ECRI Amsterdam 2016© 2016 Fluor Corporation

RISK ALLOCATION IN TRANSPORTATION INFRASTRUCTURE PROJECTS

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Hans DekkerPresident, Infrastructure

ECRI Amsterdam 2016

Agenda● Fluor Profile● Infrastructure Business Line● Tappan Zee Bridge New York (video)● Purple Line Project Maryland USA● Cost and Contingency Planning● Questions

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ECRI Amsterdam 2016

Fluor Profile● A leading Engineering, Procurement, Fabrication, Construction and Maintenance Company

● Integrated solutions delivery model● Long term global presence and mega‐project experience● Diversified across energy, industrial, maintenance (MMAI), and government markets

● Full life‐cycle capabilities from early conceptual studies, to EPFC, on through to Sustaining Capital phases of projects

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2015 +2011 – 2012 2013 – 2015ExecuteExecuteImplementImplement

Fluor Transformation

Strategic Framework

BTI Study

Restructure

Cascade

Construction

Fabrication

Supply Chain

EvaluateEvaluate One Fluor

Integrated Solutions

Growth

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ECRI Amsterdam 2016

Infrastructure Business Line

● Fluor is an industry leader in delivering large, complex infrastructure projects. 

● We are at the forefront of private development of public infrastructure around the world

● We have a proven track record of implementing transportation projects timely, that offer lower life‐cycle costs and considerably less risk to the public sector.

● Fluor have executed 11 PPP/DBFM projects in last 15 years with a total capex of more than $12.5 billion.

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Core Markets & Regions

● Core Markets Roads Bridges Rail Commercial

● Core Regions North America Western Europe Middle East Asia Pacific

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Infrastructure Project Highlights

A9 Amsterdam P3

Disney China

Saudi Landbridge

Sharq Crossing

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Project Highlights

Dallas Horseshoe

Tappan Zee BridgeDenver Eagle P3

SF Bay Bridge

ECRI Amsterdam 2016

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2016 2017 2018 2019 2020 2021

Billion

 USD

Asia Pacific (excludingChina)

Africa

Middle East

Europe

North America

Infrastructure Addressable Market by Region

Source: Fluor Internal estimates based on various information sources including IHS, EIA, SNL, WMI, GAO, Thompson Reuters, Bloomberg, company and other data.

ECRI Amsterdam 2016

Infrastructure Market Overview● Summary Transportation design firms are reporting the ‘best market conditions in years’ in the U.S. due to Fixing America’s Surface Transportation (FAST) legislation.  Several U.S. states passed public‐private partnership (P3) enabling legislation in the quarter. Canadian P3 funding and projects continue to move forward. The impact of Brexit has created political and economic uncertainty in the U.K. and more broadly throughout Europe.  The Middle East has a flow of contract awards for infrastructure projects however we are seeing delays in this market generally. Asia Pacific infrastructure construction continues to move at a rapid pace. Australia added six projects to its national priority list.

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Transport infrastructure investment to 2025

Source: Oxford Economics, PWC report

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

Asia Pacific

US & Canada

Western Europe

Latin America

FSU/CEE

Middle East

Africa

Cumulative transport infrastructure investment ($trn)

Roads Rail Ports Airports

Cumulative transport infrastructure investment to 2025

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Transportation infrastructure investment is expected to increase at an average annual rate of 5% globally from 2014 to 2025.

Asia Pacific is forecasted to be the largest growth market. 

ECRI Amsterdam 2016

North America infrastructure market has large growth potential● Infrastructure  main target markets Design Build and P3 projects in Road, Bridge and Transit

● Key  growth  market Federal Fixing America’s Surface Transportation (FAST) act ‐ signed on Dec 4th 2015 

− Authorized $305 billion over fiscal year 2016 to 2020 for highway, rail, etc. − First long‐term authorization act in a decade, provides 5 years of funding certainty for infrastructure investment

There are 33 US States that have enabling legislation for PPP (P3) in transport sector− 2016 is record year with combined USD 7.86bn capex− Purple Line and LaGuardia Airport account for USD 6bn of that amount

Canadian government is committed to deficit spending to advance infra projects

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United States P3 Overview

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Infrastructure - Prospects and Opportunities

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Construction Cost Approx. $2.25 billion

Delivery Method DBFOM PPP

Payment • Progress Payments during Construction• Lump Sum Revenue Service Availability

Payment • Lump Sum Final Completion Payment• Availability Payments during operations

Timing Construction: 2015-2021 Operations: 2021-2051

The Purple Line Project The Project involves the development, design, construction,

financing, operation and maintenance of a 16.2 mile light railtransit line that extends from Bethesda to New Carrollton,providing direct connections to four branches of theWashington Metropolitan Transit Authority Metrorail systemas well as all three Maryland Area Regional Commuter raillines and Amtrak’s Northeast Corridor

There will be twenty-one permanent stations and approximately 55-64 light rail vehicles (“LRVs”)

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Consortium Overview

Project Structure

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Flow Down of Obligations

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Risk categories● Project Risks Site Design, construction and commissioning Hard and soft facility maintenance Asset ownership

● Corporate and legal risks● Financial and market risks● Legislative and government policy risk● Environmental risk● Other risks (planned and unplanned!)

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Significant Design Build Risks● Labor  PLA with selected trades for self‐perform work

● Political/Public Engage and inform stakeholders Risk identification/mitigation process

● Testing and Commissioning Tunnel  Systems

● Utility Relocations

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ECRI Amsterdam 2016

Significant Operate and Maintain Risks● Availability transport infrastructure 20hrs/day, 7 days a week, 7.5 minutes headway

− Provide Alternate Bus Service in the event of Service Interruptions Includes stations

● Availability Light Rail Vehicles Staffing

● Safety● Coordination Regional Third Parties like University of Maryland, WMATA, MARC, Prince George’s County, Montgomery County, various utilities

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Cost and Contingency Planning

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Unknown

Behavioural Patterns

Uncertain Technical Upgrades

Macro-economic Factors

Claims and Disputes

Variations

Certain Original Scope

Final Cost

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Emerging Risks: Geotechnical● Geotechnical risk Relief Relief depending on proximity of sample information provided by client No relief; Contractor responsibility for site conditions

− Limited boring information provided if any− Inability to perform own survey during bid process− Competent engineer should have known better

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Emerging Risks: Notices● Notices Behavioral

− Condition president − Sufficiently informative, cause and consequent− Cannot provide for that in contract

● Proactively require the project team to confirm they have considered notifiable events and issued all relevant notices – and do so regularly.

● Do not accept nil return● Relationships should be two way 

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Questions

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