Interview with Stéphane Ouaki – Head of Unit “Connecting Europe – Infrastructure Investment Strategies” in the Directorate General Transport and Mobility (DG MOVE) of the European Commission
The past months have been marked by intense negotiations on the European multiannual budget for 2014-2020, investments being referred to as vital for Europe’s economic development. High-level discussions were focused more on the importance of transport in economic recovery, development of commercial relationships, support of social cohesion and, obviously, in forming a single transport system. Under these circumstances, the accent falls on implementing the projects aimed at developing a rail network capable to answer to both passenger and freight mobility needs. An essential role is played by the “Connecting Europe” Facility that will financially support Member States in the projects that define the European transport network. The new financing framework concerns three sectors and focuses on the channelling of funds to added value projects which comply with the EU political objectives stipulated in the White Paper on Transport and in the latest TEN-T policy guidelines (by setting a comprehensive and integrated Trans-European transport network). Based on the initial proposal (June 2011), the CEF budget for transport is of EUR 31.7 Billion (of which EUR 21.7 Billion are available for all member states and EUR 10 Billion will be transferred from the Cohesion Fund), but according to the agreement of the Council of Europe (of 8 February 2013), funds were reduced and in June 2013 the European Parliament is to approve or to reject this proposal.
Although, the EU wishes to develop a single transport network by sti-mulating investments, the financing allocation policy will be much tougher. “As part of the Connecting Europe Facility, the projects which are important for the EU from the point of view of establishing the European single network will be selected and priority projects are aimed at creating the missing cross-border links and the implementation of ERMTS on railway corridors. But the projects selected to receive financing are delayed, funds will be cut and allocated to other projects, but this time, European projects”, declared Stéphane Ouaki, Head of Unit “Connecting Europe – Infrastructure Investment Strategies” in the DG MOVE of the European Commission during the Conference “Infrastructure development – priority railway projects”, organized by Club Feroviar and the Romanian Railway Industry Association on 20-21 February 2013 in Sibiu.
80-85% of CEF contribution will be concentrated on support to pre-identified projects (CEF annex) that have to refer to sections of the ten core network corridors, other sections of the core network and ho-rizontal priorities (SESAR, ERTMS, ITS, RIS, VTMIS, MoS). Road projects would be eligible only for core network cross-border sections, and only for funding from the € 10 billion to be transferred from the Cohesion Fund. 15-20% of CEF financing will be allocated for other projects of the TEN-T core and comprehensive network, as grants for the TEN-T, excluding the road network, and via innovating financial instruments (for both the core and the comprehensive TEN-T networks and referring to all transport modes). These figures clearly show that the railway system is prioritized through the European policy.
CEF is a financing mechanism which demands special attention as related to both the European policy and the allocation of financing for 2014-2020. In this context, Mr Stéphane Ouaki has agreed on an interview to explain the importance of CEF in developing the European single market, the necessity of elaborating quality projects that are relevant for the European Union and the method established for allocating funds. He also explains what member states should do to benefit from these funds and the criteria for allocating funds.
RailwayPRO: The economic problems in the past years have increased the interest in the necessity to invest in infrastructure construction and modernization projects. What is the role of the Connecting Europe Facility (CEF) in developing a single European railway market and how will it stimulate European infrastructure projects?
Stéphane Ouaki: CEF is expected to play an important role in boosting investment in strategic infrastructure networks (transport, energy, broadband) in the EU. This ambition has been confirmed by the recent European Council agreement on the EU budget for the next seven years, even if the CEF budget has been reduced as opposed to the initial Commission proposal.
CEF is designed to provide financial support to those infrastructure projects of high relevance for the Union as a whole that would otherwise have difficulties being realised. Usually these are projects with high costs and complex implementation, but the benefits of which are not going only to the Member State or States that are directly contributing to it. Such is the case of cross-border connections or, in rail transport for example, projects aimed at ensuring the interoperability with other Member States’ networks. CEF funding will help to compensate this perceived gap between costs and direct benefits at Member State level.
CEF will also bring an important contribution to the development of the single European railway market. Although the single market is primarily about services, by supporting the development of a better integrated, interoperable, higher quality, higher capacity infrastructure network, CEF will contribute to the creation of the physical premises for the realisation of the single railway market.
RailwayPRO: How can EU member states benefit from these financings and what are the financing criteria?
Stéphane Ouaki: Member States need to make sure that as many good quality and maturity projects as possible are submitted for CEF financing. To qualify for financing, a project needs to concern first and foremost a section on the TEN-T network. For projects requesting support via innovative financial instruments under the CEF (such as loan guarantee or project bonds), it can be any section on the TEN-T comprehensive network, on any transport mode. For grant funding, it needs to be a section on the TEN-T core network, and it cannot concern road infrastructure, unless it is about deployment of innovative technologies/alternative fuel or of intelligent traffic management systems (ITS).
All projects will be assessed on the basis of specified requirements as well as on the basis of their quality, maturity and EU added-value. The Commission will decide which projects will be retained for funding on the basis of an independent assessment of each of the projects by external evaluators, the recommendation of an Executive Agency that will assist the Commission with the process of selection and implementation, and within the limits of the financial envelope available.
It should be noted however that requests for funding cannot be submitted at any time on any project, even if the eligibility criteria mentioned earlier were satisfied. Rather, projects will need to be submitted in response to specific calls for proposals organised by the European Commission, issued on average twice a year.
The calls for proposals will specify the types of projects for which EU financing will be available (for example deployment of ERTMS, development of LNG terminals in ports, development of rail cross-border sections and the like), the overall amount, as well as the specific requirements the projects would need to fulfil based on the established TEN-T Guidelines and CEF objectives, priorities and standards requirements. For the €10 billion to be transferred from the Cohesion Fund, special calls for proposals will be organised, which will be open only for project proposals in the Member States eligible to the Cohesion Fund support.
RailwayPRO: An important part of the future CEF financing is allocated to the modern, safe and sustainable development of the Trans-European transport networks. What are the EU priorities within the CEF for the financing of the European railway infrastructure?
Stéphane Ouaki: CEF is aimed at supporting the objective of the 2011 White Paper for Transport which include, among others, the reduction of the transport sector emissions by 60% by 2050, and a 50% shift from road to rail and waterborne transport of medium distance intercity passenger and freight transport also by 2050.
Investments in rail (passenger and freight) projects along the core TEN-T network will constitute therefore a main priority for the Commission in the coming years. The map of the TEN-T network, both of the larger, comprehensive network, and of the core network, can be consulted on the website of DG MOVE. There are also interactive maps available on our TENtec public portal (http://ec.europa.eu/transport/infrastructure/tentec/tentec-portal/site/). Just note that these maps might still suffer some changes, since they are still being considered in the co-decision process by the European Parliament and the Council of Ministers.
At the same time, on the core network, priority will be given to those rail projects that concern the development of cross-border sections and the elimination of bottlenecks. This is reflected by the highest co-financing rates that will be offered under the CEF for physical infrastructure works: up to 40% of the costs for rail cross-border projects, and up to 30% for rail bottlenecks elimination projects. In addition, priority will be given to projects contributing to the ERTMS deployment along the TEN-T core network railway sections. There, CEF support will be given for up to 50% of the costs, both for track side and on-board equipment.
For countries eligible to support from the Cohesion Fund, such as Romania, these projects will benefit of co-financing of up to 85% of costs. That is, within the limit of €10 billion that will be transferred from the Cohesion Fund. More specifically, these Member States could benefit of such co-financing rates for at least up to a share under the €10 billion proportional to their share within the Cohesion Fund. At the same time, these Member States could also benefit of support from the general CEF transport budget, available to projects in all Member States, but with the lower maximum rates as exemplified earlier.
RailwayPRO: Can you give us details about the railway infrastructure projects in plan?
Stéphane Ouaki: The Annex to the CEF regulation contains a detailed list of pre-identified projects towards which 80% to 85% of the CEF transport funds will be allocated. A great majority of this projects concern railway infrastructure development. The list specifies the sections and the type of activities which would be envisaged for CEF funding. It has been elaborated in consultation with the Member States and is based on their investment plans for the next seven years. I invite all those interested to consult this list, as it provides a very good insight into where the focus of EU and Member States transport infrastructure investments will be.
RailwayPRO: At the end of December the European Parliament Committee for Transport and Tourism (TRAN) voted the proposal of the European Commission on the recast of the Trans-European Transport Network (TEN-T) Guidelines and the adjacent financial instrument, the Connecting Europe Facility (CEF). How do you see this vote for CEF’s future? At the same time, in light of the recent agreement by the EU leaders on the EU budget for the next seven years, how do you think the cuts in the CEF budget will impact on its capacity to finance the TEN-T?
Stéphane Ouaki: The European Parliament’s vote showed a high support for the Commission’s proposals. It confirmed all the main elements of both the new TEN-T Guidelines and the CEF. It also suggests that the Parliament will seek to counter those changes proposed by the Council of Ministers that diverge too much from the Commission’s initial proposal. As for the budget, I can only regret the decision to reduce the CEF transport budget by about one third as compared to the European Commission’s initial proposal. Likely, some of the projects that we initially envisaged to be financed from the €21.7 billion envelope would not see the light in the next period. As always when resources are short, tough choices need to be made.
On the other hand, we cannot overlook that what the European Council agreed still represents an important sum: €13.1 billion plus €10 billion to be transferred from the Cohesion Fund, in 2011 prices. And we should also not forget that the European Parliament has not had its say yet, and it is the EP that needs to give its final approval on the EU budget. The Members of the EP have been from the start strong supporters of the CEF budget.
In the current period (2007-2013), with only €8 in billion available, we have managed to support a number of important projects. I remain therefore rather positive as to how much we will be able to achieve with the CEF budget, even if the scale of ambitions, and needs, is very high. It is estimated that only for the core TEN-T network investments up to €250 billion would be needed.
RailwayPRO: In case financing will not be completely absorbed (by transport infrastructure projects) what will happen with the rest? How will it be redistributed? Could it be transferred to other infrastructure projects (energy, IT)?
Stéphane Ouaki: The transfer between the sectoral budgets within the CEF is in principle a possibility. This could happen if, after the mid-term review in mid-2018, it is established that one of the sectors has considerably underspent its budget. However, it is very unlikely that we won’t be able to spend the transport budget. The estimated investment needs are so much higher than we could support with CEF co-financing. And both the Commission and the Member States have acquired in the past twenty years a good experience in TEN-T infrastructure project preparation, monitoring and implementation.
RailwayPRO: In the case of sea and river ports, the existence of appropriate railway connections between the port and the hinterland has a major importance. How could ports benefit from the CEF financing? Are there special criteria for ports?
Stéphane Ouaki: The importance attached to appropriate connections of ports to the hinterland is reflected in the revised TEN-T Guidelines. The new TEN-T policy framework requires that all core ports be connected to the TEN-T, by both rail and road, no later than the end of 2030. Deve-loping these connections, particularly for the ports along the 10 core network corridors, will also be one of main CEF investment priorities for the next financial period, 2014-2020. This becomes apparent when going through the list of pre-identified projects annexed to the CEF regulation, many of which refer to port hinterland connections.
RailwayPRO: How will the Connecting Europe Facility be spent? What allocation method is considered (annual method, absorption level..)?
Stéphane Ouaki: CEF budget spending will be programmed on an annual as well as multiannual basis. In fact, the majority of the CEF budget, 80% to 85%, will be allocated on a multiannual basis, over a period covering up to seven years, via a multiannual work programme and dedicated calls for proposals. The projects eligible will be those pre-identified in the Annex to the CEF regulation. Providing co-financing for up to seven years is meant to help ensure the financial security and stability of strategic, large infrastructure projects, the realisation of which often requires a long number of years.
The rest of the 15% to 20% of the transport budget will be allocated via annual work programmes and on the basis of specific calls for projects. These will target projects with a more limited time-span, and which are not among those pre-identified in the Annex to the CEF regulation.
The same 80% to 85% and 15% to 20% rule will apply also for the €10 billion allocated from the Cohesion Fund. However, separate multiannual work programme and annual work programmes, and corresponding calls for proposals, will be established.
RailwayPRO: For a unitary network, this financial instrument will help invest about EUR 23.1Billion, the sum agreed by Member States’ leaders following the European Council agreement on the EU’s next seven years budget this past 8 February. Out of this, EUR 10 Billion will be allocated from the Cohesion Fund to transport infrastructure in cohesion countries. The remaining EUR 13.1 Billion is the sum proposed to all member states through transport infrastructure investments. In practice, what are the countries that will most benefit from the CEF financing?
Stéphane Ouaki: Our experience so far suggests that all of them do. At the European Commission, we also have an interest to ensure that they do. We want to promote the development of a unitary, as you rightly noted, trans-European network, and not just of some parts of the network, in some Member States. Moreover, thanks to the mechanism of transfer of the €10 billion, we will be able to stimulate investment also in the Member States eligible to the Cohesion Fund, since this mechanism will allow us to provide maximum co-funding rates comparable to those of the Cohesion Fund – much higher than what we could offer under the rest of the CEF transport budget.
RailwayPRO: The New White Paper on Transport promotes a single market of railway transport. In your opinion, what are the methods to achieve this, obviously by using the European financing, including through the budget for 2014-2020?
Stéphane Ouaki: The CEF will contri-bute to the single rail market by supporting the development of a fully interconnected and fully interoperable rail infrastructure. This will provide the physical premises for transport operators in every Member State to provide integrated services all across the European Union. However, there are more barriers to the single rail market than the physical ones. And those need to be addressed by other means. That is why the Commission has recently adopted the fourth railway package. If endorsed by the Member States and the European Parliament, the measures in this package will significantly contribute to the achievement of the single rail market.
The Package proposes to complete the opening of European rail markets by opening domestic passenger markets, the last segment where Member States are still able to preserve monopolies for their national railways, and at the same time the most important segment. The measures proposed on the governance of the infrastructure manager should achieve a level playing field for all railway undertakings by enhancing separation of infrastructure and transport operation. The proposal also contains more competences for the European Rail Agency in order to allow a faster and unified authorisation pro-
cess for rail vehicles, as well as a single safety certification procedure for railway undertakings. This proposal will indeed replace the current system of national approvals which is too long and too expensive.
RailwayPRO: We know that countries in Central and Eastern Europe have serious problems regarding the absorption of European funds. Is there a chance that these countries are unfavoured (CEF) since they don’t manage to absorb funds? How will the EU support these countries in order to help them increase their absorption level?
Stéphane Ouaki: At the European Commission we are well aware of this issue and, in the recent period, important efforts have been made to ensure that it will no longer be a problem. At DG MOVE, and in close cooperation with our colleagues from DG REGIO, we have been working to identify those areas where intervention is needed, and the type of measures we could undertake.
At strategic planning level, we have sought to make sure that all Member States will have developed a comprehensive national transport plan, covering all modes of transport and providing a coherent infrastructure investment strategy, based on European and national priorities. Technical assistance under the Cohesion or Structural Funds has been provided and will continue to be provided to help Member States develop such plans.
The development of a pipeline of mature and quality projects, implementing this strategic master plan, will also benefit of EU support, via JASPERS under the Cohesion and Structural Funds and via the grants for studies under the CEF. Support for strengthening the administrative capa-city within the Member States for developing and implementing these projects will also continue to be provided. Moreover, under the CEF, more calls for projects will be organised for funding provided from the transferred €10 billion, in order to allow the eligible Member States, most of which have been confronted with this absorption capacity problem, more time to develop a larger pipeline of high quality and maturity projects.
When it comes to project implementation, the experience of strict monitoring and support developed by the TEN-T Executive Agency will help ensure that projects are delivered within the agreed deadlines and with the specified quality, to the greatest extent possible.
RailwayPRO: Will the high-speed transport be prioritized against conventional infrastructure projects in the 2014-2020 budget (including CEF)?
Stéphane Ouaki: No, there is no such prioritisation under the revised TEN-T Guidelines, nor under the three EU funding instruments that will support the TEN-T development in the next period – CEF, the Cohesion Fund and the European Regional Development Fund. Overall, the objective is to improve the capacity of all rail lines. In some cases that entails the development of high-speed lines, in others not. Wherever feasible high-speed rail development will be encouraged for passenger trains, in order both to attract more car or plane passengers to this more sustainable mode of transport, and to free up capacity for freight transport.
RailwayPRO: Will European funds for transport infrastructure development be dedicated only to state authorities and companies or will private companies also have access to European financing?
Stéphane Ouaki: Any EU based entity, be it public or private, will be eligible to submit project proposals and, if successful after the screening and selection process, to benefit of the awarded financing. However, all projects need to be approved first by the national authorities of the Member State concerned.
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