UN Training Program Keys to Successful PPP’s

September 25, 2006

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AgendaAgenda

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

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TraditionalProcurement

Privatization

PPPsFull Public-Sector Ownership and Operation

Design-Build with Public OwnershipDesign-Build with Some Development

Design-Build-OperatePublicly Operated/Privately Developed

Privately Financed Public FacilityPrivately Developed and Operated Public Project

Privately Developed 63-20Sale of Public Facility to Private SectorPublicly Owned Private Development

Concession Repurchased by Public SectorPrivate Transit Concession

Toll Road ConcessionRegulated Private Concession

Continuum of Risk Sharing

More Private – Less Public Control

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MetropolitanTransportation

Authority

MetropolitanTransportation

Authority

USA - Continuum of Risk Sharing Between Public and Private Sectors

Fullpublic-sector

ownership and operation

Design-build with some

development

Privately developedand operated public

project

Regulated private

concession

Concession repurchased by public sector

Toll road concession

CentralTexas

TurnpikeSystem

CentralTexas

TurnpikeSystem

HudsonBergen

Light Rail

HudsonBergen

Light Rail

JFK Int’lAir Terminal

LLC

JFK Int’lAir Terminal

LLC

PocahontasParkway

Richmond

PocahontasParkway

Richmond

I-70 ExpressLanes

I-70 ExpressLanes

ChicagoSkyway ChicagoSkyway

SeattleMonorailSeattle

Monorail Denver E-470Denver E-470 Florida HighSpeed Rail

Florida HighSpeed Rail

I-495 CapitalBeltway

HOT Lanes

I-495 CapitalBeltway

HOT Lanes

C-470HOT Lanes

C-470HOT Lanes Dulles RailDulles Rail

7 TrainEnhanced

Planof Finance

7 TrainEnhanced

Planof Finance

SR 91 HOTLanes

Orange Co.

SR 91 HOTLanes

Orange Co.

IndianaToll Road Indiana

Toll Road Dulles

GreenwayDulles

Greenway

SR 125San Diego

SR 125San Diego

Design-build with public ownership

Privately financed public

facility

Privately developed 63-20

Publicly owned private

development

Private transit

concession

Sale of public facility to

private sector

Publicly operated/privatel

y developed

Design-build-

operate

Public Private

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Typical European PPP Risk Allocation

Private Sector

Inflation Risks

Force Majeure

Change of Law(Volume)

Planning/Permits

Regulatory Risks

Usage Risks

Completion RiskCompletion Risk♦ Design♦ Construction ♦ Commissioning

OperatingPerformance

Technology Obsolescence

Public Sector Shared Risks

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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

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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

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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

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Netherlands High Speed RailNetherlands 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 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

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London Connect ProjectLondon Connect Project

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

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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

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I-495 Capital Beltway HOT LanesI-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

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Questions