UN Training Program Keys to Successful PPP

1
UN Training Program Keys to Successful PPPs

• September 25, 2006

2
Agenda

• Continuum of Risk Sharing
• Typical European PPP Risk Allocation
• PPP Lessons Learned - Government
• Examples of Successful PPPs
• Netherlands High Speed Rail
• London Connect Project
• Pocahontas Parkway
• I-495 Capital Beltway HOT Lanes

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
Traditional Procurement
Privatization
More Private Less Public Control
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 Intl Air Terminal LLC
Pocahontas Parkway Richmond
I-70 Express Lanes
Chicago Skyway
SR 125 San Diego
Seattle Monorail
Denver E-470
Florida High Speed Rail
I-495 Capital Beltway HOT Lanes
C-470 HOT Lanes
Dulles Rail
7 Train EnhancedPlan of Finance
Indiana Toll Road
Dulles Greenway
Public
Private
Fullpublic-sector ownership and operation
Design-build with some development
Concession repurchased by public sector
Toll road concession
Privately financed public facility
Privately developed 63-20
Sale of public facility to private sector
Design-build-operate
Privately developedand operated public project
Regulated private concession
Design-build with public ownership
Publicly owned private development
Private transit concession
Publicly operated/privately developed
5
Typical European PPP Risk Allocation
Private Sector
Public Sector
Shared Risks

Inflation Risks Force Majeure Change of
Law(Volume)
Planning/Permits Regulatory Risks Usage Risks

• Completion Risk? Design? Construction ?
  Commissioning
• OperatingPerformance
• Technology Obsolescence

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

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

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

9
Netherlands High Speed Rail

• 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 provided120 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

10
London Connect Project

• Part of the 1.7 billion project London
  Underground (LUL) awarded to CityLinkTelecommunica
  tions Limited,a special purpose company
• Design, build, maintain, and operate London
  Undergrounds 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

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 Virginias PPTA
  legislation

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

13
Questions