Alstom Transport supplier of Tram Systems in PPP schemes

Alstom Transport supplier of Tram
Systems in PPP schemes
Arnaud de Monts
04/04/2014
Various procurement schemes
A tramway system can be procured in various schemes, each of them have been experimented
in various environment but return on experience to adapt the best scheme to a particular
project taking into account the presence of existing tram system, the legal framework, the
credit worthiest of the organizing authority, the financial environment, the long term vision
for such system,…
Three main options are existing:
• Lot by lot procurement including an engineering lot
• The turnkey design & build procurement
• The PPP / Concession scheme procurement
Presentation title - 31/03/2014 – P 2
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Contract type
Separate lots
Tax payer
Transport Authority
Public sector
to finance
Interface management
Rolling Stock
Signaling
Infrastructure
Civil works
full
construction
investment
Passengers
Operator
Presentation title - 31/03/2014 – P 3
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Maintenance
Some Alstom references in lot by lot
Madrid Spain MINTRA LRT
30 Citadis vehicles 32 m, 100% low floor, bidirectional
Power supply PARLA line
Signaling PARLA line
Tram life service: 36 (27+9) trams under 2 technical
maintenance contract from start up of operation
Grenoble France SMTC LRT
35 +15 Citadis vehicles 43 m, 100% low floor, bidirectional
Track works
Istanbul Turkey ULASIM LRT
37Citadis vehicles 28 m, 100% low floor, bidirectional
Presentation title - 31/03/2014 – P 4
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Transport Authority
Public sector
to finance
Interface
Project management
management
Tax payer
Separate
Full
turnkey
lots
Turnkey consortium: Interface &
Project management
Contract type
Rolling Stock
Signaling
Infrastructure
Civil works
full
construction
investment
Passengers
Operator
Presentation title - 31/03/2014 – P 5
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Maintenance
Some Alstom references in turnkey procurement
Dubai United Arab Emirates RTA LRT
Turnkey
11 Citadis vehicles 43 m, 100% low floor, bidirectional
Track works with Appitrack
Power supply with APS
Signalling & telecom
E&M
System engineering
Depot
Tram life service: Full system maintenance from start up of
operation (Trams & Infrastructure)
Oran Algeria EMA LRT
Turnkey
37Citadis vehicles 32 m, 100% low floor, bidirectional
Power supply
Signalling & telecom
E&M
System engineering
Presentation title - 31/03/2014 – P 6
Depot
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Contract type
Separate
Full
PPP
turnkey
lots
Public sector
to finance
part of
investment
and/or
operation
subsidies
Passengers
Turnkey consortium: Interface &
Project management
Transport Authority
Interface
Project
management
management
Concession
company
Tax payer
Rolling Stock
Signaling
Infrastructure
Civil works
Operator
Lenders
Operator
Shareholders
Presentation title - 31/03/2014 – P 7
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Maintenance
Financing
Maintenance
Alstom’s references in Concessions and PPPs
Arlanda Airport Link
Manchester Metro Line
1
Nottingham LRT Line 2
Rouen Metrobus Line 1
Reims LRT Line 1
Milan metro Line 5 +
extension
Florence LRT Lines 2&3
CNM High Speed Line
Barcelona LRT Ph 1 & 2
Jerusalem LRT Line 1
Alicante-Albacete
ERTMS
Participation sold
In operation
In construction
Presentation title - 31/03/2014 – P 8
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Barcelona
Barcelona Trambaix LRV
Concession SPC : Trambaix
Contract type : Concession DBFOM
- Length : 28 years
- Private financing : 50 %
- Partial revenues/traffic risk transfer to Concessionaire (technical tariff)
15 km line including Rolling Stock:
- 19 LRVs
- Civil Work (light no big structures),
- Power supply, signalling, track
- System engineering
- Operation & Maintenance
Project history :
> Traffic risk mitigated by technical tariff and traffic bands
> 31 months between RFQ publication and financial close
> Selection criteria based on NPV after an eliminatory technical
qualification
Main milestones :
- Contract signature : November 2000
- Financial Close: July 2001
- Revenue service phase : April 2004
Presentation title - 31/03/2014 – P 9
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Barcelona Trambesos LRV
Concession SPC : Trambesos
Contract type : Concession DBFOM
- Length : 28 years
- Private financing : 50 %
- Partial revenues/traffic risk transfer to Concessionaire (technical tariff)
14 km line including Rolling Stock:
- 18 LRVs
- Civil Work (light no big structures),
- Power supply, signalling, track
- System engineering
- Operation & Maintenance
Project history :
> Traffic risk mitigated by technical tariff and traffic bands
> 10 months between award notification and financial close
> Selection criteria based on NPV after an eliminatory technical
qualification
Main milestones :
- Contract signature : January 2003
- Financial Close: April 2003
- Revenue service phase : May 2005 & May 2007
Presentation title - 31/03/2014 – P 10
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Jerusalem LRT
Concession SPC : CityPass
Contract type : Concession DBFOM
- Length : 28 years
- Private financing : 30 %
- Partial revenues/traffic risk for the Private (minimum revenues
guaranteed)
14 km line including Rolling Stock:
- 46 LRVs
- Civil Work (light no big structures),
- Power supply, signalling, track,system engineering
- Operation & Maintenance
Project history :
> Traffic risk mitigated by minimum guaranteed according to bands
> 31 months between first bid and financial close
> Selection criteria based on NPV after an eliminatory technical
qualification
Main milestones :
- Contract signature : October 2002 / October 2004
- Financial Close: January 2005 (CPs left / start of work January 2006)
- Revenue service phase : August 2011
Presentation title - 31/03/2014 – P 11
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Reims LRT
Concession SPC : Mars
Contract type : Concession DBFOM
- Length : 30 years
- Private financing : 60 %
- Revenues/traffic risk for the Private
11 km line including Rolling Stock:
- 22 LRVs
- Civil Work (light no big structures),
- Power supply, signalling, track
- System engineering
- Operation & Maintenance (including bus network)
Project history :
> Traffic risk mitigated by existing bus network where revenues were known
> 27 months between award and financial close
> Selection criteria based on NPV after an eliminatory technical qualification
Main milestones :
- Contract signature : July 2006
- Financial Close: July 2008
- Revenue service phase : April 2011
Presentation title - 31/03/2014 – P 12
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Nottingham LRT
Concession SPC : Tramlink
Contract type : Concession DBFOM
- Length : 30 years
- Private financing : 60 %
- Mix of revenues/traffic risk and availability payment for the Private
17 km lines 2 & 3 including Rolling Stock:
- 22 LRVs
- Civil Work
- Power supply, signalling, track
- System engineering
- Operation & Maintenance
Project history :
> Traffic risk mitigated by existing line one (revenues on day one) and
availability payment by the authority
> 12 months between award and financial close
> Selection criteria based on NPV after an eliminatory technical qualification
Main milestones :
- Contract signature : December 2011
- Financial Close: December 2011
- Revenue service phase for new lines: December 2014
Presentation title - 31/03/2014 – P 13
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Lessons learned
Direct or indirect government support is crucial to projects because :
-
Mass transit system do not reach financial equilibrium with fare revenues only
Capital subsidy paid alongside construction has been implemented for successful projects
Lenders may ask for government guarantees on the debt provided at least during operation
Lenders ask for fair compensation from authority in case of contract termination even for contractor default
Full revenue risk transfer in projects does not represent Value for Money because :
- Banks take low patronage forecast associated with expensive risk profile credit
- Need for higher than normal use of expensive equity capital to face lower than expected revenues
- REX prove that successful project have been implemented with mitigation like minimum revenue guarantee,
availability payment with symbolic traffic risk, existing established revenues stream
- More and more new projects are based on only availability and performance revenues
Ongoing concession and PPP projects implemented are greenfield because:
- Contractors reluctant to take the risk of the conditions of existing assets
- Modernization sections are usually managed by the public infrastructure owner through a traditional
procurement
-However in Tram urban transport existing line or bus operation can be a source of initial revenues to extend
the network
Risk transfer to the private sector:
Presentation title - 31/03/2014 – P 14
- Limited to the rail industry capacity to deal with such risks
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Reminder: Rail infrastructure Concession scheme with
traffic risk
Conceding
Authority
Capital
subsidy
Shareholders
(Industrials/Investors)
Equity
Dividends
Concession
Contract
Operating
subsidies
Loan
Concessionaire
(Special Purpose Company SPC)
EPC Turnkey
Contract
EPC
Consortium
Presentation title - 31/03/2014 – P 15
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Debt service
Lenders
(Banks, ECA, etc..)
Operation &
Maintenance
Contract
O&M
Company
Users
(Passengers or
Operators)
Reminder: Rail infrastructure PPP scheme without
traffic risk
Fare or
Access fee
Conceding
Authority
Capital
subsidy
Shareholders
(Industrials/Investors)
Equity
Dividends
Concession
Contract
Availability
payments
Concessionaire
(Special Purpose Company SPC)
EPC Turnkey
Contract
EPC
Consortium
Presentation title - 31/03/2014 – P 16
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Users
(Passengers or
Operators)
Loan
Debt service
Maintenance
Contract
Maintenance
Company
Lenders
(Banks, ECA, etc..)
Recommendations
We recommend PPP schemes :
- with a strong support of Government
- without traffic risks (or strongly mitigated)
- with availability payments based on performance
- for new lines / greenfield scope of works
- to follow some key terms required by the specific features
of the PPP (see after)
Presentation title - 31/03/2014 – P 17
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Key terms required by the specific features of the PPP
1. Clear allocation of risk
• Defining feature of PPPs
• ideally follows the party who controls and can manage such risk
• can be shared: change in laws, hardship…
2. Contract Adjustment Mechanisms devised to
• Ensure the continuity of the Public Service
• Maintain the contract economic balance throughout the life of the project
3. Private partner’s compensation in the event of termination (dictated by the fact
that the private partner finances the project)
4. Private Partner’s right on the land during performance of the contract
5. Ownership of equipment/buildings built on public land during contract
performance and upon termination
Presentation title - 31/03/2014 – P 18
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Key terms required by the specific features of the PPP
2. CONTRACT ADJUSTMENT MECHANISMS
A. When an unforeseen event occurs that prevents performance of the Contract
• PPP contracts typically include a FM clause which defines Force majeure and specifically
describe Parties rights and obligations (compensation, termination…)
B. When an unforeseen event fundamentally alter the equilibrium of the contract resulting in
an excessive burden being placed on one of the parties involved
• PPP contracts typically contain a hardship clause (discussions to discuss way forward,
compensation, additional time, right to terminate)
C. When a change in law impacts the costs or time for performance
• PPP Contracts typically include a clause which defines the consequences of a change in law
D. When the Public entity by its action, increases the burden of performance for the private
partner
• PPP Contracts typically include a clause which defines the consequences in greater details
(indemnification, extension of time, right to terminate,…)
Presentation title - 31/03/2014 – P 19
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Key terms required by the specific features of the PPP
3. COMPENSATION OF THE PRIVATE PARTNER UPON TERMINATION
A. Voluntary termination by the Public Authority:
Compensation is necessary to avoid a situation of unfair enrichment for the Public Authority
• Compensation mechanism provided for in PPP contracts is typically financing based:
defined by reference to the financing raised by the Private Partner for the project,
subordinated debt and equity.
• In addition to the base amounts mentioned above, compensation also usually covers
third-party costs and lost profits
B. Termination by the Public Authority for breach:
The principle of compensation of the private partner is widely accepted to avoid an unfair situation
• The compensation mechanism provided for in PPP contracts is typically based on the
senior debt outstanding at the time of termination (“Debt-Approach)
C. Termination on account of Force Majeure/Hardship
A prolonged force majeure event or severe hardship situation should give a right to both contracting
parties to terminate the PPP contract. General consensus is that the Private should be compensated
the compensation mechanism provided for in PPP contracts usually covers sums owed to
senior lenders (e.g. debt outstanding, unpaid interest, hedging breakage costs), the
equity contributions paid in by investors as well as payments owed to the subcontractors
Presentation title - 31/03/2014 – P 20
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Key terms required by the specific features of the PPP
4. PRIVATE PARTNER RIGHT ON THE LAND
The PPP Law should provide that the public entity may transfer land to the Private Partner through sale,
making available, transfer of use, lease or rental for the duration of the PPP contract without cost
5. OWNERSHIP OF EQUIPMENT/BUILDING ERECTED OR INSTALLED BY THE PRIVATE
PARTNER
Installation/erection on public land
• Title to Equipment/building can automatically transfer to the Public Authority however
PPP Contract should grants to the Private Partner the right to use and benefit from
such assets during the term of the contract
Installation/erection on private land (depot for example)
• Private partner owns the assets during the term of the contract
• PPP contract must define the financial conditions for the transfer of ownership upon
expiration of the contract
Presentation title - 31/03/2014 – P 21
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
To Conclude some key success factors for PPP financing
-
Realistic assessment of the investment cost and of the passenger traffic/revenues at the
‘feasibility’ stage
-
Sustained political and budgetary support to the project
-
Adequacy of legal concession frame with international standards, including:
-
-
Adequate compensation in case of early termination
-
Possibility for banks to step-in prior to termination
Well-balanced risk sharing between the conceding authority and the concessionaire
-
-
Basic rule: each risk must be allocated to the party which can manage it the best
Strong, committed and experienced international and local partners for construction,
operation, and financing
-
Impact of financial crisis : banks are less prone to finance big investments with
construction and ridership risks
Presentation title - 31/03/2014 – P 22
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
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APENDIX: Other Alstom Transport
successful PPPs
Presentation title - 31/03/2014 – P 24
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Nimes Montpellier Bypass HSL (1/2)
Concession SPC : OC’VIA
Contract type : PPP DBFM
- Length : 25 years
- Private financing : 66,3 %
- Availability payment
60 km + 20 km of connections including :
- Civil works
- Track
- Electrification
- Signaling and telecommunications
Project history :
> No traffic risk, availability payments made on performance
> Financial close in less than 4 months
Main milestones :
- Contract signature & Financial close : June 2012
- Revenue service phase : October 2017
Presentation title - 31/03/2014 – P 25
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Alicante Albacete HSL
Concession SPC : ALBALI
Contract type : PPP DBFM
- Length : 20 years
- Private financing : 63 %
- Maintenance fee payment in addition to asset fee payment
165 km including :
- ERTMS 2 signaling / interlocking
- Centralized traffic control and safety installations,
- Fixed & mobile Telecommunications (GSM-R)
- Related energy and civil works
Project history :
> No traffic risk, availability payments made on performance
> 14 months between publication and financial close
> 50 % of selection criteria based on maintenance cost and organisation
Main milestones :
- Contract signature : January 2012
- Commercial operational phase : January 2014
Presentation title - 31/03/2014 – P 26
© ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or
correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without
notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.