UN Training Program Keys to Successful PPP s September

UN Training Program Keys to Successful PPP’s September 25, 2006

Agenda u Continuum u Typical u PPP of Risk Sharing European PPP Risk Allocation Lessons Learned - Government u Examples of Successful PPP’s – Netherlands High Speed Rail – London Connect Project – Pocahontas Parkway – I-495 Capital Beltway HOT Lanes GV20050402001. ppt 2

Continuum of Risk Sharing PPPs Traditional Procurement Full Public-Sector Ownership and Operation Design-Build with Public Ownership Design-Build with Some Development Design-Build-Operate Publicly Operated/Privately Developed Privately Financed Public Facility Privately Developed and Operated Public Project Privately Developed 63 -20 Sale of Public Facility to Private Sector Publicly Owned Private Development Concession Repurchased by Public Sector Private Transit Concession Toll Road Concession Regulated Private Concession Privatization More Private – Less Public Control GV20050402001. ppt 3

USA - Continuum of Risk Sharing Between Public and Private Sectors Metropolitan Transportation Authority Seattle Monorail Central Texas Turnpike System Hudson Bergen Light Rail 7 Train Enhanced Plan of Finance JFK Int’l Air Terminal LLC Denver E-470 Pocahontas Parkway Richmond Florida High Speed Rail I-70 Express Lanes I-495 Capital Beltway HOT Lanes Public Full publicsector ownership and Designoperation build with public ownership SR 91 HOT Lanes Orange Co. C-470 HOT Lanes Chicago Skyway Dulles Rail SR 125 San Diego Indiana Toll Road Dulles Greenway Private Designbuild with some developme nt Designbuildoperate Privately financed public facility Publicly operated/priva tely developed Privately developed and operated public project Privately developed 63 -20 Sale of Concession Toll road public facility repurchased concessi to private by public on sector Publicly Private Regulated owned transit private concessi developme on on nt GV20050402001. ppt 4

Typical European PPP Risk Allocation Public Sector Shared Risks Private Sector Planning/Permits Inflation Risks Regulatory Risks Force Majeure Usage Risks Change of Law (Volume) Completion Risk ♦ Design ♦ Construction ♦ Commissioning Operating Performance Technology Obsolescence GV20050402001. ppt 5

PPP Lessons Learned u Know your priorities – Prioritize – Focus on “ready to go” projects – Proposed solution must accomplish project objectives u Select best financing approach – Reasonableness and risk of private-sector plan of finance clearly understood – Market risk understood – Public vs. private control (concession financing) u Remove or reduce – Legal – Administrative non-financial barriers GV20050402001. ppt 6

PPP Lessons Learned u Form true partnership with private sector – Quality partners • Strength of balance sheet, ability to provide bonding or insurance required • Proven PPP record • Ability to handle projects of scale and complete the project – Cooperation vs. confrontation – Regular contact vs. formal contact only – Recognize mutual learning curve of both partners – Contract form that rewards quality and success in meeting project objectives GV20050402001. ppt 7

PPP Lessons Learned u Understand private-sector needs in a PPP – Defined implementation process for proposals – Projects of scale – Enabling legislation to permit unsolicited as well as solicited proposals – List of priority projects – Opportunity to help build public support for the project – Rewards that balance the intellectual and financial investment – Buy-in by all transportation agency participants – Single-point contact on the state side to the maximum extent possible – Performance specifications not prescriptive specs GV20050402001. ppt 8

Netherlands High Speed Rail u Infraspeed Consortium includes Fluor, Siemens, local constructors u Single largest public-private partnership (PPP) contract ever awarded by the Dutch state u 1. 2 billion euro project to design, build, finance, maintain superstructure – Fluor led financing ($1. 1 billion) – Fluor and partners provided $120 million of equity u u State will not begin making payments until the availability phase – 3. 0 billion euro “performance based” revenue covers investment cost, maintenance cost, cost of amortization, taxes, insurances, cost of capital, profit, and overhead u Payments tied to performance standards based on 99. 45 percent availability 95 kilometers of rail infrastructure, 4 tunnels, an aqueduct, a bridge, and connections at 5 major interfaces GV20050402001. ppt 9

London Connect Project u Part of the $1. 7 billion project London Underground (LUL) awarded to City. Link. Telecommunications Limited, a special purpose company – Design, build, maintain, and operate London Underground’s communications system for 20 years – Contracted as a privately financed initiative (PFI) that is intended to transfer project risk to the private sector and provide London Underground with both a fixed price and contractual completion dates – Fluor has an 18 percent shareholding in City. Link. Telecommunications u u Initial Phase ($650 million) – $76 million equity; $576 million debt – Debt: Arranged by Bank of America, Royal Bank of Scotland, Bayerische Landesbank and Toronto Dominion – Equity: Provided by Fluor, Thales, Motorola, Hyder, HSBC Project Equity Throughout 20 -year operation and maintenance contract, clearly defined performance and safety measurements will cause City. Link to be penalized if service levels fall below the defined standards GV20050402001. ppt 10

Pocahontas Parkway (Route 895) u $323 million new toll bridge and road in Richmond, Virginia u Public-private partnership with Virginia DOT u Develop, finance, design-build contract u 1 st PPP to be implemented under Virginia’s PPTA legislation GV20050402001. ppt 11

I-495 Capital Beltway HOT Lanes u $1. 1 billion expansion of the I 495 Capital Beltway and addition of High Occupancy Toll (HOT) Lanes u Public-private partnership with VDOT u Develop, finance, design-build, operate & maintain under longterm concession u Status: – In development phase – Record of decision received – Finalizing project definition – Finalizing financing plan GV20050402001. ppt 12

Questions GV20050402001. ppt 13