Across the Border: Sharing P3 Experiences05/25/2016 | 8:30 – 10:10 | 2 CPEDan Huge, CPA, Public Finance Director, Indiana Finance AuthoritySekhar Angepat, Managing Director and Co-Head, Infrastructure Finance, Royal Bank of CanadaEric Reese, Director, Global Strategic Development, Scheidt & BachmannDivya Shah, Acting Senior VP of Transaction Finance, Infrastructure Ontario

PPP Market Update

May 25, 2016Sekhar AngepatRBC Capital Markets

Key Observations

History of PPP in Canada

PPP is also known as “P3” or “Public-Private Partnerships” or “AFP”

PPP is a procurement method used to deliver Core Public Infrastructure

Public sector transfers certain obligations to the private sector to design, build, finance and operate (“DBFO”) a core piece of infrastructure in exchange for a government payment stream

Risk sharing, higher value for money, private sector expertise and innovation as well as improved performance are among the main benefits of the PPP model to public sector

Concession terms typically range from 25 to 40 years

First introduced in Canada in mid to late 90s; however, really gained momentum in 2005

Currently we are seeing approximately 8-10 deals in excess of $250 MM procured each year

Provinces actively procuring PPP solutions include: Alberta British Columbia Manitoba New Brunswick Ontario Quebec Saskatchewan

Recently, other provinces, municipalities and the federal government have been initiating PPP projects

Hospitals

Schools

Courthouses

Detention Centres

Defense

Stadiums

Social

Core Public Infrastructure

Transportation

Roads

Bridges

Transit

Utilities

Renewables

Power Generation

Transmission

Water & Wastewater

Dedicated Canadian PPP Agencies

Alberta Infrastructure and Transportation

Partnerships British Columbia

Partnerships New Brunswick

Infrastructure Ontario

Infrastructure Quebec

SaskBuilds

PPP Canada Inc.

Canadian PPP Overview

Canadian PPP Market ThemesVirtually No Government

Execution Risk

Canadian provinces and procurement agencies are highly experienced and have established processes as well as templates in place, ensuring certainly of execution

Strong record of reaching financial close on transactions amid political and market turbulence Highly reliable legal framework, tested by the Province of Ontario vs. 407ETR lawsuit, which upheld rights on the private sector

Notable Differences of Canadian PPP Model

Significant substantial completion or milestone payments by the public sector (up to 50% - 85% of capital costs) Most projects are structured with no refinancing risk The majority of the projects are availability-based Infrastructure privatizations are uncommon as are revenue-risk projects No preferential tax treatment for infrastructure bonds

Steady Deal Flow

Over $10 billion deal pipeline over the next two years expected Increasing prominence of municipal and federal transactions New Federal government bullish on infrastructure renewal Visible infrastructure deficit throughout Canada:

Sector Rotation

Addressed social infrastructure deficit gives way for more sizable transportation transactions:

17%

63%

13%

4%3%

2014 Canadian PPPs by Sector ($4.9 billion)

Power

SocialInfrastructureTransport

Environment

Other

Toronto Population: 2.6MM

New YorkPopulation: 8.4MM

14%1%

1%

84%

2015 Canadian PPPs by Sector($6.9 billion)

Social Infrastructure

Other

Environment

Transport

Addresses the infrastructure backlog

Competitive bidding process ensures value for money for the public sector

Transfers risk to the private sector in delivering the project on-time and on-budget

Encourages innovation from the private sector and creates synergies of integration of design / construction / operation / maintenance

Ensures long term performance management

Lifecycle maintenance is built into the project cost and the risk is often borne by the Facilities Manager / Operator (“FM”)

Proven an effective means for government to concurrently undertake and manage a robust pipeline of transactions

Able to obtain fixed rate long term funding with high credit ratings

Why do Governments use PPP?

Long term concession contracts (construction + ~30 years)

Canadian PPP market consists primarily of:

Greenfield projects

Brownfield projects

Two general categories of PPP projects based on certainty of revenue stream:

I. Availability-based projects

Fixed payments provided by the Authority subject to the project being made available to the public and operated according to scope

Examples include social accommodation projects (hospitals, court houses, detention centresand schools) and some road / transportation projects

II. Volume-based projects

Revenue stream is dependent upon user demand or resource volume

Examples include toll roads, power projects, airports

The vast majority of Canadian PPP deals have been availability based with governments gaining comfort on value-for-money based on risk transfer during construction and operations as opposed to revenue projections

What do PPPs look like?

The term infrastructure has been used to describe a wide array of assets with different risk profiles

Lower Risk

Higher Risk

PPP Assets (Availability-based)

Brownfield Assets

Other Greenfield Assets

Definition Core public infrastructure developed under a government controlled process

Wide range of operating assets; typically auctioned off to the highest bidder

Wide range of assets to be constructed by private sector

Revenue Stream Government-backed payments based on availability of asset (no usage risk – payment assured if asset is available and operated to specification)

Revenues will vary based on usage, economic conditions and business competition

Revenues will vary based on usage, economic conditions and business competition

Costs Operating cost certainty – Operator provides fixed price and takes the risk of any cost overruns

Operating costs and CAPEX may vary from those forecasted at acquisition

Operating costs and CAPEX may vary from those forecasted

Cash Flow Certainty High certainty to ensure debt service obligations and provide distribution

Variable Variable

Construction Risk Construction completion required before revenues generated;Fixed-price, date-certain DB contract supported by strong security package

Little or no construction Construction completion required before revenues generated;May or may not have fixed-price, date-certain contract; strength of security package will vary

Infrastructure Asset Spectrum

A typical PPP transaction is structured to ensure that the majority of risks assumed by the private sector are passed down to the Design-Builder and Facilities Manager instead of being borne by equity and debt providers. These obligations are further back stopped by strong security packages provided by the Design-Builder and Facilities Manager / Operator

Project Co

(SPV)

Design-build Agreement- Fixed-price- Fixed schedule- Liquidated damages

Facilities Maintenance Agreement- Fixed-price- Term equal to length of Project Agreement

Project Agreement- DBFO (hospital, school etc)

Lenders Equity Investors

Public Authority

Design-Builder Facilities Manager / Operator

Senior Debt (~90%) Equity (~10%)

RISK

RISK

DB Support Package (LC, Parent Gtee, Perf

Bonding)

FM Support Package (LC, Parent Gtee, Perf

Bonding)

Ring Fenced SPV Structure

Debt and Equity Financing

Typical Transaction Structure

Project Jurisdiction Industry Type Expected FC Date Project Size

Data Centre (CFB Borden / Angus) Federal Social DBFM May-16 Small

William Osler Health System - Etobicoke General Hospital Phase 1 Redevelopment Ontario Healthcare DBFM May-16 Small

Winnipeg BRT Manitoba Transportation DBFM Jun-16 Small

Southwest Calgary Ring Road Alberta Transportation DBFM Jul / Aug-16 Large

Mackenzie Health – New Vaughan Hospital Ontario Healthcare DBFM Sep-16 Medium

Great Plains Generating Station Saskatchewan Power DBFM Sep/Oct-16 Large

Hamilton Biosolids Plant Ontario Social DBFOM Jan-17 Small

CAMH - Phase 1C Ontario Healthcare DBFM Feb-17 Small

Highway 427 Extension Ontario Transportation DBFM Feb-17 Medium

Alberta Transmission Line (Fort McMurray West) Alberta Energy DBFM Feb / Mar-17 Large

Finch LRT Ontario Transportation DBFM Apr-17 Large

Gordie Howe International Bridge Federal Transportation DBFM Jun-17 Large

George Massey Bridge British Columbia Transportation DBFOM Dec-17 Large

Roberts Bank Terminal 2 (Land Base) British Columbia Port DBFM Dec-17 Large

Size: - Small: < 300 MM- Medium: 300 MM > < 600 MM- Large: > 600 MM

Canadian PPP Pipeline

Over ~$10bn in Estimated Capital Costs for 2016-2017

*Project either announced as DBFM / DBF PPP or in procurement (Pre-Financial Close). Not an exhaustive list

Ontario

• Vaughan Hospital

• CAMH - Phase 1C Client Care Building

• Highway 427 Extension

• Finch LRT

Canada (Federal)

• Data Centre (CFB Borden / Angus)

• Gordie Howe International Bridge (previously NITC and DRIC)

Municipal

• Winnipeg Transit Project (Manitoba)

• Hamilton Biosolids Plant (Hamilton)

• Gardiner Expressway Revamp (Toronto)

Alberta

• Southwest Calgary Ring Road

• Stoney CNG Transit Bus Garage

• Alberta Transmission Line

British Columbia

• George Massey Bridge

• Lion’s Gate Waste Water Treatment Plant

• Roberts Bank Terminal 2

Things to Look for

Design-Builder enters into fixed-price, date-certain construction contract Design-Builder posts security and pays liquidated damages if construction is delayed Independent Technical Advisor reviews schedule and construction progress Design-Builder provider’s obligations are supported by security such as surety / performance bonding, letters

of credit and parent company guarantees

Construction Delay and Cost Overruns

Facilities maintenance provider enters into a fixed-price contract to operate the project Facilities maintenance provider’s obligations are supported by security such as surety / performance bonding,

letters of credit and parent company guarantees

Operating & MaintenanceCost Overruns

Lenders and rating agencies require sufficient committed liquidity to pay all debt service during construction delays

Financial covenants thresholds are structured to ensure the project maintains an adequate cash flow buffer to service project debt

Ability to Service Debt

Public Sector retains certain risks associated with the development of the project– Permitting– Pre-existing environmental – Land acquisitions

Development Risks

PPP – Risks and Structure Protections

Construction Phase Operations Phase

1 Design-Build (“DB”) Contract

Fixed price

Date certain

Facilities Maintenance / Operations Contract

Fixed price

Duration matches length of Project Agreement

2 DB Security Package

Letter of Credit, Performance Bonds, Parent Company Guarantees

FM / Operator Security Package

Letter of Credit, Performance Bonds, Parent Company Guarantees, Maintenance Reserves

3 Insurance Proceeds Insurance Proceeds

4 Equity at Risk Equity at Risk

5 Drawdown of bond proceeds, subject to certification by Technical Advisor including cost to complete Debt service reserve account

6 Step in Rights Step in Rights

Investor lines of Defense

Top Ten List for Credit Review

1 Nature of Revenue Stream Availability payments versus volume risk

2 Nature of Payer Government obligation, non-guaranteed authority, end user

3 Project Complexity Construction and operations

4 Nature of Equity Investors (“Sponsors”) Experience, track record and financial strength

5 Nature of Constructors Experience, track record and financial strength

6 Nature of Operators Experience, track record and financial strength

7 Skin in the game Level of commitments from Sponsors, Constructors and Operators

8 Construction Risk Mitigation Package Parent company guarantees, performance bonds, letters of credit Cost to complete test for construction draws

9 Operating Risk Mitigation Package Parent company guarantees, performance bonds, letters of credit, maintenance reserves

10 Covenant structure Reserve funds, coverage ratios, equity distribution tests, additional bonds, tail to maturity of underlying Project Agreement

Investor Checklist

On August 4, 2015, SGTP Highway Bypass Limited Partnership consortium was awarded the agreement to design, build, finance, operate and maintain the Regina Bypass in Regina, Saskatchewan (“Project”)

The Project consists of a free flow highway corridor, which includes approximately 58 km of 4-lane highway (including 40 km of new 4-lane highway) and service roads along with a number of interchanges and intersections

The Construction Period is 51 months, followed by a 30-year Operational Term, ending in October 2049

The payment structure involves availability-based payments from a high quality, “AAA / Aaa / AA” rated counterparty

Bond financing consisted of a dual offering in the form of $488.123 million 30-year (19.3-year weighted average life) amortizing bonds issued at GoC+200bps and ~$140 million 34-year bullet bonds priced at GoC+195bps through a special purpose vehicle, SGTP Highway Bypass Limited Partnership (“SGTP”)

The offering was broadly distributed across 25+ buyers

The offering came at the tail end of a heavy slate of long-term P3 bond offerings in the ~45 days prior to the issue date and SGTP was able to capitalize on solid investor demand for an “A3” rated P3 project with low construction and operating complexity

RBC acted as joint lead bookrunner and underwriter for the dual tranche issuance with 50% economics

Issuer SGTP Highway Bypass LP

Rating(s) Moody’s: A3

Financial Close August 4, 2015

Debt Size C$488.1 mm (Amortizer) / C$141.0 mm (Bullet)

Tenor 29.5y (Amortizer) / 34.0y(Bullet)

Average Life 19.3y (Amortizer) / 34.0y (Bullet)

Spread at Issue 200 bps (Amortizer) / 195 bps (Bullet)

Investor Distribution

Money Managers

50%

InsuranceCompanies

44%Banks/Trust

3%Other3%

Quebec22%

Ontario64%

BC10%

Manitoba3%

Alberta1%

Investor LocationInvestor Type

Regina Bypass

On February 8, 2016, TransEd Partners General Partnership (“TransEd”) consortium was awarded the agreement to design, build, finance, operate and maintain the Valley Line LRT in Edmonton, Alberta (“Project”)

The Project consists of extending the Edmonton LRT by 13km with additional connected structures and 12 neighborhood stops. The Project features at-grade and above-grade stations, a short LRT tunnel and procuring state-of-the-art Light Rail Vehicles

The Construction Period is 4.8 years followed by a 30-year Operational Term ending in December 2050. Service commencement will occur December 2020

The payment structure involves availability-based payments from a high quality, “AA+ / Aaa / AAA” rated counterparty

Bond financing consisted of a single offering in the form of ~$394 million 34.63-year (~22-year weighted average life) amortizing bonds issued at GoC+265bps through a special purpose vehicle, TransEd Partners General Partnership

The offering was broadly distributed across 15+ buyers

The offering was the first broadly marketed P3 bond offering of 2016

RBC acted as lead left bookrunner and underwriter for the offering with 55% economics

Issuer TransEd Partners General Partnership

Rating(s) DBRS: A (low)

Financial Close February 8, 2016

Debt Size C$394 mm

Tenor 34.63y

Average Life 21.86y

Spread at Issue 265 bps

Investor DistributionInvestor LocationInvestor Type

Edmonton LRT

Government1%

Insurance29%

Money Managers

68%Pension

Fund2%

Alberta2%

British Columbia

41%

New Brunswick

1%

Ontario51%

Quebec5%

Across the Border: Sharing P3 Experiences

May 25, 2016Divya ShahInfrastructure Ontario

Agenda:• Infrastructure Ontario (IO) Overview 

• Role of Transaction Finance in IO

• Trends 

• Crown corporation of the Ontario government responsible for building, managing, financing, and enhancing the value of Ontario public assets

• Supports Ontario’s position as a North American leader for infrastructure delivery and innovation

Infrastructure Ontario:  Who are we ?

IO’s Mandate:  Four lines of business

Infrastructure Development• Manages planning, design, and delivery of major public infrastructure projects

Real Estate and Land Management• Manages the Ontario government’s real estate portfolio, the second largest and one of 

the oldest real estate portfolios in Canada

Lending• Dedicated to providing financing solutions to help public sector clients renew 

infrastructure across Ontario

Commercial Projects• Acts as an internal advisor to government clients to help generate revenue, reduce 

costs, and create efficiencies in how public services are delivered

How are projects assigned to Infrastructure Ontario 

• The Ministry of Economic Development, Employment and Infrastructure (MEDEI), in consultation with other government ministries, submits an infrastructure renewal budget annually for Cabinet approval.

• MEDEI also identifies which projects will be assigned to IO or to a provincial ministry.

• After projects are approved by Cabinet, IO receives a Letter of Direction from the Minister of Economic Development, Employment and Infrastructure to confirm the projects, including construction start and total project budget.

• IO works in partnership with its client ministries to manage the projects.

Government Ministries• Attorney General• Children and Youth Services• Community Safety and Correctional Services

• Health and Long‐term Care• Training, Colleges and Universities

• Transportation

Cabinet  MEDEIInfrastructure 

Ontario 

1. Not Policy but execution (i.e. outside Public Service)• IO is a Crown corporation and arm’s length from the Province 

• Responsible for procurement and execution of projects, not policy development 

2. Steady pipeline of projects • Issue our pipeline every year to the market to show our commitment to infrastructure 

3. Variety of Procurement Models• One model doesn’t fit all – Build‐Finance (BF) vs. Design‐Build‐Finance (DBF) vs. Design‐Build‐Finance‐Maintain 

(DBFM)

• IO also reviews the payment structure for all models across asset classes to ensure we minimize financing costs without compromising risk transfer

4. Standardization & Consistency of templates / processes • Standardized processes and templates reduce costs and ensures consistent risk transfer

• Continuous improvement through standardization

5. Negotiating leverage• End to end service provided to the client (sponsor) from Technical / Financial / Operational perspective

• IOCIP, credit spread mechanisms, operations phase negotiations, managing relationships, consistent application of the Project Agreement provisions

Central Procurement Agency approach

All AFP Projects Number Capital cost

Completed 54 $17.29 billion

Under construction 20 $15.87 billion

Procurement/planning 15 $   6.25 billion

Total  89 $39.41 billion(as of March 31, 2016)

AFP Track Record:  2015 Track Record published on IO Website

• 98% (44 of 45 projects) AFP projects were delivered on‐budget

• 73% (33 of 45 projects) AFP Projects were On‐Time or within one month of Substantial Completion.  Eight of those projects (18%) were delivered early

Municipality Projects:  AFP Projects• Transit:  Ottawa LRT, Waterloo LRT, 

• Transportation:  City of Toronto,  City of Kingston

• Others:  City of Toronto, City of Richmond Hill 

AFP Program:  Track Record

• IO has advanced over $7.5 billion in affordable long‐term financing to public sector clients throughout Ontario

• Represents 370 clients and 2,105 infrastructure renewal projects with a total project value of more than $13 billion

• 42% of clients are repeat customers

• Average loan size: approx. $8.6 million

• Municipalities, municipal corporations, and housing providers make up over 90% of the loan volume (by value)

• Lending to Key Municipalities include:  Kingston, Barrie, Ottawa, Niagara, Hamilton, Thunderbay, TCHC, Simcoe, Queen’s, York 

IO Loan Program:  Track Record

Value for Money & Business Case Analysis 

Value‐for‐Money (VFM) is a standardized approach to assessing the optimal delivery method for a given project

The VFM analysis compares two options: “traditional” (or Public Sector Comparator, PSC) vs. AFP project delivery

VFM is a decision‐making or screening tool for government

Used to support/justify the selection of a delivery model  (BF / DBF / DBFM)  for a project

Risk Workshop• VFM is achieved when individual risks are allocated to the party that is best placed to 

manage them by undertaking effective and cost‐efficient risk mitigation strategies

• Project specific risk workshops with industry experts, cost consultants, and key stakeholders are conducted to review and assess specific attributes of a project that require an adjustment to risk matrix. Risk workshop steps include:

1. Identify project specific risks

2. Allocate to party best able to manage

3. Estimate probability of occurrence and resulting cost impact ranges

4. Run statistical analysis to quantify total retained risks

Risk Matrix Template• IO uses standard risk matrix templates to identify project risk, allocate risk between the 

private and public sector, and quantify impact to the public sector (known as “Retained Risks”) under both delivery models.

Positive VFM is demonstrated if total risk adjusted costs under Traditional delivery are greater than AFP Risk Adjusted Costs

Empirical Data

Social Infrastructure  Civil Infrastructure

Innovation Factor:  Professional advice and external research that suggests cost savings from innovation in the range of 5% to 18% can be realized for AFP social & civil infrastructure, depending on the asset class and model type.

• Innovation Factor papers by Altus and MMM Group (available on IO Website);  Examples on the following slide

Cost Overrun Retained Risk:  External research that suggests cost overruns on large traditional exceed the contractual price by an average of 20% to 25%

• P3s in Australia – Research conducted by the University of Melbourne compared the performance of 25 P3 projects to 42 traditionally delivered projects and found that P3 projects were 31.5% better than traditional projects in terms of on‐budget performance.

• Study by Infrastructure Partnerships Australia of 21 P3 projects against 33 traditionally delivered projects concluded that the average cost overrun  was 14.8% for traditional projects compared to 1.2% for AFP projects

• The Interim Report released by TTC, presented the delay costs for the on – going York Spadina Subway Extension that is being constructed using the Traditional  Delivery Approach.   The Interim Report, projects that the project is 80% complete and will be 21%  ($2.6bn vs $3.2bn expected) over budget

Deferred Maintenance:  Research on traditionally managed public sector buildings and transit infrastructure show a 20% to 40% year on year deferred maintenance factor

Asset Residual Retained Risk :  As a result of deferred maintenance and lack of funding traditionally maintained infrastructure tend to have poor facilities condition values at the end of 30 years 

Key principle of Value for Money is to ensure that there is sufficient private sector incentive, at all times, foreffective risk transfer.

• While private sector finance allows effective risk transfer and negotiating leverage, it comes with asignificantly higher cost.

• At Substantial Completion 

– Competing issues: Balance the amortization of remaining Capital Costs against walk away risk at Expiry of Project 

– Financing structure decision:  What percent of Capital Costs should be paid out by Substantial Completion ? 

• During Construction 

– Competing issues:  Balance use of payments during construction vs third party leverage

– Financing structure decision:  What combination of payments can be made by the Public Sector during construction under AFPs without impacting risk transfer ?

– Use of Interim Completion Payments, Milestone Payments and Construction Progress Payment ?

• During Operations 

– Competing issues:  Smooth annual payments vs lumpy annual payments 

– Financing Structure decision:  What is the term for the project ? What is the profile of payments?

Payment Structuring 

Cred

it Crisis

IO increased Substantial Completion Payments (SCP)

IO introduced Credit Spread Benchmarking & Clearing Spreads process + Quality of Finance evaluation

2009

PUBLIC SEC

TOR

PRIVATE SECTOR

IO introduced Multi Phased Projects and Bundling of Projects such as Women’s College Hospital, Herb Gray Parkway, OPP Modernization projects

2011

Hybrid Financing Solution Broadly marketed Long Bonds

Mini Perm Solutions

Long Term Bullet Bonds

2010

• Construction Progress Payments 

• Construction Period Payment Mechanism

2015

Trends /Innovation – Private and Public Sector

2016

• $30+ billion in Transit and Transportation infrastructure over the next 10 years.

• Greater focus on Alternative Service Delivery of government services

• Largest transit expansion in Toronto’s history.

• First time use of Green Bonds

Financing Changes to the Project Agreement / RFP Process 

Strategy Recommendation/ Concept Financial Impact

Substantial Completion Payments (SCP)

• Increase Substantial Completion Payment to up to 60% on Social Infrastructure and up to 85% on Civil Infrastructure

• However, retain some flexibility to account for affordability, market attractiveness,lender capacity & project rating

High

Payment during Construction

• All Projects will use either Construction Period Payments or Milestone Payments or Interim Completion Payment unless the savings net of Provincial Costs is outweighed by risks or administration costs.

High

Equity Sale ‐ Gain ShareMechanism

• Remove both the 1.5 x factor and the exemption from gain sharing following the three year period after Substantial Completion to allow Public Sector to more fully participate in equity gain sharing for sales occurring during operations

Low, post Construction

Letters of Credit• Standby LCs should be sized per the $ value of the project 

• Allow for 1 LC to be submitted at Preferred Proponent all the way to Financial CloseLow

Security Packages

• DBFs anf BFs will continue to require 50% Performance Bond and 50% LabourMaterial Bond for the entire length of Construction 

• Security Packages under DBFMs will continue to be dictated by Lender requirements and rating agency requirements 

Low

Country Bank Lenders

Canada TD Bank

Canada Bank of Montreal

Canada Bank of Nova Scotia

Canada National Bank of Canada

Canada Desjardins

Japan Bank of Tokyo Mitsubishi

Japan SMBC

Canada Pacific  & Western Bank of Canada

France Societe Generale

Canada ATB

Top Lenders over the last 10 years:  Exposure Report

Country % Exposure – Bank Lenders

Canada  65%

Japan 14%

France 8%

Germany 3%

Spain 3%

Rank Long Term Bond Investors

1

2

3

4

5

6

7

8

9

10

*Note: including all deals prior to Eglinton Crosstown

• One size doesn’t fit all.  

It is important to understand the technical and risk aspects of the project before selecting a particular model

Value for Money is one decision point, but not the only one

• In case of DBFM, consider impact on Operations and Maintenance phase upfront in as much detail as possible today. 

• Continuous Improvement is as important as standardization 

Key takeaways: 

Thank you

Across the Border: Sharing P3 Experiences

May 25, 2016Eric ReeseScheidt & Bachmann

Indiana P3 Projects

May 25, 2016Dan HugeIndiana Finance Authority

• Ohio River Bridges (ORB) Project History

• ORB East End Crossing Project Background

• ORB East End Crossing Project• I-69 Section 5 Project History• I-69 Section 5 Project

Agenda

• Project background– 2003: Federal Highway Administration (FHWA)

issued a Record of Decision (ROD) selecting the preferred Two Bridges/Highway Alternative

– 2008: FHWA approved the Initial Financial Plan and Project Management Plan

– 2010: The Louisville and Southern Indiana Bridges Authority was established to oversee financing and construction of the Project

ORB Project History

– 2011: The Authority worked toward developing a finance plan for the Project, while the state sponsors advanced the Supplemental Environment Impact Statements (SEIS) process after the decision was made to toll the Project

– 2012: The project sponsors decided on a dual procurement strategy, giving responsibility to Kentucky for procuring the Downtown Bridge segment and Indiana the East End Crossing

ORB Project History (cont.)

• One of two new bridges across the Ohio River, connecting roadways to address the long-term cross-river mobility needs in the greater Louisville-Southern Indiana region.

• Funded, procured, and constructed using Indiana Department of Transportation (INDOT) and Indiana Finance Authority (IFA) processes, subcomponents of the project include:

ORB – East End Crossing Project Background

– East End Kentucky Approach (Section 4): Approximately four miles of reconstruction and new terrain road on KY 841. Kentucky will be responsible for maintenance of this Section.

– East End Bridge (Section 5): A new four-lane Ohio River bridge with a pedestrian walkway/bikeway that connects the East End Kentucky Approach section with the East End Indiana Approach section. The Concessionaire will be responsible for maintenance of this Section.

– East End Indiana Approach (Section 6): Construction of a new roadway from the existing SR 265/SR 62/Port Road Interchange to the new East End River Bridge. Indiana will be responsible for maintenance of this Section.

ORB – East End Crossing Project Background (cont.)

• East End Crossing ProjectThe East End Crossing portion of the Ohio River Bridges Project is located in the eastern portion of the Louisville Metro area, connecting I-265/KY 841 (Gene Snyder Freeway) in Kentucky with S.R. 265 (Lee Hamilton Highway) in Indiana.– Request For Qualifications (RFQ): Issued:

March 9, 2012, 6 proposers submitted Statement of Qualifications (SOQ)

– Request For Proposal (RFP): Issued: July 2012, 4 proposers submitted ORB - East End Crossing Project proposals

ORB – East End Crossing Project

• Technical Proposal and Financial Proposal evaluations conducted separately by separate teams

• Evaluators are all IFA/INDOT personnel supported by staff and consultants

• No communication occurred between technical and financial teams until both teams had fully completed their evaluations

• Final step of combining technical and financial scores resulted in a total score out of a maximum of 100 points available

Evaluation Process

• Represents 75 of the total 100 proposal points available

• 72.5 of the 75 points determined by the proposer’s MAP score according to formula:

• Remaining 2.5 points awarded based on feasibility of financial proposal as determined by the evaluation committee

• Total Financial Score = MAP Score + Feasibility Score

Proposer’s Value of Base MAP

Lowest Value of Base MAP

X 72.5 Points

MAP Score =

Financial Score

• Represents 25 of the total 100 proposal points available

• Comprised of the sum of the Technical Proposal Score (up to 22.5 points) and Schedule Score (up to 2.5 points)

• Technical Proposal Score determined by 3 major elements:– Preliminary Project Management Plan (40%)– Preliminary Design-Build Plan (30%)– Preliminary Operations and Maintenance Plan (30%)

• Schedule Score determined by formula:

Schedule Score  =

Difference (in calendar days) between (i) Proposer’s scheduled date to achieve Substantial Completion and (ii) the Base MAP Date

Difference (in calendar days) between (i) the earliest scheduled date to achieve Substantial Completion shown in any conforming Proposal, and (ii) the Base MAP Date

X  2.5 Points

Technical Score

• Final step merges financial and non-financial considerations into a final score out of a maximum of 100 points available

• Combination of scores determined by formula:

Total Proposal Score (out of 100) = Financial Score(up to 75 points) + Technical Score (out of 25 points)

Best Value Determination

– Selected Preferred Developer: WVB East End Partners

– Construction Cost: $763M (this is lower than the $987M estimate included in the July 2012 initial Financial Plan); MAP: $32.9M

– Structure: Availability & Milestone Payments (with tolls)

– Construction Began: June 3, 2012

– Anticipated Completion: December 17,2016

ORB – East End Crossing Project

GFOA Resources

• Approved by Executive Board (01/15)

• Recommendation:– Organizations, and especially the finance officer, must

understand what is at stake and make informed, strategicdecisions on whether or not to pursue P3 opportunities.

– List of key considerations: Legal Authority, Justification forthe Project, Competition, Expected Project Revenue, etc.

GFOA Advisory: Public-Private Partnerships (P3)

• Available on GFOA website, in association with P3 Advisory:

– Public-Private Partnership (P3) for Economic Development and Redevelopment

– Public-Private Partnership (P3) for the Sale of Lease of Assets

– Public-Private Partnership (P3) for Outsourcing

GFOA Resource Center: Public-Private Partnership (P3)

Across the Border: Sharing P3 Experiences