PPPs imply the transfer of risks from the public to the private sector and whether the demand risk is being passed on or not is a major question in all PPPs. The current economic situation combined with the uncertainty around traffic forecasts (optimism bias) leads to a higher pricing of demand risk. Such demand risk might be too expensive to be fully, or to an appropriate extent, transferred in many proposed projects. Further, taking into account the inability to price the service to market and the uncertainty of the revenue stream, availability-based PPPs appear, at least in the short-to-medium term, a preferred solution for some TEN-T projects. It is in this type of transaction that combining EU Funds with PPPs can have the greatest contribution to reducing the cost of private capital. Although TEN-T beneficiaries can be private companies, the use of TEN-T grants to support the construction (works) component of a PPP has been very limited. Most TEN-T grants supporting PPPs have focussed on studies in the project preparation phase. The following issues have been identified as obstacles in utilising grants for works in PPPs:
• Low leverage of EU Funds: the maximum co-funding rate for works is 30% for cross-border projects, the rate for a project in a single Member State is 10%.
• Confidentiality: the EU Funds are paid against receipts for the construction costs (ex-post) and may put the confidentiality of a PPP contract at risk. The availability payment comprises amounts for the recovery of construction costs, financing costs as well as current and future maintenance and operating expenses, but only construction costs are eligible. The proportionate amounts of the availability payment are proprietary. The level of disclosure required in order to receive the grant disbursement for the construction works component of the blended payment impinges upon the principles of confidentiality.
• Timing: Article 12.4 of the current TEN Regulation, provides that "in the case of availability payment schemes, the first prefinancing payment shall be made within a period of up to three years following the granting of Community financial aid" and Article 13.1.a. of the current TEN Regulation provides that projects which have not been started in the two years following the start date of the project may be subject to penalties, including cancellation of the grant. On the other hand, if the grant is awarded before construction starts so that it produces a maximum leverage effect on the PPP financing, then complying with the 3-year rule becomes very difficult. Furthermore, funding meant to support an availability payment PPP project should not be limited by the 7-year duration of an EU budgetary cycle, as is currently the case.