PUBLIC TRANSPORT INVESTMENT FINANCING Karolis Dekeris Urban Transport
PUBLIC TRANSPORT INVESTMENT FINANCING Karolis Dekeris Urban Transport Consultant to EBRD
Content • • • About EBRD Has the moment come for private operators? Can private contribute to a better service quality? Things important to banks financing public transport Conclusions
European Bank for Reconstruction and Development (EBRD) • Owned by 64 shareholder countries and organisations • Active in 36 countries of operation • Annual business volume EUR 9 billion Estonia Latvia Lithuania Number of projects 79 71 76 Investment to date, in EUR million 595 585 629 Value of current portfolio, in EUR million 104 249 120 Private sector share 86% 64% 62%
Municipal & Environmental Infrastructure Department finances: • District heating • Solid waste • Water and waste water About half of portfolio is urban transport projects
Kaunas Public Transport Project (2004) • Bank’s first loan to a municipal bus operator in Kaunas without a municipal guarantee • Based performance-based gross cost Public Service Contract • Corporate Development Programe of UAB Kauno autobusai (Lithuania) with impressive performance improvements
Content • • • About EBRD Has the moment came for private operators? Can private contribute to a better service quality? Things important to banks financing public transport Conclusions
UT Challenges at a City Level • Lack of borrowing capacity for investment needs • High agenda toward sustainability goals in the context growing car ownership • Call for liberalization of services • Growing diversification in technology
Public Operators Dominate the Market • Stagnating quality of service • Strong trade unions and ever growing cost • Weak lobby when it come to tariff adjustment • Delayed investments • Often focus on technology rather than on passenger and service quality At the same time… Minibus era left bad association about private operators
Context Delaying Private Operators Involvement • Regulatory framework • Know-how and experience in contract management • Lack of equipment to sustain system’s integration (AFC and AVL) • Inefficient network • Weak private operators Currently many cities has these issues behind
Private operators could • Provide good benchmark of PT service cost and quality for public operators • Reduce bargaining power of trade unions • Facilitate timely adjustments in tariffs • Bring more investment into public transport • Attract more passengers and revenue to the system
Content • • About EBRD Has the moment came for private operators? Can private contribute to a better service quality? Things important to banks financing public transport • Conclusions
What is important for banks?
Commencement of service provision
Tender for buses Delivery of buses Advance payment for buses Remaining payment
Tender for buses Delivery of buses Financial analysis
Project Assessment by the Bank Market Tender Contract Operator City
Project Assessment by the Bank • Controlled, • Competitive Market Tender Contract Operator City
Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract Operator City
Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract • Well structured, • Balanced Operator City
Project Assessment by the Bank • Controlled, • Competitive • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract • Well structured, • Balanced • Experienced, • Creditworthy Operator City
Project Assessment by the Bank • Controlled, • Competitive • Capable • Has sector strategy • Prepared by experienced consultant, • Open, transparent and competitive Market Tender Contract • Well structured, • Balanced • Experienced, • Creditworthy Operator City
Financing Application Process Overview 1 2 3 4 5 6 7 • Request for financing • CONCEPT approval • Signing Mandate Latter • Project Assessment • Term Sheet Signing • FINAL approval • Loan Signing
IMPORTANCE OF PUBLIC SERVICE CONTRACT
Things to consider in the contract • Ensure strict payment mechanism, including penalties for delayed payments • Clearly defined scope of service with flexibility to amend it • Indexation formula • Strong and balanced contract termination clauses • Dispute resolution mechanism
Things that also help… • The longer the contract – the better • Part of operator’s payment comes from fare revenue • Penalties not too excessive • Clear reporting and information exchange requirements
EBRD’s Technical Cooperation Funds Available for project preparation and implementation Project development stage: • Preparation of PSC and tender document package • Feasibility studies for larger projects (PPP) • Investment and Business plans Implementation stage: • Corporate development programmes • SUMPs • Market liberalisation strategies • Gender inclusion and environmental for companies strategies • ITS projects, etc.
Summary • Private operators can contribute to overall public transport service improvement • Engagement with financiers early increases chances of success • Time constrains needs to be properly assessed • EBRD can still be source of financing in Baltics in particular for private operators
QUESTIONS?
CONTACT DETAILS Matthew Jordan-Tank Head of Infrastructure Policy European Bank for Reconstruction and Development One Exchange Square, EC 2 A 2 JN London, United Kingdom Tel: +442073386000 Email: jordantm@ebrd. com Presentation by: Karolis Dekeris Urban Transport Consultant to EBRD LT-48334, Kaunas, Lithuania Tel: +370 640 15 406 Email: karolisdek@icould. com
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