km (19,8 km in Spain and 24,6 in France)
– Single track lines connecting at Perpignan: two of 2,9 and 4,6 km
– Double tunnel of 8,3 km; Two false tunnels of 180 and 190 m
– 9 viaducts (5 in Spain): 2.240 m
– 14 railway bridges and 11 highway bridges
– 9 underpasses
– Extreme security and environmental conditions


High-

• Granting Authorities: Ministerio de Fomento (Spain) and
Ministère d l’É i
Mi i tè de l’Équipement, des Transports et du Logement
t d T t td L t
(France)
ACS 24,9

• Concessionaire: TP FERRO Eiffage
50,0
(bilateral equilibrium) Dragados
Concesio-
nes 25,1
• Date of award: February 2004
• Period of Concession: 50 years -including 5 for construction-
• P
Present situation: under construction; closing the financing
t it ti d t ti l i th fi i

High-

• Investment: Construction € 952,0 million
Others € 169 5 million
169,5
TOTAL € 1.121,5 million

• Financing: Shareholders: Capital: € 51,4 million
€ 105,0 million Participatory Loan: € 53,6 million
Grant: Direct: € 515,9 million
€ 576 6 million
576,6 Financing: € 60 7 million
60,7
Senior Debt: € 439,9 million

• Re-financing: in 2015
g 25-year extra period
y p
– Limited-recourse to sponsors
– For the whole amount of the remaining debt
– Adjusted to the real demand

High-

The Concession Contract. Peculiarities (I):
• Subject to the new French and Spanish Concessions Laws (2003) in
their common aspects; its last interpretation is submitted to an Arbitration
Court in Brussels
• Risks borne by the Concessionaire:
– Construction delay on the payment + severe penalties for delays
(up to € 22 million for 16 months) + loss of significant guarantees (€ 60
million reducible to € 30 million when financing is closed)
– Operation severe penalties for failures + loss of significant
guarantees (up to € 1,5 million)
– Availability if the infrastructure is not available: a) Operators do not
pay any tariff, and also b) Operators penalize the Concessionaire
tariff

High-

E.g.: Hi h S
E d Railway Fi
High-Speed R il Figueras-Perpignan (5)
P i
The Concession Contract. Peculiarities (II):
• Risks borne by the Concessionaire (cont ):
cont.
– Demand (limited) the small limitation lies on the approved annual
Canon Ceiling set to the Concessionaire for charging to Operators
•This Ceiling is referred to the previous years Ceiling, and depends on:
– Inflation (average of French and Spanish Inflations Indexes)
– A ratio defined in the Contract for each year
– A corrective ratio depending on traffic, only for years 4, 9 and 14
varying from 1,04 if the demand is a 20% lower than the foreseen one to
0,96 if it is a 20% greater
•Therefore th D
Th f the Demand Ri k i borne by the Concessionaire (th
d Risk is b b th C i i (the
maximum mitigation is equal to 4% and it is for a demand loss equal or
greater than 20%)
•Symmetric limitation
Symmetric Risk and Venture of the Concessionaire

High-

E.g.: Hi h S
E d Railway Fi
High-Speed R il Figueras-Perpignan (6)
P i
Conclusion:
• Th French and Spanish Governments obtain a high-speed railway
The F h dS i hG t bt i hi h d il
connection paying a grant of € 576,6 million (51% of the total
Construction Cost) and transferring the remaining cost to
Operators canon
• The whole investment is not accounted as Public Debt according to
the criteria of Eurostat:
– The private partner bears the construction risk,
– The private partner bears the availability risk (in the way that if
the infrastructure is not available, users cannot use it), and
– The private partner bears the demand risk (although it is limited,
the majority of the risk is on the private’s side)
private s

PPPs for the
Construction/Rehabilitation and
Maintenance of Urban Highways

E.g.: Rehabilitation of the M-30 – Madrid Calle 30 (1)
• Object: Rehabilitation, Operation and maintenance of the
j p
urban ring road of Madrid M-30
– Total: 21 actions
– Construction of two by-passes, north and south
– Putting underground the most j
i d d h jammed and diffi l zones
d d difficult
– Adjustment of the main access interchanges
• Estimated Investment: € 4.000 million
• Estimated social benefit (Univ. Politécnica de Madrid): > € 5.000
million

PPPs for the

• Entity Madrid Calle 30: mixed company with both municipal
and private capital
• Duration of the Entity: 35 years –with a buying and selling
crossed option in year 20–
• Present situation: under construction –the Entity’s structure is
under consideration
consideration–
• Structure under consideration: City Hall 80%
Capital 80% Private P t
P i t Partner 20%
Equity 20%
Subordinated Debt 20%
Debt 80%
%


PPPs for the

• Diagram of relationships:
City Public
Dividend Authority
Operation and
Capital Maintenance periodic
M i i di
Private
Capital payments
Partner

Fee S b di t d D bt
Subordinated Debt
Dividend
Interests and Repayment of the Constructors
subordinated debt Payment for
y
Interests and Repayment of the debt the Work

Banks
Financing


PPPs for the

()
• System: Special Purpose Mixed Company
• Payments from the City Authority:
– Basic Component fixed
– Complementary Component variable according to availability
and quality standards established in the Contract
d lit t d d t bli h d i th C t t
• The amount of these payments is offered by the private partner for the
1st phase of the project
p p j for next phases –new investments– the
p
economic-financial plan will be adjusted so as the Internal Rate of
Return (IRR) does not vary after the rebalance of the economic-
financial plan
p

PPPs for the

• The amount of these payments is offered by private bidders in a public
tender market price is achieved
p
• Risks borne by the Mixed Entity:
– Construction
– Availability payments for services depending on quality
standards related to attention to emergencies, maintenance of
g ,
several elements of the infrastructure, etc.
• Private Partner: operating expert for high-capacity highways
p g p g p y g y


PPPs for the

Conclusion: the model, under consideration, will try to achieve:
y
• The City Hall of Madrid is able to rehabilitate the ring road M-30 for its
users, postponing part of its payment and advancing the
launching of the service
• The investment is under discussion. For not being accounted as
Public Debt, according to the criteria of Eurostat:
– The private partner must bear the construction risk, and
– The private partner must bear the availability risk (dependence of
payments on quality and volume standards)
• The question remains if the 20% of private capital is enough to
bear the risk requirements mentioned by Eurostat
q y

TYPSA – Engineering the Future

TYPSA in Concessions and Services:
• TYPSA gathers experts capable of accomplishing every work included
in the Concessional Process
• TYPSA has experience in:
– Traffic and planification studies
– Projects: modelling and financial evaluation
– Structured financing studies (BOT, BOOT, shadow tolls, Project
Finance)
– D i and Construction Supervision
Design d C t ti S i i
• TYPSA has capacity for participating from the beginning of the process,
contributing a complete and multidisciplinary point of view

TYPSA – Engineering the Future

TYPSA in Concessions and Services:
• TYPSA has, among its clients:
– Public Authorities (national and international):
• Technic-economical and financial feasibility studies
• Preparation of the Concession Tender
– Concessionaire companies/consortiums:
• Preparation of the Bid
• Technical assistance to the Project, Construction Supervision, Operation and Maintenance
– C t ti companies:
Construction i
• Studies and Projects
– Financial Entities: technical consultancy in:
• Technical and economical feasibility
– Investment and Operation Costs
– Income
• Surveillance of investments: Construction Supervision
• Surveillance of operations


Thank you very much
for your attention

Teþekkür ederim

Carlos Martínez García-Loygorri
Project and Infrastructure Finance Division
TYPSA
Tel.: +34 917 227 300 – Fax: +34 916 517 588
e-mail: cmartinez@typsa.es

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