Alternative Financing and Procurement in Ontario, Canada David Livingston President and CEO Infrastructure Ontario

1. Alternative Financing and Procurement in Ontario, CanadaDavid LivingstonPresident and CEOInfrastructure Ontario

2. 2 Welcome to Ontario Half a trillion dollar economy Population of 12.8 million 39% of Canada’s nominal GDP and population Toronto is the 3rd largest financial centre and 5th largest urban centre in North America Trade-oriented – over $300 billion with US in 2006

3. 3 Building A Better Tomorrow framework Addresses Ontario’s infrastructure deficit Five key principles: The public interest is paramount Value for money must be demonstrable Appropriate public control/ownership must be preserved Accountability must be maintained All processes must be fair, transparent and efficient Infrastructure Ontario established as execution agency for Alternative Financing and Procurement (AFP) projects

4. 4 What AFP is all about: Protecting the public interest AFP is: Integrating a project’s Design, Build, Finance and Maintenance components Risk transfer Value for money On time, on budget execution AFP is not: Generally new money Privatization So why not call it PPP? Avoid privatization label

5. 5 Infrastructure Ontario’s role Execute assigned projects Drive scope detail post assignment Project costing prior to RFP release Manage procurement process Manage construction phase Hand over at construction completion

6. 6 Alternative Financing and Procurement:Delivering projects for Ontario Nearly $6 billion in capital tendered in the past 26 months Closed a variety of projects and worked with diverse market participants, advisors and stakeholders Standardized models and templates

7. 7 Differences from traditional procurement: Appropriate risk transfer away from public sector Payment occurs only after construction completed Lender due diligence brought in to achieve on-time, on-budget delivery Long term building maintenance concession tied in with building team (DBFM) “Warranty” to the Province that the facility will be available over the long term Integration of design and construction with building maintenance and lifecycle costs What makes AFP different

8. 8 Managing interest-group opposition:Counter myths with the truth about AFP

9. 9 Managing interest-group opposition:Counter myths with the truth about AFP

10. 10 Managing interest-group opposition:Counter myths with the truth about AFP

11. 11 Managing interest-group opposition:Counter myths with the truth about AFP

12. 12 Other benefits of AFP and Infrastructure Ontario Managing costs Optimal cost combination: combines capital, operating, maintenance and life cycle costs Integration of design, construction and facilities management Competitive whole life cycle cost proposals Good project planning Clear roles and responsibilities Strong governance Cost predictability Create right incentives Transfer financing Payment mechanism

13. 13 What makes Ontario unique? Project assignment approach: clear commercial authority on transactions Build-Finance model Time to market – time to financial close Predictable deal flow Opportunities with broader public-sector partners (municipalities, universities, etc.) Shareholder (government) commitment to AFP Continuity of IO involvement Standardization of process and documents

14. 14 AFP Models and Approaches

15. 15 Traditional versus AFP: DBFM project

16. 16 DBFM model – transaction phase timeline

17. 17 What is Value for Money ? Value for money is a process of comparing estimated costs using two delivery models to determine which is the better value proposition With that, lets get directly to achieving the first objective of understanding value for money. Process of analysis cost estimates under 2 delivery models to determine which gives greater value!!! First model – costs estimated under traditional method of delivering a project – PSC Second model – AFP method Difference between the two costs is VFM. VFM is not only conducted at the start of a project BUT at 3 different stages. With that, lets get directly to achieving the first objective of understanding value for money. Process of analysis cost estimates under 2 delivery models to determine which gives greater value!!! First model – costs estimated under traditional method of delivering a project – PSC Second model – AFP method Difference between the two costs is VFM. VFM is not only conducted at the start of a project BUT at 3 different stages.

18. 18 Making projects happen:Progress to date…March, 2008 16 social infrastructure projects under construction Three projects approaching financial close 10 projects in procurement phase RFP for Ontario Highway Service Centres approved for release

19. 19 Ontario: examples of market response

20. 20 Lessons learned so far Benefits of the AFP process Schedule-driven Clear governance structure Managing costs through standardization Value for money Importance of communication with industry, co-sponsors Staging, managing market capacity issues with industry Ensuring co-sponsor buy-in on IO approach and process Interest group opposition Counter with transparency Third-party validation Drive standardization

21. 21 Design-Build-Finance-Maintain projects:Plenty of work and opportunities in the pipeline

22. Alternative Financing and Procurement in Ontario, CanadaDavid LivingstonPresident and CEOInfrastructure Ontario