1. Transport Public Private Partnerships: policy outlook and the Annual Call 2012: Support for PPPs Stéphane Ouaki- Head of Unit B.4 Connecting Europe and Infrastructure Investment Strategies, Directorate General Mobility and Transport, European Commission Katarzyna Gryc- Policy Officer- Unit B.4, Directorate General Mobility and Transport, European Commission Shelley Forrester – Senior Financial Engineering Manager, Unit T4, TEN-T Executive Agency 29 November 2012, TEN-T Info Days 1

2. Transport Infrastructure Investment Challenge estimated investment needs in the TEN-T core network of EUR 250 bn by 2020 scarcity of EU, national and local budgetary resources as consequence of the economic downturn private capital difficult to attract to finance risky or long term investments 29 November 2012, TEN-T Info Days 2

3. Transport Market outlook on PPP activity EUR 17.9 bn in 2011, well below 2005 transaction level in Q2 2012, EUR 6 bn transactions closed, the lowest level in the decade 29 November 2012, TEN-T Info Days 3

4. Transport Policy Framework to address the challenge TEN-T to optimise EU-wide PPP projects pipeline and pave the way for the Connecting Europe Facility (CEF) -Capacity Building of the Network of the National PPP units through the European Expertise Centre (EPEC) -Loan Guarantee Instrument (LGTT) jointly funded by EU and the EIB to mitigate traffic dependent risks & cashflows Currently supporting 6 TEN-T investments worth EUR 11 bn Project Bond Instrument pilot phase (2012-2016) is in force -PPP project preparation grant funding 29 November 2012, TEN-T Info Days 4

5. Transport Policy Framework to address the challenge Connecting Europe Facility 2014-2020 -Grants to support projects with EU value added to address key societal and economic challenges (mobility, competitiveness, inter-connectivity, modal shift to adapt to climate change) -Financial instruments … … to attract private capital through innovative financial instruments … to share risks with private investors and provide Public sector commitments … to unlock the full potential of the debt capital markets through the pilot phase of the Project Bond Instrument 29 November 2012, TEN-T Info Days 5

6. Transport Pilot Phase of Project Bond Initiative: private capital to deliver EU infrastructure priorities Implemented since 7 November 2012,with signing of Cooperation Agreement between Commission and EIB the applications, appraisal and pricing of the individual projects done by the EIB EIB approvals until 31 December 2014, financial close by end of 2016 the PB credit enhancement is designed to improve the credit quality of senior debt of a project company in order to issue project bonds the EIB provides a finance facility to a project company in the form of a sub-ordinated loan and / or guarantee target investment rating of at least A-, a level expected to attract long term institutional investors (insurance companies and pension funds) mitigates all types of project risks (construction, operations, performance, traffic) Adaptable to all types of PPP payment mechanisms, including availability and user-pay 29 November 2012, TEN-T Info Days 6

7. Transport 2012 Annual Call Priority 3: Support for PPPs and innovative financial instruments The objective of this priority is to support the screening and development of projects for suitability to be procured as PPPs and to exploit EU level financial instruments. The expected result will be the creation of an EU level PPP project pipeline within the TEN-T that will: Provide a clear signal to the private sector of the long term public sector commitment to PPP procurement Enhance the preparation of projects suitable for PPP procurement Ensure the effective and efficient use of EU funds Provide upstream support to projects, facilitating access to innovative financial instruments such as the EU project bond initiative (PBI) and LGTT Contribute to the success of the pilot phase of the project bond initiative to open the bond market as a source of long term finance for TEN-T projects 29 November 2012, TEN-T Info Days 7

8. Transport Steady growth of EU level PPP project pipeline Annual Call 2010 7 million offered, 3 projects selected 2010-NL-93302-S – Implementation study to prepare PPP to improve maritime access to TEN-T at Amsterdam – Sea Lock Annual Call 2011 15 million offered, 6 projects selected 2011-CZ-94064-SPPP for D3 motorway 2011-ES-94123-SPPP for intermodal logistics platform 2011-FR-94036-SPPP for CNM stations 2011-IT-94006-SPPP for Port of Venice 2011-IT-94030-SPPP for rail link at Malpensa 2011-NL-94111-SPPP for Beatrix locks and Lekkanaal Annual Call 2012 25 million offered Evolution towards stronger linkage to financial instruments 29 November 2012, TEN-T Info Days 8

9. Transport 2012 Annual Call Priority 3 - Support for PPPs: feasibility to maturity PPP screening: feasibility studies necessary for value for money assessment and preparation of business case: Market scan to identify private sector potential; Risk analysis, allocation and mitigation Affordability – funding and financing models, including revenue generation studies, payment model options Identification of output requirements, development of public sector comparator Development of financial models based on robust cost estimates, current market pricing and quantitative risk assessment PPP procurement: Mature project preparation phase, studies necessary to bring project to tender and to support procurement phase: Further technical studies to define preferred solution: output requirements and service quality standards Establishment of risk allocation, mitigation and pricing model Financial studies to identify optimal sources of financing, including capital markets solutions Preparation of draft PPP contract, including provisions to accommodate bond solutions Studies to support procurement phase, including development of shadow credit rating but not including bid evaluation 29 November 2012, TEN-T Info Days 9

10. Transport Opportunities available for projects selected under Priority 3 Screening of mature PPPs for pilot phase of PBI: Procurement phase to be launched not later than mid-2014 Bond friendly tender documentation Similar financial viability and political support as needed to attract bank finance Screening for feasibility of PPPs for the future Develop robust value for money assessment Prepare PPP projects for Connecting Europe Facility Increased use of financial instruments at EU level 29 November 2012, TEN-T Info Days 10

11. Transport 29 November 2012, TEN-T Info Days 11 A NY Q UESTIONS ?

12. Transport 12 Stéphane Ouaki Stephane.ouaki@ec.europa.eu Katarzyna Gryc Katarzyna.gryc@ec.europa.eu Shelley Forrester Shelley.forrester@ec.europa.eu Thank you! 29 November 2012, TEN-T Info Days

13. Equity & Quasi- equity 13 European Investment Bank PBI: funded and un-funded debt Project Bonds Target rating minimum A- Bond Issue and underwriting SPV Project Costs EIB/EU Sub-debt EIB/EU Sub-debt comes as a mezzanine, sub-ordinated loan – replacing part of the bond to increase its target rating EIB/EU Unfunded Sub-debt guarantees part of the bond issued to improve the target rating Increases the amount of bonds to be issued Available during the whole lifetime of the project Can address the problem of cash shortfalls during the construction period EIB pays only when guarantee is called Project Bonds Target rating minimum A- up to 20% of total Bond issue Project Bond Investor SPV Project Costs Project Bond Investor Bond Issue and underwriting EIB/EU Un-funded Sub-debt up to 20% of total Bond issue

14. Equity from Project Sponsors EU contribution EU/EIB Risk- sharing facility (loan or guarantee) Bond issued by Project company ( with high rating on the markets thanks to the risk- sharing facility ) Institutional investors (Pension funds, Insurance companies, banks… buy PROJECT COMPANY FINANCING STRUCTURE 29 November 2012, TEN-T Info Days 14