RWE Thames Water. GREEN PAPER ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC CONTRACTS AND CONCESSIONS COM(2004) 327 final

Transcription

1 GREEN PAPER ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC CONTRACTS AND CONCESSIONS COM(2004) 327 final Position RWE Thames Water Introduction: RWE Thames Water welcomes the Commission s Green Paper, which has raised some important issues that deserve to be debated at EU level. RWE Thames Water is the world s third largest private water service provider and part of the energy and water group RWE. In its Europe region, RWE Thames Water operates water and waste water service for 28 million customers in 6 countries (on global level: over 70 million customers in 20 countries). RWE Thames Water is in the unique position to be the owner and operator of the water and waste water services for the one of the biggest cities in the world - London. This background provides us with a thorough understanding of the importance of Public Private Partnerships for the water sector in Europe and in the world. The provision of safe and affordable water and waste water services to people is one of the key concerns of public authorities and private operators. Water has also been high on the political agenda of the European Union over the past years. Water and sanitation are vital to human life and to the environment. One of the key elements about the water sector is its local character with production, distribution and treatment of the services planned and provided on municipal level. This led to a high degree of diversity in the organization and management of the water and wastewater sector according to local customs and needs. Subsidiarity is therefore crucial when aiming at establishing legal clarity as to how the public and the private sector can work together in Public-Private Partnerships. In doing so, the focus must be on ensuring that key obligations such as highquality service, affordability, security and safety of supply are fulfilled. RWE Thames Water plc European Affairs Avenue de Tervuren Brussels T F Ulrike.ebert@rwethameswa ter.com Registered in England and Wales No , Registered office 14 Cavendish Place, London W1G 9NU

2 Page...2 In our view, the Green Paper does not provide sufficient clarity about the Commission s understanding of PPPs and why and how it distinguishes between contractual and institutional PPPs. Contractual PPP s seem to include an extremely wide variety of partnerships such as: Operational management contracts with no capital investment ( O&M Contracts ) Operational management contracts with ongoing maintenance investments ( Concession Contracts ) Operational management contracts with large upfront investment followed by steady maintenance investments (PFI s or DBFO s) In addition to the variable capital investment element above, other important factors include the size of the contract (in financial or geographical terms), the duration of the contract (1 year 40 years) and the risk transfer expected within the contract. In contrast, the institutionalized PPP appears to be one specific from of PPP where the public and private sector jointly invest in a company vehicle to deliver the service contract on behalf of the public sector. In RWE Thames Water s opinion, the key term of concessions is not clearly defined and can have different meanings in the member states according to local historical evolution of the sector and the ownership of assets. We suggest that the Commission clarify its understanding of the concession model with regards to water services and provide more information on what role concessions play in PPPs. Central aspects of a differentiation between public procurement contracts and PPPs should be the distribution of risks and responsibilities between the private and the public partner; the ownership of assets and the complexity, length and scope of the partnership etc. Considering that there is still a lack of level playing field and competition in the water sector in Europe, RWE Thames Water urges the European Commission to focus on the implementation, enforcement and evaluation of existing rules and regulations with regards to public services provision, in addition to any potential new proposals in the context of PPPs.

3 Page...3 RWE Thames Water input on specific questions asked by the Commission 1. What types of purely contractual PPP set-ups do you know of? Are these set-ups subject to specific supervision (legislative or other) in your country? The organization of water services provision is very local and different concepts have evolved across Europe. Whereas in some member states public-private partnership in the water sector has a long-standing tradition it is inexistent in other member states. In England and Wales, private companies and institutions own the assets and provide water and wastewater services. The operators have a legal obligation to provide these services to all citizens, which is enshrined in a 25-year license awarded and renewed by the relevant public authority. The UK situation is quite unique as the private operators fulfill a role typically given to the public authority. Service provision can be carried out by the owner operator itself or is outsourced to a third party to operate (as in the case of Dwr Cymru, previously known as Welsh Water). In both cases the asset ownership and operation is in private hands. In Scotland and Northern Ireland, water supply and wastewater treatment are still effectively under direct Government control with asset ownership and management being carried out by government appointed authorities (Scottish Water and Northern Ireland Water Services respectively). Subsequently there are two different forms of PPPs in the UK: - In Scotland and Northern Ireland, a concession is typically understood as a long-term contract (20-30 years) between a public authority and a private undertaker. The authority awards the right not only to operate the water supply or wastewater treatment service on its behalf to the private undertaker (OPEX) but also the obligation to carry out required capital expenditure (CAPEX) over the length of the contract. The ultimate obligation for ensuring sufficient and high-quality water supply and wastewater treatment standards, however, still lies with the authority and is not transferred to the undertaker. The undertaker does not necessarily have a direct relationship with the customer but is generally rewarded by the authority. No concessions involving direct cash

4 Page...4 collection from the end consumer have yet been let in Scotland or Northern Ireland. - Another type of PPP is the outsourcing of service provision and capital investment in the form of Private Financing Initiatives PFIs (DBFO s), which previously have been awarded in Scotland and two are currently planned in Northern Ireland. They are typically set up to bridge a financial gap in public infrastructure investments with private resources. In these cases the private partner invests in the design and building of the assets and operates them over a year term. It recovers the costs in the form of a service payment from the water undertaker appointed by the Government, rather than from the end consumer. The risks are shared between the public sector/private partner and financial institutions. 2. In the Commission s view, in the context of a purely contractual PPP, the transposition of the competitive dialogue procedure into national law will provide interested parties with a procedure which is particularly well adapted to the award of contracts designated as public contracts, while at the same time safeguarding the fundamental rights of economic operators. Do you share this point of view? If not, why not? This form of dialogue has occurred on a number of projects both in the UK and Holland as part of the procurement process following advertising in the Official Journal of the EU and pre-qualification. In this instance, all prequalified candidates are invited to consult on a range of issues from technical solution, contractual conditions and funding proposals. The Competitive Dialogue would be a sensible approach providing that the Municipality or awarding body do not adopt suggestions (technical and commercial) which by their nature favour one party over another thus discouraging effective competition. 3. In the case of such contracts, do you consider that there are other points, apart from those concerning the selection of the tendering procedure, which may pose a problem in terms of Community law on public contracts? If so, what are these? Please elaborate. No.

5 Page Have you already organised, participated in, or wished to organise or participate in, a procedure for the award of a concession within the Union? What was your experience of this? RWE Thames Water has participated or tried to participate in procedures for the award of a concession within the European Union. The transposition process of EU regulation into national law can lead to differences in the award procedures across the member states. This is partly due to the historically diverse development of the sector but also due to a lack of enforcement of existing EU regulations. In our experience the national rules and regulations are generally clear to the interested parties bidding for a concession contract. 5. Do you consider that the current Community legal framework is sufficiently detailed to allow the concrete and effective participation of nonnational companies or groups in the procedures for the award of concessions? In your opinion is genuine competition normally guaranteed in this framework? RWE Thames Water considers that the current Community legal framework is sufficient to ensure effective participation of European operators in the UK in tender procedures of services contracts and concessions. Competition for industrial clients exists and is enforced. For domestic clients, the UK regulator creates a competitive environment through so-called comparative competition and effective benchmarking of the operators. 6. In your view, is a Community legislative initiative, designed to regulate the procedure for the award of concessions, desirable? Before considering any legislative initiatives, RWE Thames Water encourages the European Commission to clarify the term concessions. As it stands, some concession contracts could be discussed in the context of public procurement whereas others fit better in the context of PPP. The water sector in Europe is diverse and locally organized. Based on the principle of subsidiarity, the relevant public authority should maintain its right to choose how it organizes water supply and waste water treatment (either by itself or through a third party). By choosing a concession model with a third party a municipality chooses to enter into a long-term and complex partnership with the concessionaire to supply water and/or waste water treatment. This requires flexibility for embedding the social and environmental obligations, the technical needs and financial and managerial possibilities of the task into the concession arrangement.

6 Page...6 The principles of transparency, fairness, equality of treatment, non-discrimination etc. are laid down in the Treaty of the European Union. The Directives on public procurement (2004/17/EC and 2004/18/EC) were adopted in 2004 and are now being transposed into national law and implemented. Additional legislation for concessions would not add value at the current stage. 7. More generally, if you consider that the Commission needs to propose new legislative action, in your opinion are there objective grounds for such an act to cover all contractual PPPs, irrespective of whether these are designated as contracts or concessions, to make them subject to identical award arrangements? See answer to question In your experience, are non-national operators guaranteed access to private initiative PPP schemes? In particular, when contracting authorities issue an invitation to present an initiative, is there adequate advertising to inform all the interested operators? Is the selection procedure organised to implement the selected project genuinely competitive? We do not see the need to treat privately initiated PPPs separately from publicly initiated PPPs. Due to the specific character of the water sector, the initiative to set up PPPs generally derives from the public authority. 9. In your view, what would be the best formula to ensure the development of private initiative PPPs in the European Union, while guaranteeing compliance with the principles of transparency, non-discrimination and equality of treatment? See answer to question In contractual PPPs, what is your experience of the phase, which follows the selection of the private partner? This depends on the conditions of the specific contract agreed and on the local requirements. 11. Are you aware of cases in which the conditions of execution including the clauses on adjustments over time may have had a discriminatory effect or may have represented an unjustified barrier to the freedom to provide services or freedom of establishment? If so, can you describe the type of problems encountered? N/A

7 Page Are you aware of any practices or mechanisms for evaluating tenders, which have a discriminatory effect? N/A 13. Do you share the Commission s view that certain step-in type arrangements may present a problem in terms of transparency and equality of treatment? Do you know of other standard clauses which are likely to present similar problems? N/A 14. Do you think there is a need to clarify certain aspects of the contractual framework of PPPs at Community level? If so, which aspects should be clarified? The Green Paper does not provide sufficient clarity about the Commission s understanding of PPPs and why and how it distinguishes between contractual and institutional PPPs. The Commission should also clarify its understanding of the concession model with regards to water services and which role it plays in PPPs. Central aspects should be the distribution of risks and responsibilities between the private and the public partner; the ownership of assets; and the complexity, time and scope of the partnership. On the basis of this clarification and existing EU rules and regulations, RWE Thames Water does not consider further legislation on PPP to be needed. 15. In the context of PPPs, are you aware of specific problems encountered in relation to subcontracting? Please explain. In his role as an entrepreneur and long-term partner, the private operator is interested to fulfill its contractual obligations with the public authorities in the most efficient way. The rules and regulations for sub-contracting and the obligations to be met by the operator are laid down in the contract thus setting the necessary framework. RWE Thames Water believes, in order to ensure a maximum of flexibility and cost-efficiency in response to contractual and local requirements, that the operator of a water and

8 Page...8 waste water service is free to choose on the modalities of sub-contracting specific tasks to other companies. 16. In your opinion does the phenomenon of contractual PPPs, involving the transfer of a set of tasks to a single private partner, justify more detailed rules and/or a wider field application in the case of the phenomenon of subcontracting? See answer to question In general, do you consider that there is a need for a supplementary initiative at Community level to clarify or adjust the rules on subcontracting? See answer to question What experience do you have of arranging institutionalised PPPs and in particular, in the light of this experience, do you think that Community law on public contracts and concessions is complied with in such cases. If not, why not? A recent and novel example of an institutionalized PPP has occurred in Scotland. Scottish Water, the government appointed authority, sought partners from the private sector to join with it to deliver its 4 year capital investment programme. The partners were selected from a fully assessed EU compliant tender process based upon technical capability, price and partnering approach. Having selected two consortia, these were then invited with Scottish Water to set up a jointly owned company to deliver their 4-year investment programme. Clearly, this process is in contrast to occasions where jointly owned companies are created first and operating concessions are awarded later. RWE Thames Water is of the opinion that it should be in the discretion of the public authority to decide through which route it chooses to select a private partner for a long-term institutionalized PPP. RWE Thames Water is not in favour of further EU regulation with regards to private investments in companies. Investment decisions are made on the basis of strategic or commercial considerations. Investors (private

9 Page...9 and public) do need the assurance that European Union respects the principle of free movement of capital. 19. Do you think that an initiative needs to be taken at Community level to clarify or define the obligations of the contracting bodies regarding the conditions requiring a call for competition between operators potentially interested in an institutionalised project? If so, on what particular points and in what form? If not, why not? The Scottish Water example quoted in question 17 is one potential way in which competition could be utilized to select potential operators for institutionalized projects. The Green Paper further suggests that there are some cases of institutionalized PPP where the public-private undertaking awards services contracts to its private partner without a tendering procedure. RWE Thames Water maintains its position that a public entity should be free to choose whether to tender concession contracts or not. We believe, however, that the Commission should provide more clarity on the rules and procedures applicable to this type of situations, in order to ensure a level playing field and maximum transparency. We believe there needs to be clarity in what influence the new jointly owned company and in particular the private shareholder as part of that jointly owned company should have in the assessment process for selection of the new concessionaire, i.e. the risk of undue influence needs to be eradicated. 20. In your view which measures or practices act as barriers to the introduction of PPPs within the European Union? One obstacle for Public-Private Partnerships in the European water sector are public monopolies; i.e. in Germany, where the public sector has an exclusive right to provide waste water treatment. 21. Do you know of other forms of PPPs which have been developed in countries outside the Union? Do you have examples of good practice in this framework which could serve as a model for the Union? If so, please elaborate. N/A.

10 Page More generally, given the considerable investments needed in certain Member States in order to pursue social and sustainable economic development, do you think a collective consideration of these questions pursued at regular intervals among the actors concerned, which would also allow for the exchange of best practice, would be useful? Do you consider that the Commission should establish such a network? The European Commission has communicated its interest to enable evaluation and benchmarking in its White Paper for Service of General interest. This would be particularly valuable for the water sector. Regular benchmarking would include environmental, social and economic aspects of the sector and unveil best practices. The question of a network of appropriate actors should be raised in this context. RWE Thames Water position Green Paper PPP.final.doc