Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on public-private partnerships in Trans-European Transport Network projects
Date: 1997-09-10
Institutions: European Commission
Subjects: organisation of transport, private sector, transport infrastructure, transport network, transport policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 10.09.1997 
COM(97)453  final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

ON 
PUBLIC-PRIVATE PARTNERSHIPS IN TRANS-EUROPEAN TRANSPORT 
NETWORK PROJECTS 

COMMUNICATION  OF THE EUROPEAN COMMISSION TO THE 
COUNCIL, TO THE EUROPEAN PARLIAMENT TO THE 
ECONOMIC AND SOCIAL COMMITTEE AND TO THE 
COMMITTEE OF THE REGIONS 
ON 
PUBLIC-PRIVATE PARTNERSHIPS IN TRANS-EUROPEAN TRANSPORT 
NETWORK PROJECTS 

1. 

2. 

3. 

4. 

5. 

Introduction 

Commission Response to Recommendations of the High-Level Group for 
Action by the Community Institutions 

Public Procurement 
EC Competition policy 

2.1 
2.2 
2.3  Development of Financing Instruments 
2.4 
Proactive Ways of Providing Support at EU Level 
2.5  Network and Trans-European Benefits and a PPP Database 

Other Recommendations of the High-Level Group 

Application of PPP Approach: Possible Projects 

Conclusions 

An 

COMMUNICATION TO THE COUNCIL, TO THE EUROPEAN 
PARLIAMENT, TO THE ECONOMIC AND SOCIAL COMMITTEE AND TO 
THE COMMITTEE OF THE REGIONS 
ON 
PUBLIC-PRIVATE PARTNERSHIPS IN TRANS-EUROPEAN  TRANSPORT 
NETWORK  PROJECTS 

1.  Introduction 

1. The High-Level  Group on Public-Private Partnership Financing of  Trans-European 
Transport  Network  Projects  was  set up at Commissioner  Kinnock's  initiative,  and 
with  the  agreement  of  the  Transport  Council,  in  September  1996.  The  Group 
comprised  individuals  representing all parts of the private  sector having an interest 
in the provision of transport  infrastructure,  as well as representatives  of the public 
sector nominated by their Ministers of Transport,  and the EIB and EIF.  The Group 
reported  in  May,  and  Commissioner  Kinnock  presented  the  report1  to  the  June 
Transport Council. 

2.  The  purpose  of  the  High-Level  Group  was  to  look  at  how  Public-Private 
Partnerships  (PPPs) can help accelerate  the implementation  of  the  Trans-European 
Transport  Network.  The Group concluded that PPPs do have a crucial role to play 
in this respect. 

3.  The  Commission  fully  endorses  the  recommendations  of  the  Group.  Given  the 
constraints  on public  finance,  there  is an urgent  need  to  develop  real  partnerships 
between the public and private sectors to accelerate implementation of the TEN, by 
making  complementary  finance  available  and  improving  cost-effectiveness,  so 
developing  projects  which  are  closer  to  financial  viability.  This  will  mean  that 
smaller public subsidies will be needed. 

4.  This  Communication  sets  out  how  the  Commission  will  follow  up  those 
recommendations  in which it is directly  involved.  It  sets out a number  of  projects 
which  the  Commission  has  initially  identified  on  which  a  PPP  approach,  on  die 
lines set out by the High-Level Group, would be appropriate to accelerate progress. 

5. Trans-European Networks are an essential component,  alongside the Single Market 
for  assuring  the  long-term  competitiveness  and  growth  of  the  EU,  and  thus  long-
term  employment.  That  is  why  the  proposals  in  this  Communication  will  be 
important  in the development of a European employment  strategy,  identified  as an 
urgent priority for the Union. 

Final  Report of the High-Level  Group on Public-Private  Partnership Financing of Trans-European 

Network Transport Projects (VH/321/97) 

2.  Recommendations  for Action by the Community  Institutions 

In this  section,  the  Commission  gives  its  response  to the recommendations  made by 
the  High-Level  Group  for  action  by  the  Commission.  The  recommendations 
themselves are given in bold italics. 

2.1 

Public Procurement 

The application of EC public procurement legislation, particularly the Public  Works 
and  Utilities  Directives, needs to  be  clarified. The Commission  should  elaborate 
specific guidelines which  would provide  greater  clarity  with  regards to public 
procurement procedures  to  be followed for  the award of  transport  infrastructure 
contracts. 

In line with EU public procurement legislation tendering procedures may be necessary 
in each phase  of  project  development  depending  on the public  authorities'  approach 
towards  involving  the  private  sector.  They  can  relate  to  small  service  contracts  for 
carrying  out  technical  feasibility  studies  or  preparing  traffic  forecasts,  as  well  as  to 
much  more  costly  concession  contracts  for  building,  financing  and/or  operating  an 
infrastructure  project. 

Private-sector  concerns  and  specific  points  in  EU  procurement  rules  have  been 
examined  in  order  to  favour  a  regulatory  framework  where  flexibility,  publicity, 
negotiation  and  call  for  tender  would  be  key  issues.  The  High-Level  Group 
conclusions  are  being  integrated  in  the  consultation  process  on  the  Green  Paper  on 
Public Procurement as a major contribution. 

The  Commission  intends  to  present  soon  a  Communication  on  Public  Procurement, 
forming  the  framework  for  guidelines  on  the  application  of  the  public  procurement 
legislation to infrastructure  projects, covering the following issues: 

* Relationship between Public Works (93/37/EEC) and Utilities 
(93/38/EEO Directives 

There  are  two  Directives  potentially  relevant  for  larger  transport  infrastructure 
projects  -  those  on  Public  Sector  Works  and  on  Utilities,  which  have  different 
provisions  in respect  of tendering  procedures.  The guidelines  will clarify  which  of 
these  Directives  applies.  In  most  cases,  due  to  the  nature  of  the  awarding  authority 
(public  authority  not  exercising  one  of  the  relevant  activities  under  Art.  2  (2)  of 
93/38/EEC  Directive),  the  Public  Sector  Works  Directive  will  be  the  applicable 
regime.  Thus,  the concessionaire  would be  allowed  freely  to  award  its public  works 
contracts  to  undertakings  which  have  formed  the  consortium  that  bid  for  the 
concession  contract,  or  undertakings  affiliated  to  them,  under  Article  3  (4)  of  this 
Directive. In addition,  if Directive 93/37  is applicable to the works,  the provision of 
the  supplies  connected  to  the  execution  of  the  original  works  project  will  also  be 
covered by this exception,  since such supplies may be considered  as subsumed within 
the totality of the works (see by analogy Art. 6(5) Directive 93/37). 

In  the  Utilities  sector,  to  which  directive  93/38/EEC  is  applicable,  there  exists 
considerable  flexibility  for  the contracting  entity  in the choice  of the tender  procedure 
to  be  adopted.  Thus,  for  instance,  it  is  open  to  the  contracting  entity  in  all  cases  to 
select  a negotiated  tender  procedure,  after  a call  for  competition,  which  will  permit  it 
to negotiate with the potential contractors  during the award  of contracts  (see Article 20 
(1)  Directive  93/38/EEC).  Moreover,  the  possibility  exists  to  conclude  what  are 
referred  to  as  "framework  agreements",  in  order  to  create  a  long  term  relationship 
between a contracting  entity  and  its partners  (see Article  1 (5) Directive  93/38/EEC). 

» Other contractual  aspects of PPPs 

It  should  be  remembered  that  the  current  EC  procurement  regime  only  covers  the 
stages leading up to the award  of a contract.  Thus,  some of the most  important  aspects 
of  the  life  of  a  PPP  contract,  as  described  by  the  private-sector  participants,  still 
depend  on  rules  which  are  not  harmonised  at  European  level,  even  in  the  field  of 
public procurement  (compensation for  all bidders, payments  and  financial  equilibrium, 
specifications,  etc).  They  are,  therefore,  only  governed  by  the  relevant  national 
legislation and EC competition rules. 

* Technical  dialogue and conception phase of a  PPP 

The  other  main  issue  of  concern  for  the  private  sector  was  the  proper  organisation  of 
the  preliminary  phases  of  conception  and  planning,  in  order  to  reconcile  technical 
dialogue with the protection of intellectual property  of the bidders. 

The  Commission  considers  that  technical  dialogue  is  possible  as  long  as  it  does  not 
prohibit  competition  between  potential  contractors  (see  Article  4  (2)  Directive 
93/38/EEC  "Contracting entities  shall  ensure that  there  is no  discrimination  between 
different  suppliers,  contractors  or  service  providers"  and  Article  VI  (4)  of  the 
Agreement  on  Government  Procurement2).  Should  the  technical  dialogue  with  a 
potential  contractor  lead  to  the  absence  of  call  for  tender  or  the use  of  discriminatory 
specifications,  the  Commission  would  consider  this  as  a  prima  facie  infringement.  In 
other cases, an examination  of the particular  facts  would need to be carried  out. 

Innovative  technical  solutions  from  the  private-sector  for  the  development  of  the 
project  and  fairness  of the conception  phase can be protected  by  current  European  law 
on patents and  design combined  with the use  of  adequate  clauses  in tender  documents, 
but cannot be assured  in a technical  dialogue relationship,  which  is by nature  informal. 

In  order  to  improve  the  procurement  process  by  reflecting  private-sector  concerns  in 
the  tender  documents,  the  Group  recommended  the  use  of  the  "design  contest" 
formula  providing  direct  payments  for  design  ideas  from  the private  sector  at  an early 
stage  of the global  PPP project  (see Article  13 of  Directive  92/50/EEC  and  Article  23 

2  "Entities shall not seek or accept,  in a manner which would have the effect of precluding competition, 
advice  which may  be  used  in  the preparation  of  specification for  a  specific procurement from  a 
firm  that may have a commercial interest in the procurement" 

of  Directive  93/38/EEC).  Such  an  approach  would  stimulate  the  participation  of 
potential  bidders,  because of  the possibility  for  them to recover  at least part  of their 
costs  in  preparing  the  conception  of  the  project  and  allow  the  selection  of  the  best 
ideas on an equal footing. 

From the  "design contest",  the project  authority  would decide on the broad  shape of 
the project.  It could then prepare the concession award phase on the basis of a realistic 
but challenging project  and give bidding documents to interested  concessionaires  in a 
second phase based on construction-operation proposals. 

2.2  Competition Policy 

The application  of  the EC competition  legislation  has caused some confusion and 
uncertainty amongst prospective  PPP partners.  The Group recommended  that the 
existing guidelines on the application  of the legislation,  which were  included in the 
Commission's  report to the European Council  in Madrid (COM(95)571,  December 
1995, Annex II),  should be developed to clarify their application further. 

* Access rights and capacity reservation 

A  separate  Communication3  on  clarification  of  the  existing  guidelines  to  new 
infrastructure  rail  projects  is  to  be presented  in parallel  with  the  Communication  at 
hand. 

This  Communication  on  competition  aspects  seeks  to  clarify,  in  particular,  the 
conditions  in  which  competition  rules  may  be  applicable  with  regards  to  capacity 
reservation.  It tries to reconcile the difficulty  of maximising the financial  viability of 
rail projects  whilst at the same time ensuring non-discriminatory  freedom  of access to 
infrastructure. 

Though the guidelines clarify  application of the competition rules, each case has to be 
considered  on its own merits, due to their complex and often  very  individual nature. 
Early  discussion  and  consultation  with  the  relevant  services  of  the  Commission, 
especially with regards to competition rules, is therefore advisable. 

In order  to promote a broader  discussion,  and to obtain more information  and advice 
on  the  various  issues  involved,  those  interested  (both  public  and  private  actors)  are 
actively  encouraged  to  contact  the  relevant  services  of  the  Commission  as  early  as 
possible in project development. 

Clarification  of  the  Commission  Recommendations  on  the  Application  of  the  Competition  Rules  to 

New Infrastructure  Projects  COM(97).... 

* State aids 

The  building  of  transport  infrastructure  financed  by  the  public  sector  is  a  general 
measure  of  economic  policy  and  thus  does  not  normally  come  within  the  State  aid 
rules  provided  the  infrastructure  is  open to  potential  competitors  in  accordance  with 
Community legislation4. Where the State finances infrastructure  in partnership with the 
private  sector,  the  project  may  entail  consideration  under  the  State  aid  rules. 
However,  in  such cases,  the public  support  can  frequently  be  arranged  so that  it  is 
compatible with the State aid rules. One of the best ways to ensure this compatibility 
is  to  hold  a  non-discriminatory,  competitive  tender  open  to  all  actual  and  potential 
competitors, thereby providing a guarantee that the public support corresponds to the 
minimum  needed  to  accomplish  the  project.  Once  again  early  discussion  with  the 
relevant  services  of  the  Commission  is  desirable  to  ensure  that  a  project,  given  its 
particular characteristics, is compatible with Community law. 

2.3  Development of Financing Instruments 

The  TEN High-Level Group recommended structurally subordinated loans and early 
operational stage loans as means to cope with  risks caused by uncertainties in  early 
operational  stage cash-flow  generation. The High-Level  Group also  recommended 
that steps be taken to enhance the availability of equity and, in particular,  of quasi-
equity for infrastructure projects in Europe. 

* Structurally subordinated loans and early operational stage loans 

The Group observed that many large transport  infrastructure  projects  are profitable  in 
the long term,  but  suffer  from  low cash-revenue  during  the period  immediately  after 
completion,  making  it  difficult  to  put  together  appropriate  financing  packages  for 
projects  intended  to  be  implemented  with  limited  public  sector  financial  backing. 
During the early operational stage of a project,  when its debt burden and debt service 
obligations  are at their  highest,  the revenue generated  by the project  is at  its  lowest, 
and  the  promoter  exposed  to  a  great  deal  of  uncertainty.  Structurally  subordinated 
loans and early operational stage loans were identified  as the instruments best suited to 
overcome  these  difficulties.  The  Commission  notes  that,  in  addition  to  possible 
development  of  such  instruments  in  the  private  sector,  the  development  of  these 
instruments  would  be  possible  within  the  framework  of  the  Community financial 
institutions with support from Community resources, if necessary and appropriate. 

Structurally  subordinated  loans  are  loans  of  equal  priority  to  usual  bank  debt, 
but  with  extended  maturities  (20-30  years)  and  grace  periods  which  allow 
amortisation  to  be  deferred  until  after  commercial  bank  debt  has  been 
substantially  repaid.  This  complementary  loan  instrument  would  alleviate  the 
burden of debt amortisation by spreading it over a longer period of time. 

4 

In  some  cases,  there  can  be  issues  concerning  intermodal  competition.  The  Commission  considers 
these are best dealt with through  a Community  framework  for  infrastructure  charging on which  it 
intends to produce a White Paper next year. 

Early  operational  stage  loans  are  non-amortising  loans  or  revolving  credits 
covering the early  operational period of a project.  These early operational  stage 
loans  would  convert  into  term  loans  for  sale  to  commercial  banks  in  the 
secondary  loan  market  as  soon  as  the  project  has  achieved  financial  stability. 
Thus  loan  instruments  of  this  type  would  have  the  additional  advantage  of 
allowing  the  rapid  recycling  of  public  resources.  Moreover,  the  later  sale  of 
these  loans  would  help  create  a  secondary  market  in  transport  TENs  loans 
helping to attract new commercial bank lenders to transport projects. 

The Commission notes that structurally  subordinated  loans have already been  offered 
by the EIB, in co-operation with the EIF, on a limited scale. The Commission invites 
the  EIB  and  EIF,  in  direct  co-operation  with  commercial  bank  debt  providers,  to 
increase the volume of such operations and to develop early operational stage loans. 

The EIB has been urged by the Amsterdam European Council to step up its very long-
term lending  in the area of large infrastructure  networks, and primarily  for  the Essen 
priority  projects.  The Commission welcomes the recommendations  of the High-Level 
Group,  and suggests that further  consideration  should be given to a move away  from 
requiring  full  guarantees  to  cover  this  TENs  lending  in  selected  cases.  The  TEN-T 
budget,  where  necessary  and  appropriate,  can play  a supporting  role  in this  respect, 
through the provision of interest rate subsidies and contributions towards fees for loan 
guarantees. 

* Subordinated debt and equity 

The Group noted that in Europe the  market for  the provision of subordinated  debt or 
mezzanine  finance  for  infrastructure  investment  is limited  and infrastructure  projects 
are prevented  from  taking advantage of funding  capacity  which institutional  investors 
e.g.  insurance  companies  could  provide.  The  Commission  acknowledges  that  a 
balanced  financial  structure  with  robust  layers  of  equity  and  subordinated  debt  is 
essential  for  large  infrastructure  projects,  in  order  to  raise  bank  debt.  Within  the 
Community  the  availability  of  such  funding  is  so  far  very  limited.  This  seems  to 
constitute a significant market failure for infrastructure  finance. 

Mezzanine finance  i.e.  subordinated debt or quasi-equity  in a project  is the risk-
absorber  senior to equity,  but subordinated  to bank debt;  it complements equity 
and  fills  the gap between equity  and bank debt. It adds a risk cushion to equity 
which  helps  the  raising  of  bank debt for  projects.  In  a considerable  number of 
infrastructure  projects  subordinated  debt could be the catalyst  needed  to get the 
project's financing on its way. 

Equity represents the funds  that the shareholders are willing to risk in a project. 
It  is  the  first  building  block  of  a  financing  package  and  allows  the  raising  of 
bank  debt  since  it  ranks  behind  all  debt  financing.  The  provision  of  equity  is 
therefore essential for the success of a public-private partnership. 

It  could  be  argued  that,  over  time,  such financing instruments  will  develop,  as  the 
number of projects to be financed  grows. But in practice, the absence of such finance 

is  inhibiting  the  timely  development  of  TENs  projects.  Thus  the  Commission  sees  a 
case  for  taking  action  to  stimulate  the  availability  of  such  financial  instruments.  The 
Commission,  in consultation  with the EIB and  the EIF,  intends  to examine  the setting 
up  of  a  mezzanine  fund  focused  on  TENs.  The  fund  should  play  a  catalytic  role  and 
encourage  institutional  investors' participation in the financing of TENs,  as the  market 
becomes  convinced  of  the  viability  of  the  projects.  It  would  be  a  limited  life  public-
private partnership, with institutional  investors contributing the majority  of the capital. 
Any  involvement  of  the  Community  would  respect  existing  Financial  Perspective 
ceilings.  The  Commission  has  already  commenced  an  exploratory  dialogue  with  the 
financial markets on a PPP mezzanine  fund. 

2.4  Proactive ways of providing support at EU Level. 

Innovative  ways  of  providing  public  support  for  TEN  PPP  projects  should  be 
examined [...].  Initiatives  [...]  should  be  undertaken by  the  Commission,  with  the 
technical  support  of  the  EIB  and  EIF,  in  order  to  ensure  the  optimal  and  co 
ordinated use of the public  resources provided  by the  TENs budget and the  financial 
institutions of the Community. Such initiatives would clearly need to be supported by 
Member States. 

The  Commission  supports  this recommendation,  but would underline  that  a more pro 
active role for  the Commission,  in co-operation with the EIB and the EIF, will need  to 
fully  respect  the  fact  that  primary  responsibility  for  infrastructure  development  lies 
with  the  Member  States.  Any  action  in this  area  can  therefore  only  be  contemplated 
with the full  support of the Member  States concerned.  The Commission sees two  ways 
in which a more pro-active role could be  useful: 

(1)  to  catalyse  the  early  involvement  of  the private  sector  in project  design,  so 
helping,  particularly 
the  key 
participants and keep up the momentum of  development; 

in  cross-border  projects, 

to  bring  together 

to  ensure  that  support  from  the  range  of  Community-level  financial 
(2) 
instruments  is  provided  in  a  co-ordinated  way  most  suited  to  the  individual 
project.  This  would  allow  the  impact  of  Community  financial  instruments  to  be 
maximised.  The  available  range  of  instruments  could  best  be  combined,  for 
example,  with  a  greater  use  of  some  forms  of  Community  support,  such  as  the 
financing  of the premia on EIF guarantees. 

Such  an  approach  can  only  be  applied  to  concrete  cases.  This  would  require  the 
identification  of  specific  projects  by  each  Member  State 
the 
Commission.  Firm  commitment  would  have  to be  received  from  the  relevant  Member 
State(s)  involved  in  the  examination  of  a  project  through  a  PPP  perspective.  The 
projects  can  be  at  any  stage  of  development,  with  private-sector  involvement  already 
demonstrated  or  foreseen. 

together  with 

One  of  the  problems  identified  in  the  development  of  the  TENs  is the  relatively  slow 
progress  of  several  of the projects  adopted  in Essen.  These  14 projects  were  included 

as  a  list  of  "specific  projects"  in  an  Annex  to  the  TEN  Guidelines  adopted  by  the 
European  Parliament  and  the  Council  on  23  July  19965.  They  were  the  subject  of 
attention  at  the  Cannes  European  Council  in  June  1995  and  more  recently  at  the 
Amsterdam European Council which requested the EIB to increase  its long-term loan 
commitment  to  infrastructure  networks  and,  in  particular,  to  the  "priority  projects 
adopted  at  Essen".  These  projects  do therefore  seem  a natural  starting  point  for  the 
identification  of suitable projects,  especially those which are at a stage where private-
sector  intervention  is feasible,  though not yet necessarily  involved.  However the PPP 
approach  is  also  appropriate  for  a  very  wide  range  of  TEN  infrastructure  projects, 
some  of  a  relatively  modest  nature,  which  could  help  to  liberate  public-sector 
resources for use on those projects most in need. 

Exactly  what  form  the  Commission  involvement  should  take  will  depend  on  the 
individual cases.  One option might be,  for projects  at a very early stage, to  hold,  in 
conjunction  with  Member  States,  project  design  competitions  for  the private  sector. 
Another option would be to fulfil  the role of bringing together the key participants to 
facilitate  decision-making.  It  would  also  provide  a  means  of  making  full  use  of 
Community financial  instruments in the design of the financial package. In this context 
the  association  of  the  EIB  and  the  EIF  in  the  discussions  should  also  prove  very 
useful. 

All questions and obstacles could then be addressed on a real, concrete basis, with the 
need  for  any  specific  action  from  the  Community  being  identified  and  examined  in 
each case. 

As far  as the TEN-T budget line is concerned Regulation 2236/956 states at Article 6 
(Project  selection  criteria),  §3  second  indent  that  the  decision  to  grant  Community 
assistance  should  also  take  into  account  "...the  stimulative  effect  of  Community 
intervention  on public  and private  finance".  The association of private capital  with a 
project  as  one  of  the  elements  to  be  considered  with  regards  to  financial  support  is 
therefore  already made. 

The  Commission  intends  to  make  use  of  the  full  potential  of  this  provision  and  is 
ready to take the necessary steps to ensure that those projects for which a PPP is either 
being  explored  or  developed,  receive  the  appropriate  financial  support  through  the 
TEN-T  budget  line,  and  from  other  sources  where  appropriate.  This  will  require 
including  submission  of  the  draft  financial 
compliance  with  existing  procedures, 
support measures to the TEN Financial Assistance Committee. As stated in the Treaty 
on European  Union,  Article  129d  §2 "...projects  of common interest  which relate to 
the territory of a Member State shall require the approval of the Member State". 

Participation  of  a  sufficient  number  of  bona-fide  bidders  in  the  tendering  phases 
(including  possible  "project  concept  tenders")  is  essential  to  get  good  value  for 
money.  However,  the  substantial  costs  inherent  in  the  preparation  of  bids  for  large 

Decision  n°  1692/96/EC  of  the  European  Parliament  and  of  the  Council  of  23  July  1996  on 

Community  guidelines  for  the development of the trans-European  transport  network. 

Council  Regulation  (EC)  n°  2236/95  of  18  September  1995  laying  down  general  rules  for  the 

granting  of  Community  financial  aid in the field  of trans-European  networks 

8 

infrastructure  projects  constitute  an  important  obstacle  to  wider  participation.  The 
Commission  intends  to  examine  whether  it  would  be  possible  to  grant financial 
support  to  the  short-listed  bidders  in these  specific  cases  through  the  TEN-T  budget 
line. Such support would, clearly, need to be subject to strict quality criteria. 

The  Commission  will  consider  whether  any  future  proposal  to  amend  Regulation 
2236/95,  in accordance with its Article  19, should include ways of extending possible 
support to PPP projects through the TEN-T budget line. 

2.5  Network and Trans-European Benefits and a PPP Database 

The Group recommended that trans-European and network benefits should be taken 
into account when assessing  the projects.  The Commission,  together with Member 
States,  should  ensure  that  adequate  data  and  appropriate methodologies  are 
available as soon as possible.  A European-wide database of PPP projects could be a 
useful aid to all parties involved in infrastructure development,  enabling public- and 
private-sector  actors to benefit from  past  experiences  of  PPP schemes, to improve 
future  project  designs  and  reduce  costs.  The  Commission should  explore  the 
possibilities for  and seek to actively support the establishment of such a database. 

Trans-European  and  network  benefits,  as  well  as  corresponding  impacts  on  the 
environment and safety,  are often  significant  for the assessment of the socio-economic 
case for  projects  and might  influence  decisions on whether  they  should go ahead and 
on  sources  of  finance.  (In  the  assessment  of  TEN  projects,  financial  and  socio 
economic  network  benefits  have  of  course  to be  weighed  against  the  trans-European 
network effects  on environment and safety.) 

Assessing  the  network  effects  associated  to  TEN  projects  would  facilitate  the 
implementation of projects  through a balanced distribution of costs, benefits  and risks 
among public and private partners of trans-European networks. 

The assessment of both financial  and socio-economic returns and environmental  effects 
relies  to  a  large  extent  on  the  availability  of  reliable  traffic  statistics.  Detailed  and 
reliable  traffic  data  should  be  made  available  by  public  authorities  to  all  interested 
analyse  the  feasibility  of  an  harmonisation  of 
parties.  The  Community  should 
methodologies of data collection and treatment.  The Commission thus intends to step 
up its research into common methodologies,  in co-operation with Member  States.  As 
appropriate,  this  will  be  integrated  into  the  framework  of  the  Community  statistical 
programme, 1998-2002. 

By providing  a breakdown  and  analysis  of  PPP experiences  to-date,  a PPP  database 
would allow all parties involved in transport infrastructure  development to gain access 
to  the  methodologies  and  financial,  administrative  and  legal  structures  employed  in 
other  PPP  infrastructure  projects.  The  Commission  will  explore  possibilities  for  the 
establishment of a European-wide PPP database. 

3.  Other Recommendations of the High-Level Group 

The  Group  made  a  number  of  other  recommendations  for  action  by  Member  States 
and/or  the  private  sector.  These  recommendations  stemmed  from  the  Group's  broad 
conclusion that PPP methods harness the entrepreneurial and managerial skills, as well 
as finance,  of  the private  sector,  and  so provide best value for  money  in developing 
TEN  infrastructure.  The  Commission  offers  the  following  comments  on  these  other 
recommendations : 

3.1  Public/private collaboration should start as early as possible in the life cycle 
of each particular project. 

Detailed  discussion  in  the  HLG  sub-groups  showed  that  the  greatest  benefits  to  a 
project  as a whole were gained where the private sector had contributed to the design 
and other development of a project,  before the construction and major financing  stages 
were reached. But for many current projects, private sector involvement had only been 
considered  when the construction  stage had been reached,  so removing the  flexibility 
of design adjustments to fit financing constraints. 

3.2  The public sector must, at an early stage, clearly define the aims of a project. 

It  is  essential,  when  seeking  private  sector  commitment  to  a project,  that  the public 
sector  commits  itself  equally  to  the  objectives  that  are  to  be  met  in  the  project's 
development.  Otherwise, the full  cost-benefits  of the PPP may not be realised, and the 
project's  financial viability may be jeopardised. 

3.3  The creation of ad-hoc companies is often the best approach...Member States 
should remove any remaining barriers to the creation of such vehicles. 

As  the  report  notes,  project  vehicles  provide  a  stable  framework  within  which  the 
various  partners  can  establish  a confident  working  relationship.  In particular,  cross-
border  projects,  which  have  two  or  more  national  governments  supporting  them, 
benefit  from  the  establishment  of  a  single  vehicle  having  technical,  economic  and 
commercial  responsibility  for  the  project  as  a  whole.  The  Commission  recommends 
the  formation  of  an EEIG (European  Economic Interest  Group),  which must  involve 
the  private  sector,  as  such  a  vehicle  in the early  phases  of  a project's  development. 
The  Commission  hopes  to  see the  rapid  adoption  of  the  European  Company  Statute 
(ECS) given the new possibilities  opened up by the Davignon working group and the 
accelerated  procedure  foreseen  in the Action Plan on the Internal Market endorsed by 
the European Council in Amsterdam. In cross-border projects, there will be a need for 
a  specific  Inter-Governmental  Commission.  The  identification  of  a  single  point  of 
contact  between  the project  promoters  and  the  public  authorities  will  also  streamline 
the project's  development. 

10 

3.4  Public policy risks should be borne by the public sector and there is a case for 
developing  common  approaches  to  their  definition  and  mitigation...[the  private 
and  public  sectors]  should  each  in  principle  bear  the  risks  it  is  best  able  to 
control, and has the most interest in controlling. 

Large  infrastructure  projects  such  as  the  bulk  of  TENs  schemes  require  significant 
public sector commitment particularly  in their early development stages. Lack of such 
commitment  will  at  the  very  least  significantly  increase  the  project's  costs.  It  is 
understandable  that each  sector  should  wish the other  to bear as much of  the risks as 
possible,  because  risks  represent  costs.  But a PPP  is a partnership,  where  both  sides 
have an interest in minimising risks. The sector best able to minimise the risks,  is the 
one which  is best able to control  them.  Thus,  risk  of public policy  change  is  for  the 
public  sector  to bear;  whereas  traffic  risk  would  normally  fall  on the private  sector. 
Improved  risk  allocation  will  give better  value  for  money  and more  efficient  project 
management,  as well  as bearing  on the amount of  support projects  will  require  from 
the TEN-T budget line. 

3.5  Environmental  protection considerations  should be addressed  strategically... 
at the earliest possible stage in the project planning process. 

The Commission would urge Member States to implement the relevant EC legislation. 
If projects  now being considered  are not assessed  in accordance  with this  legislation, 
they  are  likely  to  face  delays  and  uncertainty  at  a  later,  more  critical  stage.  The 
Commission  is  also  already  undertaking  the  necessary  work  to  develop  appropriate 
methods for  the strategic environmental  assessment  of the whole transport  TEN and 
for  the  environmental  assessment  of  its  corridors,  as  required  by  the  Community 
Guidelines  for  the  transport  TEN.  This  will  allow  the  better  integration  of 
environmental considerations at the early planning stages of the network development. 

3.6  PPPs should be envisaged for  a number of  priority  [and other] projects...to 
liberate public sector resources for use on [other TENs] projects. 

Clearly,  where  the  private  sector  is  contributing  skills  and  resources  that  would 
otherwise have been taken from  the public sector, those public sector resources can be 
committed  elsewhere. This  in turn will  allow  more projects  to be developed  with the 
necessary public sector support. 

11 

4.  Application of PPP Approach: Possible Projects 

Having  considered  the recommendations  directly  addressed to it,  the Commission has 
made an initial  attempt at identifying  some known TENs projects  that are suitable  for 
the  PPP  approach.  This  is  in  response  to  the  report's  recommendation  on  follow-up 
action. The aim is expressly noi to draw up a new list of priority projects; rather,  it is 
to identify  potential PPPs from within the existing priorities. 

The  projects  set  out  in  the  Annex  attached  have  been  identified  on  the  basis  of 
information  already  offered  by  Member  States,  or  discussions 
in  which  the 
Commission  has  already  participated.  Specifically,  the  following  criteria  have been, 
and would be applied to select schemes: 

(a)  they  are  economically-viable  TEN  projects,  or part  of  projects,  on part  of 

the recognised TEN; 

(b)  there is a firm and explicit commitment from the Member State concerned to 

use the PPP approach; 

(c)  a possible revenue stream identifiable  from the outset; and 

(d)  the  scheme  forms  a critical  stage/part  of  an ongoing  project,  or  is  situated 

on a cross-border axis. 

It  must  be  emphasised  that  this  is  very  much  a  preliminary  attempt  at  project 
identification.  Subject  to  Member  States'  approval,  these  and  other  possible  projects 
will  be  discussed  and  agreed  in  continuous  discussion  with  the  Commission.  The 
projects identified  fall into two groups: those at a very early stage of development, and 
those  more  advanced.  They  are  as  set  out  in  Annex  1.  For  these  projects,  it  is 
intended that the Commission,  with the EIB and the EIF,  will  make special  efforts  to 
support Member States on reaching early agreement on PPP structures and  financing. 

12 

5.  CONCLUSIONS 

The  High-Level  Group  agreed  that  public-private  partnerships  represent  an  essential 
means  of  developing  the  transport  Trans-European  networks  which  the  Maastricht 
Treaty  envisages.  The  Commission  has  previously  reported  to  the  Council  on  the 
progress  that  has  so  far  been  made,  which  has  been  slower  than  expected,  even  with 
those  projects  which  have  been  identified  as  priorities  for  development.  The 
the  actions 
is  therefore  following  up,  as  a  matter  of  urgency, 
Commission 
recommended  by  the  High-Level  Group  for  the  Commission  itself  to take,  in order  to 
facilitate  the creation of more PPPs in TENs projects. 

The  Commission  invites  the  other  institutions  to  endorse  the  conclusions  of  the 
High-Level  Group,  and 
to  accelerate 
implementation  of  transport  TEN  projects.  In  particular,  the  Commission  invites  the 
Member  States  to  urgently  identify  specific  projects  where  a  PPP  approach  would  be 
suitable. 

the  development  of  PPPs 

to  support 

While  fully  respecting  the  existing  priorities  set  out  in  the  Guidelines  for  the 
development  of  the  transport  TEN,  the  Commission  has  identified,  on  the  basis  of 
Member  States'  views,  a  number  of  projects  or  part-projects  where  a  PPP  approach 
would  seem  appropriate.  These  projects,  and  others  that  may  be  subsequently 
identified,  would  be  the  subject  of  a  special  effort  by  the  Commission  and  the  other 
institutions to facilitate  early  agreement  on a PPP  structure,  with a leading  role  played 
by  the  private  sector  in  developing  this  structure.  The  specific  approach  will  depend 
on the circumstances of each individual case. 

The Commission also invites the other Community  institutions to note that it 

(1)  proposes  to  issue  revised  guidelines  on  the  application  of  EC  public  procurement 

legislation to transport  infrastructure  concessions; 

(2)  has  reviewed  the  existing  guidelines  on  the  application  of  EC  competition 
legislation,  with a view to clarifying  them further  - a separate  Communication  has 
been addressed to this Council on the  subject. 

(3)  it has begun discussions  with the EIB and the EIF on the possible  development  of 

structurally  subordinated  and early operational  loans; 

(4)  it  is consulting  potential  private  sector  investors,  in consultation  with  the  EIB  and 

the EIF, on setting up a mezzanine fund  focused  on TENs; 

(5)  it will examine,  together  with the  EIB and  EIF,  possible  innovative  and  proactive 

ways of providing  support for  TENs projects; 

(6)  it  will  consider  possible  methodologies  for  assessing  project  benefits  at  a 
European  level  (including  from  a  strategic  environmental  perspective),  with  a 
view  to  their  use  in  assessing  the  level  of  TENs  funding,  and  will  explore 
possibilities  for  the  establishment  of  a  European  database  on  PPPs  in  transport 
infrastructure  projects. 

13 

Member  States  are  also  urged  to  make  strong  efforts  to  implement  those 
recommendations  requiring  action on their  part.  The Commission hopes that they 
will therefore: 

(1)  seek  to  involve  the  private  sector  at the  earliest  possible  stage  of  infrastructure 

project development; 

(2)  work to  remove  any remaining  barriers  to the creation  of  ad-hoc project  vehicle 

companies, particularly in the railway sector; 

(3)  press ahead with the reform  of their railway  industries, along the lines  set out in 

the Commission's White Paper; 

(4)  co-operate as fully  as possible with the private sector in developing new,  as well 

as existing suitable financial instruments to finance infrastructure  projects; 

(5)  integrate  environmental  considerations  at  the  earliest  possible  stage  into  their 

planning processes. 

14 

Possible projects so far identified  for the application of a PPP approach: 

ANNEX 

The HST south:  the Madrid -Barcelona section was proposed by sub-group II as a 
possible PPP, associating the private sector with the superstructure  investment  and 
operation  phases;  and  the  Figueras-Perpignan  section,  where  there  is  a  formal 
agreement  between the  Spanish and French governments  to develop the  section as 
a concession; 

The PBKAL,  Dutch  section,  where an  initial  examination  is being  undertaken  by 
the relevant authorities in order to establish the possibility of a PPP scheme during 
its operational phase. 

the Brenner tunnel project,  where the setting up of a public-private  partnership  for 
the  base  tunnel  section  is aimed  at  (a  concession  for  construction  and  operation), 
and where an EEIG will be created in the short term, to be responsible for both the 
technical  project  planning  and  legal  and  financial  analysis  in  preparation  for  the 
PPP. 

The new Berlin airport, where possibilities for the establishment  of an ad-hoc legal 
and financial package are being explored. 

The  Semmering  tunnel  project  (part  of  the  Pontebbona  axis  linking  Austria  with 
Italy),  where  the  tendering  procedure  for  a  BOOT  concession  is  currently  under 
way. 

The Piraeus-Athens rail connection. 

Member States are invited to put forward additional projects which are appropriate  for 
a  PPP  approach,  and  the  Commission  is also  considering,  with  the  EIB,  what  other 
projects may be suitable. 

4r 

ISSN 0254-1475 

COM(97) 453  final 

DOCUMENTS 

EN 

07  08  06 

Catalogue number  :  CB-CO-97-470-EN-C 

ISBN 92-78-24632-8 

Office  for Official  Publications of the European Communities 

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