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UN Training Program Keys to Successful PPP’s

UN Training Program Keys to Successful PPP’s. September 25, 2006. Agenda. Continuum of Risk Sharing Typical European PPP Risk Allocation PPP Lessons Learned - Government Examples of Successful PPP’s Netherlands High Speed Rail London Connect Project Pocahontas Parkway

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UN Training Program Keys to Successful PPP’s

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  1. UN Training Program Keys to Successful PPP’s September 25, 2006

  2. Agenda • Continuum of Risk Sharing • Typical European PPP Risk Allocation • PPP Lessons Learned - Government • Examples of Successful PPP’s • Netherlands High Speed Rail • London Connect Project • Pocahontas Parkway • I-495 Capital Beltway HOT Lanes GV\20050402001.ppt

  3. Continuum of Risk Sharing PPPs Full Public-Sector Ownership and Operation Design-Build with Public Ownership Design-Build with Some Development Design-Build-Operate Publicly Operated/Privately Developed Privately Financed Public Facility Privately Developed and Operated Public Project Privately Developed 63-20 Sale of Public Facility to Private Sector Publicly Owned Private Development Concession Repurchased by Public Sector Private Transit Concession Toll Road Concession Regulated Private Concession Privatization Traditional Procurement More Private – Less Public Control GV\20050402001.ppt

  4. USA - Continuum of Risk Sharing Between Public and Private Sectors SR 91 HOT Lanes Orange Co. Metropolitan Transportation Authority Central Texas Turnpike System Hudson Bergen Light Rail JFK Int’l Air Terminal LLC Pocahontas Parkway Richmond I-70 Express Lanes Chicago Skyway SR 125 San Diego Seattle Monorail 7 Train EnhancedPlan of Finance Denver E-470 Florida High Speed Rail I-495 Capital Beltway HOT Lanes C-470 HOT Lanes Dulles Rail Indiana Toll Road Dulles Greenway Public Private Fullpublic-sector ownership and operation Design-build with some development Design-build-operate Privately financed public facility Privately developed 63-20 Sale of public facility to private sector Concession repurchased by public sector Toll road concession Design-build with public ownership Publicly operated/privately developed Privately developedand operated public project Publicly owned private development Private transit concession Regulated private concession GV\20050402001.ppt

  5. Typical European PPP Risk Allocation Public Sector Shared Risks Private Sector Planning/Permits Regulatory Risks Usage Risks Inflation Risks Force Majeure Change of Law(Volume) Completion Risk♦ Design♦ Construction ♦ Commissioning OperatingPerformance Technology Obsolescence GV\20050402001.ppt

  6. PPP Lessons Learned • Know your priorities • Prioritize • Focus on “ready to go” projects • Proposed solution must accomplish project objectives • Select best financing approach • Reasonableness and risk of private-sector plan of finance clearly understood • Market risk understood • Public vs. private control (concession financing) • Remove or reduce non-financial barriers • Legal • Administrative GV\20050402001.ppt

  7. PPP Lessons Learned • Form true partnership with private sector • Quality partners • Strength of balance sheet, ability to provide bonding or insurance required • Proven PPP record • Ability to handle projects of scale and complete the project • Cooperation vs. confrontation • Regular contact vs. formal contact only • Recognize mutual learning curve of both partners • Contract form that rewards quality and success in meeting project objectives GV\20050402001.ppt

  8. PPP Lessons Learned • Understand private-sector needs in a PPP • Defined implementation process for proposals • Projects of scale • Enabling legislation to permit unsolicited as well as solicited proposals • List of priority projects • Opportunity to help build public support for the project • Rewards that balance the intellectual and financial investment • Buy-in by all transportation agency participants • Single-point contact on the state side to the maximum extent possible • Performance specifications not prescriptive specs GV\20050402001.ppt

  9. Infraspeed Consortium includes Fluor, Siemens, local constructors Single largest public-private partnership (PPP) contract ever awarded by the Dutch state 1.2 billion euro project to design, build, finance, maintain superstructure Fluor led financing ($1.1 billion) Fluor and partners provided$120 million of equity 95 kilometers of rail infrastructure, 4 tunnels, an aqueduct, a bridge, and connections at 5 major interfaces State will not begin making payments until the availability phase 3.0 billion euro “performance based” revenue covers investment cost, maintenance cost, cost of amortization, taxes, insurances, cost of capital, profit, and overhead Payments tied to performance standards based on 99.45 percent availability Netherlands High Speed Rail GV\20050402001.ppt

  10. Part of the $1.7 billion project London Underground (LUL) awarded to CityLinkTelecommunications Limited,a special purpose company Design, build, maintain, and operate London Underground’s communications system for 20 years Contracted as a privately financed initiative (PFI) that is intended to transfer project risk to the private sector and provide London Underground with both a fixed price and contractual completion dates Fluor has an 18 percent shareholding in CityLinkTelecommunications Throughout 20-year operation and maintenance contract, clearly defined performance and safety measurements will cause CityLink to be penalized if service levels fall below the defined standards Initial Phase ($650 million) – $76 million equity; $576 million debt Debt: Arranged by Bank of America, Royal Bank of Scotland, Bayerische Landesbank and Toronto Dominion Equity: Provided by Fluor, Thales, Motorola, Hyder, HSBC Project Equity London Connect Project GV\20050402001.ppt

  11. Pocahontas Parkway (Route 895) • $323 million new toll bridge and road in Richmond, Virginia • Public-private partnership with Virginia DOT • Develop, finance,design-build contract • 1st PPP to be implemented under Virginia’s PPTA legislation GV\20050402001.ppt

  12. I-495 Capital Beltway HOT Lanes • $1.1 billion expansion of the I-495 Capital Beltway and addition of High Occupancy Toll (HOT) Lanes • Public-private partnership with VDOT • Develop, finance, design-build, operate & maintain under long-term concession • Status: • In development phase • Record of decision received • Finalizing project definition • Finalizing financing plan GV\20050402001.ppt

  13. Questions GV\20050402001.ppt

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