Lessens and case study from the Tans-European Rail Network (TEN-T) to the region. The presentation highlights Structuring, financing and implementing this massive 900 billion euro investment with focus on risk transfer. The region can learn greatly from TEN-T projects across Europe in terms of overcoming regulation barriers to cross border infrastructure projects and in exploring the lending facilities and guarantees used by the European Investment Bank (EIB), state Governments and the Private sector to fund this project.
2. TEN – T Overview
EU Commission, TENs Budgets, Policies & Funds
EIB TENs Financing Role
EIB 2012 Preview & Financial Standing
EIB Financing Facilities , Funds & PPP’s
Lessons Learnt: TEN – T Financing Shortfalls
Lessons Learnt: Compelling PPP Logic
Lessons Learnt: Regulatory & Standardization
Lessons Learnt: Barriers to Cross-Border Projects
Lessons Learnt: Europe Single Railway Area
Lessons Learnt: Privatization Future - The British Railways Example
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 2
4. The “Europe 2020” Strategy was endorsed in
March 2010 by the European Council
“Europe 2020” Priorities:
Priority 1: Smart growth
(Innovation, Education, Digital Society)
Priority 2: Sustainable growth (Climate, Energy
and Mobility, Competitiveness)
Priority 3: Inclusive growth (Employment and
Skills, Fighting Poverty)
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 4
5. TEN-T – European Union Investment challenges
75,200 kilometers of roads
79,400 kilometers of railways
430 Airports
270 International seaports
210 Inland ports
Traffic Management Systems, User Information and
Navigation Services
TEN-T – Objectives
The development of TENs aims to provide:
High-quality infrastructure supporting the links
between the 27 EU Member States and connecting the
EU and the countries of the European Neighborhood
Interconnection and interoperability of existing
national networks
Access to the basic networks, permeating the benefits of
the Trans-European Networks over the whole EU
territory
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 5
7. Full Ten-T Network Cost - EUR 900 billion (from 1996 to 2020).
EUR 500 billion remaining, as of 2009
Cost of Priority Projects alone - EUR 415 billion (from 1996 to
2020). EUR 253 billion remaining, as of 2009
The estimated TENs investment requirement in 2007-2013 is
over €350bn
TEN-T investment programs are too large for the public sector
to develop alone without increased private sector risk
participation.
The credit crisis has had significant impact on the volume of
transactions, speed of closing, margins, and tenors.
Syndication and wrapped bond markets dried up.
Currently uncertainties relating to the scale of investments
and the way it are to be financed.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 7
8. EU, Budget Lines and Structural & Cohesion Funds - 15%
EIB Loans Finance - 15-20%
National Resource Finance - 40-50%
Private sector risk finance needed to finance 20-25%
Volume of Investments EUR Support Rate
(2007 - 2013) bn
Member States 196
TENT-T Budget (direct) 8 Up to 30% (10% in reality)
Cohesion + Structural (CS) Funds 47 Up to 85%, grants, technical support
EIB loans 54
Funding Gab 45
Total 350
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 8
9. PPP/concessions have been used widely for
road, bridges/tunnels, light rail, heavy rail, airport and
seaports projects at national and subnational level in
the EU.
Several EU Member States have used transport projects
concessions like Austria, Belgium, Bulgaria, Czech
Republic, Cyprus, Denmark, Finland, France, Germany, G
reece, Hungary, Ireland, Italy, the
Netherlands, Latvia, Poland, Portugal, Romania, Slovaki
a, Spain and the United Kingdom
Despite extensive use of concessions in transport sector
,YET NO explicit reference to PPP in 2004 EU public
procurement legislative package. EU now are
Introducing new process of Competitive Dialogue in
new legislative package (intended to make PPP easier)
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 9
11. “Convergence” Objective: regions in which GDP per head does not reach
75% of the EU average – Funds set at € 283 billion (81.5% of EU budget)
for 84 regions – 154 million people
“Regional Competitiveness & Employment” Objective: regions facing
difficulties or changes in key sectors, decline of traditional activities,
economic/social crisis, deterioration in urban areas, depopulation of
rural areas - Funds set at € 55 billion (16%) ,168 regions – 314 million
people
“Territorial Cooperation” Objective - Funds set at € 8.7 billion (2.5%)
The policies focus on enhancing accessibility and strengthening regional
economies and achieving cohesion and competitiveness with railways,
mobile rail assets, motorways, multimodal and inland waterways being a
key element. (Consumes nearly 1/3 of the budget).
Cohesion Policy builds capacities in Member States for project
identification, selection, implementation and management in addition to
financial engineering project preparation and financing.
Cohesion Policy finances up to 85% of the total costs of the project in
convergence regions.
Cohesion Policy finances up to 50% in competitiveness and employment
regions.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 11
12. EU’s long term lending bank set up in 1958 by the Treaty
of Rome, to promote EU objectives and policies in several
sectors.
Shareholders: 27 EU Member States.
The EIB supports projects through loans, guarantees and
venture capital.
Employs about 1500 people.
World’s largest multilateral financial institution with total
assets of EUR 300bn, mainly financed by bond issuances.
Rated AAA by S&P, Moody’s and Fitch.
EIB - European Priority Objectives within the Union
Cohesion and convergence
Small and medium-sized enterprises (SMEs)
Environmental sustainability
Knowledge Economy (i To i)
Trans-European Networks (TENs)
Sustainable, competitive and secure energy
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 12
13. Mobility is essential for the free movement of people and economic
growth. EIB strives for the most efficient, most economic and most
sustainable way of satisfying transport demand.
The EIB will continue its strong commitment to the funding of TENs as
the backbone of transport investment in the EU and essential for the
functioning of the internal market.
Funding railways, inland waterways and maritime projects will continue
to be a priority as these are intrinsically the most promising in terms of
reducing greenhouse gas emissions per transport unit. The same
applies to urban transport and intermodal hubs.
Further emphasis will be given to RDI activities with vehicle
manufacturers whatever the sector involved. This should primarily
focus on ensuring energy efficiency, emissions reduction and safety
enhancement.
Preliminary Outcomes
EIB is well placed with its current product portfolio
Refinement of EIB offers in order to close market gaps that have become visible
during the recent economic and financial crisis
EIB does and will continue to support of safer/smarter/cleaner transport
infrastructure and vehicles
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 13
23. EIB adds value to TENs Transport and Energy :
Mobilize on competitive terms the large amounts necessary to co-finance
the building of this infrastructure;
Offers maturities tailored to the long construction and operating periods
of the schemes concerned;
Provides structured finance as a complement to commercial bank and
capital market funding.
Establishes equity funds to finance TEN-T Infrastructure such as the
2020 European Fund for Energy, Climate Change and Infrastructure – the
Marguerite Fund - to invest in minority participations with other
strategic investors greenfield infrastructure projects in TEN-T, TEN-E and
renewable energy (loan facility of €5 billion, Investment period of 4
years, Duration of the Fund: 20 years)
Many green field transport projects are sub-investment grade unless
supported or guaranteed by government/pubic authorities or credit
enhanced. EIB provides such support
Senior lenders require expensive additional buffers (e.g. lower gearing/
higher cover ratios, contingent mezzanine debt and equity). EIB provides
such facilities.
In current market circumstances, projects need supplementary
robustness in order to attract private financings in traffic related
infrastructure investments. EIB provides rump up guarantees.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 23
24. It is desirable for projects to be presented to the Bank at the
earliest possible stage by potential Promoters , Commercial
Banks , Public Authorities and International or National
Development Finance Institutions.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 24
25. Project scope must fall under EIB eligible sectors
(e.g.
transport, environment, energy, education, health, et
c.) and at least one of the EIB objectives
EU procurement rules, particularly publicity and
environmental legislation must be observed.
Technical and economic feasibility must be
demonstrated under conservative assumptions
including market, job creation, and economic rate of
return.
Satisfactory credit risk level under EIB own
assessment.
Information to be provided to EIB also include;
General and legal information about the main
shareholders;
Financial information, historic and forecast (balance
sheet, P&L, business plan);
Confirmation legislation;
25
27. Loan Guarantee Instrument for TEN Transport projects (LGTT): EUR 5 bn
EIB guarantee program for which EUR 1 bn risk capital has been jointly
provided by the EIB and EU budget. LGTT shares the revenue / traffic
risk in the early years of TENs projects
Structured Finance Facility (SFF): to fund projects with a higher risk
profile to enable equity financing; mezzanine and guarantee operations
for infrastructure schemes
Investments in Equity Funds: EIB invests in equity funds, e.g.
Marguerite, which in turn take direct equity participations in
infrastructure investments
European PPP Expertise Centre (EPEC): expertise service provided by
the EIB and European Commission to support program and policy
development as well as best practice by the public sector for PPP
transactions.
Joint Assistance to Support Projects in the European Regions (JASPERS):
a joint policy initiative of EIB, EBRD and KfW to provide assistance for
absorption of Structural & Cohesion Funds period 2007 to 2013
European Clean Transport Facility (ECTF) : is a major EIB financing
program to support investments targeting RDI (Research, Development
and innovation); emissions reduction and energy efficiency.
EIB participation in PPPs
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 27
28. LGTT is a specialized risk based instrument created in 2008
jointly EIB & European Commission to support demand-based
PPPs with transfer of traffic risk. Both have committed evenly a
total of €1 billion over the next years (until 2013) .All TEN-T
projects are eligible
The LGTT Guarantee Facility is designed to provide contingent
stand-by mezzanine debt to promoters and thereby to protect
senior debt. EIB will only be repaid out of cash available post
senior debt service.
The Capital Commitments of €1bn enable LGTT Guarantees of €
5bn to be issued based on a 20% provisioning ratio with a
maximum €300 per transaction and up to 7 years from
construction completion (ramp-up phase). Residual risk is borne
by the EIB Balance Sheet.
In current crises, LGTT proved decisive to attract senior lenders
and to close sound TEN-T PPP projects with traffic risk
components from near-investment grade to better funding cost.
LGTT is particularly useful to mitigate refinancing risk in Mini-
Perm structures.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 28
29. Purpose of SFF is to increase EIB leverage value added and
financing capacity while limiting amounts financed. SFF
financing of EUR 4.2 bn in 2008, EUR 5.8 bn in 2009
SFF allows EIB to increase the leverage on its own funds
and those of the Commission Budget through structured
finance.
SFF allows EIB to reach projects with a credit quality that
previously might not have qualified for EIB financing.
Strategic objectives established by the Bank include the
building of a significant and sustainable SFF program,
transforming these activities into a mainstream element
of the Banks’s lending with a focus on high priority
sectors of TENs, i2i (Knowledge Economy), energy and
cooperation in partner countries.
SFF may also be used for other priority objectives where
appropriate, such as SMEs.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 29
30. Emerging Europe Convergence Fund Aug-05 655 50 CEE ITC expansion
Dexia Southern EU Infrastructure Mar-06 120 25 FR, IT, ES, PT PPP
Dutch/Northern EU Infrastructure Aug-05 121 15 NW Europe PPP
Barclays European Infrastructure Jul-06 315 28 UK, IE, FR, DE PPP
San Paolo IMI Infrastructure Fund Dec-06 120 18 IT PPP
Enercap Power Fund Jun-07 98 25 CEE Renewable Energy
Benelux, FR,
DIF Renewable Energy Fund Sep-07 314 25 DE, Scandinavia
Renewable Energy
Meridian Infrastructure Fund Oct-06 547 50 EU PPP
Green Alliance Renewable Fund Dec-07 41 15 ES,PT Renewable Energy
Espirito Santo Infrastructure Fund May-08 96 15 ES,PT Renewable Energy
PPP / Renewable
DIF Infrastructure Fund II Dec-08 220 35 NW Europe
Energy
Worldwide (40%
Dasos Timberland Fund I May-09 85 17 Europe)
Timberland assets
Meridian Infrastructure Fund II Dec-09 175 50 EU PPP
SE Europe Energy Efficiency &
SE Europe Energy Efficiency Fund Dec-09 95 25 including Turkey Renewable Energy
Renewable Energy,
2020 Marguerite European Fund Dec-09 710 100 EU
TEN-T, TEN-E
Total 5243 528
European Investment
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 Bank 30 30
31. A collaborative venture between the EIB and
European Commission
Membership open to PPP taskforces in
Member States and candidate countries
Allows members to share experience and
expertise
Staffed by experienced transactors capable
of synthesizing experience and
disseminating guidance
27 organizations already signed up
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 31
32. Joint Assistance to Support Projects in the
European Regions
Joint policy initiative of EIB, EBRD and KfW
Assistance for absorption of Structural &
Cohesion Funds period 2007 to 2013
Assistance with project presentation and
identification
Analysis of horizontal issues such as
grant/loan blending
Project implementation support to follow in
second phase
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 32
33. ECTF facility is targeting RDI (Research, Development and Innovation)
investments in emission reduction and energy efficiency in the European
transport industry.
Lending under ECTF amounted to EUR 4.2 bn and targets automotive
(OEMs/Suppliers), railroad, aircraft and shipping industries as well as
related infrastructure.
This Risk Sharing facility targets larger scale investments with corporate
sponsors (or project finance structures).
Such risk-sharing facility is used for example in:
Intelligent traffic management (e.g. variable message signs, advanced traveller
information systems, advanced driver’s assistance, speed
advisory/control, electronic tolls, etc.), and
“Smart” vehicles (e.g. Advanced Drivers’ Assistance, accident
sensors, automated guided vehicles, navigation systems, inter-vehicle
communications systems etc.), and “Green” vehicles (application of ICT in
reducing the congestion of vehicles).
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 33
34. Involvement since pre-qualification stage;
Principle of non-exclusivity during tender;
Public tender compliant with EU requirements;
Non-discriminatory treatment;
Tight cooperation with public sector;
Tenor shorter concession termination (need of
“tail”);
Usual coverage ratios (debt service, loan life);
Benefits of EIB financing must be transferred to
private and public sector;
Complementary with banking sector and capital
markets.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 34
35. Fully guaranteed or intermediated by
acceptable financial institutions until final loan
maturity;
Guaranteed during construction and early
operations and confirmation of project meeting
minimum technical / financial requirements.
Structure Finance Facility, if eligible, the EIB
would participate with other Senior Lenders,
assuming construction and operation risks.
Maximum amount of EUR 200m.
LGTT –TENs Guarantee Instrument: funded by
the EU budget and managed by the EIB taking
the revenue ramp-up risk in the early years of
TENs projects.
Participate through Infrastructure Fund.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 35
36. Since 1990, EIB has progressively broadened geographic and sectorial
spread of its PPP lending. 2009 approvals amounted to EUR 36bn
The Bank is now Europe’s foremost funder of PPP projects. Portfolio of
120 projects and investment of around EUR 25 billion
Despite difficult economic conditions in 2009, signatures exceeded EUR
2 billion.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 36
37. INFRABEL RAIL TUNNEL PPP (BE) - €313m AUTOBAHN A-5 PPP TEN (DE) - €225m
METRO DE MADRID IV- TR C (ES) - €50m METRO DE SEVILLA DBFO 1&2 (ES) - €10m
AUTOVIAS RENOVACION PPP (ES) - €211m M25 WIDENING TRANCHE A (GB) - €448m
AUTOROUTE A 19 (TEN/SFF) (FR) - €200m M80 MOTORWAY PPP (GB) - €157m
TRAMWAY DE REIMS PPP (FR) - €107m SCUT ACORES (PPP) TRANCHE BST (PT) - €60m
AUTOROUTE A88 PPP (FR) - €102m SCUT ACORES (PPP) TRANCHE BBVA (PT) - €60m
E-K-P-P-T MOTORWAY PPP PROJECT (GR) - BAIXO ALENTEJO MOTORWAY (PT) - €225m
€200m
M6 DUNAUJVAROS-SZEKSZARD (HU) - €200m
AEROPORTI DI ROMA II (IT) - €80m
2ND COEN TUNNEL PPP (NL) - €194
A1 MOTORWAY - 2ND PHASE (PL) - €575m
DOURO LITORAL PPP (IC 24) (PT) - €350m
IP4 AMARANTE-VILA REAL (PT) - €200m
TRANSMONTANA MOTORWAY (PT) - €289m
37
40. LGTT does not extend the guarantee period to cover risks of difficult
revenue scenarios after the initial ramp-up period. This unfunded
guarantee instrument can provide a supplementary buffer to down side
scenarios.
A specific instrument for availability of PPPs payment schemes is not
there. Many projects in rail and inland waterway projects can benefit
from facility like a guarantee or subordinated debt instruments which
can substantially open PPPs to capital market financing.
The use of escrow accounts in order to better support PPPs on the entire
duration of the contract concession and to avoid the constraints of the EU
/ Governments budgetary cycle is not available.
Project bonds credit enhancement instruments are not available under
EU initiatives. This would facilitate bond issuance at appropriate rating
(at least single A) to attract interest of institutional investors and
pension funds lacking specialist expertise in the sector, project finance
or PPPs.
No GAP Facility is available. This facility would improve the rating
assigned to the senior debt/bonds to A, AA-levels and consequently
enable certain institutional investors to invest in an asset class that
matches their own liabilities.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 40
41. TEN-T budget Cohesion Fund roles, availability, as
well as the way they are managed vary substantially.
No National Task Forces are there to oversee and
coordinate the implementation of the TEN-T network
to the community.
Some elements to be improved in EU funding
constraints with respect to PPP projects. Duration of
EU budgetary cycle and duration of PPP contracts
often mismatch.
EU TEN-T funds must be allocated in a 3 years
maximum after the financing decision
Confidentiality issues : EU reimburses real costs
incurred, which some time can create issues for the
private partner
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 41
42. Facilitation of the issuance of bonds through subordinated
debt instruments is something that can be done with ease.
Greater availability of subordinated debt tranches could
enhance projects credits. The size of this tranche would
depend on the risk of the project/portfolio as the purpose
is to uplift the credit profile of the higher ranking senior
debt financing to single-A rating.
In this instance, TEN-T budget and EIB can provide /
contribute to such instrument. In this case Instead of
loans, EIB can provide guarantees and EC could also
provide the same using Community Budgetary funds on
Risk Sharing basis.
Institutional investors would be interested to invest in the
sector with suitable risk sharing between public and
private institutions. The subordinated tranche could be
similar in structure to LGTT.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 42
44. Environment
Support green and sustainable transport
Improve air quality
Reduce Noise
Safety
Safeguard public safety
Improve transport security
Economy
Value for money
Improve transport efficiency and encourage competition
Support businesses and create employment opportunities
Accessibility
Improve access to transport, interoperability and cross-
border
Increase transport options
Reduce severance
Integration
Improve transport interchanges
Integrate transport policy with land use
Consistency in legislation and regulations
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 44
45. Need to improve cost and quality in strategic public
services as infrastructure
Scarcity of public capital – infrastructure investment
needs outstrip the ability of the public sector to fund
Procurement Procedures that improve Value for Money
for public sector
Maturity Of PPP Market Varies Across EU Member States:
some committed to very significant programs (UK,
Germany: target for PPP to meet 15% of public
infrastructure investment requirements)
Diversity of PPP models across Europe – a key advantage
of PPP is its flexibility to meet different economic and
political priorities
Strong Track Record Of Operational Projects In Europe;
focused on transport, but also waste, water, defense,
health, education, custodial services etc.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 45
46. Importance of strategic planning and management among
all levels of government
Forecasting demand/transferring demand risk
Determining how much users can pay and how
Dealing with policy issues and setting priorities. Need for
effective regulation
Scoping projects (size/ability to finance)
Blending PPP with EU / EIB Budget Funds, Structural
Funds and Guarantees
Complexity of during procurement processes & contracts
management - public sector skills needed
Managing competition for proprietary technologies
(vertical separation on rail lines is an important option in
PPP- wheel-rail interface design)
protections from abuse of monopoly powers and future
development - Industry-wide codes and rules, proper
incentives and fair market behavior are needed
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 46
47. Recognize that transport is more complex than energy,
water broadcasting & telecommunications
Construction, ground conditions risks
Acquisition of land rights
Interface & integration with existing management systems
Integration with port and other facilities / assets
Partners (many) – need maturity + competence / capacity
of counterparties, construction industry + others
Rolling stock design & approval
International and local supplies , interoperability issues
Revenue risk / Traffic forecasts
Safety and economic regulation
Change over time – how much does the structure
accommodate it
Termination & hand back
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 47
49. Importance of regulatory authority’s competence
often underestimated or misunderstood
Sound and durable regulatory system is a major
protective regime for everyone:
Infrastructure manager
Infrastructure users
Final customers
Taxpayers
Government
Requires regulatory authority to have
professionalism, technical and legal
competence, resources and ability to do its job
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 49
50. Road (Intelligent Transport Systems – ITS); EASYWAY – Europe-
wide ITS deployment on main trans-European road network
corridors. Advantages near 15% reduction of congestion, less
fatalities and less co2 emissions.
Rail (European Rail Traffic Management System – ERTMS).
ERTMS aims at creating cross-border rail traffic that enables
speeds higher than 200 km/
Aviation (Air Traffic Management – ATM); SESAR (Single
European Sky ATM Research) Development Phase
Inland waterways (River Information Services – RIS)
Maritime (Vessel Traffic Management and Information Services –
VTMIS)
GSM-R: A radio system similar to GSM (but with specific
frequencies for voice and data exchange between the driver and
central control
ETCS: European Train Control System
Speed limits are transmitted from track to train
Driver response is monitored continuously
On-board computer stops train if speed limit exceeded
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 50
51. At shared interfaces,
Everything necessary to meet the essential
requirements like safety, healthy, availability, reliability,
environmental protection and especially technical
compatibility.
Elsewhere
That which is necessary to ensure mutual recognition of
vehicle authorization and Safety Management Systems
Where market opening for common components adds
value
Everything else – Beware!
Too much standardization (e.g. couplings, design
technical solutions) inhibits innovation and market
entry.
Interchangeability of vehicles and components
Is not necessary for interoperability
Can often be achieved voluntarily
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 51
53. Cross-border infrastructure development has impact
on country’s sovereignty that must be balanced with
other stakeholders. Political nervousness can arise.
For effective cross-border infrastructure planning
key political, economic and
financial, technical, social and
environmental, institutional and coordination issues
need to be discussed.
Measures can be undertaken to minimize these
effects thru mechanisms like committee exchanges
and frequent coordination meetings
The asymmetrical distribution of costs and benefits
among the different groups of stake holders need to
be addressed with both appropriate institutional
arrangements
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 53
54. Allocations of resources “huge sunk-costs “are usually
questioned due to the indirect and long term benefits. An
Infrastructure Development Fund can reduce capital cost,
debt service requirements and pressure on increasing
tolls.
The issue of incentives compatibility should be dealt with
as early as the planning and design stage. It is crucial that
incentives and financing arrangements are aligned to
ensure equitable benefit from the project.
Interests of pure transit countries are different from those
benefiting from such a link and need to be balanced and
regional alternative competitiveness need to be observed.
For example land freight cost make up near 30 - 40% of
the value of exports from landlocked countries.
Often upfront external financial support is needed in the
identification and design of cross-border infrastructure
projects catering a large market.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 54
55. A project-based approach to cross- border infrastructure
development tends to have a high failure rate. Institutional
coordination and enabling regulatory framework help minimize
project failure risks. Difference in institutional and human
capacities across border can become serious barriers.
Despite private sector involvement, Governments play important
role in cross-border infrastructure. In situations where
relationships are governed by commercial benefits, differences
are more easily resolved.
Projects, like those involving power, rail, and water require
harmonization of legal and regulatory framework as well as
standardization of rules and procedures. The non-tariff barriers
and policy environment are equally important and must be
addressed under sector reforms.
While investors are encouraged to participate, selection of lead
partner or partners in various countries can become an issue
especially in any major change in shareholding structure or
technology selection.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 55
56. Cross – Acceptance, a “Bridge” to Interoperability
Private companies normally work together to deliver
interoperability and standardization for mutual commercial
benefit
Public bodies find it more difficult to work together due to
national pride and politics which often takes precedence.
The importance of Technical Compatibility (horizontal
Integration) as every (infrastructure) project left to its
own devices will develop its own solution
The role of the Government
Defining the role and responsibilities thus ensuring the
separation of powers (Areas of Transparency)
Regulating the (monopoly) Infrastructure Managers thus
ensuring technical compatibility of different infrastructure
projects
Setting the specifications at the shared interfaces thus
balancing risk and cost between the infrastructure Managers
and Train Operators
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 56
57. In 1993 the Railways Act 1993 was introduced by John Major's
Conservative government. The operations of the British Railways
Board (BRB) were broken up and sold off. This process was very
controversial at the time, and the Labor opposition announced
its intention to re-nationalize the railways, although this was not
implemented by the subsequent Labor government. The manner
in which privatization was carried out has also received
criticism for the number of companies involved (over 20), and its
complexity.
The UK: WHAT WENT WRONG?
Railway industry restricted and privatized too fast
Inadequate experience and expertise, stewardship was flawed
Infrastructure manager’s (Rail track) accountability to train
operators and public interest confused, complex and weak
Infrastructure manager abused its monopoly power, neglected its
assets and was hostile to its customers
Deferred maintenance, inadequate asset knowledge and
stewardship, incompetent management, poor contracting practices
with suppliers.
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 57
58. The Financial Regime - review of charges which introduced
stronger incentives on infrastructure provider to maintain
network properly and grow capacity while controlling costs and
driving out waste and insufficiency
Review the Infrastructure Provider’s License to Operate - thru
monitoring the adequacy of maintenance, renewal and
development of network
The Contractual Regime - proper specification of what is
required from each party and remedies when things go wrong
Clear And Understood Industry-Wide Common Procedures - for
changes to timetable, network, rolling stock; for dealing with
operational disruption; etc.
Competent Infrastructure Manager - by focusing on the key
drivers of performance improvement while engaging its
customers, its regulator and the public. A culture of co-operation
Track-train Interface Design - the most important of all.
Interoperability is not just about safety
TEN-T Case Study - Oman Infrastructure Summit, Sep,2012 58