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0 New Brunswick P3s Presentation to Northern Border Finance Conference Darrell Stephenson Stewart McKelvey Saint John, NB
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1 Scope of the Projects
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2 Fredericton-Moncton Highway Project 204 km Opened in 2001 Maine New Brunswick
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3 Scope – Fredericton-Moncton Highway Project (FMHP) Implemented with a P3 model Agreements signed in January 1998 Highway opened to traffic October 2001 Guaranteed Maximum Price $579 Million 204 kilometres of 4-lane highway Developer responsible to operate, maintain and manage the highway until 2027 (average annual cost - $9 Million 1997) Progress Payments Made Against Sign-Off By Independent Engineer Financing: Lease based debt Toll based debt to be repaid by user tolls User tolls replaced by shadow tolls
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4 Fredericton-Moncton Highway Project 204 km Opened in 2001 Trans-Canada Highway Project 275 km To be opened November 2007 New Brunswick Maine
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5 Scope – Trans-Canada Highway Project (TCHP) Implemented With a P3 Model Agreements Signed February 2005 Highway to be Opened by October 2007 Guaranteed Maximum Price $543 Million 275 km of highway 130 km existing 4-lane highway 47 km built by NBDOT 98 km built by the Developer No payments will be made to the Developer until the highway is opened to traffic Largest P3 Project Undertaken In Canada With No Payment Until Completion
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6 Scope – TCHP (Continued…) The Developer to Operate, Maintain and Rehabilitate all 275 km of highway until 2033 (annual fixed cost - $19 Million) OMR work for 130 km of existing sections commenced June 1, 2005 Financing: By the Provision of a Debenture for the Guaranteed Maximum Price to the Developer Developer had the Debenture S&P Rated and Sold it to Canadian Institutional Investors in consideration of Progress Advances during the construction phase Financing Structure Won Award for Innovation and Excellence in 2006 From Canadian Council for Public Private Partnerships
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7 Fredericton-Moncton Highway Project Opened in 2001 Trans-Canada Highway Project To be opened November 2007 Fundy Islands Ferry Services Project Delivery of Vessels 2009 - 2011 Maine New Brunswick
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8 Scope – Fundy Islands Ferry Services Project (FIFSP) Design-Build Design, construct and supply three new vessels Grand Manan – 101 AEU, 400 passengers (2009 delivery) Deer Island – 24 AEU, 99 passengers (2010 delivery) White Head – 12 AEU, 84 passengers (2011 delivery) Operations For a period of 16 years: Provide the Grand Manan, White Head and Deer Island Ferry Services Maintain and refit the Vessels (includes both new and existing Vessels) Operate and perform routine maintenance to Ferry Terminals Collect passenger and vehicle fares for the Grand Manan Ferry Service set by the Province
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9 Key Contractual Considerations
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10 Key Contractual Considerations As Is, Where Is Developer/Operator Should Accept Responsibility for Construction and Operation During the Contract Period for the Bid Price, save for Scope Changes Identify Risks Which Should not be Moved to the Developer/Operator, but for which a Scope Change is allowed, e.g.: Changes in Technical Standards Failure of the Governmental Authority to perform an obligation Unknown Contaminated Sites/Archaeological Sites/Sulphide Bearing Rock Inflation During Operations Period Identify Impact of Scope Changes/Force Majeure (e.g.: occurrence before a specified date does not move completion date) Contractual Considerations:
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11 Key Contractual Considerations (Continued…) Clear and Expedited Time Frames for Resolution of Dispute regarding Non-Conformance, Scope Change, Force Majeure, etc. – e.g.: if the Developer/Operator does not challenge the determination of the Governmental Authority they should be deemed to have accepted its determination Performance Based Contracts are More Work to Prepare, but Easier to Administer (ie: develop Key Performance Indicators and associated Payment Adjustments) Bonding/Insurance Programs which Afford Reasonable Protection for Risks you Wish to Transfer to the Developer Reasonable Protection for Lenders Allow Proponents an Opportunity to Comment on Legal Agreements in the RFP Process
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12 Lessons Learned FMHP to TCHP
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13 Lessons Learned and Solutions between FMHP and TCHP ISO Compliant SystemsISO Certification Required Quality Management SystemsIntegrated Management Systems Determination of Scope Changes – Specifically Defined Materiality Basedin Agreements Transfer of NBDOT Built SectionsDefined Time Frame - Operator Audit Rights ArbitrationDispute Resolution Board for DB Work, Arbitration for OMR FMHPTCHP Solutions
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14 Lessons Learned and Solutions Progress PaymentsCompletion Payment Auditing by Independent AgentNo Independent Agent - Audit by Province Variable Operations PaymentsFixed Operations Payments Renegotiate OMM Price - Year 20 Price Bid for Term of Project Conformance BasedPerformance Based - Key Performance Indicators, Payment Adjustments and Asset Management Stand Alone Hand Back StandardsTied to KPIs and 3 rd Party Inspection Added FMHPTCHP Solutions
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15 Financial Models TCHP and FIFSP
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16 Financial Models – TCHP and FIFSP For TCHP, for DB Component Completion Payment Model Full payment after construction Extended Repayment Model Payment over 25 years after construction Lowest NPV Offer Selected Model Common Elements Guaranteed Maximum Price for construction OMR Payments Term of OMR period – to June 30, 2033
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17 For FIFSP, Proponents Have the Option to Submit Under Two Models Completion Payment Model Payment for Each Vessel on Delivery Extended Repayment Model Payment for the Deer Island and White Head Vessels on Delivery Proponent Retains Title to the Grand Manan Vessel and NBDOT Pays an Availability Fee over the Term Proponents Bid Option Price for which Province has the Right to Purchase the Grand Manan Vessel at the end of the Term Lowest NPV Offer Selected Model Option Price Discounted 5% for Purposes of NPV Comparison Financial Models – TCHP and FIFSP (Continued…)
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18 Comparison of FMHP and TCHP Annual Payments (Operations, Maintenance and Rehabilitation) Forecast Demand of OMM for FMHP Operator’s maintenance schedule is driven by forecast budget Equal Annual Payments for OMR for TCHP Full responsibility on Operator to manage maintenance work and cash flow
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19 Risk Transfer
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20 Key Risk Transfer RiskGovernmentDeveloper/Operator Price Schedule Scope Change Weather Soil Conditions Insurance and Bonding Environment Impact Assessment Environmental Permitting Quality Management Safety Management Strikes Archeological Finds (known) Pollution Right of Way Acquisition X X X X X X X X X X X X X X
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21 Business Models
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22 Organizational Structure – Highway Projects Province NBHC Project Company Developer/Operator 100% Project Agreements
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23 Organizational Structure – Ferry Project Province Developer/Operator Project Agreements
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24 Measurements of Success Guaranteed Delivery Date Guaranteed Maximum Price Key risks borne by the Developer Environmentally responsible delivery Safe workplace Safe, reliable, high quality and economic service for users Economic and Industrial benefits and Aboriginal Inclusion Plan All applicable standards and guidelines met or exceeded Development of expertise Technology transfer
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25 CONCLUSION P3s have delivered for New Brunswick: Accelerated delivery Innovation Value for money Resident expertise Contractually assured service delivery
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26 Contact Information Trans-Canada Highway Project Co. Ltd. 444-2007 telephone 457-7332 fax TCH web site at www.gnb.ca keyword: Trans-Canada Highway
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