Grand Prairie Irrigation ProjectPublic-Private-PartnershipRequest for Information No. P3-16-01

Industry Day

June 29, 2016

Little Rock, Arkansas

Please note that in the event of any conflict between the content of this presentation and the RFI, the terms and conditions of the RFI shall prevail.

Grand Prairie Demo Project

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• Initially authorized in 1950, the Grand Prairie

Region Demonstration Project aims to provide

water security for drinking water, industrial and

agricultural use, as well as address depletion and

resiliency of the alluvial and Sparta aquifers which

underlie a seven state region.

• Key project features include a major pumping

station on the White River; conveyance channels to

deliver to water depleted areas; flood

management; and other environmental restoration

and conservation measures.

• Key Public Sponsors:

�United States Army Corps of Engineers (USACE)

is Federal sponsor.

�The State of Arkansas, acting through its

Arkansas Natural Resources Commission (ANRC),

is the non-Federal sponsor.

�White River Irrigation District (WRID) is a legal

entity created for the purpose of operating and

maintaining the Project upon completion.

Grand Prairie Area Demo Project

Federal Investment-to-date $137 million

Non-Federal Spend-to-date $75 million

Total investment-to-date $212 million

Project Cost Estimates

Infra and Distribution System $433.5 million

On-Farm Work $106 million

Sunk PED $11.5 million

Est. Total Project Cost $551 million

Estimated completion date (at

current funding levels)34.5 years

Key Transaction Objectives

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PRIMARY OBJECTIVES OF P3 APPROACH

� Accelerate delivery to advance public benefits;

� Provide greater cost and schedule certainty;

� Leverage private sector innovation;

� Ensure asset life-cycle management;

� Minimize cost impact on end-users;

� Optimize risk allocation; and

� Maximize public benefits by Incentivizing

innovative asset uses and monetization.

PRIMARY OBJECTIVES OF RFI PROCESS

� Assess market interest in Project (and pipeline);

� Solicit industry Input:

• Transaction structure;

• Risk identification and mitigation;

• Roles and responsibilities; and

• Procurement process.

� Determine next steps.

Anticipated Transaction Structure

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Contracting Authority: WRID (in

cooperation with ANRC and USACE)

Transaction Structure: Design-Build-

Finance-Operate-Maintain (DBFOM) :

• Design-Build Criteria

• Financing

• O&M (including existing assets)

Scope of Services: Private Partner to

complete off-farm system and provide for

its continual operation at prescribed

service levels over term of contract.

Water rights: ANRC issued non-riparian

permit (560,000 acre-feet per year)

Payment Mechanism: Water usage

revenues / ancillary revenues

Water pricing and adjustments: Bid

criteria / regulation by contract

Anticipated Term: 50+ years

Asset ownership: With public sponsors

Anticipated Transaction Structure

Water Usage

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Crop AcreageEstimated Water

needs (acre-feet)

Rice 85,000 212,500

Corn 25,000 50,000

Soybeans 140,000 175,000

250,000 437,500

• Project boundary contemplates approximately

300,000 acres.

• Within footprint, approximately 250,000 acres used

for agriculture, with some 95% of those acres

irrigated annually.

• Farming not sustainable without irrigation, which is

currently deriving from a combination of on-farm

capture and aquifer extraction (depletion of aquifer

increasing costs).

• Currently no mandated water usage policy in place

• On-farm capture and storage systems are estimated

to deliver up to 35% of these needs, at present,

farmers are forced to pump from aquifers to meet

remaining water needs.

• Project replaces need to draw from aquifer,

providing sustainable water sources at a more

affordable and predictable price.

• Alternative usage also possible (i.e., water fowl, etc.)

Key Risks

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Key risk elements include, amongst others:

1. Traditional project risks

• Schedule

• Cost

• Existing assets / latent defects

• Operations

2. Water usage and demand risk

• Affordability

• Usage

• Competition from alternatives

• On-farm system readiness

• Other

3. Governance and oversight

4. Managed risks

• Environmental

• Legal

• Easements

RISK ALLOCATION AND MITIGATION:

1. Standard project risks to be allocated

to private partner

2. Consideration being given to demand

risk mitigation strategies:

1. Take or pay arrangements

2. MRG

3. Others

RFI Process

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I. GENERAL INFORMATION

III. SCOPE & PHASING

VII. FINANCING

II. INNOVATIVE PROJECT DELIVERY

IV. SCHEDULE

VI. ANCILLARY REVENUES

Description of Respondent1. Critical path

2. Duration

RFI Appendix ARequest for

Information

Ideas to optimize delivery using

alternative methods, such as P3:

1. Is Project suitable as P3?

2. Payment structure?

3. Required guarantees to mitigate

revenue risk?

4. Scope of O&M?

5. Optimal contract term?

6. Potential suitability of tax-

exempt structures or the use of

tax exempt financing, such as

Private Activity Bonds?

7. What do you deem the

appropriate roles of the State

and USACE for this Project?

1. Project elements

2. Phasing

3. How to address transfer risks

associated with existing

infrastructure?

V. DESIGN

1. Opportunities to employ

innovation for cost and

schedule efficiencies

2. Use of alternative standards

1. Opportunities for ancillary

revenues generated from

innovative uses of Project assets

2. Rights needed to enable Private

Partner to maximize ancillary

revenues?

1. Availability of private sector

debt and/or equity

2. Guarantees or risk mitigation

strategies

3. How to address financial risk?

4. Financial close

VIII. PROCUREMENT

1. Comments on potential

procurement process.

2. Time period for preparing

statement of qualification and

proposals

3. Bid validity period

IX. RISK

1. Optimal risk sharing

2. Identification of key project

risks and proposals for

addressing those risks

X. OTHER

1. Any specific suggestions and

refinements to the allocation

of responsibilities

2. Any other comments or

suggestions regarding the

Project, transaction structure

and/or anticipated process.

Schedule & Process

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Anticipated Transaction Timeline

Milestone Date

Industry Forum June 29, 2016

Submission of Responses July 11, 2016

Publish RFQ August 2016

Short-List Announced October 2016

Launch RFP December 2016

Contract Award / Commercial Close

March/April 2017

Financial Close 3rd Quarter 2017

• Should project sponsors pursue a P3, a dual-

stage procurement will be implemented to

select Private Partner;

• Anticipating the short-listing of 3 teams;

• Accelerated procurement timeline with

simplified submission criteria;

• Not currently envisioning use of a stipend

• Ambitious timeline subject to Industry

feedback. Desire is to simplify process and

expedite contracting, while likewise ensuring

transparency in decision making and

providing appropriate time for preparing and

evaluating proposals.

Wrap-Up

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• Project is critically important to Federal and non-federal sponsors:

• Provides a reliable, sustainable, and affordable source of

non-potable water necessary for agriculture;

• Enhances water security;

• Boosts food security; and

• Supports economic growth.

• Grand Prairie Irrigation P3 is the first of many irrigation and water

supply projects being considered for P3/P4 delivery in Arkansas

and across the nation

• Project sponsors recognize that the Grand Prairie Irrigation Project

entails demand risk and is working to identify the appropriate and

credit-worthy risk mitigation mechanisms. Expectation is that

industry will help inform this decision (for this and future projects)

• New U.S. P3 asset class presents both challenges and

opportunities. Sponsors hope that experienced design-build,

O&M, and infrastructure finance firms will provide industry input

and suggestions to help ensure a successful and well-balanced

transaction structure.