Since rolling out its first PPP projects a decade ago there is now an established support base in the Netherlands for the model, a standard policy framework and numerous Transport and Accommodation projects in the pipeline.

Over the years the Dutch government has strived to develop strong foundations for its PPP programme, and for the first time new standard PPP contracts were used on the A12 highway contract, Schiphol Airport Justice Complex and the upcoming A15.

While the government is yet to fully embrace PPPs in quite the same way the UK or France has in recent years, the financial close of the A12 Widening PPP [Projects Database] is a positive signal moving into 2011 and establishes a benchmark for the burgeoning market going forward.

Background & Procurement

The proposed improvement of the A12 highway is part of a wider strategy of the Dutch government to improve the connection to cater for current and future traffic numbers.

This stretch of the A12 highway - between the Randstad conurbation and Germany - is increasingly congested, especially during peak hours.

Towards the end of 2007 the Dutch Ministry of Transport held individual industry days for two road schemes - the A12 and A15 highways - in anticipation of tender releases in late 2008.

In October 2007 the first industry meeting took place for the A12 Utrecht - Veenendaaland DBFM contract. Topics covered included the procurement procedure, payment systems/performance incentives, and the scope of PPP projects in the Netherlands.

In addition, by June 2008 a committee headed by former Minister of Finance Dr H Onno Ruding (serving from 1982-1989) presented a report (the Ruding Report) to the current Minister of Finance and Minister of Transport on investments in infrastructure. PPPs featured strongly in the recommendations.

In January 2009 Rijkswaterstaat Utrecht (RWS) - part of the Dutch Ministry of Transport, Public Works and Water Management - published a contract notice in the OJEU and by early 2009 the procurement process was underway for both the A12 and A15 highway schemes.

Throughout the procurement process RWS received financial and technical advice from PwC and Pels Rijcken & Drooglever Fortuijn.

By summer 2009 the following four teams were pre-qualified for the A12:

• A-Lanes A12 - Strukton, Ballast Nedam, John Laing, Strabag and Croon
• Royal BAM Group
• Heijmans, VolkerWessels, Egis and DIF
• Macquarie Bank, Dura Vermeer and Besix

Later that year the consortium led by Macquarie, Dura Vermeer and Besix had dropped out of the competition, leaving just three teams in the running.

Even though the tendering process had got underway during the financial crisis, the consortia had fully committed financing in place for final bids on 3 May 2010.

In mid-June 2010 the PPP contract was awarded to a BAM-led consortium under the competitive dialogue procedure applicable to public works contracts under the EU Directive 2004/18/EC.

The appointment was subject to a statutory 'cooling off' period seeing off challenges from the rival two bidders.

The following Royal BAM Group companies formed part of the winning team:

• BAM PPP
• BAM Wegen
• BAM Civiel
• BAM Infratechniek
• BAM Infraconsult

Its advisers were:

• KPMG - financial
• De Brauw Blackstone Westbroek - legal
• Nauta Dutilh - legal
• Aon - insurance

Rijkswaterstaat and BAM signed the A12 contract on 2 July and reached financial close on 23 September 2010.

Project Description

The contract includes the design, build, finance and maintain (DBFM) of the widening of a 30km section of the A12 motorway between the city of Utrecht and the town of Veenendaal.

This TEN-T (Trans-European Transport Networks) scheme will be constructed in two phases, and concerns a general increase in road capacity between Lunetten and Veenendaal.

The project involves the construction of an additional lane in both directions; the construction and adaptation of viaducts and traffic installations; and maintenance over a 20-year period.

The new lanes will be constructed next to the central reservation, so that the emergency lane is maintained over the length of the route. The project also includes adjustment of the junction near Veenendaal.

The improved A12 will be quieter with the addition of two-layer porous asphalt on major parts of the road as well as noise barriers. New streetlights are also less likely to radiate beyond the hard shoulder and surrounding areas.

Construction work is due to start in early 2011 and will be completed by the end of 2012.

This relatively short construction period is expected to significantly reduce the impact on road users.

Financing

The financing for the Eu350 million A12 project is being provided by a consortium of banks consisting of five commercial lenders and the European Investment Bank (EIB).

The Eu170 million commercial financing package includes:

• senior term loan - Eu80 million
• revolving credit facility - Eu70 million
• equity bridge loan (EBL) - Eu20 million

The following five commercial banks took equal tickets across the above commercial facilities:

• Bank of Tokyo-Mitsubishi UFJ (BTMU)
• DZ Bank
• Fortis Bank (BNP Paribas)
• KBC
• KfW

Senior debt pricing starts at around Euribor+200-210bp and steps up to around 250bp over the 22-year tenor. The debt to equity ratio is around 89:11-90:10.

The European Investment Bank (EIB) is also providing an Eu80 million loan.

The lenders received advice from the following consultancy firms:

• Clifford Chance - legal
• Mott MacDonald - technical
• Aon - insurance
• BDO - model audit

Rijkswaterstaat is providing a total of Eu100 million in 'milestone payments' that are linked to the end of the various construction phases in the scheme.

The two lump sum payments are:

• Eu70 million - on availability
• Eu30 million - on completion of construction

Construction work will start in early 2011 and with completion expected by the end of 2012.

The DBFM project has a net present value (NPV) of Eu260 million and a concession period of 25 years.

Conclusion

The development of the PPP market in the Netherlands has been sluggish due to intermittent deal flow over the last couple of years, lengthy procurement timetables and high transaction costs.

However, the pipeline remains strong with the much larger A15 progressing well through financing and the upcoming three road PPPs that form part of the Eu3 billion Schiphol, Amsterdam to Almere A6/A9 road PPP that is expected to get underway by the end of the year.

With new standardised PPP contracts in place - which are now broadly in line with PFI contracts - we can expect to see a more streamlined procurement and delivery process to follow in future deals.

This was demonstrated in the A12 deal which managed to go from OJEU notice to financial close in 18 months, and which secured commercial finance on decent terms during the height of the European sovereign debt crisis.