Presentation is loading. Please wait.

Presentation is loading. Please wait.

Experience Using Innovative Finance for Major Projects Northern Border Finance Conference Chicago, Illinois May 14 th, 2007 Richard Fyfe, COO Gateway Program,

Similar presentations


Presentation on theme: "Experience Using Innovative Finance for Major Projects Northern Border Finance Conference Chicago, Illinois May 14 th, 2007 Richard Fyfe, COO Gateway Program,"— Presentation transcript:

1 Experience Using Innovative Finance for Major Projects Northern Border Finance Conference Chicago, Illinois May 14 th, 2007 Richard Fyfe, COO Gateway Program, BC

2 Public Private Partnerships: Top-Down Support “Having modern, reliable infrastructure in place allows businesses to invest with greater certainty, thus furthering the adjustment process. This may mean the use of private funds to develop public infrastructure projects...and now is the time to encourage this type of investment, given our climate of low nominal interest rates, and the presence of large pension funds that are searching for these kinds of investment opportunities.” David Dodge, Governor of the Bank of Canada June 21, 2006

3 Public Private Partnerships: Commitment “Since we launched the public/private initiative in 2002, we have actually either started or completed $4.7 billion in new P3 projects...that is the future of Development in the Province of British Columbia: Better value, on time, on budget. So, in the future, we’re going to work with you, but we will insist that Partnerships BC look at major Projects and the base case in British Columbia will be P3’s unless Partnerships BC says there’s a compelling reason to do otherwise. P3 will be the Standard in British Columbia for three reasons: They work for you, they work for us, and most importantly, they work for the taxpayers that we work for.” British Columbia Premier Gordon Campbell - Speech to UBCM, October 27, 2006

4 B.C. Experience: Foundation for Success Legislative Framework  Transportation Investment Act  Significant Projects Streamlining Act Policy Framework  Capital Asset Management Framework  Tolling Guidelines Supporting Organization  Partnerships BC  Suitable Projects

5 Typical Transaction Structure DB Contract O & M Contract DBFO Agreement Concessionaire (SPV) Asset Manager + Maintenance Contractor Design Contractor / Construction Contractor (May be DB Contractor) Private Equity or Investment Fund Bond Financing or Bank Financing Owner / Authority / Province of BC

6 The P3 Start: Elements of a successful project  Risks and benefits appropriate allocation  Cost management during and after construction  Innovation removing the obstacles  Operating efficiency integrate capital and O&M decisions  The public/private interest Where do they overlap?

7 The P3 Start: Getting Started Define the Project  Scope/Schedule/Budget Delivery Model  Conventional Tender  Design/Build  DBFO (availability payments/independent revenue) Decision Making/Input  Public Consultation Project Definition Design  Private Consultation Risk Allocation Project Financeability

8 Who Should Bear the Risk? Which party can best bear the risk  Competencies Contingency Value for money  Capacity to assume risk Unconstrained risk Self-Insurance – Quantify  Public Interest

9 Risk Decisions Commercial v. Technical Insurable v. Uninsurable Quantified v. Unconstrained Allocating v. Creating

10 Proponent’s Procurement Costs Evaluation Criteria Contract Provisions Submission Requirements

11 Structuring a Procurement Process Registration of Interest (ROI) Request for Qualifications (RFQ) Request for Proposals (RFP) Best and Final Offer (BAFO)

12 Procurement Risk Allocation Province’s rights  amend or cancel the procurement process  negotiate if no conforming proposal  reject any and all proposals  not responsible for procurement costs or damages  request proposal clarification and additional information

13 Concession Contract: Overview Province  Pay After Construction Complete (Availability payments or tolls)  Property, EAC, Approvals Concessionaire Risks / Responsibility  Traffic management  Construction risk  Comply: Environmental Assessment Certificate laws, regulations and permits  Obtain: subsidiary permits, licenses and approvals  Indemnify BC and BCTFA for losses and claims  Site safety and security  Protestors and trespassers

14 Concession Contract: Overview Concessionaire Risks / Responsibility  Design, construction, completion, commissioning and testing of the Works  Delay events, compensation events, Province changes and force majeure traffic management plan  Archeological surveys, inspections and impact assessments  Insurance with Province and BCTFA named insureds  Quality management system and quality documentation compliance  Reporting  Project records

15 Design/Build Agreement Pass-Through Obligations of Concessionaire :  design/ construction/ completion/ commission and testing of Works Cap on maximum DB contractor liability for liquidated damages  10% of the aggregate DB Contract Price

16 Lessons Learned Importance of linkage between project objectives, evaluation and payment Importance of interaction between Owner and Proponents Focus on User Benefits Open Communication Contract Documents to be finished early

17 Current PPP Activity in Canada B.C. $4.7 Billion Quebec 2 highway projects Alberta 2 transportation projects Ontario 40+ projects multiple sectors

18 PPP Quebec Transportation Projects underway:  Autoroute 25 (DBFM, $400 million)  Autoroute 30 (DBFM, $1.2 billion) Transportation Projects under development:  Highway rest areas (7 sites)

19 Alberta Infrastructure Edmonton Ring Road: Anthony Henday Drive  Southeast component  DBFM, $493 million  North component:  Planning Jan 2007 Calgary Ring Road  Northeast component:  DBFO, $500 million

20 Partnerships BC: Role and Structure Window on British Columbia Develop partnership market Knowledge bank of Best Practices  Consistency in business case planning  Reduce government’s planning / procurement costs  Consolidated experience Commercial viability Transparency and disclosure

21 Project Delivery Business Planning Feasibility Analysis Options Analysis Business Case  Quantitative analysis (PSC vs alternative)  Risk analysis  Multiple Criteria Analysis (MCA)  Procurement options  Market Sounding Procurement Process Standard RFQ & RFP Consolidated Concession Agreement Request for Information and Consultation process EvaluationImplementation Value for Money Report Post Financial Close Services Best Practices  Strategic communications  Value for money  Conflict of interest

22 B.C. – Projects in Delivery $4.7 billion in 23 PPP projects  Highways  Bridges  Rapid Transit  Acute Care  Ambulatory Care  Long Term Care Facilities  Primary Access Centres  Sports Centre  Water Treatment  Telecommunications  $3.5 billion in BC Hydro IPP projects

23 Sea-to-Sky Highway Improvement Project B.C. Projects Underway Mountainous Terrain Kicking Horse Canyon (Phase 2)

24 William R. Bennett Bridge Golden Ears Bridge B.C. Projects Underway Bridges

25 Sierra Yoyo Desan Resource Road Canada Line B.C. Projects Underway Other Transportation Projects

26 Projects Under Construction or Operating Project Expected Benefit ($millions) Capital Cost ($millions) Status Sierra Yoyo Desan Resource Road $250 royalties$40 Project operational 3 months early Sea-to-Sky Highway$131$600 Project on time, on budget William R. Bennett Bridge$25$144 Project on time, on budget Canada Line$92$1,900 Project on time, on budget Kicking Horse Canyon (Phase 2) $18$130 Project on time, on budget Golden Ears Bridge$8$808 Project on time, on budget Total Transportation$3,622

27 Developers / Constructors Bilfinger-Berger BOT Inc. ** Bilfinger-Berger Constructors ** CH2M Hill ** EPCOR ** Flatiron Constructors ** Giffels Design Build Ledcor ** Macquarie North America ** Parsons Overseas Company PCL ** Peter Kiewit & Sons Co. ** SNC-Lavalin ** EGIS Projects ** Sources of Capital ABN AMRO/Capital Markets ** Bank of Ireland BC Investment Management Corp ** CIT DEPFA Deutsche Bank Dexia Manulife ** Nordebank Ontario Teachers Pension Plan Royal Bank of Scotland Societe Generale SNC-Lavalin Capital ** Sun Life ** Current Partners in B.C. ** Located in British Columbia

28 Developers / Constructors Balfour Beatty Honeywell** Transfield Services WesGroup ** Skanska Infrastructure Health Care Projects Ltd Bouygues Batiment Int. John Laing Infrastructure Laing Roads Transurban Stuart Olsen ** Acciona Cintra Bechtel Fluor Sources of Capital Babcock & Brown Infrastructure ** CKI Infrastructure Holdings HSBC Infrastructure Fund Plenary Group ** Innisfree Larco ** Emerging Market Participants ** Located in British Columbia

29 BC Transportation Projects Under Development

30 Pacific Gateway Opportunities

31 Pitt River Bridge Design/Build Project

32 South Fraser Perimeter Road

33 Port Mann Highway 1 Project

34 Richmond/Airport/Vancouver Rapid Transit Expansion Coquitlam Rapid Transit Expansion North Fraser Perimeter Road New Pitt River Bridge & Mary Hill Interchange Highway 1 (widening) New Golden Ears Bridge Border Infrastructure Project (highway widening) New South Fraser Perimeter Road Twinning of Port Mann Bridge Gateway Program

35 Opportunity Real Toll Concession – 40 years Revenue from proven corridor 37 km urban highway Significant river crossing $1.7 billion capital budget Operations & Maintenance – 450 lane km

36 Revenue Management 130% of Concessionaire Forecast Revenue 105% of Concessionaire Forecast Revenue Concessionaire Forecast Revenue

37 Selection Process

38 RFQ Objective Select 3 potential long-term partners with: Complex infrastructure development experience Toll concession operations experience Customer service focus Asset management experience

39 RFP Process Technical and Financial Submittal Draft concession agreement issued with RFP 6 – 7 months for technical submittal Honoraria Bidders agreement

40 Interactive Process Exchange information, clarify issue  Fair Process  Balance Confidentiality and Information Sharing All party meetings  Information provided by Province One-on-one meetings  Mandatory workshops  Topic meetings as required

41 Two-Part Submittal Technical Submittal  Traffic forecast sign-off by lenders  Complete technical submission  End of interactive process  Acceptance by Province triggers final stage Financial Submittal  Committed equity and debt funding  Commitment to enter C.A. by concessionaire and lenders  Annual Payment Commitment

42 Challenges in the Canadian Market Very active construction market Resource Demand  Labour  Materials Reducing transaction and procurement costs

43 Cost Escalation Forecasts for B.C. Source: BTY Group, Market Intelligence, Q4 2006

44 Lessons Learned Central PPP Advocate  Effective for government and market  Approximately 30 PPP agencies worldwide Consistency  Policy  Processes (lower costs)  Information (to and from market) Need to build Pan-Canadian, consistent market

45 “Partnerships BC is at the vanguard of public-private partnership agencies worldwide.” Chair, U.K. Public Private Partnerships Export Advisory Group As quoted by Don Cayo Vancouver Sun, October 2006 “British Columbia, in particular, has been receiving international accolades for its early accomplishments in the area of P3 development.” TD Bank Financial Group June 2006


Download ppt "Experience Using Innovative Finance for Major Projects Northern Border Finance Conference Chicago, Illinois May 14 th, 2007 Richard Fyfe, COO Gateway Program,"

Similar presentations


Ads by Google