PPP in Practice High Speed Line...

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29-11-2011 15:30 PPP in Practice

I Foro Internacional Ferroviario BCNRail

PPP in PracticeHigh Speed Line Netherlands

Infraspeed Maintenance

Ruud Schellekens



Goal• HSL-line Facts & Figures• The Parties• Two examples (problem/change)

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Track Description

Shield-driven Tunnel “Groene Hart”

Noordelijk Holland

Barendrecht

Zuid Holland Zuid

BrabantZuid

Breda RAS

Rotterdam Lombardijen

Rotterdam West RAS

HoofddorpRAS

Zuid Holland Midden

BrabantNoord



HSL Facts & Figures

Shield-driven Tunnel “Groene Hart”

Noordelijk Holland

Barendrecht

Zuid Holland Zuid

BrabantZuid

Breda RAS

Rotterdam Lombardijen

Rotterdam West RAS

Hoofddorp RAS

Zuid Holland Midden

BrabantNoord

- Amsterdam - Schiphol: 17 kilometer- Schiphol - Hoofddorp: 5 kilometer- Hoofddorp - start High Speed Track: 2 kilometer- start High Speed Track - end High Speed Track : 42 kilometer- end High Speed Track - Rotterdam Station: 4 kilometer- Rotterdam Station - Rotterdam Lombardijen: 7 kilometer- Rotterdam Lombardijen - start High Speed Track : 5 kilometer

- start High Speed Track – Belgium Border: 43 kilometer.25% at surface level;75% HSL-Zuid-tracé 170 civil works

•viaducts, 4 tunnels,dive-unders•one aquaduct A few bridges

Investment•Civil works 6. Billion EURO•Otherworks 1. Billion EURO PPP

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First: The good news• Project delivered ON-TIME• First 5 years availability OK!• No serious safety incidents• …..• …..Conclusion:===PPP-works for all parties===



But…. Monthly Availability

94,00%

95,00%

96,00%

97,00%

98,00%

99,00%

100,00%

101,00%

jan-07

apr-07

jul-07

okt-0

7jan-0

8

apr-0

8jul

-08

okt-0

8jan

-09

apr-0

9jul-0

9

okt-0

9jan-1

0

apr-1

0jul

-10

okt-10

jan-11

apr-1

1jul-1

1

okt-1

1

Availability without Bonus minutes(%)

Availability with Bonus minutes(%)

Start Operation AMS-ROT 160Km/h

Start Operation AMS-PAR 300/160 Km/h

Full line 300 Km

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PPP Challenges• Many parties involved >20

– Different roles– Different Interests/Goals

• Risk allocation is Key• System integration• Partnership (Cooperation)


I Foro Internacional Ferroviario BCNRail Parties

SPCInfraspeed

EPCMaintenance

Rai

lway

Man

ager

: PR

OR

AIL

Saf

ety

Auth

ority

: IVW

STA

TE

Sha

reho

lder

s

Institutionals

Industrials

Lend

ers

Advi

sors

•Rabobank •ING Bank•KBC Bank•KfW •Dexia Credit Local•HypoVereinsbank•BNG + •20 Syndicated Banks

Allen & Overy (Legal)Scott Wilson (Techno)Heath Lambert (InsurePKF (financial auditor)

Infraspeed Advisors

•Freshfields Bruckhaus Derringer (Legal)•Ernst & Young (Accounting, Fiscal)•Marsh UK (Insurance)•Delta Rail (Independent Safety Assessor)

PUBLIC PRIVATE

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• Risk mitigation: which party can best control the risks ?

• Fit for purpose Service Level Agreement – Functionality and Quality of the Systems

• Value for money (to the taxpayer) • Public Sector Comparator• PFI: Time is money• budget stability for the Public Sector

• Long term stability & contractual relationships• Private sector risk improves quality• Lump Sum, Turn Key, date certain contracts• Safety/environment

What does the State, look for?



• Risk aversion• Allocation : which party can best control the risks ?• Reflected in contracts and insurance

• Predictable• Investments• Revenues CASHFLOW• costs

• Reliable• contract parties• “Stick to the rules“ - no surprises !

What do Lenders look for?

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• Risk aversion• Allocation : which party can best control the risks ?• Reflected in contracts and insurance

• Predictable• Investments• Revenues CASHFLOW• costs

• Reliable• contract parties• “Stick to the rules“ - no surprises !

• Return on Investment• Profit

NB: view of Lenders and Institutional investors is alike!

What do Institutional investors look for?



• Manageable Risks• Allocation : which party can best control the risks ?• Reflected in contracts • Scope of work to different parties

• Return on Sales• Positive Cash flow• Margin/Profit

• Reliable• contract parties/partners

• Protect Reputation

What do Industrials look for?

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My view on PPP

PRIVATEINDUSTRIAL

PRIVATEINSTITUTIONALS

LENDERS

PUBLIC(STATE)

PROFITREPUTATION

RELIABILITYRETURN ON INVESTMENT

COMPETITIVEBEST IN CLASSAVAILABILITY

ADVISOR

ADVISOR

ContractsRisk

distribution



Risk AllocationState – Infrastructure Provider

• General Principle: – IP takes all the risks subject to exceptions

• Exceptions:– Delay Events (time + money)– Non-Attributable Events (time + money)

eg civil defects <10 yrs – Relief Events (time) eg force majeure,

strikes > 48 hrs– Compensation Events (money)

eg change in law

PRIVATEINDUSTRIAL


LENDERS

PUBLIC(STATE)

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Risk AllocationInstitutionals/Lenders – Industrials

• General Principle: – Contractual risks/obligation towards the STATE are

forwarded (back to back) to the Industrials.– Industrials takes all the risks

subject to exceptions

• Exceptions:– Risks that belong to the STATE– Finance/Tax risks– Risks above CAPS

PRIVATEINDUSTRIAL


LENDERS

PUBLIC(STATE)



Allocation of risks

State Infraspeed EPC MCGround RiskCivils assetsOther interface risksConstruction cost overrunsDelay in completionConsentsTrafficDefects in system assetsPerformance DeductionsOperating cost overruns/renewalsDerailmentDiscriminatory change in law/taxesOther change in taxForce MajeureCaps insufficientInfraspeed is only responsible for limited residual risk

PRIVATEINDUSTRIAL


LENDERS

PUBLIC(STATE)

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Examples of Non-Attributable Events• State breach• Civils Assets / Connecting Systems Defects• Contamination• Sound emission levels• Train not compliant with requirements• Failing traction power supply (in-feed 150kV)• Failure by task organisations (Prorail VL, Infra)• Soil settlement

PUBLIC(STATE)



PPP Cash-flow model Infraspeed

100

0

100

200

Euro

(milli

ons)

2005 2010 2015 2020 2025 2030

Development Period Availability Period

Construction Costs

Performance Payments

Maintenance & Renewals Costs

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Availability• Duration of trains on track = X• Delay of trains due to errors = Y• Availability = 1- Y/X %

Time table

Error

SimulationAccuracy < 2% Availablity



Monthly Availability Penalty

€ 1.000.000

€ 2.000.000

€ 3.000.000

€ 4.000.000

€ 5.000.000

€ 6.000.000

€ 7.000.000

€ 8.000.000

€ 9.000.000

penalty

perfo

rman

ce p

aym

ent

Performance Fee

100 %99 %

98 %97 %

96 %95 %

94 %93 %

92 %91 %

90 %

Availability (%)

availability penalty

Tra

in D

elay

Pen

alty

(€)

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First Example: a planned changeor new requirement

PUBLIC(STATE)

COMPETITIVEBEST IN CLASSAVAILABILITY

POSITION OF THE STATE



Response to a ChangeRELIABILITYRETURN ON INVESTMENT

Everything worksI do not want a ChangeThis changes the cashflowThe risk increasesRisk must be accepted by Industrials

The lenders must approveIt jeopardizes the Loan..price up

PRIVATELENDERS


ApproveNecessary

Risk toIndustrials


The lenders must approveIt jeopardizes the Loan

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Response to a Change

PRIVATEINDUSTRIAL

PROFITREPUTATION

Risk increases… need more profit

I am the only one that can execute the change ;-)

I will not take the magnitude of the risk (whole system)On a “small” change


The lenders must approveIt jeopardizes the Loan..price up



Result

PRIVATEINDUSTRIAL


LENDERS

PUBLIC(STATE)

Changes are:•Expensive (high risk no competition)•State needs to take the availability risk•Lenders need to approve•Process is complex and time consuming•Many advisors get involved•What to do with the financing?•…….•…….•…….

Changes do not benefit from PPP

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PRIVATEINDUSTRIAL


LENDERS

PUBLIC(STATE)

Problem

Second Example: a problem



Example ETCS Level 2Problem: Trains now and then loose connection to RBC and

come to a stop

Involved parties

• Train Operating Company (OBU)• GSM-r Operator• Infrastructure Provider (RBC)

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SolutionIt is Public Private PartnershipParties need each other to solve the problem

• Bring all involved parties together:– Suppliers OBU and RBC and GSM-r– Train Operating Company– Infrastructure Provider

• Share knowledge !CONTRACT! Is a forbidden word

• Define an approach to analyse and solve



ResultRBC communication Loss HSL-Z south section

WalClock STreinOverigGSM-RGrensTraxx én ThalysVL_lifesign

0

5

10

15

20

25

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

Week 2011

num

ber

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What is needed for Partnership• It all starts with TRUST• TRUST starts with Transparency• TRANSPARENCY starts with communication• COMMUNICATION starts with People

PEOPLE need to communicateThe goal is simple



Did you ever do a communications training together with your -external- customer?If you are “married” for 30 years: Do It!

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Maybe it works different in Spain…

“There is unity now, in principle everybody here does what I ask them. Because they are not Dutch….as soon as you take a breath Dutch say: “yes but…..” “

Johan Cruijff about his work in Spain:

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PPP in Practice High Speed Line...

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