Across the Border: Sharing P3 Experiences

Across the Border: Sharing P3 Experiences
05/25/2016 | 8:30 – 10:10 | 2 CPE
Dan Huge, CPA, Public Finance Director, Indiana Finance Authority
Sekhar Angepat, Managing Director and Co-Head, Infrastructure
Finance, Royal Bank of Canada
Eric Reese, Director, Global Strategic Development, Scheidt &
Bachmann
Divya Shah, Acting Senior VP of Transaction Finance, Infrastructure
Ontario
PPP Market Update
May 25, 2016
Sekhar Angepat
RBC Capital Markets
Canadian PPP Overview
Core Public Infrastructure
Key Observations
 PPP is also known as “P3” or “Public-Private Partnerships” or “AFP”
 PPP is a procurement method used to deliver Core Public
Infrastructure
 Public sector transfers certain obligations to the private sector to
design, build, finance and operate (“DBFO”) a core piece of
infrastructure in exchange for a government payment stream
 Risk sharing, higher value for money, private sector expertise and
innovation as well as improved performance are among the main
benefits of the PPP model to public sector
 Concession terms typically range from 25 to 40 years
History of PPP in Canada
 First introduced in Canada in mid to late 90s; however, really gained
momentum in 2005
 Currently we are seeing approximately 8-10 deals in excess
of $250 MM procured each year
 Provinces actively procuring PPP solutions include:
 Alberta
 British Columbia
 Manitoba
 New Brunswick
 Ontario
 Quebec
 Saskatchewan
 Recently, other provinces, municipalities and the federal government
have been initiating PPP projects
Social
Transportation
Utilities
 Hospitals
 Roads
 Renewables
 Schools
 Bridges
 Power Generation
 Courthouses
 Transit
 Transmission
 Water & Wastewater
 Detention Centres
 Defense
 Stadiums
Dedicated Canadian PPP Agencies
Alberta Infrastructure and
Transportation
Partnerships British Columbia
Partnerships New Brunswick
Infrastructure Ontario
Infrastructure Quebec
SaskBuilds
PPP Canada Inc.
Canadian PPP Market Themes
Virtually No Government
Execution Risk
 Canadian provinces and procurement agencies are highly experienced and have established processes as well as templates in place, ensuring
certainly of execution
 Strong record of reaching financial close on transactions amid political and market turbulence
 Highly reliable legal framework, tested by the Province of Ontario vs. 407ETR lawsuit, which upheld rights on the private sector
 Significant substantial completion or milestone payments by the public sector (up to 50% - 85% of capital costs)
Notable Differences of
Canadian PPP Model
 Most projects are structured with no refinancing risk
 The majority of the projects are availability-based
 Infrastructure privatizations are uncommon as are revenue-risk projects
 No preferential tax treatment for infrastructure bonds
 Over $10 billion deal pipeline over the next two years expected
 Increasing prominence of municipal and federal transactions
 New Federal government bullish on infrastructure renewal
 Visible infrastructure deficit throughout Canada:
Steady Deal Flow
Toronto
Population: 2.6MM
New York
Population: 8.4MM
 Addressed social infrastructure deficit gives way for more sizable transportation transactions:
2014 Canadian PPPs by Sector
($4.9 billion)
Sector Rotation
13%
4%
3% 17%
Power
2015 Canadian PPPs by Sector
($6.9 billion)
14%
Social
Infrastructure
Transport
1%
1%
Social Infrastructure
Other
Environment
Environment
63%
Other
84%
Transport
Why do Governments use PPP?
 Addresses the infrastructure backlog
 Competitive bidding process ensures value for money for the public sector
 Transfers risk to the private sector in delivering the project on-time and onbudget
 Encourages innovation from the private sector and creates synergies of
integration of design / construction / operation / maintenance
 Ensures long term performance management
 Lifecycle maintenance is built into the project cost and the risk is often borne by
the Facilities Manager / Operator (“FM”)
 Proven an effective means for government to concurrently undertake and
manage a robust pipeline of transactions
 Able to obtain fixed rate long term funding with high credit ratings
What do PPPs look like?
 Long term concession contracts (construction + ~30 years)
 Canadian PPP market consists primarily of:
 Greenfield projects
 Brownfield projects
 Two general categories of PPP projects based on certainty of revenue stream:
I. Availability-based projects
 Fixed payments provided by the Authority subject to the project being made available to the
public and operated according to scope
 Examples include social accommodation projects (hospitals, court houses, detention centres
and schools) and some road / transportation projects
II. Volume-based projects
 Revenue stream is dependent upon user demand or resource volume
 Examples include toll roads, power projects, airports
 The vast majority of Canadian PPP deals have been availability based with governments gaining
comfort on value-for-money based on risk transfer during construction and operations as opposed to
revenue projections
Infrastructure Asset Spectrum
 The term infrastructure has been used to describe a wide array of assets with different risk profiles
Lower
Risk
PPP Assets
(Availability-based)
Brownfield
Assets
Other Greenfield
Assets
Higher
Risk
Definition
Core public infrastructure developed
under a government controlled
process
Wide range of operating assets;
typically auctioned off to the highest
bidder
Wide range of assets to be
constructed by private sector
Revenue Stream
Government-backed payments
based on availability of asset
(no usage risk – payment assured if
asset is available and operated to
specification)
Revenues will vary based on usage,
economic conditions and business
competition
Revenues will vary based on usage,
economic conditions and business
competition
Costs
Operating cost certainty – Operator
provides fixed price and takes the
risk of any cost overruns
Operating costs and CAPEX may
vary from those forecasted at
acquisition
Operating costs and CAPEX may
vary from those forecasted
Cash Flow Certainty
High certainty to ensure debt
service obligations and provide
distribution
Variable
Variable
Construction Risk
Construction completion required
before revenues generated;
Fixed-price, date-certain DB
contract supported by strong
security package
Little or no construction
Construction completion required
before revenues generated;
May or may not have fixed-price,
date-certain contract; strength of
security package will vary
Typical Transaction Structure

A typical PPP transaction is structured to ensure that the majority of risks assumed by the private sector are passed down to the
Design-Builder and Facilities Manager instead of being borne by equity and debt providers. These obligations are further back
stopped by strong security packages provided by the Design-Builder and Facilities Manager / Operator
Debt and Equity Financing
Lenders
Equity Investors
Equity (~10%)
Senior Debt (~90%)
Project
Co
(SPV)
Ring Fenced
SPV Structure
Design-build Agreement
- Fixed-price
- Fixed schedule
- Liquidated damages
RISK
RISK
Project Agreement
- DBFO (hospital, school etc)
Public Authority
Facilities Maintenance Agreement
- Fixed-price
- Term equal to length of Project Agreement
Design-Builder
Facilities Manager /
Operator
DB Support Package
(LC, Parent Gtee, Perf
Bonding)
FM Support Package
(LC, Parent Gtee, Perf
Bonding)
Canadian PPP Pipeline
Project
Jurisdiction
Industry
Type
Expected FC Date
Project Size
Data Centre (CFB Borden / Angus)
Federal
Social
DBFM
May-16
Small
William Osler Health System - Etobicoke General
Hospital Phase 1 Redevelopment
Ontario
Healthcare
DBFM
May-16
Small
Manitoba
Transportation
DBFM
Jun-16
Small
Southwest Calgary Ring Road
Alberta
Transportation
DBFM
Jul / Aug-16
Large
Mackenzie Health – New Vaughan Hospital
Ontario
Healthcare
DBFM
Sep-16
Medium
Saskatchewan
Power
DBFM
Sep/Oct-16
Large
Hamilton Biosolids Plant
Ontario
Social
DBFOM
Jan-17
Small
CAMH - Phase 1C
Ontario
Healthcare
DBFM
Feb-17
Small
Highway 427 Extension
Ontario
Transportation
DBFM
Feb-17
Medium
Alberta Transmission Line (Fort McMurray West)
Alberta
Energy
DBFM
Feb / Mar-17
Large
Finch LRT
Ontario
Transportation
DBFM
Apr-17
Large
Gordie Howe International Bridge
Federal
Transportation
DBFM
Jun-17
Large
George Massey Bridge
British Columbia
Transportation
DBFOM
Dec-17
Large
Roberts Bank Terminal 2 (Land Base)
British Columbia
Port
DBFM
Dec-17
Large
Winnipeg BRT
Great Plains Generating Station
 Size: - Small:
< 300 MM
- Medium: 300 MM > < 600 MM
- Large:
> 600 MM
Over ~$10bn in Estimated Capital Costs for 2016-2017
British Columbia
• George Massey Bridge
• Lion’s Gate Waste Water
Treatment Plant
• Roberts Bank Terminal 2
Alberta
Ontario
• Southwest Calgary Ring Road
• Vaughan Hospital
• Stoney CNG Transit Bus
Garage
• CAMH - Phase 1C Client
Care Building
• Alberta Transmission Line
• Highway 427 Extension
• Finch LRT
*Project either announced as DBFM / DBF PPP or in procurement (Pre-Financial Close). Not an exhaustive list
Canada (Federal)
Municipal
• Data Centre (CFB Borden /
Angus)
• Winnipeg Transit Project
(Manitoba)
• Gordie Howe International
Bridge (previously NITC and
DRIC)
• Hamilton Biosolids Plant
(Hamilton)
• Gardiner Expressway
Revamp (Toronto)
Things to Look for
PPP – Risks and Structure Protections
Development Risks
 Public Sector retains certain risks associated with the development of the project
– Permitting
– Pre-existing environmental
– Land acquisitions
 Design-Builder enters into fixed-price, date-certain construction contract
 Design-Builder posts security and pays liquidated damages if construction is delayed
Construction Delay and
Cost Overruns
Operating & Maintenance
Cost Overruns
 Independent Technical Advisor reviews schedule and construction progress
 Design-Builder provider’s obligations are supported by security such as surety / performance bonding, letters
of credit and parent company guarantees
 Facilities maintenance provider enters into a fixed-price contract to operate the project
 Facilities maintenance provider’s obligations are supported by security such as surety / performance bonding,
letters of credit and parent company guarantees
 Lenders and rating agencies require sufficient committed liquidity to pay all debt service during construction
delays
Ability to Service Debt
 Financial covenants thresholds are structured to ensure the project maintains an adequate cash flow buffer to
service project debt
Investor lines of Defense
Construction Phase
Operations Phase


1

2
Design-Build (“DB”) Contract
Facilities Maintenance / Operations Contract
 Fixed price
 Fixed price
 Date certain
 Duration matches length of Project Agreement
DB Security Package

 Letter of Credit, Performance Bonds, Parent Company
Guarantees
FM / Operator Security Package
 Letter of Credit, Performance Bonds, Parent Company
Guarantees, Maintenance Reserves
3

Insurance Proceeds

Insurance Proceeds
4

Equity at Risk

Equity at Risk

Drawdown of bond proceeds, subject to certification by
Technical Advisor including cost to complete

Debt service reserve account

Step in Rights

Step in Rights
5
6
Investor Checklist
Top Ten List for Credit Review
1
Nature of Revenue Stream
 Availability payments versus volume risk

2
Nature of Payer
 Government obligation, non-guaranteed authority, end user

3
Project Complexity
 Construction and operations

4
Nature of Equity Investors (“Sponsors”)
 Experience, track record and financial strength

5
Nature of Constructors
 Experience, track record and financial strength

6
Nature of Operators
 Experience, track record and financial strength

7
Skin in the game
 Level of commitments from Sponsors, Constructors and Operators

8
Construction Risk Mitigation Package
 Parent company guarantees, performance bonds, letters of credit
 Cost to complete test for construction draws

9
Operating Risk Mitigation Package
 Parent company guarantees, performance bonds, letters of credit, maintenance
reserves

Covenant structure
 Reserve funds, coverage ratios, equity distribution tests, additional bonds, tail to
maturity of underlying Project Agreement

10
Regina Bypass

On August 4, 2015, SGTP Highway Bypass Limited Partnership consortium
was awarded the agreement to design, build, finance, operate and maintain
the Regina Bypass in Regina, Saskatchewan (“Project”)

The Project consists of a free flow highway corridor, which includes
approximately 58 km of 4-lane highway (including 40 km of new 4-lane
highway) and service roads along with a number of interchanges and
intersections

The Construction Period is 51 months, followed by a 30-year Operational
Term, ending in October 2049

The payment structure involves availability-based payments from a high
quality, “AAA / Aaa / AA” rated counterparty

Bond financing consisted of a dual offering in the form of $488.123 million 30year (19.3-year weighted average life) amortizing bonds issued at
GoC+200bps and ~$140 million 34-year bullet bonds priced at GoC+195bps
through a special purpose vehicle, SGTP Highway Bypass Limited
Partnership (“SGTP”)

The offering was broadly distributed across 25+ buyers

The offering came at the tail end of a heavy slate of long-term P3 bond
offerings in the ~45 days prior to the issue date and SGTP was able to
capitalize on solid investor demand for an “A3” rated P3 project with low
construction and operating complexity

RBC acted as joint lead bookrunner and underwriter for the dual tranche
issuance with 50% economics
Money
Managers
50%
SGTP Highway Bypass LP
Rating(s)
Moody’s: A3
Financial Close
August 4, 2015
Debt Size
C$488.1 mm (Amortizer) / C$141.0 mm (Bullet)
Tenor
29.5y (Amortizer) / 34.0y(Bullet)
Average Life
19.3y (Amortizer) / 34.0y (Bullet)
Spread at Issue
200 bps (Amortizer) / 195 bps (Bullet)
Investor Distribution
Investor Type
Insurance
Companies
44%
Issuer
Investor Location
BC
10%
Banks/Trust
3%
Other
3%
Ontario
64%
Manitoba
3%
Alberta
1%
Quebec
22%
Edmonton LRT

On February 8, 2016, TransEd Partners General Partnership (“TransEd”)
consortium was awarded the agreement to design, build, finance, operate
and maintain the Valley Line LRT in Edmonton, Alberta (“Project”)

The Project consists of extending the Edmonton LRT by 13km with
additional connected structures and 12 neighborhood stops. The Project
features at-grade and above-grade stations, a short LRT tunnel and
procuring state-of-the-art Light Rail Vehicles

The Construction Period is 4.8 years followed by a 30-year Operational
Term ending in December 2050. Service commencement will occur
December 2020

The payment structure involves availability-based payments from a high
quality, “AA+ / Aaa / AAA” rated counterparty

Bond financing consisted of a single offering in the form of ~$394 million
34.63-year (~22-year weighted average life) amortizing bonds issued at
GoC+265bps through a special purpose vehicle, TransEd Partners General
Partnership
Issuer
TransEd Partners General Partnership
Rating(s)
DBRS: A (low)
Financial Close
February 8, 2016

The offering was broadly distributed across 15+ buyers
Debt Size
C$394 mm

The offering was the first broadly marketed P3 bond offering of 2016
Tenor
34.63y

RBC acted as lead left bookrunner and underwriter for the offering with 55%
economics
Average Life
21.86y
Spread at Issue
265 bps
Investor Distribution
Investor Type
Insurance
29%
Government
1%
Pension
Fund
2%
Investor Location
New
Brunswick
1%
Money
Managers
68%
British
Columbia
41%
Ontario
51%
Quebec
5%
Alberta
2%
Across the Border: Sharing P3
Experiences
May 25, 2016
Divya Shah
Infrastructure Ontario
Agenda:
•
•
•
Infrastructure Ontario (IO) Overview Role of Transaction Finance in IO
Trends Infrastructure Ontario: Who are we ?
•
Crown corporation of the Ontario government responsible for building, managing, financing, and enhancing the value of Ontario public assets
•
Supports Ontario’s position as a North American leader for infrastructure delivery and innovation
IO’s Mandate: Four lines of business
Infrastructure Development
•
Manages planning, design, and delivery of major public infrastructure projects
Real Estate and Land Management
• Manages the Ontario government’s real estate portfolio, the second largest and one of the oldest real estate portfolios in Canada
Lending
•
Dedicated to providing financing solutions to help public sector clients renew infrastructure across Ontario
Commercial Projects
•
Acts as an internal advisor to government clients to help generate revenue, reduce costs, and create efficiencies in how public services are delivered
How are projects assigned to Infrastructure Ontario •
The Ministry of Economic Development, Employment and Infrastructure (MEDEI), in consultation with other government ministries, submits an infrastructure renewal budget annually for Cabinet approval.
•
MEDEI also identifies which projects will be assigned to IO or to a provincial ministry.
•
After projects are approved by Cabinet, IO receives a Letter of Direction from the Minister of Economic Development, Employment and Infrastructure to confirm the projects, including construction start and total project budget.
•
IO works in partnership with its client ministries to manage the projects.
Government Ministries
Cabinet MEDEI
Infrastructure Ontario • Attorney General
• Children and Youth Services
• Community Safety and Correctional Services
• Health and Long‐term Care
• Training, Colleges and Universities
• Transportation
Central Procurement Agency approach
1. Not Policy but execution (i.e. outside Public Service)
•
IO is a Crown corporation and arm’s length from the Province •
Responsible for procurement and execution of projects, not policy development 2. Steady pipeline of projects •
Issue our pipeline every year to the market to show our commitment to infrastructure 3. Variety of Procurement Models
•
One model doesn’t fit all – Build‐Finance (BF) vs. Design‐Build‐Finance (DBF) vs. Design‐Build‐Finance‐Maintain (DBFM)
•
IO also reviews the payment structure for all models across asset classes to ensure we minimize financing costs without compromising risk transfer
4. Standardization & Consistency of templates / processes •
Standardized processes and templates reduce costs and ensures consistent risk transfer
•
Continuous improvement through standardization
5. Negotiating leverage
•
End to end service provided to the client (sponsor) from Technical / Financial / Operational perspective
•
IOCIP, credit spread mechanisms, operations phase negotiations, managing relationships, consistent application of the Project Agreement provisions
AFP Program: Track Record
All AFP Projects
Number
Capital cost
Completed
54
$17.29 billion
Under construction
20
$15.87 billion
Procurement/planning
15
$ 6.25 billion
Total 89
$39.41 billion
(as of March 31, 2016)
AFP Track Record: 2015 Track Record published on IO Website
• 98% (44 of 45 projects) AFP projects were delivered on‐budget
• 73% (33 of 45 projects) AFP Projects were On‐Time or within one month of Substantial Completion. Eight of those projects (18%) were delivered early
Municipality Projects: AFP Projects
•
Transit: Ottawa LRT, Waterloo LRT, •
Transportation: City of Toronto, City of Kingston
•
Others: City of Toronto, City of Richmond Hill IO Loan Program: Track Record
•
•
IO has advanced over $7.5 billion in affordable long‐term financing to public sector clients throughout Ontario
•
Represents 370 clients and 2,105 infrastructure renewal projects with a total project value of more than $13 billion
•
42% of clients are repeat customers
•
Average loan size: approx. $8.6 million
Municipalities, municipal corporations, and housing providers make up over 90% of the loan volume (by value)
•
Lending to Key Municipalities include: Kingston, Barrie, Ottawa, Niagara, Hamilton, Thunderbay, TCHC, Simcoe, Queen’s, York Value for Money & Business Case Analysis Value‐for‐Money (VFM) is a standardized approach to assessing the optimal delivery method for a given project
VFM is a decision‐making or screening tool for government
The VFM analysis compares two options: “traditional” (or Public Sector Comparator, PSC) vs. AFP project delivery
Used to support/justify the selection of a delivery model (BF / DBF / DBFM) for a project
Positive VFM is demonstrated if total risk adjusted costs under Traditional delivery are greater than AFP Risk Adjusted Costs
Risk Matrix Template
Risk Workshop
• IO uses standard risk matrix templates to identify project risk, allocate risk between the private and public sector, and quantify impact to the public sector (known as “Retained Risks”) under both delivery models.
• VFM is achieved when individual risks are allocated to the party that is best placed to manage them by undertaking effective and cost‐efficient risk mitigation strategies
• Project specific risk workshops with industry experts, cost consultants, and key stakeholders are conducted to review and assess specific attributes of a project that require an adjustment to risk matrix. Risk workshop steps include:
1.
Identify project specific risks
2.
Allocate to party best able to manage
3.
Estimate probability of occurrence and resulting cost impact ranges
4.
Run statistical analysis to quantify total retained risks
Empirical Data
Social Infrastructure Civil Infrastructure
Innovation Factor: Professional advice and external research that suggests cost savings from innovation in the range of 5% to 18% can be realized for AFP social & civil infrastructure, depending on the asset class and model type.
•
Innovation Factor papers by Altus and MMM Group (available on IO Website); Examples on the following slide
Cost Overrun Retained Risk: External research that suggests cost overruns on large traditional exceed the contractual price by an average of 20% to 25%
•
P3s in Australia – Research conducted by the University of Melbourne compared the performance of 25 P3 projects to 42 traditionally delivered projects and found that P3 projects were 31.5% better than traditional projects in terms of on‐budget performance.
•
Study by Infrastructure Partnerships Australia of 21 P3 projects against 33 traditionally delivered projects concluded that the average cost overrun was 14.8% for traditional projects compared to 1.2% for AFP projects
•
The Interim Report released by TTC, presented the delay costs for the on – going York Spadina Subway Extension that is being constructed using the Traditional Delivery Approach. The Interim Report, projects that the project is 80% complete and will be 21% ($2.6bn vs $3.2bn expected) over budget
Deferred Maintenance: Research on traditionally managed public sector buildings and transit infrastructure show a 20% to 40% year on year deferred maintenance factor
Asset Residual Retained Risk : As a result of deferred maintenance and lack of funding traditionally maintained infrastructure tend to have poor facilities condition values at the end of 30 years Payment Structuring Key principle of Value for Money is to ensure that there is sufficient private sector incentive, at all times, for
effective risk transfer.
•
While private sector finance allows effective risk transfer and negotiating leverage, it comes with a
significantly higher cost.
•
At Substantial Completion •
•
–
Competing issues: Balance the amortization of remaining Capital Costs against walk away risk at Expiry of Project –
Financing structure decision: What percent of Capital Costs should be paid out by Substantial Completion ? During Construction –
Competing issues: Balance use of payments during construction vs third party leverage
–
Financing structure decision: What combination of payments can be made by the Public Sector during construction under AFPs without impacting risk transfer ?
–
Use of Interim Completion Payments, Milestone Payments and Construction Progress Payment ?
During Operations –
Competing issues: Smooth annual payments vs lumpy annual payments –
Financing Structure decision: What is the term for the project ? What is the profile of payments?
IO introduced Credit Spread Benchmarking & Clearing Spreads process + Quality of Finance evaluation
2009
IO introduced Multi Phased Projects and Bundling of Projects such as Women’s College Hospital, Herb Gray Parkway, OPP Modernization projects
2010
2011
• Construction Progress Payments • Construction Period Payment Mechanism
2015
• $30+ billion in Transit and Transportation infrastructure over the next 10 years.
• Greater focus on Alternative Service Delivery of government services
2016
• Largest transit expansion in Toronto’s history.
• First time use of Green Bonds
Hybrid Financing Solution PRIVATE SECTOR
Credit Crisis
IO increased Substantial Completion Payments (SCP)
PUBLIC SECTOR
Trends /Innovation – Private and Public Sector
Mini Perm Solutions
Broadly marketed Long Bonds
Long Term Bullet Bonds
Financing Changes to the Project Agreement / RFP Process Strategy
Substantial Completion Payments (SCP)
Recommendation/ Concept
• Increase Substantial Completion Payment to up to 60% on Social Infrastructure and up to 85% on Civil Infrastructure
• However, retain some flexibility to account for affordability, market attractiveness,
lender capacity & project rating
Payment during Construction
• All Projects will use either Construction Period Payments or Milestone Payments or Interim Completion Payment unless the savings net of Provincial Costs is outweighed by risks or administration costs.
Equity Sale ‐ Gain Share
Mechanism
• Remove both the 1.5 x factor and the exemption from gain sharing following the three year period after Substantial Completion to allow Public Sector to more fully participate in equity gain sharing for sales occurring during operations
Letters of Credit
Security Packages
• Standby LCs should be sized per the $ value of the project • Allow for 1 LC to be submitted at Preferred Proponent all the way to Financial Close
• DBFs anf BFs will continue to require 50% Performance Bond and 50% Labour
Material Bond for the entire length of Construction • Security Packages under DBFMs will continue to be dictated by Lender requirements and rating agency requirements Financial Impact
High
High
Low, post Construction
Low
Low
Top Lenders over the last 10 years: Exposure Report
Country
Bank Lenders
Canada
TD Bank
Canada
Bank of Montreal
Canada
Bank of Nova Scotia
Canada
National Bank of Canada
Canada
Desjardins
Japan
Bank of Tokyo Mitsubishi
Japan
SMBC
Canada
Pacific & Western Bank of Canada
France
Societe Generale
Canada
ATB
1
2
3
4
5
6
Country
% Exposure – Bank Lenders
Canada 65%
Japan
14%
France
8%
Germany
3%
Spain
3%
*Note: including all deals prior to Eglinton Crosstown
Rank
7
8
9
10
Long Term Bond Investors
Key takeaways: •
One size doesn’t fit all. 
It is important to understand the technical and risk aspects of the project before selecting a particular model

Value for Money is one decision point, but not the only one
•
In case of DBFM, consider impact on Operations and Maintenance phase upfront in as much detail as possible today. •
Continuous Improvement is as important as standardization Thank you
Across the Border: Sharing P3
Experiences
May 25, 2016
Eric Reese
Scheidt & Bachmann
Indiana P3 Projects
May 25, 2016
Dan Huge
Indiana Finance Authority
Agenda
•
•
•
•
•
Ohio River Bridges (ORB)
Project History
ORB East End Crossing Project
Background
ORB East End Crossing Project
I-69 Section 5 Project History
I-69 Section 5 Project
ORB Project History
•
Project background
– 2003: Federal Highway Administration (FHWA)
issued a Record of Decision (ROD) selecting
the preferred Two Bridges/Highway Alternative
– 2008: FHWA approved the Initial Financial Plan
and Project Management Plan
– 2010: The Louisville and Southern Indiana
Bridges Authority was established to oversee
financing and construction of the Project
ORB Project History (cont.)
– 2011: The Authority worked toward developing a
finance plan for the Project, while the state
sponsors advanced the Supplemental
Environment Impact Statements (SEIS) process
after the decision was made to toll the Project
– 2012: The project sponsors decided on a dual
procurement strategy, giving responsibility to
Kentucky for procuring the Downtown Bridge
segment and Indiana the East End Crossing
ORB – East End Crossing Project
Background
•
One of two new bridges across the Ohio
River, connecting roadways to address
the long-term cross-river mobility needs
in the greater Louisville-Southern
Indiana region.
•
Funded, procured, and constructed
using Indiana Department of
Transportation (INDOT) and Indiana
Finance Authority (IFA) processes,
subcomponents of the project include:
ORB – East End Crossing Project
Background (cont.)
– East End Kentucky Approach (Section 4): Approximately four miles of
reconstruction and new terrain road on KY 841. Kentucky will be
responsible for maintenance of this Section.
– East End Bridge (Section 5): A new four-lane Ohio River bridge with a
pedestrian walkway/bikeway that connects the East End Kentucky
Approach section with the East End Indiana Approach section. The
Concessionaire will be responsible for maintenance of this Section.
– East End Indiana Approach (Section 6): Construction of a new roadway
from the existing SR 265/SR 62/Port Road Interchange to the new East
End River Bridge. Indiana will be responsible for maintenance of this
Section.
ORB – East End Crossing Project
•
East End Crossing Project
The East End Crossing portion of the Ohio
River Bridges Project is located in the eastern
portion of the Louisville Metro area, connecting
I-265/KY 841 (Gene Snyder Freeway) in
Kentucky with S.R. 265 (Lee Hamilton
Highway) in Indiana.
– Request For Qualifications (RFQ): Issued:
March 9, 2012, 6 proposers submitted
Statement of Qualifications (SOQ)
– Request For Proposal (RFP): Issued: July
2012, 4 proposers submitted ORB - East End
Crossing Project proposals
Evaluation Process
•
Technical Proposal and Financial Proposal evaluations conducted
separately by separate teams
•
Evaluators are all IFA/INDOT personnel supported by staff and
consultants
•
No communication occurred between technical and financial
teams until both teams had fully completed their evaluations
•
Final step of combining technical and financial scores resulted in
a total score out of a maximum of 100 points available
Financial Score
•
Represents 75 of the total 100 proposal points available
•
72.5 of the 75 points determined by the proposer’s MAP
score according to formula:
MAP Score =
Lowest Value of Base MAP
Proposer’s Value of Base MAP
•
X 72.5 Points
Remaining 2.5 points awarded based on feasibility
of
financial proposal as determined by the evaluation
committee
•
Total Financial Score = MAP Score + Feasibility Score
Technical Score
•
Represents 25 of the total 100 proposal points available
•
Comprised of the sum of the Technical Proposal Score (up to 22.5 points) and
Schedule Score (up to 2.5 points)
•
Technical Proposal Score determined by 3 major elements:
– Preliminary Project Management Plan (40%)
– Preliminary Design-Build Plan (30%)
– Preliminary Operations and Maintenance Plan (30%)
•
Schedule Score determined by formula:
Schedule Score =
Difference (in calendar days) between (i) Proposer’s scheduled date to achieve Substantial Completion and (ii) the Base MAP Date
Difference (in calendar days) between (i) the earliest scheduled date to achieve Substantial Completion shown in any conforming Proposal, and (ii) the Base MAP Date
X 2.5 Points
Best Value Determination
•
Final step merges financial and non-financial considerations
into a final score out of a maximum of 100 points available
•
Combination of scores determined by formula:
Total Proposal Score (out of 100) = Financial Score
(up to 75 points) + Technical Score (out of 25 points)
ORB – East End Crossing Project
– Selected Preferred Developer: WVB East
End Partners
– Construction Cost: $763M (this is lower
than the $987M estimate included in the July
2012 initial Financial Plan); MAP: $32.9M
– Structure: Availability & Milestone Payments
(with tolls)
– Construction Began: June 3, 2012
– Anticipated Completion: December 17,2016
GFOA Resources
GFOA Advisory: Public-Private
Partnerships (P3)
•
Approved by Executive Board (01/15)
•
Recommendation:
– Organizations, and especially the finance officer, must
understand what is at stake and make informed, strategic
decisions on whether or not to pursue P3 opportunities.
– List of key considerations: Legal Authority, Justification for
the Project, Competition, Expected Project Revenue, etc.
GFOA Resource Center: PublicPrivate Partnership (P3)
•
Available on GFOA website, in association with P3
Advisory:
– Public-Private Partnership (P3) for Economic Development
and Redevelopment
– Public-Private Partnership (P3) for the Sale of Lease of Assets
– Public-Private Partnership (P3) for Outsourcing
Across the Border: Sharing P3 Experiences