Source: EURLEX
Language: en
Format: md

**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. Introduction

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

2.1 Public Procurement
2.2 EC Competition policy
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

3. Other Recommendations of the High-Level Group

4. Application of PPP Approach: Possible Projects

5. 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 report [1] 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 longterm 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 Procurement [2] ). 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 Communication [3] 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 legislation [4] . 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 longterm 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 riskabsorber 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 publicprivate 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 proactive 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 in cross-border projects, to bring together the key
participants and keep up the momentum of development;

(2) to ensure that support from the range of Community-level financial
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 together with 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.

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 1996 [5] . 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 privatesector 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 2236/95 [6] 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
compliance with existing procedures, including submission of the draft financial
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 socioeconomic 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
parties. The Community should analyse the feasibility of an harmonisation of
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, crossborder 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
Commission is therefore following up, as a matter of urgency, the actions
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 support the development of PPPs 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.

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

ANNEX

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

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.

**4 r**

##### **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

L-2985 Luxembourg