Published on March 6, 2014
The European PPP market: trends and developments Guy Chetrit OECD, February 2014
Introduction Objective: • Overview of PPP market developments in Europe • Look at new trends for financing PPPs in Europe • Are institutional investors filling the gap? Dataset: • DBFOs / DBFMs (including concessions) for public services which reach financial close • Sourced from commercial databases, specialised publications, EIB and EPEC Members • Provisional data for 2013 • Far from perfect! 2
The European PPP Market in 2013: out of the crisis? 3
Headlines for 2013 • Increase in aggregate market value: EUR 16.7 billion (EUR 11.7 billion in 2012) • More deals closed: 80 transactions compared to 68 in 2012 • Average deal value at EUR 208 million (EUR 188 million in 2012) • 6 large deals (over EUR 500 million) compared to 4 in 2012 • UK, Italy and France account for two thirds of the overall market value • 14 countries closed at least one deal (compared to 9 in 2012) 4
The UK still in the lead 5
Incidence of large deals (over EUR 500 million) • Thameslink rolling stock (EUR 1.9 billion) • Royal Liverpool hospital (EUR 509 million) • BreBeMi motorway (EUR 2.3 billion) • Milan Eastern ring road (EUR 1.8 billion) A1/A6 motorway Schiphol-Amsterdam-Almere (EUR 1 billion) Phase 1 of Gebze-Izmir toll road (EUR 1.1 billion) 6
Transport and education as prime sectors Value Number of transactions 7
Overall improvements but… • Weak project pipelines and issues with project quality and regulatory environments in certain places • Important PPP policy reviews have been completed / may feed a wave of ex-post evaluation analyses • Significant institutional frameworks changes are taking place in a number of countries (e.g. Cyprus, Portugal) • Financing appears to be less of an issue (although pricing is still very high) • Institutional investors are more active lenders in more mature markets only 8
Closed PPP deals involving institutional investors • Something is happening! • 17 deals over the last two years (out of 116 PPPs closed) • In 2013, almost 30% of the market • Over EUR 1.3 billion of investors debt has been secured • Long-term debt indeed (up to 41 years) • Large share of debt financing package • Availability-pay deals • Very high country concentration • Many (very) different structures 9
Structures / initiatives involving institutional investors • Many caveats to our research… • 21 initiatives, 16 in operation, 5 in preparation (1 closed down) • Over EUR 15 billion of debt available • Four main models: • Direct lending • Credit enhancement platforms • Debt funds (asset managers) • Managed accounts and soft partnerships with banks • All seek to marry the expertise of banks (or bankers) with the capital of investors 10
Structures / initiatives involving institutional investors (2) • A wide range of products (e.g. senior debt, private placements, junior debt, credit enhancement for bonds) • Mix of greenfield and brownfield to diversify risks and build an infrastructure asset class • Varying risk appetite (construction, post-completion, availability, demand) • Typical sectors with important focus on availability-based deals • Varying degrees of sophistication and transformation into commercial bank-like debt • High geographic concentration 11
Some challenges to attract institutional investors debt • There are real issues for weaker PPP countries (financing issue remains significant) • Pipelines! • Role for the public sector: • Improve regulatory and institutional frameworks • Adjust procurement processes to attract investors • Playing a more active role in refinancing 12
European PPP Expertise Centre firstname.lastname@example.org www.eib.org/epec Twitter: @EpecNews Telephone: +352 4379 22022 Fax: +352 4379 65499 13
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