TWINNING PROJECT SI/03/IB/TR/01TWINNING PROJECT SI/03/IB/TR/01

Workshop on EU Financing ModuleWorkshop on EU Financing ModuleEuropean programme preparation & European programme preparation &

planningplanning

Ljubljana, Tuesday 29 November 2005Ljubljana, Tuesday 29 November 2005

Risks and opportunities for the rail sectorRisks and opportunities for the rail sector

Ian MackayIan MackayHead of TEN team, Europe Division, UK Department of Head of TEN team, Europe Division, UK Department of

TransportTransport

Outline of presentationOutline of presentation

• ContextContext• Priority Project No 2: PBKAL (inc. CTRL)Priority Project No 2: PBKAL (inc. CTRL)• Priority Project No 14 WCMLPriority Project No 14 WCML

• Problems and difficultiesProblems and difficulties• Lessons to be learnedLessons to be learned• Summary and conclusionsSummary and conclusions

• EU rail transport rulesEU rail transport rules

ContextContext

• A personal perspective: EU experienceA personal perspective: EU experience

• The TENs guidelinesThe TENs guidelines

• EU competition and internal market rulesEU competition and internal market rules

• DBFO contract let 1996. Rescue 1998. Further 4 DBFO contract let 1996. Rescue 1998. Further 4 state aid notifications. state aid notifications.

PP2 Paris-Brussels-KPP2 Paris-Brussels-Köln-Amsterdam-Londonöln-Amsterdam-London

Channel Tunnel Rail LinkChannel Tunnel Rail Link forms part of UK contribution forms part of UK contribution to the projectto the project

• Flagship PPP project worth €7,5 billion.Flagship PPP project worth €7,5 billion.• Scheduled for completion in 2007Scheduled for completion in 2007

• Contractual matrix very complicatedContractual matrix very complicated

•Most important rail route in UKMost important rail route in UK•2000 trains a day2000 trains a day•Mixed traffic routeMixed traffic route•Long distance ‘high speed’ Long distance ‘high speed’ servicesservices•Regional and commuter services Regional and commuter services •Serves all main citiesServes all main cities•Important for freight, tooImportant for freight, too•Modernisation project started 1994Modernisation project started 1994•Due for completion 2008Due for completion 2008•Worth €12 billion+ Worth €12 billion+

PP14 West Coast Main LinePP14 West Coast Main Line

• Risk transfer – what to transfer and how to do it?Risk transfer – what to transfer and how to do it?

• Heroic assumptions and ‘the march to the right’Heroic assumptions and ‘the march to the right’

Problems and difficulties (1)Problems and difficulties (1)

Building new rail infrastructureBuilding new rail infrastructure

• Rail PPP a new ideaRail PPP a new idea

• Public and private – when two (or more) worlds collidePublic and private – when two (or more) worlds collide

• What does the private sector want?What does the private sector want?

• How does it measure risk?How does it measure risk?

• Rail inherently unviable?Rail inherently unviable?

• Exclusive rights, vertical integration and downstream Exclusive rights, vertical integration and downstream constraintsconstraints

Upgrading existing rail infrastructureUpgrading existing rail infrastructure

Problems and difficulties (2)Problems and difficulties (2)

• Risks to both finance and reputationRisks to both finance and reputation

• “ “Can we have our money back?”Can we have our money back?”

• Commission moves the goalposts?Commission moves the goalposts?

• When is an upgrade not an upgrade?When is an upgrade not an upgrade?

• ERTMS level 3 a pipedream. Level 2 not practicable, eitherERTMS level 3 a pipedream. Level 2 not practicable, either

• Affordability and escalating costsAffordability and escalating costs

Problems and difficulties (3)Problems and difficulties (3)

• The spirit and the letterThe spirit and the letter

Understanding EU law and what it means for TENs fundingUnderstanding EU law and what it means for TENs funding

Internal market (procurement)Internal market (procurement)• Relatively straightforward Covers all TENs projects in Relatively straightforward Covers all TENs projects in principleprinciple

Competition (antitrust and state aids)Competition (antitrust and state aids)• Ditto. Applies to all markets ‘with an EU dimension’. Ditto. Applies to all markets ‘with an EU dimension’. But note DG Competition’s market sounding exercise on But note DG Competition’s market sounding exercise on barriers to competition in rail freightbarriers to competition in rail freight

The sectoral framework (1st & 2nd Railway Packages)The sectoral framework (1st & 2nd Railway Packages)

• Be realisticBe realistic

Lessons to be learnedLessons to be learned

• Get the project structure right. That flows from the need toGet the project structure right. That flows from the need to

• Get the regulatory framework rightGet the regulatory framework right

In particular, make sure implementation of the railway In particular, make sure implementation of the railway packages respects EU jurisprudence as a whole, especially packages respects EU jurisprudence as a whole, especially as regards independence of essential functionsas regards independence of essential functions

•How will TENs funding for the DivaHow will TENs funding for the Divača-Koper ča-Koper section help 3section help 3rdrd party access? party access?

Summary and conclusionsSummary and conclusions

• Constructing major PPP projects which comply with Constructing major PPP projects which comply with EU law can be challenging but is not impossibleEU law can be challenging but is not impossible

• EU objectives for rail TENs are best met by facilitating, to the EU objectives for rail TENs are best met by facilitating, to the maximum extent possible, competition in the downstream maximum extent possible, competition in the downstream market for the provision of rail transport servicesmarket for the provision of rail transport services

ButBut

• Is PP6 going to do that?Is PP6 going to do that?

• How will the procurement rules apply?How will the procurement rules apply?

Questions?Questions?