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