1. PUBLIC-PRIVATE PARTNERSHIPS (P3) Issues, solutions and what’s next?
Chet Mitrani, Executive Vice President
Willis North America
September 20, 2012

2. LBJ EXPRESS

3. WHAT IS A PPP?
A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each section (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.

4. P3 PROJECTS Bluebonnet Contractors, LLC
Ferrovial Agroman / W.W. Webber
Concessionaire NTE Mobility Partners, LLC
Cintra / Meridiam Infrastructure
$1.45 Billion
Trinity Infrastructure, LLC
Concessionaire LBJ Infrastructure Group, LLC
$2 Billion
MAT Concessionaire, LLC
Bouygues Civil Works / Meridiam Infrastructure
$700 Million
Central Texas Highway Constructors, LLC
Ferrovial Agroman / Zachry Construction
Concessionaire – SH 130 Concession Co, LLC
Cintra / Zachry Infrastructure
Co-Broker with Marsh
Segments 5 & 6
$1 Billion

5. CURRENT P3 Fraser Transportation Group
ACS Infrastructure / Dragados Group / Zachry
South Fraser Perimeter RD Project
Vancouver, CA
$700 Million
NTE Mobility Partners – Segments 3A / 3B
Cintra / Meridiam
Fort Worth
$1.3 Billion

6. COMPREHENSIVE DEVELOPMENT AGREEMENT (CDA)
1. Current Types Of CDAs
Design / Build
Pre-Development Agreements
Concession Agreements
2. CDA procurement
Unsolicited
Independent Proposals submitted at TxDOT’s request
3. Project Transfer To TxDOT
At the end of the CDA term (Concession)
Transfer occurs after construction (Design/Build)

7. CURRENTLY EXECUTED CDAs IN TEXAS
PROJECT
DESCRIPTION
COST OF CONSTRUCTION ($) 1
DFW Connector (Oct-09)
Design/Build w/Maint Opt
1.5 billion 2
I-635 / LBJ Freeway (Sept-09)
Concession
4 billion 3
North Tarrant Express Seg 1 & 2W (Jun-09)
1.1 billion 4
North Tarrant Express Seg 2-4 (Jun-09)
Master Development Plan
750 million up to 4 billion 5
SH 130 Segments 5 & 6 (Mar-2007)
1.35 billion 6
SH 130 Segments (2002)
1 billion 7
I-35 TTC (2005)
4.4 billion 8
Toll Integrator (2004)
Design/Build Raytheon
68 million

8. CONVENTIONAL PROJECT DELIVER: DESIGN-BID-BUILD
In the United States, most transportation projects are delivered using the Design-Bid-Build “(DBB”) model
Public Owner
Designs project to 100% PS&E
Breaks project up into biddable scopes
The bidder submitting the lowest responsive bid is awarded the contract
Pays invoices out of available tax revenues and/or bond proceeds
Operates and maintains project itself or through separate contractor
Keeps integration, traditional construction, long term performance and revenue risks
Private Parties
Design the project and perform construction under standard construction contracts and specifications
Have conventional rights to claims and change orders

9. CONVENTIONAL PROJECT DELIVER: WHY CHANGE?
DBB works well for many projects, but there are situations in which P3s can offer outcomes not available otherwise
Capture private sector innovation early in project development
Accelerate project delivery
Fix costs / completion date early in design phase
Encourage lifecycle cost efficiencies and quality facility performance
Shift risks and reduce claims that under DBB are public’s responsibility
P3s can offer more upfront capital formation than muni revenue bonds
Tax-exempt bond market has more conservative debt coverage ratios
Investor classes are different, offering different risk appetites
Private investors are willing to take more risk on toll revenues performance
Tax exempt borrowing rates available through $15B federal PABs program
Accelerated depreciation creates significant value for private equity

10. P3 SCREENING AND STRUCTURING
INPUTS
SCREENING
OUTPUTS
Technical
Project Characteristics
P3 Contract Terms
Legal
P3 or Conventional
If P3, Which Type?
RFP Submittal Requirements
Sponsor Priorities
Competition Structure
Evaluation Criteria

11. TYPES OF P3 CONTRACTS Design – Build – Finance
Availability Payment Concession
Toll Concession
Pre-Development Agreement
Asset Lease

12. Special Purpose Vehicle CONSTRUCTION CONTRACTOR
PUBLIC PRIVATE PARTNERSHIPS INFRASTRUCTURE CONTRACTUAL STRUCTURE – RISK ALLOCATION
LENDERS / BONDS
Senior & Subordinated
Equity Sponsor A
Equity Sponsor B
Equity Sponsor C
PUBLIC ENTITY
Loan Agreement
Financial Covenants, Remedies, Reserve and Insurance Requirements and Flow of Funds
Concession Agreement
Performance requirements, Risk Allocation, Schedule, Force Majeure, Relief Events
PROJECT COMPANY
Special Purpose Vehicle
EPC Contract
Insurance Requirements
O&M Contract
Insurance Requirements
Sources and forms of Insurance and Guarantees
Sources and forms of Insurance and Guarantees
Supplier Contract
CONSTRUCTION CONTRACTOR
SUPPLIER
O&M CONTRACTOR
Sub-contracts
Sub-contracts
Sub-contracts
Sub-Contractor
Sub-Contractor
Sub-Contractor

13. TYPES OF P3 COMPETITION STRUCTURES
Competitive Hard Bid
RFP requires:
Committed pricing and financing
Detailed technical proposal in response to pre-defined project
Award based on value or auction
Best Development and Finance Plan
RFP Requires:
Recommended approach to developing and financing project within specified general concept
Qualifications to work as successful private partner
Degree of sweat equity and capital committed to pre-feasibility phase
Award based on best plan, qualifications and pre-feasibility cost-sharing

14. DESIGN – BUILD – FINANCE
TYPES OF P3 CONTRACTS
DESIGN – BUILD – FINANCE
Suitable When Project Is:
Close to environmental clearance
Sufficiently designed for developer to guarantee price I completion date
Not 100°/o designed, to permit developer innovation
A gap exists between total project capital costs and identified public funding sources
The timing of available funding is spread over time and does not allow for levels of upfront capital needed to do the project
Savings from accelerated project delivery outweigh cost of private sector financing
Public Owner
Performs conceptual I preliminary design
Achieves environmental clearance
May provide some, but not all, capital funding

15. DESIGN – BUILD – FINANCE
TYPES OF P3 CONTRACTS
DESIGN – BUILD – FINANCE
Public Owner (cont.)
Oversees design and construction
Operates and maintains the project
Keeps long term revenue risk
Developer
Designs and builds the project
Assumes integration of design and construction and other development risks conventionally retained by public agencies
Finances the owner's shortfalls in cash flow
Provides debt financing via one or more mechanisms (i.e., deferred payment schedule, contractor loan, subordinated debt, financing of change orders)
Assumes interest rate risk on its financing
Guarantees price / completion

16. DESIGN – BUILD – FINANCE
TYPES OF P3 CONTRACTS
DESIGN – BUILD – FINANCE
Results In:
Greater price certainty with a lump sum price I guaranteed delivery date
Cost and time efficiencies
Provides owner cash flow financing, as needed
Examples
Florida DOT
1-75 Road Expansion Project ($430M)
95 Express ($122M)
SR-5 (US-1) Project ($112M)
Michigan DOT
1-69 Reconstruction in St. Clair County ($38M)
1-75/M-21 (Corunna Road) Bridge ($7.3M)

17. AVAILABILITY PAYMENT CONCESSION
TYPES OF P3 CONTRACTS
AVAILABILITY PAYMENT CONCESSION
Suitable When
Public owner has identified a dedicated source of revenue for the project (toll revenue or other source)
Public owner desires life-cycle cost efficiencies
Public owner wishes to retain direct toll rate setting authority and collection
Revenue or traffic volume is difficult to predict

18. AVAILABILITY PAYMENT CONCESSION
TYPES OF P3 CONTRACTS
AVAILABILITY PAYMENT CONCESSION
Public Owner - Same as Design-Build-Finance, except:
Pays private party based upon project availability and performance over extended period
Liable for fewer claims and change orders than DBF
Developer- Same as Design-Build-Finance, plus:
Operates and maintains the project for contract term ( years)
Assumes life cycle performance risks
Primary compensation is through availability payments
May also receive milestone payments from the public owner upon reaching certain construction milestones
May receive federal tax benefits due to deemed "tax ownership"

19. AVAILABILITY PAYMENT CONCESSION
TYPES OF P3 CONTRACTS
AVAILABILITY PAYMENT CONCESSION
Availability Payments
Unitary payments for capital expenditures, O&M expenditures and financing costs
Amount bid by the developer as part of its proposal
Made periodically after substantial completion (e.g., monthly)
Fixed amount that may:
Be adjusted downward based on developer's performance with respect to quality, safety, lane availability, environmental provisions, etc.
Be adjusted by changes in an index (e.g., CPI)
Structure encourages early completion of the construction phase and quality facility performance
Examples
Florida DOT
Florida DOT - Port of Miami Tunnel
British Columbia MOT - Sea to Sky Highway

20. TOLL CONCESSION TYPES OF P3 CONTRACTS Suitable When
Project will directly generate revenues
Traffic and revenue risk can be efficiently transferred to private sector
Political support exists for private sector toll collection and enforcement
Public Owner - Same as AP Concession, except:
Contributes no or limited public funds to project costs
Decides on toll rate setting mechanism over contract life
Relieved of all or most toll revenue risk
May receive share of toll revenue as/when benchmarks met
Possibly receives upfront payment from the developer

21. TOLL CONCESSION TYPES OF P3 CONTRACTS
Developer - Same as AP Concession, plus:
Collects tolls in accordance with rate-setting mechanism
Assumes all or most project traffic and revenue risk
May share excess toll revenues with public owner
Examples
TxDOT - SH 1307 Segments 5 and 6
TxDOT- North Tarrant Express
TxDOT - I-635
Virginia DOT - I-95/395 HOT Lanes

22. PRE-DEVELOPMENT AGREEMENTS
TYPES OF P3 CONTRACTS
PRE-DEVELOPMENT AGREEMENTS
Suitable When
Project not yet completely defined
Financial feasibility not yet determined, but preliminarily has good potential
Public owner seeks private sector innovation in defining and accelerating an optimally feasible project
Environmental analysis is in the early stages
Procurement and Award
Public owner procures Developer on basis of "best development and financial plans"
Awards contract with two phases:
Initial phase to determine feasibility
Implementation phase

23. PRE-DEVELOPMENT AGREEMENTS
TYPES OF P3 CONTRACTS
PRE-DEVELOPMENT AGREEMENTS
Initial Phase
Public and private partners "co-invest" in pre-development activities
Public owner retains complete control over environmental clearance process, with Developer performance of technical studies
Developer participates in project planning and design
Developer prepares master financial plan and master development plan
Developer may absorb some or all of its initial phase work - "sweat equity"
If project proves feasible, Developer has right of first negotiation for the agreement(s) covering the implementation phase
If unable to reach agreement, public owner retains right to separately procure
Implementation phase agreements can take form of:
Design-Build-Finance
Availability Payment Concession
Toll Concession

24. ASSET LEASE TYPES OF P3 CONTRACTS Public Owner
Leases existing asset to private partner
Gets up front payment from private partner (monetizes the asset)
Gets facility back at the end of the lease
Private Partner
Gets right to any revenues (e.g., fees, tolls) from the facility
Implements fees I tolls in accordance with lease requirements
Maintains the facility in accordance with lease requirements
Examples
Indiana Toll Road ($3.8B up front payment; 75 year lease)
Chicago Skyway ($1.8B up front payment; 99 year lease)
Pocahontas Parkway (Pay off $500 M of existing debt, upgrade facility and cover other VDOT expenses; 99 year lease)
 Asset leases have been particularly controversial

25. CDAs & RISK ALLOCATION
Assign to Owner
CDAs DELEGATE RISK TO THE PARTIES BEST ABLE TO MANAGE IT.
Assign to Developer
Shared Risk
Concession Program Differs from Design / Build

26. RISK ALLOCATION & CONTRACTING ALLOCATING OTHER RISKS
Right of Way
Utility Relocations
Differing Site Conditions
Force Majeure
Hazardous Materials
Paleo / archaeo / bio
Permits
Railroads
Who can best control the risk? Who can best manage the risk? Are contractors willing to assume the risk? How much will it cost?

27. DIFFERENT PROJECT DELIVERY TYPES & RISK SHARING1
RISK TYPE
DESIGN
BID
BUILD
AVAILABILITY PAYMENT
DESIGN BUILD FINANCE O/M
(PASS-THROUGH)
CONCESSION FINANCE O/M 50 YEARS
Environmental Approval
Owner
Environmental Compliance
Shared
Developer
Financing
Design
ROW Acquisition
Developer2
Utility Delays
Construction
Schedule Delays
O & M
Traffic & Revenue
1 Actual Risk Allocation may vary by specific project
2 Eminent Domain risks and delays retained by the owner

28. … SHARED RISK ALLOCATION
PUBLIC
RISK TRANSFER BY MODEL
PRIVATE
DESIGN / BUILD
D/B/FINANCE
D/B/F OPERATIONAL / MAINTENANCE
BUILD-OPERATE-TRANSFER / CONCESSION
Regulatory
Approvals
Environmental
Customer Acceptance
Design
Traffic / Rev.
Finance
Technology
R-O-W
Construction
O&M

29. INSURANCE ISSUES FOR DESIGN AND CONSTRUCTION PROFESSIONALS INVOLVED IN A PPP PROJECT
Insurability
PPP agreements must always be carefully checked against the professional liability policy
In the event that terms and conditions appear uninsurable, make sure that the Concessionaire understands that their interests – even if for a lesser amount -- are better served by an insured claim that by a potentially larger claim that has no insurance support

30. KEY PPP PROJECT INSURANCES - INSURANCE REQUIREMENTS
Construction Period
Construction “All Risks”
Construction “All Risks” Terrorism
Soft Costs/Delay in Opening
Third Party Public Liability
Statutory Insurances (Workers Compensation/EL)
Professional Liability (Design and Build)
Pollution Legal Liability
Auto Liability
Railroad Protective Liability

31. KEY PPP PROJECT INSURANCES - INSURANCE REQUIREMENTS
Operational Period
Property Damage “All Risks”
Property Damage “All Risks” Terrorism
Business Interruption
Third Party Public and Products Liability
Statutory Insurances (Workers Compensation/EL)
Pollution Legal Liability
Auto Liability
Professional Liability

32. WHY ARE THESE INSURANCES REQUIRED?
They protect the Public Agency, SPV, Lenders and other parties with an insurable interest in respect of
physical loss or damage to Project property/assets
earnings and additional costs of the SPV in respect of the above
incurred Third Party Legal Liabilities (bodily injury and property damage)
Without insurance the SPV could not accept the financial consequences of such risk events occurring

33. WHY IS THE INSURANCE REGIME UNDER PPP DIFFERENT TO STANDARD PROCUREMENT?
The Public Agency, Lenders and others with an insurable interest sit inside the insurance mechanism as a co-insured taking direct benefit for their separate insurable interest
Insurances to be procured on a project specific basis and not derived from parent company program.
Public Agency guidelines and Lender requirements seek to ensure specific conditions are in place defining the duties of the parties to the Project in terms of the operation of the ‘required insurances’

34. WHAT ARE THE KEY CONDITIONS OF A PPP INSURANCE REGIME?
Waiver of subrogation (Multiple Insured Clause)
Separate policy
Waiver of disclosure of material information
No obligation for premium payment
Additional insured
Control of claim monies (Loss Payee)
Notification of change in cover
Notice of cancellation and subsequent step in rights of various parties to the Project

35. PPP INSURANCES –CONSIDERATIONS & SOLUTIONS
Relief Events and Force Majeure
Premium increases– who bears the risk?
Insurance market capacity and market participants
Uninsurability
Excesses/Deductibles – who pays?
Meeting bid/tender requirements - what level of information is required – insurance proposals must remain “fluid” and negotiable until final design and construction timetable is known
Cost of insurance – provision for cost of insurance in the Financial Model; prevailing market cost + contingency amounts

36. PPP INSURANCES – CONSIDERATIONS & SOLUTIONS
Phased completion timetable
Overlap of ALOP/BI
Pre-existing property
Latent Defects
Environmental/Contamination issues
Contractor’s plant and equipment
Terrorism risk
Marine/Transit

37. PPP INSURANCES – CONSIDERATIONS & SOLUTIONS
Uninsurability
Definition of trigger of Uninsurability – what is the test?
What happens to the risk if it becomes uninsurable (Termination/Public Agency “insurer of last resort”)

38. WHAT DOES THIS MEAN FOR THE PROJECT INSURANCES?
Contractor/Lender uncertainty over “the risk of insurance” – cost and availability
Fear of the unknown from insurers on contractual requirements of PPP
No established insurance market experience of some risk exposures through PPP contracts
Unpredictable insurance market cycles
Sector specific claims impacting on competitive terms and also cost provision in Financial Model

39. RECENT TRANSACTIONS: Creating mobility options within existing highway corridors
If a public owner is interested in adding managed lanes to an existing facility, it might benefit from comparing two recent managed lanes projects:
I-595 Corridor Roadway Improvements Project (Florida DOT)
North Tarrant Express (Texas DOT)
I-595 Corridor Roadway Improvements Project Background:
Project covers 10.5 miles along I-595 in Fort Lauderdale, Florida
Improvements to the existing freeway and interchanges and the addition of reversible, congestion-priced managed lanes
$1.28 construction and 35 years of O&M (both free and managed lanes)
First availability payment-based P3 in the United States
Florida DOT unable to currently finance the project using DBB
Winning price - $275M under Florida DOT estimates (present value)
Successful financing despite economic crisis (bank financing)

40. RECENT TRANSACTIONS: Creating Mobility Options within Existing Highway Corridors
North Tarrant Express Background
Toll concession and pre-development agreement
Phase year toll Concession
Rebuild 13 miles of I-820/SH 183; add 2 new tolled managed lanes
Financing Package - $2.05 B
$400M of Private Activity Bonds - 30 year maturity
$650M TIFIA credit - 40 year term
$570M in public sector funding
$427M in equity from private partner (includes $43M from Dallas Police and Fire Pension System) - First time a U.S. pension fund has directly invested equity in a U.S. P3 project
Remaining Phases - Pre-Development Agreement
Texas DOT Goals for Phase 1:
To shift construction, lifecycle, performance and availability risks
To shift revenue risk, subject to rate setting restrictions and revenue sharing
Texas DOT used a toll concession to close funding gap
Reached financial close December 2009

41. RECENT TRANSACTIONS: Creating Mobility Options within Existing Highway Corridors
Comparison of I-595 and NTE
Both are complex, urban projects that involve reconfiguring and reconstructing existing Interstates to add managed lanes and make other improvements
Contrasting Agency Goals
Florida DOT - Maximize project availability (both managed lanes and general purpose lanes)
Texas DOT- Minimize state funding for the project
Availability Payments vs. Toll Concession (Reflection of Goals)
Florida DOT - Kept toll revenues and used an availability payment concession to achieve its goals (first such U.S. deal)
Texas DOT- Shifted toll revenue risk to achieve its goals

42. CURRENTLY IN PROCUREMENT
PROJECT
CITY
LIMITS
DELIVERY METHOD
TOTAL COST (4) 1
Grand Parkway SH 99
Houston
F1, F2 and G
Design / Build w/ Maint Opt
1.5 billion 2
Interstate 35 E
Dallas
LBJ 635 to Denton
Concession or D /B
4 billion 3
North Tarrant Express
Ft Worth
Seg 3 A and 3 B
Concession and D/B/B
500 million 4
The Horseshoe
I 35 I 30 interchange
Design / Build or Concession
600 million 5
Border Highway Loop 375
Design Build

43. WHAT’S NEXT? PROJECT DESCRIPTION Washington D.C. RFI August 12 DDOT
22 Mile Priority Streetcar System
Potential PPP
Design, Construction, Finance, Ongoing Operations and Maintenance
Allentown, PA
September 2012
Capital Value: $100 Million
Water Lease
City Water & Sewer System
PPP – Up to 50 Years
San Juan, Puerto Rico
Planning
Capital Value: $360 Million
Light Rail
PPP
5.3 Miles
Odessa, Texas
July 2012
Capital Value: $120 Million
Desalination Plant
Water Supply
Design, Build, Finance, Operations
Ontario, Canada
RFQ September 2012
Capital Value: $350 Million
Providence Care Hospital PPP
Design, Build, Finance and Maintenance
Gloucester – Salem, NJ
RFI November 2012
Capital Value: $326 Million
Wastewater Treatment Plant
Universities
University of California – Student Housing, Hotels
University of Kentucky – Residence Halls
Ohio State – Parking Garage, Lots
University of Arizona – Student Housing
Note: American Water Works Association identified the need for $1 Trillion over 25 years in the drinking water sector and waste water.