1. AIF Florida Water Forum Carol Howard Orlando, FL Sept. 21, 2017
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AIF Florida
Water Forum
Contemporary Private Funding Structures for Water Resource Projects
Sept. 21, 2017
Carol Howard
Orlando, FL

2. Poseidon Water
Poseidon Water: Leading U.S. water infrastructure development specialist employing a performance-based, Public-Private Partnership approach
Founded in 1995; headquartered in Boston, MA with presence in CA, FL, and TX
Developer of Carlsbad Desalination Plant and other water infrastructure projects
Majority owned by Brookfield Infrastructure Partners
Brookfield Asset Management: Global owner and operator of alternative assets
115-year track record in real assets with a global presence (100 offices or locations; ~55,000 employees)
$250B of assets under management (AUM) – $135B in U.S. (~11,000 employees)
Brookfield in Florida (as of Dec 2016):
Assets: $4.6B AUM
Employees: ~180
Projects/Assets: ~82
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3. Brookfield | Florida Presence
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4. What is a P3 Concession?
Public-Private Partnership (“P3”) is a method of delivering public infrastructure in which significant risks are transferred to the private sector developer, builder, operator, and finance partner, while the public agency retains certain risks and has the ability to retain project/asset ownership
Alignment of interests between Public and Private sector
Guaranteed on-time and on-budget performance
Accelerated delivery of critical project infrastructure
Public asset investment is protected because facility condition and performance is guaranteed for a long-term period (30 to 50 years)
Provides greater “value-for-money,” reflecting the added value of risk transfer (operation, maintenance, compliance, financing, delivery, etc.) using a P3 approach as compared to a traditional project delivery
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5. Public-Private Partnership is Not Privatization
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P3 Concession Overview
Development: Project Company funds upfront development expenses to fully define the project, secure permits, and establish final pricing
Construction: Project Company provides project funding (debt & equity), potentially including tax-exempt public financing through Private Activity Bonds, WIFIA and State Revolving Funds
Risk Transfer: Public Partner only pays if Project Company meets performance obligations
Creates real value for taxpayers by transferring the risk of cost overruns, schedule delays, performance shortfalls, and deferred maintenance
Debt Burden: Preserves public partner debt capacity with potential for credit improvement
Expedited Schedule: Accelerated project delivery is not constrained by lengthy procurement processes
Project/Asset and operations reverts to public agency at end of P3 contract term
Public-Private Partnership is Not Privatization
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6. Typical P3 Concession Structure
Key
Agreements
Payments
Management
Services
Agreement
Project Company
Operations & Maintenance Provider
Engineering, Procurement, and Construction Contractor
Water
Purchase
Loan
O&M Service Agreement
EPC Agreement
Public Agency/Off-taker
Debt Provider: Bond Investors or Banks
Project
Revenues
Debt
Proceeds/ Repayments
Equity Contribution
Agreement
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7. Addressing Common P3 Concession Concerns
Benefits
Higher Cost of Funding
Incentivizes overall lower lifecycle cost
Public Agencies lack sufficient public funding to meet water infrastructure needs
Ability to combine public and private funding sources; traditional tax-exempt public financing is not always the lowest cost financing for municipal facilities
P3 entities are able to access a wide range of financing options, including both taxable and tax-exempt (Public) debt & equity
P3 is Privatization
Public Private Partnership is not Privatization
Flexibility to structure P3 Projects as concession agreements, service/lease agreements or full asset ownership by the Project Company under Public oversight
Roles and responsibilities of Public and Private Partners are well defined in agreement
Board/Utility Control
P3 Concession Contract defines controls desired by the Public entity in the system/assets
Public entity maintains oversight and step-in rights
Scope book, standards and regulation, guarantees, revisions/approval rights ensures Public entity controls
O&M Integration Difficulties
Agreement structured to integrate O&M of Project Company with existing operations
Option for Public employees to work for the Project Company
Transfer of the Project and its operations to the Public entity at end of the contract term
Contract restricts Public Entity
Agreement payments is an operating cost, similar to debt payments, overhead, O&M costs, etc. associated with Public financing
P3 is based on a performance-based contract; Public entity doesn’t pay if Project Company doesn’t meet performance obligations
P3 provides long-term price and rate certainty
No Value to Risk Transferred
Value-for-money (VfM) analysis is a useful tool to evaluate value of risk transfer
Multiple components of projects can be delivered using split delivery method
Inclusion of long-term equity is the critical component that drives performance, efficiency and innovation
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8. Potential P3 Concession Risk Allocation
Risk Description
Project Company
Public Agency
Permitting
Financing
Interest Rate x
Construction
Technology
Operating Performance
Electricity
Consumption
Pricing
Water or Wastewater Supply & Quality
Regulation/Change in Law
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9. When Does a P3 Concession Make Sense?
Situation
Notes
Underinvestment and/or Operational/ Maintenance Difficulty
Where transfer of operating performance to a qualified and experienced private sector operator will improve system reliability and performance
Where system has been chronically underinvested in or has deferred maintenance and significant upgrade/ capital investment is required
Consent Decree
Requiring a new technology and/or significant capital investment, i.e. Cranston Wastewater Concession (See Case Study)
Financial Constraint
Budget or debt limitation or existing liability such as pension obligation, operating deficit or high utility debt burden
New Technology
Where the public agency is more comfortable transferring the technology risk to the private sector, i.e. Carlsbad Desalination Project
Advanced Schedule
Where project delivery is needed in a tight timeframe, the private sector can guarantee delivery on a date certain, fixed-price basis. For example, to meet permit compliance or water supply constraint
Regional Project
Where no regional governance or organization exists or to serve an existing regional agency
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10. 11/13/2018
Concession Case Study

11. Cranston Wastewater Concession | Overview
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Cranston Wastewater Concession | Overview
Project Description: Poseidon entered into a 25-year concession to Lease, Upgrade, Operate, Maintain, and Transfer the City of Cranston’s wastewater treatment system
System Overview: 23 MGD WWTP, 250-mile collection system, and pump stations
Project Value: $77M in non-recourse debt & equity, including $48M upfront lease payment to the City of Cranston
Equity: $8.6M
Taxable Institutional Debt: $39.5M from New York Life and John Hancock (8.05%)
Tax-exempt Revenue Debt: $28.5M (5.8%) from RI Clean Water Finance Agency1
Agreed capital improvement program ensured system modernization/expansion to meet customer needs, regulatory requirements (incl. Consent Decree), and deadlines
Status: 25-year concession term from 1997 – 2022
First Large-Scale WWTP P3 & Upgrade in the U.S.
1 Now the Rhode Island Infrastructure Bank (“RIIB”)
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12. Cranston | Project Benefits
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Cranston | Project Benefits
City received $48M upfront payment to repay outstanding sewer debt and cover the City’s budget deficit
Expected to yield $76M in accumulated savings and $24M in present-value benefits (by reducing rate of user fee increases and avoiding tax increases)
Lease structure maintained public ownership and City continued to set rates, handle billing and collection, and enforce their pretreatment program
City avoided significant bond issuance; and net payment was expected to be viewed positively by credit rating agencies; credit rating has significantly improved since contract inception from Baa2/BBB+ to A1/AA- (Moody’s/S&P)
System and WWTP employees retained
Performance-based contracting approach transfers risk to private entity, drives innovation and increased efficiency, and delivers greater value, price certainty, and long-term savings over the contract duration
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13. Florida P3 Legislation HB 85: enrolled in 2013
Qualifying Project: includes water/wastewater facilities
Responsible Public Entity: counties, municipalities, school boards, regional entities, state subdivisions
Unsolicited Proposals: permitted
Proposal Requirements:
Conceptual design/plan
General financing plan
Proposed user fees or lease/service payments over the term
Proposal Ranking: Professional Qualifications, General Business Terms, Innovative Design Techniques, Cost-reduction Terms, and Finance Terms
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14. Questions? _____________________________________________________________________________________________________________ Carol Howard –