Transcript Meeting with Charles Gargano

UN Training Program
Keys to Successful PPP’s
September 25, 2006
Agenda
 Continuum
 Typical
 PPP
of Risk Sharing
European PPP Risk Allocation
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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Continuum of Risk Sharing
PPPs
Traditional
Procurement
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
More Private – Less Public Control
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USA - Continuum of Risk Sharing Between
Public and Private Sectors
Metropolitan
Transportation
Authority
Seattle
Monorail
Central
Texas
Turnpike
System
Hudson
Bergen
Light Rail
7 Train
Enhanced
Plan
of Finance
JFK Int’l
Air Terminal
LLC
Denver E-470
Pocahontas
Parkway
Richmond
Florida High
Speed Rail
I-70 Express
Lanes
I-495 Capital
Beltway
HOT Lanes
SR 91 HOT
Lanes
Orange Co.
C-470
HOT Lanes
Chicago
Skyway
Dulles Rail
SR 125
San Diego
Indiana
Toll Road
Public
Full
public-sector
ownership and
operation
Design-build
with public
ownership
Dulles
Greenway
Private
Design-build
with some
development
Designbuildoperate
Privately
financed public
facility
Publicly
operated/privately
developed
Privately developed
and operated public
project
Privately developed 63-20
Sale of public
facility to
private sector
Concession
repurchased by
public sector
Publicly
owned private
development
Toll road
concession
Private
transit
concession
Regulated
private
concession
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Typical European PPP Risk Allocation
Public Sector
Shared Risks
Private Sector
Planning/Permits
Inflation Risks
Regulatory Risks
Force Majeure
Usage Risks
Change of Law
(Volume)
Completion Risk
♦ Design
♦ Construction
♦ Commissioning
Operating
Performance
Technology
Obsolescence
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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
– Legal
– Administrative
non-financial barriers
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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 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


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
95 kilometers of rail
infrastructure, 4 tunnels, an
aqueduct, a bridge, and
connections at 5 major
interfaces
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London 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


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
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
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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 Lanes

$1.1 billion expansion of the I495 Capital Beltway and
addition of High Occupancy Toll
(HOT) Lanes

Public-private partnership with
VDOT

Develop, finance, design-build,
operate & maintain under longterm concession

Status:
– In development phase
– Record of decision received
– Finalizing project definition
– Finalizing financing plan
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Questions
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