Motorways of the Sea Forum

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Noel Matthews
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1 New MOS services in the Atlantic area Motorways of the Sea Forum Brussels /06/15 1

2 Agenda 1. Atlantis phase 1 (study): context, objectives and results 2. Atlantis phase 2 (a pilot action): the ways forward 3. Conclusion 4. Exchange with the audience 2017/06/15 2

3 1- Atlantis : objectives Improve North-South Europe freight transport Connect and enlarge TEN-T network Reduce long-distance road impact Liverpool Objective: A new MOS line to interconnect Brest-Liverpool Leixoes and their hinterlands Hypothesis : A RoRo service, 2 rotations/week Brest: hub to Paris and Lyon (rail) No subsidy for maritime operators (Marco Polo type) Leixoes Brest Paris Lyon Three study axes: Infrastructure (port, logistic, rail ) Info-structure: a «Logistic Single Window» Economic, legal and financial structure: A sustainable economic scenario Innovative financial and legal models to cover the start up risk 2017/06/15 3

4 2- Technico-economic, legal and financial study Goal: to define a stable technico-economic scenario and related financial/ legal models, starting from the initial hypothesis: A RoRo service between the 3 ports and their hinterlands 2 rotations per week Modality: Managed by Brest and the consortium With support of Catram consultants (technico-economic model), Caisse des Depots et Consignation (financial model) and August & Debouzy (legal model) Coverage: A study of the economic and business model A study on risks management An economic analysis to define the most suitable financial and legal models 2017/06/15 4

5 2.1: Economy The facts Liverpool Brest Paris Lyon Strong competition from road haulage resulting from the development of main axes «Core network» Competition from the Vigo- Montoir route (EU & national aids) UK: unbalanced flows (low export compared to import) Leixoes Brest: A hinterland reduced by the lack of rail connection (cessation of Combiwest service) 2017/06/15 The RoRo market is speculative 5

flows (peripheral regions) Brest An economic development potential for

6 2.1: Economy specificity of MOS in the Atlantic area A market potential but captured by the «Core network» Pb Difficult massification of traffic flows (peripheral regions) Brest An economic development potential for these regions? In many cases, MoS are risky for maritime operators /06/15

2.3 Economy : model Liverpool Economic model: Purchase the vessels to reduce the costs S1: 2

days/time in each port S1: 1,2,3,4 S2:1,2, 5, 6 1 5 6 2 4 3 Brest Santander Paris Lyon

7 2.3 Economy : model Liverpool Economic model: Purchase the vessels to reduce the costs S1: 2 nd hand; 2000 ml, 140 trailers; 25 meuros S2: 2 nd vessel; new; 2500 ml; 175 trailers, 55 meuros. S1 replaced after 10 years ( by a new vessel) Rotations ensured in 7 days, with fixed days/time in each port S1: 1,2,3,4 S2:1,2, 5, Brest Santander Paris Lyon Optimization: Add Santander southbound to increase flows from UK (Sp+Pt) Liverpool: hub to North UK and Ireland Rail to Paris and Lyon : second phase LSW to secure door to door services Leixoes 2017/06/15 7

Chartering : flexible (garantee on risks) l 5,00 Result H7 => Requires means to guaranty the ramp up risks and vessels costs - (5,00) 1 2 3 4 5 6 7 8 9 10

8 2.1 Economy: economic scenario - hypothesis 7 (M ) 20,00 Start reimbursment of the 2 nd vessel 1 st vessel (second hand): in operation year 1 2 nd vessel (New ): in operation year 4 15,00 Change of the second hand vessel : after 10 years 10,00 Total costs Revenues Vessels: European flag second register Chartering : flexible (garantee on risks) l 5,00 Result H7 => Requires means to guaranty the ramp up risks and vessels costs - (5,00) st vessel to be replaced 2nd vessel to be replaced) (Year) Total costs (M ): capital, exploitation, port operation 2017/06/15 8

9 2.1 Economy : facts The economic analysis demonstrates: A real market potential but with a strong competition from the road Necessity to provide incentives to motivate change of habits Necessity to reduce investment costs: aids for infrastructures including the vessels (min: 30%) Atlantis/ MoS in the Atlantic : a service of general interest: Contribute to Blue Growth of the partners regions (increase maritime activities) Environmental & socio-economic benefit: reduce road traffic Interest/ implication of «all interest parties» to carry out the project (not only the maritime company) Which legal and financial models? 2017/06/15 9

2.2 Legal & financial arrangements: The goal : to divide costs/risks areas to address the right financial instruments PT UK FR CEF/MOS+ blending Port Investment Port Investment Port Investment

10 2.2 Legal & financial arrangements: The goal : to divide costs/risks areas to address the right financial instruments PT UK FR CEF/MOS+ blending Port Investment Port Investment Port Investment 2017/06/ /06/06 Atlantis LSW (e-booking service) Facilitates integration with other transport segment and promotion of the maritime lines (so: a commercial tool) Open to all interested operators : call for tender Atlantis service * (SA, EEIG,...) The Atlantis service operator guarantees the sustainabilty and manages public aids Atlantis Ship owner (e.g. SEM French PPP) Market development; customer relation 10

2.2 Legal model proposed approach (2/3) Management of

vessels SEM Owner of the vessels Mutual engagement for a

financing (Leasing agreement, Loan ) Possible stake in the

(after a tender procedure) Freight and Shipping company

11 2.2 Legal model proposed approach (2/3) Management of «ecobonus» aids Atlantis service (EEIG or other ) Atlantis- vessels SEM Owner of the vessels Mutual engagement for a service of public interest Public / Private Investment Bank financing (Leasing agreement, Loan ) Possible stake in the share capital Agreement between SEM and the shipping company (after a tender procedure) Freight and Shipping company Marketing Market & business development Organisation of freight corridors 2017/06/15 11

12 2.3 Proposals for new incentives (1/2) Paradox : MOS are promoted by the EU because of their public interest. But yet no specific and efficient aid schemes, thus MOS are more expensive than road Economic Operators are not ready to bear the extra cost. Only an incentive system could create enough long-term demand. Several models: tax incentives, commercial incentives, per ITU, per road km, many parameters «Atlantic Blue Bonus» Model Basis + - Target: min +20% traffic Commercial incentives for EO Nb of ITU channeled by the EO on a MOS Or a % of the MOS service cost Demand catalyst, Equality of treatment for EO temporary financial burden for the MOS operator, but can be partially anticipated.! The creation of these incentives needs the support/ coordination of the MS and the consent of the EU. 2017/06/15 12

13 2.3 «Atlantic Blue Bonus» - cost estimation Model 1: 100 / transport unit (distance independent) Total 4 years Total 5 years Total for the 2 services Total/country (5 countries) Total/ country with EU contrib 50% Model 2: 20% of the transport cost Total 4 years Total 5 years Total Total/country (5 countries) Total/ country with EU contrib 50% These incentives are not discriminatory since they depend on a criterion based on the use of MOS. Call for tender to select interested maritime operators Integration of new ports interested to join (eg Santander, Ireland ) Justification: Blue Growth (socio-economic development of the maritime regions) 2017/06/15 13

14 3- Conclusion Atlantis has set out: There is a real market devlopment potential for Atlantis, and for MOS in the Atlantic area Financial measures are necessary to motivate /enable road to sea transfer & MOS development: New incentives to stimulate the market Blending to finance the infrastructures: port infrastructures, vessels (an infrastructure); info-structure A legal model to facilitate the set up of sustainable PPP to operate multi-port/ multi-operators services Coordination and cooperation between MS at basin level would help devloping MOS network in the AA. Proposal for the next step: A pilot action (article 32 of RTE-T) including Studies: finalise / implement the financial and legal models in concertation with Atlantic member states: Incentive measures: starting from the model «BlueBonus» (coordination between MS) Legal model: in particular call for tenders towards maritime operators and final «Atlantis» grouping Works: Investment in port infrastructures Tests: the models in real conditions Capitalisation: analyse possible replications to other MOS ( inside and oustide Atlantis) 2017/06/15 14

15 4- Discussion Open discussion on the DIP2: Importance of the MOS program/ calls (before 2019) Call blending is limited to investment for «greening vessels» and for port infrastructures - Does not cover pilot phases of MOS Interpretation of the article 32 of TEN-T (does not include services) Interest to organize cooperation between member states of the Atlantic zone on incentive measures (e.g. «Blue Bonus») and support to MOS initiatives 2017/06/15 15

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