Case Study 08.10.03 Norwegian Experience with Highway Concessions 2nd Workshop on Applied Infrastructure Research Dr. Ansgar Bendiek, Head of Infrastructure and Maritime HSH Nordbank, Hamburg, Germany
08.10.03 Page 2 Content. � The Norwegian Road Program � E 39 Klett-Bardshaug: Financing – Decision Making Process – General terms – PPP - Road Projects – Structure � E39 Klett-Bårdshaug: Project – Tenor & Repayment Description – Security & Guarantees – Map – Risk Allocation – Scope of work � Timetable – Main Elements � Outlook – Project Contracts – Scope of Work
08.10.03 Page 3 The Norwegian Decision Making Process Road Program � Decision in the Storting to test the PPP concept – Autumn 1998: The Storting asks the Government to propose road projects to test the PPP concept � National Transport Program – February 2001: The Storting approves three road projects. Aims to test efficiency and effectiveness in achieving political objectives through the PPP model. � E39 Klett – Bårdshaug – June 2001: The Storting approves the financing of new E39 Øysand – Thamshamn, partly financed by tolling, and asks the Vegdirektoratet to procure E39 Klett – Bårdshaug as a PPP- project.
08.10.03 Page 4 The Norwegian PPP - Road Projects Road Program � E39 Klett – Bårdshaug, Sør-Trøndelag – Financial Close and Construction start-up 04/2003. Completion 09/2005. Construction cost NOK 1.3 billion � E39 Lyngdal – Flekkefjord, Vest-Agder – Indicative Bid 09/2003. Scheduled Financial Close and Construction Startup 04/2004. Construction cost NOK 0.8 – 1.1 billion. � E18 Kristiansand – Grimstad, Aust-Agder – Pre-qualification 2003. Construction cost not defined.
08.10.03 Page 5 Project Desciption E 39 Klett- Bårdshaug: Map
08.10.03 Page 6 Project Desciption Scope of work � Engineering, Procurement and Construction: Øysand- Thamshamn 21.9 km. Approx. 2,5 year construction period. Cost NOK 1.3 billion. � Operation and Maintenance: Klett-Bårdshaug 26.9 km. Concession period 25 years. � Financing of construction and operating period.
08.10.03 Page 7 Project Desciption Contractual Structure The Storting Additional Right to Ministry of Transport Funds collect toll Toll Company Users Vegdirektoratet Toll Toll AP, Three Party Agreement MMP, PPP Contract TP, SP, and ERC Loan Equity Skanska BOT AB Debt Lenders Orkdalsvegen Repayment Return Laing Roads Fixed Price Turn O&M Contract Key Contract D&C Construction O&M Contractor Contractor Company Based on Statens Vegvesen Vegdirektoratet Selmer Skanska AS
08.10.03 Page 8 Project Desciption Project Parties � Tendering Authority: Statens Vegvesen Vegdirektoratet � Sponsors � SPC � Lead Arrangers
08.10.03 Page 9 Project Desciption Main Elements � Two lane highway. � 7 tunnels, totalling 10.2 km. � 4 main intersections. � Daily traffic: – 7,900 AADT at Øysand – 5,600 at Thamshamn
08.10.03 Page 10 Project Desciption Project Contracts � Concession Contract – 25 years operation, plus 2.5 years construction – Risks placed with party that can influence them – No traffic risk – Payment subject to completion – Payment mechanism during operation linked to performance – Handover to Vegdirektoratet at end of concession � Evaluation criteria: Net Present Value of future payments
08.10.03 Page 11 Project Desciption Project Contracts � EPC Contract – Fixed-price date-certain turn-key contract – Back-to-back w/ concession (quality, dates, penalties, etc) – Penalties for non-performance (delays etc) � O&M Contract – Defined service level for 25 years – Back-to-back w/ concession (services, penalties, reporting, etc.) – Penalties for non-performance
08.10.03 Page 12 Project Desciption Payment Mechanism � Concept – Monthly/annual unitary payments being available for the SPC, but with the actual level of payment being varied according to performance against a number of pre-defined criteria. � Five Elements – Availability Payments – Maintenance Monitoring Payments – Safety Payments – Traffic Payments – Early Repayment of Construction Cost
08.10.03 Page 13 Project E 39 PPP Road - Scope of Work Description Storting Toll Collector Candidate (SPV) � Design � Construction � Operation � Toll Collection � Availability Payment � Legal Framework
08.10.03 Page 14 Financing General Terms � Borrower Orkdalsvegen AS � Sponsors Skanska BOT and Laing Roads � Facility NOK 1,414 million � Bank Syndicate HSH Nordbank Lead Nordea Arranger Svenska Handelsbanken Dexia Co- IKB Arranger ING SEK
08.10.03 Page 15 Financing Structure Combined construction and long-term facility: Tranche A NOK 1,150 million Tranche B - NIB tranche NOK 300 million Total NOK 1,450 million
08.10.03 Page 16 Financing Security & Guarantees � Security - Assignment of contracts and other rights - Pledge on SPC shares - Pledge on assets � Guarantees - D&C and O&M contract backed by Skanska AB � Reserve Accounts - 6 months DSRA - MMRA built up over 2 years in advance � Hedging - Interest fixing (swap) required
08.10.03 Page 17 Financing E 39 PPP Road - Risk Allocation and Means of Mitigation State SPV Shared � Geotechnical Risks � � Planning Risks � Construction Risks � Operational Risks Financial Risks • Inflation � • Interest / Currency Risks • Insolvency � Payment Risk � Political Risks � Force Majeure
08.10.03 Page 18 Timetable Timetable E39 - I 15 January 2003 Appointment of preferred bidder final negotiations, due diligence, documentation 7 April 2003 Financial Close 26 June 2003 Syndication Closed April 2003 Construction start-up September 2005 Road completion
08.10.03 Page 19 Conclusion Conclusion � Norway‘s first PPP project E39 I has successfully proven – Interest from bidders ➭ availability of contractors – strong support from banks ➭ availability of funds – favorable terms and conditions ➭ competitive bidding – sound risk allocation and sharing ➭ Public Private Partnership � groundbreaking reference for projects to follow!
08.10.03 Page 20 Outlook Outlook � Potential Scandinavian follow up projects – Norway: • E18 Grimstad-Kristianssand (Motorway) • Sandnes-Stavanger, new double track railway – Denmark: • Parking facility Ørestad, Copenhagen • Link across Roskilde Bay – Finland: • E18 Tusken -Helsinki Motorway
08.10.03 Page 21 Structured Corporate Finance The Infrastructure & Maritime Team
08.10.03 Page 22 Infrastructure & Maritime - The team and the market. � The Infrastructure and Maritime Team as part of the Structured Corporate Finance Division offers advisory and arranging services. Our Market: � Infrastructure (Roads, Tunnels, Bridges et al) � Maritime infrastructure (Substructures, Container, Öl & Gas terminals) � PPP-projects (Schools, Hospitals, Prisons et al) Utilities � � Broadband cable market
08.10.03 Page 23 Team Infrastructure & Maritime. Dr. Ansgar Bendiek Tel. +49 (0)40 / 3333 13484 Team head Fax +49 (0)40 / 3333 6 13484 e-Mail ansgar.bendiek@hsh-nordbank.com Maik Tschentschel Tel. +49 (0)40 / 3333 12584 Fax +49 (0)40 / 3333 6 12584 e-Mail maik.tschentschel@hsh-nordbank.com Thorsten Lundius Tel. +49 (0)40 / 3333 10062 Senior Manager Fax +49 (0)40 / 3333 6 10062 e-Mail thorsten.lundius@hsh-nordbank.com Matthias Meyer Tel. +49 (0)40 / 3333 12662 Senior Manager Fax +49 (0)40 / 3333 6 12662 e-Mail matthias.meyer@hsh-nordbank.com
08.10.03 Page 24 Team Infrastructure & Maritime. Carl Augustin Tel. +49 (0)40 / 3333 14611 Senior Manager Fax +49 (0)40 / 3333 6 14611 e-Mail carl.augustin@hsh-nordbank.com Petra Hoefle Tel. +49 (0)40 / 3333 12789 Manager Fax +49 (0)40 / 3333 6 12789 e-Mail petra.hoefle@hsh-nordbank.com Karen Raguse Tel. +49 (0)40 / 3333 13530 Junior Manager Fax +49 (0)40 / 3333 6 13530 e-Mail karen.raguse@hsh-nordbank.com Phillip Staake Tel. +49 (0)40 / 3333 13250 Assistance Fax +49 (0)40 / 3333 6 13250 e-Mail phillip.staake@hsh-nordbank.com
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