Waste Management System for the City of Poznan PPP Incineration Plant Project. December 2011

Transcription

1 Waste Management System for the City of Poznan PPP Incineration Plant Project December 2011

2 Project Background Financial situation of the City limited City resources, high indebtedness of the City EU grant New waste legislation in Poland (July 2011) Complex Project New PPP legislation (2009) no large PPP projects completed successfully so far Timetable Experience first large hybrid PPP in Poland, first large incineration plant project in Poland 01/12/2011 Page 2

3 Contract (EPC) Contract (O&M) PPP agreement Project Structure Residents Municipal waste management fee Charges for collection and delivery of municipal waste from residents EU funds Private Partner s remuneration Poznan City Cession of PPP agreement payments (or other collateral) excessive third party revenue / profit or deductions/ contractual penalties The Poznan project will be carried out in DBFO (design-buildfinance-operate) scheme Transport companies Private Partner (or SPV) Loan agreements Financing institutions Recipients of the products Third party revenues, e.g.: from sale of heat from sale of electricity from sale of green certificates from sale of recovered recyclables Equity and/or subordinated debt Investors * Private Partner (or SPV) General contractor Operator (*) Subcontractors Collaborators 12/1/2011 Page 3

4 UE Grant (5) Qualified expenses refund (6) Transfer of project own contribution (2) Payment for construction works executed Implementation Body Poznan City Private Partner Construction work subcontractor (4) Request for payment (3) Transfer of the paid invoice for construction works (1) Invoice for construction works executed Expenses related to the implementation of the Project, namely the construction of the installation (qualified expenses) will be covered by the Private Partner (authorized entity) who will transfer the invoices received from subcontractors to the City. Invoices will be the basis for submitting the request for payment and obtaining reimbursement by the City of expenditure incurred by the Private Partner from the EU grant. 12/1/2011 Page 4

5 Challenges timetable (1/3) Timetable interdependence between the PPP tender process and the EU grant application 30/06/ /10/2011 Current project stage 03/2012* 10/2012* Application form Application form appraisal Conditional financing agreement JASPERS appraisal Submitting application form to EC UE appraisal UE decision Application form update Suggestion To make project viable in the assumed timeframe - either the approach of the EC should be more flexible or the interdependence should be broken otherwise. 12/1/2011 Tender announcement Private Parters submitting bid applications Competitive dialogue procedure Selection of Private Partner * Preliminary schedule The financial structure of the project will be discussed and prepared with shortlisted bidders during the competitive dialogue Page 5

6 Challenges timetable (2/3) Timetable EC requires mature projects (EIA, building permits, etc.) The regulation 1083/2006 determines the scope of information on major projects to be sent to the EC. However, in practice, the EC demands more information than required e.g. results of PPP tender. Suggestion EU grant approved at an earlier stage on conditional terms. 01/12/2011 Page 6

7 Challenges timetable (3/3) Timetable PPP process is lengthy and sometimes may overlap with subsequent programming periods It may take up to 10 years to implement a PPP project since the conceptual phase. The EU programming periods assume there are only 9 years to implement the project and settle EU grant. In practice the period is shorter because the negotiations on cohesion policy and operational programs with Member States often end later than the start of eligiblity period. Suggestion Conditions of EU grant approval in each programming period should be known as early as possible. The rules relating to phasing of large projects should be absolutely clear from the outset of each programming period 01/12/2011 Page 7

8 Challenges: EU grant uncertainty to obtain the grant / uncertainty of the level of grant (1/3) Who can and who should take the risk of not getting EU grant or getting it lower than expected? Beneficiary Private partner may apply for the EU grant Solution: Allowing for a switch between public and private beneficiary during the PPP process Questions: In practice, are the private partners willing to take a risk of applying for EU grant? Should they include EU grant in their bids or be obliged to apply for it having been selected? Will the EC change policy and allow for switching a private partner beneficiary during the PPP process? How to incentivise private partner to apply for EU grant? Poznan solution: The City controls the grant process and takes the risk of applying for EU grant. In case EU grant is not obtained higher costs are to be borne by inhabitants. The clear split of obligations between the city and a private partner should be included in the PPP contract in relation to EU grant management and settlements. 01/12/2011 Page 8

9 Challenges: EU grant uncertainty to obtain grant / uncertainty of level of grant (2/3) Funding gap might be revised based on the private partners tenders Risk of loss or reduction of the amount of grant as a result of tender results or changes in the Project New revenue sources (e.g. green certificates after 2017) or fundamental change in tariff policy - the obligation to recalculate the funding gap. For funding gap calculation purposes project revenues are revenues of the City of Poznan (fees from residents and infrastructure) - the risk of grant reduction due to changes in income controlled by the City. The risk of grant reduction due to decrease in capex (change in grant amount without the necessity to recalculate the funding gap). Considered solution: Project structure based on availability payments. The changes in CAPEX will have impact on EU grant level. Suggestion: In the next financial perspective safeguards on the EU grant level is a good solution 01/12/2011 Page 9

10 Challenges: EU grant uncertainty to obtain grant / uncertainty of level of grant (3/3) Funding gap might be revised based on the private partners tenders Unknown project revenues Unknown funding gap level Unknown private partner bids Unknown EU grant level Unknown financing costs Unknown private equity 01/12/2011 Page 10

11 Document purpose This document was compiled by Corporate Finance sp. z o.o. ( EYCF ) and has been prepared solely for information purposes in connection with utilizing EU funds in PPP projects. This document is not intended to provide a basis for financing the Project and should not be seen as a recommendation to participate in the Project. Any entity interested in participating in the financing or other activities in relation to the Project is responsible for conducting their own analysis. This document is based on publicly available data and the information contained in it has not been verified by EYCF and EYCF do not bear any responsibility to any parties that may obtain a copy of this document. 12/1/2011 Page 11

12 Contacts Jarosław Błaszczak Partner Corporate Finance Sp. z o.o. Rondo ONZ 1, Warsaw Tel: Łukasz Piekarski Chief Expert, Department for Individual Projects' Preparation Lukasz.Piekarski@mrr.gov.pl Ministry of Regional Development ul. Wspólna 2/4, Warsaw Tel.: /1/2011 Page 12