Rome Energy Meeting 2008 Rome, November 2008 Investments Opportunities and Project Finance in the Energy Market Luigi Marsullo President Finpublic ltd – FinEnergie ltd Italian Founder, D.G. EVALUATION Ministry of Economy and Finance

2 The Italian framework Italy is dependent on external sources Italy is dependent on external sources Average energy prices in Italy are higher than in the rest of Europe Average energy prices in Italy are higher than in the rest of Europe Energy policy is presently driven by market liberalisation, devolution to the regions and diversification Energy policy is presently driven by market liberalisation, devolution to the regions and diversification Complex administrative procedures are required to conduct investments Complex administrative procedures are required to conduct investments

3 Recent issues in the Italian energy policy Diversification of energy sources and increase of efficiency Diversification of energy sources and increase of efficiency Secure timely investment in energy- related infrastructure Secure timely investment in energy- related infrastructure Clarify the responsibilities of the regions and the central Government Clarify the responsibilities of the regions and the central Government

4 Energy market trends Improve integration of the Italian energy market into the single European market Improve integration of the Italian energy market into the single European market Promote the process of liberalisation of the electricity and gas markets Promote the process of liberalisation of the electricity and gas markets Prepare the tools to promote and facilitate investments Prepare the tools to promote and facilitate investments Increase transparency of markets rules and streamline procedures Increase transparency of markets rules and streamline procedures

5 The Italian infrastructures financing background The Public sector has traditionally played a major role in infrastructures projects in Italy The Public sector has traditionally played a major role in infrastructures projects in Italy The public expenditure reduction has given rise to a significant impact on investments The public expenditure reduction has given rise to a significant impact on investments Social role of the infrastructures: this is the starting point for a new framework Social role of the infrastructures: this is the starting point for a new framework A new co-operation between public sector and private investors is needed A new co-operation between public sector and private investors is needed

6 Key Issues to be addressed Ex-ante evaluation Ex-ante evaluation Ex-post evaluation Ex-post evaluation Performance monitoring in the long term Performance monitoring in the long term

7 Why PPP in Italy ? Key features of successful partnerships Key features of successful partnerships Major gaps identification Major gaps identification Role of a strategic planning process Role of a strategic planning process New roles and responsabilities of Regions in two crucial sectors: energy and transport New roles and responsabilities of Regions in two crucial sectors: energy and transport Conflict of Interests between Central Government and Local Government Conflict of Interests between Central Government and Local Government What are the solutions and prospects for the near future? What are the solutions and prospects for the near future?

8 PPP Preliminary Criteria in Italy Stakeholders involvement Stakeholders involvement Risk assessment (political, financial, operating, environmental) Risk assessment (political, financial, operating, environmental) Legal and regulatory framework Legal and regulatory framework Identifying constraints and how to overcome them Identifying constraints and how to overcome them Defining objectives Defining objectives

9 Key issues faced by Central and Local Governments in Italy Performance requirements Performance requirements Definition of key performance indicators Definition of key performance indicators Quality improvement Quality improvement Definition of inputs and outputs Definition of inputs and outputs Need for overall control and monitoring in Italy Need for overall control and monitoring in Italy

10 Impact Assessment Identifying stackholders and related interests Identifying stackholders and related interests Assessing the impact of the project Assessing the impact of the project Identifying assumptions and risks about stakeholders Identifying assumptions and risks about stakeholders Main problems: too many authorities and burocracy Main problems: too many authorities and burocracy

11 PPP investment financing Business evaluation Business evaluation Feasibility evaluation Feasibility evaluation PPP must be financially viable PPP must be financially viable Cost-benefit analysis: a significant tool for identifying the best options that conform to the economic goal of the country to satisfy the demand of the final users Cost-benefit analysis: a significant tool for identifying the best options that conform to the economic goal of the country to satisfy the demand of the final users

12 Performance monitoring (1) Monitoring is an effective tool to manage the Public-Private dialogue process and to demonstrate its purpose and performance of the investments in infrastructures Monitoring is an effective tool to manage the Public-Private dialogue process and to demonstrate its purpose and performance of the investments in infrastructures Monitoring through cost-benefit analysis is an optimum instrument to ascertain the financial feasibility of the project financing Monitoring through cost-benefit analysis is an optimum instrument to ascertain the financial feasibility of the project financing

13 Performance monitoring (2) Performance evaluation and reporting Performance evaluation and reporting Definition and characterisation of performance indicators Definition and characterisation of performance indicators

14 Performance indicators They should provide information for decision-makers They should provide information for decision-makers The information must be available in time to influence decisions The information must be available in time to influence decisions They should be truly representative They should be truly representative They should be adequately verifiable They should be adequately verifiable

15 The challenge: definition of public/private roles Sectors that are fully liberalised and other sectors affected by rules of public governance Sectors that are fully liberalised and other sectors affected by rules of public governance Electricity and gas grids operated under concessions by central or local government Electricity and gas grids operated under concessions by central or local government

16 The opportunities The Italian energy market may present significant opportunities to new investments The Italian energy market may present significant opportunities to new investments Financial and business environment look friendly towards renewed and strengthened enterprise collaboration and partnership Financial and business environment look friendly towards renewed and strengthened enterprise collaboration and partnership PPP should develop a baseline assessment to measure their effectiveness in order to enable the partnership to better measure how it is achieving its goals over time and delivering on its envisaged benefits PPP should develop a baseline assessment to measure their effectiveness in order to enable the partnership to better measure how it is achieving its goals over time and delivering on its envisaged benefits