1. Ministry of Finance and World Bank PPP Seminar Legal, Implementing and Economic Issues, Warsaw, 17-18 June 2008 Building and accomodation PPP projects The point of view of a financial investor Thomas Vieillescazes Director, DIF

2. #34022- 2 - Introduction DIF DIF PPP, DIF Renewable Energy & DIF Infrastructure II Independent investment funds & fund manager Operational as of September 2005 Two infrastructure funds - DIF PPP (€150m): DBFM/O investments W-Europe - DIF Infrastructure II (€500m+) : Infrastructure investments EU27 One renewable energy fund - DIF Renewable Energy (€150m): Wind & solar energy Europe DIF’s investors consist of long term investors, including pension funds and the EIB DIF PPP invests in primary and secondary PPP/PFI & infrastructure transactions Teams in The Netherlands/Schiphol, Paris and London Frankfurt will be opened in the coming months

3. #34022- 3 - Introduction DIF Investments & projects in tender (primary) in PPP 5 UK PFI schools projects 2 UK PFI Healthcare projects 3 French hospital projects, Rail infra project, road/bridge project 2 Dutch road schemes Danish acommodation project 3 UK PFI Leisure projects 2 UK PFI Detention projects (PB) Belgian road scheme Plus various CEE PPP roles in bidding consortia (pipeline DIF Infrastructure II)

4. #34022- 4 - Introduction to DIF A financial investor, what’s it in for? Well structured projects require competitive funding and are all about proper risk assessment & risk allocation Financial investors can play a role in enforcing the finance side of a project / bid Added value in the following areas: - providing equity funding (‘DIF cheque’ up to ~€75m) and adding to industrial sponsors who wish to protect their balance sheet - represent alignment of SPV (Project company) and funders interests (bankability) - provide in-depth knowledge of finance markets/parties to the Sponsors’ table (team background) Alignment with the Public sector’s interest : investors want projects that deliver what is promised !

5. #34022- 5 - Efficient risk sharing is ensured by back to back subcontracts : ‘transparent’ Project Company is key to efficiency of the system Project Co Public Authority EPC contractor FM contractor Not necessarily the same shareholders (role and efficiency of financial investors) Construction : Risk transfer on construction price Penalties on delays, etc. Operation and Management Cost of O&M Penalties for availability, performance, etc. Construction : Risk transfer on construction price Penalties on delays, etc. Operation and Management Cost of O&M Penalties for availability, performance, etc. Operation and Management Contract Cost of O&M passed to FM contractor Penalties for availability, performance, etc. passed through this contract If underperforming (penalties paid every year), FM contractor can be changed without the PPP contract modified Operation and Management Contract Cost of O&M passed to FM contractor Penalties for availability, performance, etc. passed through this contract If underperforming (penalties paid every year), FM contractor can be changed without the PPP contract modified PPP contract Subcontracts Interface contract Risks Risk Sharing Pass-through of risks using contractual structure

6. #34022- 6 - Performance indicators Some examples Maintenance « Soft » FM Other Services Renewal plan Maintenance plan Technological upgrades … Cleaning Catering Safety … IT/Telecom Commercial activities other ‘public services’ Security … Energy Fluids Energy efficiency Fluids consumption As measured Implementation of plans Timely update of plans … Reportings Measurements Panels Customer satisfaction reportings … Indicators could take the form of ‘grades’ or %, then used to calculate a mitigation on PPP payments ‘Availability’ is not straightforward !

7. #34022- 7 - PPP schemes for buildings Size does matter PPP contracts are big, complex, costly to put in place, costly to monitor Think of the criteria and number of performance indicators beforehand, keeping in mind the size of the project (cost/benefit) Pragmatic risk sharing approach Long contract life, and contracts have to be understandable by new parties on the project try to keep documentation simple / light Contract modifications always happen During construction : a PPP contract is a transfer of project ownership, and therefore the project is not fully in the hands of the public sector as with a ‘standard’ public procurement project Design modification process has to be precise in the contract documentation O&M/FM modifications also always happen – 20+ year lifetime, how could it be different? try to keep documentation simple / light Alternative methods for tendering smaller scale projects?

8. #34022- 8 - Project Rigsarkiv Scope of services DKK 580m/€78m Pilot Acommodation PPP, providing for archive storage depots for the Danish National Archives and the Royal Library (Phase 1) OPP Pihl Arkivet A/S (50/50 Pihl/DIF) selected as private contract partner by the Authority Project Company has 30 year title on the building Partly brownfield: refurbishment of the ground-floor of a DSB building (KB32) – 3,800m 2 Partly greenfield: two multi-storey depots and an intermediate building running between the DSB building (KB32) and the depots beneath a landscape bridge (open to the public) - 13,000m 2 First PPP in Denmark

9. #34022- 9 - Project Rigsarkiv Scope of services 370 shelf km of documents (half the way from Copenhagen to Amsterdam) Administration facilities, reception and workshops Technically advanced (‘coherent shelf concept’ with control systems) Actually moving in will take 18 months Payment based on functionality (availability & performance), services and utilities

10. #34022- 10 - Project Rigsarkiv Main Project milestones FC & Start New build 30 June 2007 & 1 July 2007 Start renovation Existing 1 January 2008 Construction completion 1 July 2009 End date DBFM contract 30 June 2037 Construction periodOperational period FC & Start New build 30 June 2007 & 1 July 2007 Start renovation Existing 1 January 2008 Construction completion 1 July 2009 End date DBFM contract 30 June 2037 Construction period (24 months) Operational period (28 years)

11. #34022- 11 - 25 yr DBFM contract ~€100m project Tender launched in July 2004 PPP contract (+ financial closing) signed in March 2006 Start of operation April 2009 Other Example : Caen Hospital PPP (France) Project description

12. #34022- 12 - Performance guarantees for the following services Multi-technical maintenance (on non-medical equipments) Heavy maintenance/renewal – technical adaptation Water treatment and control Cleaning of windows, common spaces, offices (not hospital rooms) Security and Safety Energy control and adjustment, volume warranties on : Electricity for production of cooling Natural gas for production of heat in the building Medical services / equipment (including beds) were excluded from the PPP scope in both construction / provision and maintenance Performance indicators defined in the PPP contract item per item (150 pages of such descriptions!) Reported by the SPV Easily measurable – form of reports agreed and defined in the contract Other Example : Caen Hospital PPP (France) Performance indicators

13. #34022- 13 - Alternative model small PPP projects “DBM+F model” (PMV Flanders) - background For small DBFM projects (like Rigsarkiv, or under), tendering costs and timing are always an issue Flanders (the Region’s investment arm PMV) developed an alternative tendering model designated for smaller DBFM (road) projects (< €100m) Aiming to achieve full DBFM benefit: - off balance sheet treatment (ESR95 neutral) - build in time and within budget; - life cycle concept applied; - reduced bid/tender costs; - template for future similar projects; and - ‘contractual’ PPP model combined with ‘participative’ PPP model One project closed (summer 2007) with a pipeline of four new projects to come

14. #34022- 14 - Alternative model small PPP projects “DBM+F model” (PMV Flanders) - mechanics Technics (DBM) and Finance (F) two separate tenders - DBM is paid by Project Company SPV - F is bidding on a (dynamic) risk allocation matrix and ultimately on the ‘credit’ of the DBM consortium Finance regards equity and senior debt (in one tender) After selection ‘DBM PB’ and ‘F PB’ both parties are “married” into one ‘classical’ DBFM scheme Payment on the basis of availability PMV (authority) mandates advisers for the ‘F bidders’, who price the cost thereof in their bids (ultimately winning consortium pays) Every consortium has one-to-one client dialogue meetings Contract based on (Dutch) standard road DBFM contract PMV takes a minority equity stake in the SPV (25 – 49%)

15. #34022- 15 - Conclusion 1. PPP / DBFM is a superiour contracting method: output specified (ideally) certainty of delivery (on time, in budget) forces parties (public & private) to define their project beforehand provides long term O&M cost certainty 2. Several Public Authorities make a good effort to deal with “small size DBFM” not over-complicate things try to keep documentation simple / light Consider alternative methods for tendering small – size DBFM projects (~Flanders roads?) Limit tender duration (2 years!) 3. Importance of building experience at a country level UK a very mature market : documentation standard, projects go fast Other markets (France, Denmark, others) not marture yet PPP legal environment constantly adapted Pilot projects

16. #34022- 16 - Contact details DIF PPP DIF Thomas Vieillescazes WTC Schiphol AirportDirector (head of Paris office) SchipholTel. +33 1 76 74 92 58 The NetherlandsMob. +33 6 87 96 66 61 www.dif.euwww.dif.euE-mail t.vieillescazes@dif.eut.vieillescazes@dif.eu