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									Developing and Structuring
 PPP projects in Lithuania



         2006/11/22

                             1
TABLE OF CONTENTS

  • Perception of PPP in Lithuania;

  • Overview of PPP initiatives and
    “symptoms” in Lithuania;


  • A brief overview of Vilnius schools PPP
    project;


  • What have we learned so far?


                                              2
CURRENT INFRASTRUCTURE
  OF SCHOOLS IN VILNIUS




                          3
     PERCEPTION – public sector



Maybe PPP could become an additional source of funding and
    it would not take 200 years to satisfy urgent needs of
                 infrastructure improvements?




                                                        4
PERCEPTION – private sector



 Is public infrastructure (PPP project) a (new) business
                        opportunity?




                                                           5
PPP initiatives and “symptoms”
          in Lithuania
         In the form of:

         • Standard public procurement (service contracts);

         • Asset swap contracts;

         • Joint ventures;

         • Consortium agreements;

         • Long term rent (operator) contracts;

         • Privatization.



                                                        6
A FEW RECENT PRESS
     RELEASES




                     7
A FEW RECENT PRESS
     RELEASES




                     8
                           A FEW RECENT PRESS
                                RELEASES
Rugpjūčio 24 d.


                              MIESTAS IR SAVIVALDA
Koncesija susidomėjo prokurorai („Laikinoji sostinė“, 2 psl., Arūnas Dambrauskas)
Kauno apygardos prokuratūros vyriausiasis prokuroras K.Betingis vakar susitiko su
Kauno meru A.Garbaravičiumi ir susitarė dėl bendradarbiavimo tiriant skandalą sukėlusią
Aleksoto transporto mazgo statybos sutartį.
„Su vyriausiuoju prokuroru norėjo pasikonsultuoti kaip turėtumėm bendradarbiauti, kad
tyrimas būtų kuo efektyvesnis, kad būtų nustatyti asmenys, dėl kurių kaltės miestui
primesta akivaizdžiai nuostolinga sutartis“, -sakė A.Garbaravičius.



Fokusas už 20 milijonų litų („Kauno diena“ 1 psl., Arūnas Andriuškevičius )
„DnB Nord“ banko atstovai paneigė, kad Kauno savivaldybė įsipareigojo jiems
mokėti milžiniškas palūkanas
Savivaldybės administracijos direktorius A. Keserauskas vakar patvirtini, kad bendrovė „
Kamesta“ sutinka nutraukti Aleksoto transporto mazgo koncesijos sutartį, tačiau
greičiausiai tai bus padaryta jau pastačius objektą.
„DnB Nord“ banko specialistai vakar paneigė įtarimus, kad už 15,5 mln. litų paskolą per
25 metus jiems būtų atseikėta net 26,6 mln. litų palūkanų.




                                                                                           9
PPP initiatives and “symptoms”
     in Lithuania (cont’d)
        • Technology and science cluster “Saulėtekis valley”,
          current, Vilnius – (legal obstacles);
        • Construction of Siemens universal sports hall in
          Vilnius (sharing losses);
        • Kaunas schools PPP, Kaunas (terminated at political
          level).




                                                             10
PPP initiatives and “symptoms”
     in Lithuania (cont’d)
         Success stories:
         • Vilnius SPA, 2003, Druskininkai;

         • Europa City hotel, 2006, Druskininkai;

         • Long term rent of utility service providers in
           Vilnius, Druskininkai and several other cities
           across country;

         • Other.




                                                            11
PPP initiatives and “symptoms”
     in Lithuania (cont’d)
        Current projects:

        • Vilnius healthcare (clinics) PPP, Vilnius;

        • Vilnius schools PPP, Vilnius;

        • Vilnius Tram PPP, Vilnius.

        Ideas and plans:
        • Ignalina nuclear power plant;
        • Santariškės medical valley;
        • Universal sports halls in Kaunas;
        • Universal sports halls in Panevėžys, etc.

                                                       12
A LEARNING PROJECT -
 Vilnius schools PPP
     At the beginning:

     • A tender for advisors was announced 1.5 years
       ago (summer 2005);
     • Expected timing and scope of the project – as fast
       as possible and as many EI as possible;
     • Expected time of sample results - August 2006;
     • Expected investment per school ~ LTL 2 mill.;
     • Expected services – all (from reconstruction and
       building maintenance to leisure and community
       hours);
     • Expected framework – Concession Law.




                                                    13
                                A LEARNING PROJECT -
                                      Vilnius schools PPP
                             I Stage                 II Stage                 III Stage    IV Stage


                             Examination and                                               Tendering and
                                                                Feasibility study
Inception stage (planning)




                             selection of EI                                               Contracting


                             • Selection criteria   • PSC                 • Invitation
                             • Technical            • Shadow tariff       • Competitive dialogue
                             examination            analysis (PPC)        • Binding proposals
                             • Selection            •VfM analysis         • Selection
                                                    • Legal feasibility   • Negotiations
                                                    • Risk assessment     •Contracting and
                                                    & risk allocation     implementation
                                                    • Soft marketing

                                                     PR and promotion


                                                                                                           14
A LEARNING PROJECT -
 Vilnius schools PPP
     The result:

     • The Pilot project – 2 lots of total 15 schools;
     • Expected start of Pilot project – summer 2007 (2
       years after the selection of consultant);
     • Expected investment per school ~ LTL 4-8 mln.;
     • Services – just reconstruction, facility
       management and financing (DBOF/PFI);
     • Expected framework – competitive dialogue
       procedure under the Law on Public Procurement
       (DBOF/PFI).




                                                   15
A LEARNING PROJECT -
 Vilnius schools PPP
     What we have learned:



     • PPP is a concept, a guideline for effective public
       sector planning and decision making process
       related to capital intensive, complex and long-term
       investment projects in public service and
       infrastructure area rather than a new financial
       instrument.




                                                    16
A LEARNING PROJECT -
 Vilnius schools PPP
     What we have learned (cont’d):




     • We are starting from “the wrong foot”...




                                                  17
A LEARNING PROJECT -
 Vilnius schools PPP




  Source: EU Guidelines   18
A LEARNING PROJECT -
 Vilnius schools PPP
     What we have learned (cont’d):




     • We do not need to re-invent a bicycle...




                                                  19
A LEARNING PROJECT -
 Vilnius schools PPP
              The options for choice




  Source: EU Guidelines                20
A LEARNING PROJECT -
   Vilnius schools PPP
                             Typical PPP Structure
                                                                  Governing Body Agreement


                                                  Procuring Council                     Governing Body


                                         PPP Agreement       Lease / Licence


                             Debt Funding
                             Arrangement
                                                  SPV/Contractor
 Banks – debt finance
                                                PPP Service Provider


                                            FM/Operating      Construction
                                              Contract         Contract
 Facilities Management                                                                       Construction
         Company                                                                              Company


             Sub-contracts                                                                           Sub-contracts
                                 Operating/FM                 Construction contract
                              contract performance               performance
    Sub-contractors                guarantee                      guarantee            Sub-contractors
   e.g. cleaning and                                                                   and Professional
     maintenance                                                                            Team
                                                                                                                     21
RECOMMENDATIONS
    Government level:
   • Get Central Government involvement and
     commitment – establish an effective PPP
     knowledge and administration body;

   • Identify resources (perform inventory of the State
     property), capital expenditure needs and set
     investment priorities;

   • Coordinate/centralize State property management;

   • Resolve purchase VAT issue for public institutions
     (contracting authorities). Is an exemption for PPP
     projects eligible/feasible?

                                                    22
RECOMMENDATIONS
     Government level (cont’d):


   • Elaborate on legal realization of PPP schemes.
     Particular attention to “step in” realization, which
     mitigates the risks of financing institution in case of
     vendor default;

   • Elaborate on Government contribution to PPP
     projects mechanisms through co-financing and/or
     risk hedging (guarantees, etc.).




                                                       23
RECOMMENDATIONS
    Contracting Authority level:

   • Do not try to re-invent a bicycle - learn from and
     adopt PPP practice and guidelines of other
     countries;

   • Involve all stakeholders and pay special attention
     and use resources to ensure sufficient
     communication (publicity) and transparency;

   • Position a PPP project in the market;

   • Facilitate competition among potential vendors to
     get best value for money;

   • Establish a win-win, not win-lose relationship with
     a private partner.                              24
           THE END



The rest is a matter of education, choice and
          professional management.




                                                25
THE END




Thank you for Your attention.



                      Arvydas Saročka,
                      Managing Partner
        UAB “Verslo procesų valdymas”,
                Tel.: +370 5 239 41 41,
               Email: arvydas.s@vpv.lt
                             www.vpv.lt
                                          26

								
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