Investment Opportunities: The next wave of PPP projects

Report
Ireland Infrastructure Briefing
in association with Osborne Clarke & Inspiratia
Investment Opportunities: The Next Wave of PPP Projects
10th September 2013
Introduction and Background
Track Record in Ireland of successful PPPs
• Historic

9 major inter-urban motorways/by-passes

5 education PPPs, including 15 schools

International Convention Centre

Major criminal courts complex

Motorway Services Stations contract
• And recently….

N11 roads contract (April 2013) and Schools Bundle 3 (November 2012)

A further roads contract is scheduled to close by end 2013
3
Investment Partners in our PPPs to date
Project
FC Date
Operator
Equity Investor(s)
Funders
EIB, Bank of Scotland
National Maritime
College
2003
FocusEducation
Bovis Lend Lease, Bank of
Scotland (Focus Education Ltd)
5 Schools PPP
2003
HSG Zander
Hochtief, HICL (Infrared)
Barclays
N4 N6 Kilcock
Kinnegad
2003
Eurolink Motorway
Operations
Cintra, DIF Infrastructure II
EIB, BBVA, Santander
M1 Dundalk Western
Bypass
2004
North Link M1 Ltd
BAM PPP, Semperian, DIF
Infrastructure II
EIB, SG, AIB, Depfa, KBC
M8 Rathcormac
Fermoy Bypass
2004
Intolligent Ltd
KBR, Strabag, Lagan,
Roadbridge, FIIF, Uberior
EIB, AIB, ING, KBC
Cork School of Music
2005
HSG Zander
Hochtief PPP Solutions, HICL
(Infrared)
Barclays
N25 Waterford Bypass
2006
South Link N25 Ltd
Dragados, NTR, BAM
EIB, BBVA, Santander
N7 Limerick Southern
Ring
2006
Intolligent Ltd
Strabag, Sisk, Lagan,
Roadbridge, Meridiam, AIB
EIB, AIB, HBOS, Meridiam
Courts of Criminal
Justice
2007
G4S
INPP (Amber Infrastructure)
KBC
4
Investment Partners in our PPPs to date
Project
FC Date
Operator
Equity Investor(s)
Funders
Convention Centre
Dublin
2007
NEC (SDCCD No.2
Ltd)
Treasury Holdings (SDCCD Ltd)
AIB, Depfa, Barclays, Ulster
Bank
M3 Clonee Kells
2007
Eurolink Motorway
Operations
Cintra, Siac
BBVA, Santander, Credit
Agricole
N6 Galway to East
Ballinasloe
2007
N6 Operations Ltd
FCC, Itinere, PJ Hegarty
EIB, Banesto, Fortis, MCC,
RBS
M50 Upgrade
2007
M50 Concessions
FCC, Itinere, PJ Hegarty
EIB, La Caixa, Fortis, MCC,
RBS
M7 M8 Portlaoise
Castletown Culahill
2007
Mid Link M7 M8 Ltd
BAM, Iridium, NTR
EIB, SG, BOI, ING
Schools Bundle 1
2009
Sodexo Ireland Ltd
Macquarie (MPFI)
BOI
Service Areas T1
2009
Applegreen
Tedcastle, Petrogas, Pierse
BOI
Schools Bundle 2
2010
Sodexo Ireland Ltd
Macquarie, Sisk (Pymble)
EIB, BOI, NIBC
Schools Bundle 3
2012
BAM FM
BAM PPP, PGGM
EIB, BOI, NPRF
N11 Arklow Rathnew
2013
BAM Civil Ltd
BAM PPP, PGGM
EIB, BOI, NPRF
5
Irish Government Stimulus Package and PPP
Programme: Phase 1 (announced in July 2012)
Appendix 1: Stimulus Package PPP Projects
Appendix 2: Ireland Regaining Creditworthiness
€1.4 billion Phase 1 PPP Programme
Education

12 Schools to be delivered in 2 bundles
‐ A single prequalification procedure with access to 2 lots of 6 schools
‐ OJEU notice published for both bundles in June 2013. PQQ submissions
received in July 2013
‐ Authority to secure Full Planning Permission based on Specimen
Designs

Grangegorman/DIT Campus: 2 Quadrangles – expected to be procured as a
single project
- PIN published August 2013, OJEU expected early October 2013
Health

Primary Care Centres: circa 15 sites
‐ Single-supplier national framework
‐ Authority to secure Full Planning Permission based on Specimen
Designs
7
€1.4 billion Phase 1 PPP Programme
Justice

3 Divisional Garda HQs : single contract expected

7 Courthouse developments: single contract expected

Authority to secure Planning Permission based on Specimen Designs
Transport

2 new road procurements have commenced in 2013 (by National Roads
Authority, with NDFA as financial advisor)
‐ N25 New Ross Bypass; OJEU notice published in March 2013.
Shortlisted consortia announced in August 2013
‐ M11 Gorey to Enniscorthy; OJEU notice published in July 2013

N17 N18 Gort to Tuam scheme forecast to reach financial close in Q4 2013

All PPPs so as to be “off balance sheet” in accordance with EuroStat rules

Standard availability based payment mechanism proposed for all schemes
8
Market consultation
• Sponsors, equity
• Debt Funders
• Contractors/FM
• Professional service providers
9
Issues and concerns
• Pipeline
• Deal size
• Sovereign credit rating
• Availability of funding
• Previous project cancellations
• Process – cost and duration
10
Meeting the challenges
Potential debt funding sources identified
•
European Investment Bank
•
Council of Europe Development Bank
•
National Pension Reserve Fund

To be re-orientated as Ireland Strategic Investment Fund (ISIF), with €6.4 billion discretionary
portfolio available for commercial investment in Ireland (including PPPs)

Required legislative changes (in draft form) approved by Government, to be signed into law
later this year
•
Domestic banks
•
Other Private: domestic (e.g. pension funds) and foreign (e.g. banks, pension
funds, insurers)
•
Part of the proceeds realised from sale of “State assets” is available to fund
project elements that require up-front exchequer spending.
12
Potential Funding for the Programme
Schools
Third Level
Campus
Primary
Care
Justice
Projects
Roads
EIB


under review


CEB

tbc
tbc


NPRF





Domestic
Banks
Expressions of support received for lending into PPP Programme
Other
Private
(domestic
& foreign)
Subject to market testing / consultation
Asset sale
Proceeds





13
Initiatives to reduce bid time and cost
•
Overall objective to reduce bid costs for private sector partners by 50%
•
Development of specimen/exemplar designs for repeat building types

Schools, Primary care centres
•
Target reduction of procurement schedule to between 15 mths (schools) and 18 mths (from
OJEU Notice to financial close/contract award)
•
Publication in advance of indicative capital budget
•
Reduced submissions and no draft tender submission stage
•
Expect to continue to use Negotiated Procedure
Policy decision agreed by Government in December 2012
•
Reimbursement of part-bid costs for bidders/PT in event of PPP project cancellation
•
Reimbursement of part-bid costs to unsuccessful bidders (with a compliant bid)
14
Negotiated Procedure (envisaged for all schemes)
3 months
Pre-Qualify & Shortlist Tenderers
Invitation to Negotiate
5-8
months
Authority Secures Planning
Already in place for roads
Conclude Negotiation
Submit Tenders
Authority Term Sheet
2 months
Appoint Preferred Tenderer
Debt Funding Sourced
5 months
Contract Award
15
Other initiatives
•
Increased “Self-declaration” regime for pre-qualification stages
•
PA: Remove requirement for Authority Bond
•
PA: Reduce/remove “Change-in-Law” provisions (in line with PF2)
•
PA: Review insurance provisions (in line with PF2)
BUT
•
Expect to keep “soft FM” services with private sector
•
Areas for innovation: increased focus on

energy use and performance of buildings; and

Lifecycle material/equipment decisions
as part of the technical/quality evaluation
16
Indicative schedule (subject to market conditions)
Indicative Timeline
2013
Q2
Q3
2014
Q4
Q1
Q2
2015
Q3
Q4
Q1
Q2
Accomodation Schemes
Schools Bundle 4
OJEU
Schools Bundle 5
OJEU
Funding/Fin. Close
Funding/Fin. Close
Primary Care Centres
OJEU
Funding/Fin. Close
PQQOJEU
Grangegorman/DIT
Justice Programme 1
Funding/Fin. Close
OJEU
Justice Programme 2
Funding/Fin. Close
OJEU
Funding/Fin. Close
Road Schemes
N17 N18
N25 New Ross Bypass
M11 Gorey to Enniscorthy
Funding/Fin. Close
PQQ
OJEU
OJEU
Funding/Fin. Close
Funding/Fin. Close
Appendix 1
Stimulus Package PPP Projects
Education – PPP Schools
• 2 PPP contract bundles expected of 6 schools each
• OJEU notice published for both bundles in June 2013. PQQ submissions
received in July 2013
• Continuation of successful PPP programme

15 schools completed; FC on 8 further schools in Nov ‘12
• Standardised PPP contract in place
• Standard availability-based payment mechanism
• NDFA to develop specimen
designs with full planning
permission
• Technical adviser appointed
Kildare Town: a post-primary school for 1,000 pupils
19
Demographics driving need for places
45,000 additional
Primary school places
by 2018
Total number of Pupils Registered
600,000
24,900 additional
Secondary school
places by 2017
Primary
Secondary
500,000
400,000
300,000
200,000
100,000
2007/8
2008/9
2009/10
2010/11
2011/12
2013/14
2017/18
20
Education – New campus, Dublin
• Development is part of the consolidation of Dublin Institute of Technology
(“DIT”) onto a new campus
• 57,000 m² of teaching space in two major buildings
• Expected to be procured as a single PPP project
• Standard availability-based payment mechanism
• Capex estimated circa €200m
• Site in central Dublin has special planning status to facilitate development
• First planning applications lodged (site infrastructure)
• Technical advisor appointed
• www.ggda.ie
21
Grangegorman DIT Campus
Healthcare facility:
near completion
Central Quad
East Quad
22
Health – Primary Care Centres
• Circa 15 sites to be developed
• Single supplier national framework-type structure
• Does not involve GP or healthcare related services
• HSE/NDFA to procure planning permission
• Common template (specimen) design
• Availability-based payments
• Potential Phase 2 developments
23
Justice – Garda (Police) Regional HQs
•
3 locations identified

Dublin, Galway, Wexford
•
Total capex estimated circa €65m - €75m
•
Special planning consent regime
•
Standard availability-based payment mechanism
•
Single contract expected
Dublin, Kevin Street Site
24
Justice - Courthouses
• 7 locations identified

Cork, Drogheda, Letterkenny, Limerick, Mullingar, Wexford and Waterford
•
•
•
•
Single contract expected
Total capex estimated circa €120m
Will follow special planning consent regime
Refurbishment/development of existing historical structures a feature of
some sites
• Standard availability-based payment mechanism
Wexford Court House - Schematic Development
25
Second PPP Roads Programme
• 2 new road procurements to commence in 2013
 N25 New Ross Bypass:
‐ OJEU notice published in March 2013
‐ PQQ submissions received in June 2013 with shortlisted consortia
announced in August 2013
‐ 14.6km dual carriageway, 1.2km of single carriageway including an
extrados bridge of c. 900m

M11 Gorey - Enniscorthy:
- OJEU notice published in July 2013
- 28 km new build motorway

Standard availability-based payment mechanism
26
Appendix 2
Ireland: Regaining Creditworthiness
Ireland continues its macro/fiscal recovery in 2013
•
Government deficit of 7.5% of GDP in 2012 means target was beaten by a wide margin
again; this time full percentage point below EU (EDP) target
 Second year of outperformance, following deficit 1.5pp of GDP lower in 2011
 Fiscal data for first half of 2013 point to further progress; Revenue slightly better-thanexpectations and expenditure control is quite tight
 EDP target of 7.5% of GDP looks readily achievable at this stage
•
Second consecutive year of real and nominal GDP growth in 2012
 Export growth remained resilient in 2012, despite weak external demand
 Domestic demand bottoming over last nine months, ending five-year drag
 Unemployment rate drops from high of 15.1% to 13.7% as of latest data
 Ireland’s GDP growth expected to be among highest in euro area for 2013/14
•
Banking-related contingent liabilities for the State reduced sharply
 Pillar bank deleveraging almost complete: haircuts smaller-than-feared
 State has reformed insolvency laws to deal with mortgage debt overhang
 Ireland's main contingent liability being reduced: NAMA is well on track to repay €7.5bn
of its senior bonds by end-2013 (repaid €6.25bn thus far)
 Ending of ELG scheme for new liabilities after 28th March 2013 marks significant step
towards banking system normalisation; ECB reliance now only ~20% of GDP
28
NTMA working plan to normalise market access in
2013 is on track
•
NTMA issued a new 10yr benchmark Treasury Bond in March 2013
 Sold €5bn of 2023 bond at 4.15% through a syndicate of six primary dealers; first 10yr
issuance since January 2010 (well below previous yield of 5.09%)
 Broad investor interest: over 400 investors submitted bids, including fund managers,
pension funds, banks and insurance companies
 82 per cent by overseas investors; mainly from the U.K. (25%), Germany (12%), the Nordic
region (12%), France (11%) and U.S. (7%)
•
NTMA also issued conventional bond via syndication in January 2013
 Sold €2.5bn of 2017 bond at 3.32% through syndicate of five primary dealers: the first
such syndicated deal for three years
 Investor spread was broad-based and skewed towards real money accounts across the
UK, euro area and US
 This followed the initial return to the Treasury Bill and bond market in 2012
•
Next steps towards sustainable market re-entry in early 2014
 Continue regular schedule of Treasury Bill auctions – rate fell to 0.2% or lower over 5th–
11th auctions (Jan-Jul 2013) from 1.8% at first auction (July 2012)
 Continue to engage with investors on a regular basis: the NTMA conducted two non-deal
road shows each year during both 2011 and 2012
 Possibility of MLT bond auction(s) in Q4 2013 after Budget 2014
29
Irish bond market recovery continues in 2013 (yld: %)
25
20
15
10
Bank Losses on NAMA
Haircuts; Rising ELA;
Deauville Agreement
Moody's
Downgrade EU/IMF Loan
Rate
LTRO
Reduction
Announced
PCAR
by ECB
Results
EU/IMF
EU Summit
Programme
Commitment;
NTMA
Recommence
Issuances
OMT
5
0
Jan 10 Apr 10
Jul 10
Oct 10
Jan 11 Apr 11
Jul 11
Oct 11
10 Year
Jan 12
Apr 12
Jul 12
Oct 12
NTMA
returns
with
syndicated
bond deals
Jan 13 Apr 13
2 Year
Source: Bloomberg (weekly data)
30
Foreign ownership of marketable bonds is high
€ million
End quarter
March
2012
June
2012
September
2012
December
2012
March
2013
1. Resident
18,755
22,447
24,211
24,387
51,600
(23.5%)
(27.0%)
(27.4%)
(27.8%)
(43.0%)
– MFIs and Central Bank
17,158
20,083
21,285
21,784
49,126
– General Government & Financial
Intermediaries
1,392
2,180
2,737
2,416
2,271
205
184
189
188
203
60,896
60,684
64,295
63,466
68,483
(76.5%)
(73.0%)
(72.6%)
(72.2%)
(57.0%)
Total MLT debt
79,651
83,131
88,506
87,853
120,083
Total MLT debt (adjusted for
IBRC Promissory Note repayment ) *
79,651
83,131
88,506
87,853
95,049
– Households & Non-Financial Corporations
2. Rest of world
Source: Central Bank of Ireland
* The Mar-2013 holdings are adjusted here for the recent IBRC Promissory Note repayment (non-cash settlement) which
resulted in €25bn of long-dated Government bonds being issued to the Central Bank of Ireland on liquidation of IBRC. This
transaction results in a large increase in the share of resident holdings.
31
Total funding requirement declining steadily (€bn)
•
Funding requirement
substantially improved since
Budget 2013 (Dec. 2012)
following sale of BOI CoCos and
Irish Life. Restructuring of IBRC
Promissory Note and extension of
EFSF/EFSM maturities also of
significant benefit
25
EFSF/EFSM maturity extension and banking-related deals meant
that 2014-15 funding requirement was dramatically reduced;
NTMA has already pre-funded that lower 2014 requirement
(shaded) via its 2012 and 2013 market forays
20
15
•
•
Cumulative NTMA Funding
Requirement for 2014-15 now
c.€11bn lower than at Budget
2013
End-June cash and other financial
assets of €30.6bn provide a
considerable funding buffer for
future years
Source: NTMA; Department of Finance
10
5
0
2014
2015
Exchequer Borrowing Requirement (Budget '13, Dec 2012)
Exchequer Borrowing Requirement (SPU, April 2013)
Latest Est. Funding Requirement
Est. Funding Requirement (Budget '13, Dec 2012)
1. “Est. Funding Requirement” includes the EBR, maturing Government bonds and EU/IMF Programme loans.
2. EFSF loans have been extended by a weighted average 7 years . EFSM loans are also subject to a 7 year extension.
It is not expected that Ireland will have to refinance any of its EFSM loans before 2027. A €5bn EFSM loan originally
32
due to mature in 2015 is therefore no longer part of the “Latest Est. Funding Requirement” in 2015.
.
Exports continue to drive recovery as domestic drag
lessens (annual real GDP growth contributions, p.p.)
6.0
Percentage point contributions
3.0
0.0
-3.0
-6.0
-9.0
-12.0
2007
2008
Net Exports
2009
2010
Value of Stocks
2011
2012
2013
Domestic Demand (ex. Stocks)
2014
2015
2016
Real GDP
Sources: NTMA, CSO and Department of Finance (SPU April, 2013)
33
Ireland’s balance of payments current account surplus
reflects large-scale rebalancing of economy (% GDP)
8.0%
6.0%
Highest quarterly surplus on
record in Q1 2013 (5.6% of
GDP), but may be somewhat
flattered by record net factor
inflows
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: CSO
34
Ireland’s competitive position vastly different to
the other non-core countries
Current Account Balance (% GDP)
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
2002
Spain
2004
2006
Greece
2008
Ireland
2010
Italy
2012
Portugal
Source: DataStream
35
Ireland is far more open than other non-cores
Source: Eurostat
Note: Based on 2012 data
36

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