PPP – an Introduction NRW.BANK

2 October 5th, 2010 PPP – an Introduction NRW.BANK: Development Bank for North-Rhine Westphalia NRW.BANK is the development bank for the State of North-Rhine Westphalia Owners of NRW.BANK are the State of North-Rhine Westphalia (98,62 %) and the Regional Associations of the Rhineland and of Westphalia-Lippe (0,69 % each) NRW.BANK offers its services through 5 portals: Education Financing, Municipal & Infrastructure, Mid-Capital and Business Start-up, Housing NRW.BANKs business is carried out to a large extent in co-operation with banks and savings banks, or with public authorities NRW.BANK cooperates closely with the PPP-Task-Force, the Public Private Partnership initiative of the state of North Rhine-Westphalia

3 October 5th, 2010 PPP – an Introduction Public Private Partnership is a set of legally-binding contracts…… between public sector and private business entities for the…... procurement of infrastructure and the delivery of services (the project).….. that allocates responsibilities and business risks among the partners…... throughout the lifecycle of the project. Key-features: Life cycle Risk allocation between the parties PPP – in a nutshell

4 October 5th, 2010 PPP – an Introduction PPP – in a nutshell Private Business Corporate or Special Purpose Company PPP Contract (eg 22 years) Design Build Operate (DBO) ….or….. Design Build Operate and Finance (DBOF)…or… Concession, Design Build and Finance (DBF)…or… Operate only Including… …Remuneration for construction and operation Public Sector (e.g. municipality) Administrative building/ Roads Design Build Finance = Construction Phase, (eg2 y) Operate = Operational Phase (eg20 y) Bank Financing Agreement

5 October 5th, 2010 PPP – an Introduction PPP stands for: Cost efficiency and cost transparency throughout the life cycle Higher value with output-based specification Integration of private capital and private expertise PPP – in a nutshell PPP does not stand for borrow money build without money Save without money

6 October 5th, 2010 PPP – an Introduction PPP – in a nutshell Financing options Corporate loan to construction company to cover construction work; followed by non-recourse forfeiting of installments payable by the public authority for construction work Project Finance

7 October 5th, 2010 PPP – an Introduction PPP closed in Germany App. 190 PPP closed: Source of data: PPP Plattform der Deutschen Bauindustrie and BWI-Letter

8 October 5th, 2010 PPP – an Introduction Strong bias towards non-recourse forfeiting (app. 60% by #) due to Higher transaction costs and the difficulty to communicate these to the public Reluctance of medium-sized private bidders to get involved into the negotiations of a project finance documentation Difficulty in equity-rising (esp. medium-sized bidders) Risk allocation that is seen as not appropriate by bidders and banks Size of several projects is not attracting banks experienced in project financing PPP closed in Germany

9 October 5th, 2010 PPP – an Introduction Benchmark for the public administration as part of its modernisation Economically motivated feed-back Transparency for efficiencies and inefficiencies within the procurement process In-depth analysis of the project before start: PPP screening test Economic feasibility study Evaluation of different options in respect to the investment backlog Integration of political objectives within the procurement process Ecological Lifecycle assessment Stimulation of creativity given by output-specification Integration of private capital and private expertise broadens scope of solutions Bidders are incentivised to offer the most efficient solution ….Evolution ongoing PPP - a driving force for innovation

10 October 5th, 2010 PPP – an Introduction NRW.BANK - at home in Düsseldorf and Münster NRW.BANK Düsseldorf Kavalleriestraße Düsseldorf phone: fax: Münster Johanniterstraße Münster phone: fax: and web: Liaison Office Brussels Rue Montoyer BRUSSELS phone: fax: Contact: Dr. Jörg Hopfe Head of Municipal Customers : : Elisabeth Leidinger Senior-Project Manager : :