1. CORPORATE FINANCE FINANCIAL INSTITUTIONS ENERGY AND INFRASTRUCTURE TRANSPORT TECHNOLOGY Philippe Mallea Norton Rose LLP March 5th, 2010 PPP in France: a success story Presentation to the French Embassy in the Czech Republic

2. 2 PPP could literally be interpreted as any form of public – private partnership: –Concession (délégation de service public); –Bail Emphythéotique (Administrative / Health / Police / Justice); –Partnership contract. “PPP” is most commonly used to refer to a specific form of public procurement, the newest tools of public procurement: the partnership contract (Ord. of 17 June 2004). The partnership contract is a global contract under which the State or a State-run entity entrusts to a third party, for a long period, a project related to the construction or conversion, upkeep, maintenance, operation or management of works, equipment or intangible assets necessary to the public service, and their total or partial financing (Legal framework: Ord 17 June 2004). Partnership contracts are a success: –The use of partnership contracts has increased; –The partnership contract is used in various areas (public lighting, transport infrastructures, telecommunications...). As part of a long tradition of public procurement, the creation of a new tool was not so easy. Why this success? –The partnership contract meets a need unmet by the traditional tools of public procurement; –The implementation of the partnership contract is subject to a strong political will. Some recommendations to contribute to the success of its operation. PPP in France: a success story

3. 3 1) The partnership contract does not constitute a "miracle tool": it responds to specific needs It responds to particular situations which can not be processed through the traditional tools of public procurement –It can be used, unlike the concession, when: The public entity does not want to transfer the management of the public service / the management of the public service is not transferable; No end-users revenues may be received. –It can be used, unlike the public procurement (marché public), when: The public entity does not have the financial capacity to carry out the project. PPP in France: a success story

4. 4 It meets specific needs and has its own characteristics –The partnership contract is a long term contract which allows the transfer to a private operator of a global mission: the co-contracting party of the public entity provides the design, construction, maintenance and operation, and some or all of the financing; –The co-contracting party does not take the risk of revenues: it receives a rent paid by the public entity throughout the duration of the contract, even if the building is not used; –The private sector bears certain risks (including design and construction, risk of delay…), and ensures coordination between the various private parties involved; –The co-contracting party may operate ancillary revenue-generating activities, which reduce the cost of the operation.  It is not a “miracle tool”: to be effective, it must be used according to its purpose PPP in France: a success story

5. 5 2) The implementation of the partnership contract requires a strong political will A will to gradually implement the partnership contract The first laws were passed in specific areas (prisons, hospitals and police stations) before a general law was enacted (Ord. of 17 June 2004) relating to partnership contracts; The “ordonnance” relating to the partnership contracts was amended several times to improve the efficiency and to extend the use of the partnership contract (law of 28 July 2008; law of 4 February 2009 “loi de finances rectificative pour 2009”; law of 17 February 2009 “loi pour l’accélération des programmes de construction et d’investissements publics et privés”); As part of the French recovery policy, tools were created to stimulate the use of partnership contracts and facilitate their financing: The State guarantee; The “Fonds d’épargne”, a savings fund managed by CDC. A desire to establish regulations adapted to local market If the legal framework of the partnership contract is based on English PFI, it is not just a copy of the PFI: It takes into account lessons learned from the implementation of the English PFI; It takes into account the specificities of the French market. PPP in France: a success story

6. 6 The public entity must prepare and structure its project: it is important to be well advised (MAPPP, IGD). The needs of the public entity must be clearly identified before launching the procedure: –To avoid the withdrawal of the procedure (costly and demotivating); –To set realistic goals (program, targets, budget etc...). It is recommended when using a partnership contract for the first time to test it on small projects. The partnership contract is a sophisticated tool which implementation requires technical skills. It is a global contract: each component may affect the others (choice of materials in the building / maintenance constraints, distribution of risks / cost of the project). In order for the co-contracting party to achieve the result expected from it, it will need to ensure coordination between these different components. As a matter of fact it is necessary: –To have technical, legal and financial knowledge during the procedure and in the implementation phase; –To anticipate problems. The time for dialogue with the candidates should be sufficient without a lengthy procedure. 3) Some recommendations to contribute to the success of a project PPP in France: a success story

7. 7 In France, the success story of partnership contracts can be explained by: The gradual implementation of the partnership contract; A strong and constant political will; The adoption of rigorous methods. It has shown: A very low occurrence of legal challenge; Little or no withdrawal of the procedure; A strong private sector appetite for such procedure. PPP in France: a success story

8. 8 Presentation 1No individual who is a member, partner, shareholder, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. 2Any reference to a partner means a member of Norton Rose LLP or a consultant or employee of Norton Rose LLP or one of its affiliates with equivalent standing and qualifications. 3This presentation contains information confidential to Norton Rose Group. Copyright in the materials is owned by Norton Rose Group and the materials should not be copied or disclosed to any other person without the express authorisation of Norton Rose. 4This presentation is not intended to give legal advice and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. Readers must take specific legal advice on any particular matter which concerns them. If you require any advice or information, please speak to your usual contact at Norton Rose Group.

9. CORPORATE FINANCE FINANCIAL INSTITUTIONS ENERGY AND INFRASTRUCTURE TRANSPORT TECHNOLOGY