THE GOVERNMENT would have to underwrite the financing risks associated with the public-private partnership (PPP) project for Metro North if it is to be built, according to one of the consortiums bidding for the contract.
Stephane Kofman, who heads the specialist investment division of HSBC, told a lunch meeting in Dublin organised by the Ireland-France Chamber of Commerce that equity had become “very scarce” as a result of the recession.
The British government had set up a co-financing agency to underwrite private finance initiatives (PFIs) for public infrastructure projects in order to ensure that it had “solid partners” at a time when the volume of PFIs is in decline.
Mr Kofman said HSBC had invested €10 billion in PPP projects since 2001 and it was now a partner with Alstom, the French tramway builder, and SIAC in bidding for the Metro North contract, for which competition was “very fierce”.
Didier Traube, concessions director of Alstom, said the recession had meant there were now fewer lenders in the market – just seven to 10, compared to between 30 and 40 offering loans just two years ago. Lenders had also become “more risk averse”.
Consequently, project debt was now more expensive – “by a factor of two or three”. This meant that there would have to be “guarantees from the public side” to underwrite the financing or refinancing risks, according to Mr Traube.
Mr Kofman conceded that there was an “ideological reluctance” to accept PPPs because they were seen as more expensive, as privatisation in disguise, offering reduced levels of service and with the State awarding “secret” tenders.
“The PPP model faces intense scrutiny, but continues to spread,” he said. The main advantage was that it “spread costs over life of the asset”, although it was “unlikely to offer a rapid remedy” as an economic stimulus because of long lead times.
Without referring to the secrecy surrounding Metro North, for which the Railway Procurement Agency (RPA) has refused to divulge any estimated cost, he said PPP projects should be “implemented in a very transparent procurement process”.
One of the PPP projects in which HSBC is involved is the new high-speed rail link between Belgium and the Netherlands. Alstom, which built the Luas trams for Dublin, is currently delivering a single-line tramway in the northern French city of Reims.
This was also a PPP contract for design, construction, operation and maintenance of the new tramway, as well as all bus services in the Reims metropolitan area for a 35-year period – 10 years longer than the term quoted for Metro North by the RPA.
The €413 million project, due for completion in 2011, is receiving a 40 per cent public subsidy, with 50 per cent provided by bank debt and the rest by the project’s shareholders, including Alstom, French construction giant Bouygues and a number of banks.
Mr Traube said Reims Metropole, the public client, is covering part of the risk, including interest rate changes. The main advantage of controlling the buses is that it “provides revenue during construction as well as better control of tramline patronage”.
In Dublin, Luas and bus services operate entirely independently and are run by different agencies – Veolia, the French company that won the contract to operate Luas, and Dublin Bus, which is planning a 10 per cent cut in services to reduce its growing deficit.
In Reims, as in Bordeaux, bus services are being reorganised to “feed” passengers to the 11km tramway after it opens in two years’ time. Mr Traube said this will lead to a 40 per cent increase in public transport patronage in the metropolitan area.
Bidding for metro: four consortiums in the mix
DUBLIN EXPRESS Link, one of the four consortiums bidding for the Metro North contract, claims it is “uniquely placed” to deliver the 18km line linking Swords with St Stephen’s Green because of its “combination of experience, cohesion and scale”.
A brochure accompanying its detailed bid, which was among those submitted to the Railway Procurement Agency, notes that Alstom supplied and still maintains the Luas trams.
The Dublin Express Link consortium is led by Bouygues, working in a joint venture with Spanish contractor Acciona. Their experience includes the Sydney, Barcelona and Cairo metros and the Meteor line in Paris.
Also involved is Siac, one of Ireland’s largest civil engineering contractors. “Totally familiar with Dublin’s road and rail infrastructure, Siac will ensure that our approach is comprehensively planned and delivered at a local level, using local resources”, it says.
Alstom would build the “light metro vehicles” for the line, more than half of which would be installed underground. It would also provide the power and distribution, signalling, control and communications, as well as maintaining the system for the 25-year contract period.
Dublin Express Link’s principal architects are London-based Grimshaws, who would “focus on aesthetics, accessibility, ease of movement and the creation of signature designs” for the Metro North stations in association with Dublin-based architects RKD.
The line would be operated by Keolis, which manages integrated transport systems in the French cities of Lyon and Lille, while the financial investors in Dublin Express Link are HSBC and Meridiam, who are also involved in funding the Limerick Tunnel PPP project.