In order to face the economic and financial downturn, the European Union and its member states are implementing ambitious recovery projects, which focus directly on stabilizing the financial sector and limiting the impact of the crisis on the real economy.
Infrastructure investments are important for maintaining the economic activity throughout the crisis and they support a rapid recovery that leads to a sustainable economy. Public-private partnerships (PPP) can provide efficient ways for the implementation of infrastructure projects and for the supply of public services. At the same time, PPP is an interesting instrument for the long-term structural development of infrastructures and services, providing different advantages for both the private and public sectors.
PPPs represent a form of cooperation between the public authorities and the private sector, which focuses on the modernisation of infrastructures and strategic public services. In some cases, PPPs involve infrastructure financing, development, construction, rehabilitation, management and maintenance, and in other cases, they contribute to the implementation of a service which is usually delivered by public institutions.
Although the main focus of PPPs should be on promoting efficient public services by spreading the risk and using private expertise, they can also reduce the pressure on public financing by providing an additional source of capital. In its turn, public financing can provide major guarantees for private investors, especially long-term
stability, public cash flows and significant social and environmental benefits.
For the European Union, PPPs act as leverage in key projects, providing common policy objectives, such as reducing climate change, promoting alternative energy sources and energy efficiency, developing research projects and supporting a sustainable transport system.
Added-value for transports
During the “Info Day 2010” event organised by the TEN-T Executive Agency during May 31 – June 1, 2010, a seminar was held which focused on “Project Financing and Public-Private Partnerships (PPP)”. This seminar presented various information related to the application, evaluation and implementation of PPPs.
In the European Union, PPPs are used mainly in the transport sector (road and rail) and in the environmental protection sector. Many EU countries, however, have a limited experience in the implementation of PPPs and some of them have never applied them. In this context, PPP coverage for public services or the construction and operation of public infrastructures at European level is very limited and it represents only a small part of the overall public investments. PPP can improve project development and implementation because they are applied immediately and the budget allocated is high.
The projects developed for the trans-European network (TEN-T) prove that PPPs can be successfully applied for various projects and modes of transport. Let’s take, for instance, the 50-year concession of the Perpignan — Figueras rail link (which includes the border tunnel), the Oresund rail link between Sweden and Denmark or a high-speed line in the Netherlands. Also, there are several “borderline” projects being developed for the extension of the trans-European network. These projects include the road-rail bridge between Denmark and Germany, the Seine-Nord Europe Channel and the inland waterways transport project between France and Belgium. Investments for the development of TEN-T infrastructures have been estimated at EUR 390 Billion (for 2007-2013) and the potential financing sources come from the national public sector (40-50%), the private sector (20-25%), EIB funds (15-20%) and EC resources (around 15%). The economic downturn has had a negative impact on public-private partnerships, because of the reduction of bank loans and other forms of credit, as well as the significant deterioration of the financial conditions provided for PPP projects. Also, the development associated with changes in risk evaluation elaborated by the banking sector and the measures taken by the national governments and regional authorities have reduced or eliminated altogether the use of public-private partnerships.
Therefore, the development of PPP projects is limited by the significant increase in debts, the reduced payment deadlines set by the banks and by the fact that the financing allocated is available only until the end of the acquisition process. Public-private partnerships represent a much more complex system than the conventional one and aim at turning a defective transport project into a success.
Advantages of using the PPP in transport projects:
– it’s more convenient for large, complex and expensive projects
– it provides a better risk spread
– it responds positively to market requirements
– it attracts capital for numerous TEN-T projects, covering the financing deficit
– it brings added-value to investments
by Pamela Luică
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