1. III Astana Economic Forum. Ensuring Sustainable Economic Growth of Countries in Post-Crisis Period July 1-2, 2010 JSC «Kazakhstan public-private partnership center» ROUND TABLE: PRACTICAL ASPECTS OF PPP,S FINANCIAL CRISIS IMPACT, FUTURE PERSPECTIVES AND COUNTRY RISKS Antonio M. López Corral Professor at Polytechnic University of Madrid Responsible of Master in Infrastructure, Facilities and Utilities Management Astana, July 1 - 2, 2010

2. ROUND TABLE: PRACTICAL ASPECTS OF PPP´s SUMMARY 1.Developed countries: Spanish case -Use of PPP´s -Financial and economical crisis impact 2.Emergent countries 3.Training the actors

3. LAST YEARS SPANISH PPP -Spanish Administrations use regularly PPP contracts -80% of contracts came prepared from regulatory framework We do not have PPP Central Unit in our Administrations, but

4. HIGHWAY ANDTOLL HIGHWAY NETWORK 4

5. MADRID: REGIONAL HOSPITALS IN CONCESSION 5

6. UNDERGROUND PARKING CONCESSIONS IN MADRID

7. PUBLIC WORKS FINANCING AND FINANCIAL CRISIS: CHARACTERISTICS - Liquidity problems -Bigger price for risks -Bigger debt cover ratio -More equity -Substitution of Project Financing by Corporative Financing -As consequence, investment expenses will remain in the balance of concession holder -Problems to finance demand risks (economical crisis)

8. -Budget cuts have frozen projects already underway and others that would be tendered soon - Economic crisis and changes in financial markets have left out feasibility concessions in operation, under construction and others recently awarded - But, in short term, it is necessary to solve two problems: - Finding out solution to the feasibility of actual concessions - Use the concession system for new projects CHARACTERISTICS OF FINANCING SPANISH INVESTMENTS NOW

9. Out of possibilities offered by the Courts, to recover financial and economic equilibrium of concession, the parties, grantor and concession holder, have other options: 1. Reverse the contract by mutual agreement, under the conditions that set the Law 2. Grantor, unilaterally, citing reasons of public interest, reverse the contract under the conditions set by the Law POSSIBLE SOLUTIONS FOR NO LONGER FEASIBLES CONCESSIONS (I)

10. 3. Concession holder, with the authorization of the grantor, sell the concession to other investor with a discount rate that makes it feasible for the new concessioner. 4. Grantor give a loan to a great operator of concessions, to buy with discount concessions with problems. 5. Grantor create a public company and would give an equity contribution to reverse the concessions with problems under the conditions established by the Law. POSSIBLE SOLUTIONS FOR NO LONGER FEASIBLES CONCESSIONS (II)

11. 1. Budgets will be scarce, probably marginal, 2. Most new projects will need concessional financing. The client of the concession holder will be the user and sometimes the administration itself, which will pay it for availability and/or shadow toll 3. Projects will be better and will offer more return to the private sector, because competition will decrease USE OF CONCESSION SYSTEM FOR NEW PROJECTS (I)

12. 4. Grantor will offer financing and some guaranties to bidders 5.Financial markets, once stabilized, will re- structure the financing like project financing 6. Financing will be more expensive and the required capital of shareholders will also be higher. Demand risks will must be mitigated to be financed USE OF CONCESSION SYSTEM FOR NEW PROJECTS (II)

13. USE OF CONCESSION SYSTEM FOR NEW PROJECTS (III) Spanish Government has announced a program of concessions of 17 billions € trying that answer to this characteristics

14. ROUND TABLE: PRACTICAL ASPECTS OF PPP´s SUMMARY 1.Developed countries: Spanish case -Use of PPP´s -Financial and economical crisis impact 2.Emergency countries 3.Training the actors

15. 1.Stability and security 2.Enough capacity of payment of users 3.Reliable regulatory framework: Publicity, Transparency and no discrimination 4.Infrastructure plan and mature projects portfolio CONCESSION CONTRACTS: CONDITIONS FOR IMPLEMENTATION (I)

16. 5. Strong political support 6. Institutional capacity to develop projects. 7. Participation of local actors 8. Participation of multilateral agencies CONCESSION CONTRACTS: CONDITIONS FOR IMPLEMENTATION (II)

17. DIAGNOSIS OF SITUATION

19. RECOMMENDATIONS ON THE FIRST ADJUSTMENTS - Identify projects to be contracted - Make feasibility studies - Give political support to projects - Ask for support to local economic agents and financiers - Work well the specifications, mitigate risks and allocate them efficiently - Establish evaluation criteria in such a way that a bad candidate could not win - Do the necessary to get 56 points or more - Train the officers

20. ROUND TABLE: PRACTICAL ASPECTS OF PPP´s SUMMARY 1.Developed countries: Spanish case -Use of PPP´s -Financial and economical crisis impact 2.Emergency countries 3.Training the actors

21. TRAINING THE ACTORS IN SPAIN 1.Polytechnic University of Madrid (UPM) has a MASTER on Infrastructures, Facilities and Utilities. We have just finished 8 th Edition (master.infraestructuras@ciccp.es).master.infraestructuras@ciccp.es - We have prepared till now 250 experts - We use 50 cases studies (all over the world) 2.UPM has also a Course on line on Infrastructure and Facilities Management. We have finished the 4th edition - We have prepared 120 officers of different Latin - America Administrations 3.UPM is preparing now a Global Course on line in English language, on Infrastructures, Facilities and Utilities Management, that we wait to begin at the end of 2010

22. THANK YOU © Antonio M. López Corral Antonio M. Lopez Corral Polytechnic University of Madrid Teléfonos: (+34) 91 536 32 71 (+34) 91 533 44 96 Fax: (+34) 91 536 32 71 E-mail: alopezcorral@telefonica.netalopezcorral@telefonica.net