IN THIS ISSUE LaGuardiaMainTerminalP3OnFastTrack · 2012-12-07 · e-mail us at [email protected] or call (201) 395-3405 for assistance. Reference RFQ # 31224 in the subject line

The journal of record forpublic-private partnershipsand infrastructure finance,

since 1988.

November 2012Volume 276

1. Laguardia planets aligned

2. Goethals back on track

2. JFK P3 a negotiated deal

3. ACS now controls Hochtief

3. FL, TX waffle on p3s

3. ODOT’s first P3 launched

4. Mid-Currituck delayed again

5. P3swansong forGov.Daniels

6. Las Vegas I-15 RFP soon

7. Columbia River Crossing?

8. WIFIA, PABs in play

9. Carlsbad desal deal done

11. Federal P3 office posed

13. Don’t reinvent the wheel

14. TIFIA a boon to transit?

16. P3 performance results

Transportation Policy Review

18. The cost of all-electron-

ic toll collection is roughly

the same as motor fuel tax

collection.

by Robert W. Poole, Jr.

20. U.S. P3 market players

Canadian Infrastructure

Finance

21. PBC rewards O&Msavings

European News

23. EU bond enhancements

24. IMF, EU force Portugal to

renege on availability payments

25. $1.5b Dutch P3 launch

36. Public-Private Services

Directory

IN THIS ISSUE � LaGuardia Main Terminal P3 On Fast TrackThe political planets are lined up for a successful financial close on the replacementof the central terminal at LaGuardia Airport as a hard money bid for a pure revenuerisk DBFOM concession with a project cost of over $3 billion, Wall Street sourcessay.Most importantly:

• Gov. Andrew Cuomo is committed to the P3 approach;

• Patrick Foye, the executive director of the airport’s owner, the Port Authority ofNew York and New Jersey, has the private sector’s trust that he can push the pro-ject through the bistate agency’s formidable bureaucracy. Bids are due next sum-mer and a financial close could happen by the end of 2013.

• The governors of New York and New Jersey work well together;

• Gov. Christie has appointed his former chief of staff, Richard Bagger, to the PortAuthority Board as head of the finance committee.

As a result, the RFQ issued on Oct. 26has drawn the global P3 industry’s top tech-nical talent and its investment capital. “Wenow have the attention of the top P3 playersin the world,” says the financial partner onone of the 16 teams that responded to theagency’s RFI a year ago. “The PortAuthority will get a great deal,” he says.

Qualifications are due January 25, a shortlist will be announced about three monthslater, and detailed proposals from finalists will be due early next summer, accordingto targets set in the RFQ ( http://www.panynj.gov/business-opportunities/pdf/LGA-CTB-DBFOM-Final-RFQ.pdf ).

The design-build estimate of $1.5 billion includes a new central terminal, roads,utilities, and taxiways, to be put under construction early in 2014. Two large parkinggarages and other facilities will be built separately by the Port Authority using passen-ger-facility-charge bonds and other sources of credit. The private components willprobably be financed with airline rental payments as the credit for tax-exempt specialfacility bonds.

The Port Authority will seek bids with committed financing for a long-term con-cession that gives the winner the ability to negotiate agreements with the airlines withgates at the central terminal, which represent about half of all users at LaGuardia.

(Allowing the private operators to negotiate with the airlines could change. The

“We now have the atten-tion of the top P3 playersin the world. The PortAuthority will get a greatdeal.”

2 PWFinancing /November 2012

alternative would be for the Port Authority to negotiate useagreements as part of its offering, as was done for the pro-posed—and ultimately unsuccessful—Midway Airportlease in Chicago a few years ago.)

Rather than an up-front lease payment at LaGuardia, thePort Authority is seeking an equity commitment of at least$200 million, ground rent, and 10% share of the net rev-enues generated by the new terminals. Concession feesfrom food and retail outlets could be substantial due to thelong departure delays typical at LaGuardia.

Advising the Port Authority are URS Corp., programmanager; Frasca & Associates, financial advisor; andSkidmore, Owings & Merrill, architect.

A potential issue for bidders is the expected retirement ofSusan Baer, promoted by former Executive DirectorChristopher Ward in 2009 as director of aviation, to replaceWilliam R. DeCota, a P3 skeptic. The authority’s three air-ports are its main revenue generators so Foye’s proposedreplacement will get close scrutiny by the teams bidding forthe LaGuardia concession. �

THE PORT AUTHORITY OF NEW YORK & NEW JERSEYREQUEST FOR QUALIFICATIONS

DESIGN/BUILD/FINANCE/OPERATE & MAINTAIN LAGUARDIA AIRPORT CENTRAL TERMINAL BUILDING

REPLACEMENT PROJECTThe Port Authority of New York and New Jersey is seeking to qualify teams via a Request for Qualifications (RFQ) related to the LaGuardiaAirport Central Terminal Building Replacement Project.

RFQ # 31224 may be obtained online at http://www.panynj.gov/business-opportunities/bid-proposal-advertisements.html?tabnum=8. Addendato the RFQ, if any, will be posted at this site. Monitor the advertisementon the web site to ensure your awareness of any changes.

If you have any technical problems accessing the RFQ documents online,e-mail us at [email protected] or call (201) 395-3405 for assistance.Reference RFQ # 31224 in the subject line on all e-mail requests.Your e-mail should include the following information: firm name, e-mail address, contact person, mailing address, and telephone number.

It is currently anticipated that submissions shall be due by 2:00 pm,E.S.T. on December 21, 2012, or as otherwise indicated in the RFQpackage provided to you. Submissions must have the RFQ Number andRespondent name clearly and conspicuously placed on the outsidepackage.

Send submission(s) to: The Port Authority of NY & NJ, Attn: RFQCustodian, Procurement Department, Two Montgomery Street, 3rd Floor, Jersey City, NJ 07302.

A VALID PHOTO ID IS REQUIRED TO GAIN ACCESS INTO THEBUILDING, IF YOU ARE HAND DELIVERING YOUR SUBMISSION.

Goethals Bridge Finally On Track“It takes a lot of bureaucratic hard work to make apublic-private partnership work,” says ChristopherWard, former executive director of the Port Authority,who initiated the Goethals Bridge availability pay con-cession in May 2010.

His spade work and the follow-up efforts by hisreplacement, Patrick Foye, an M&A lawyer appointedby Gov. Andrew Cuomo, dislodged the $850-millionproject from the agency’s legal department a fewmonths ago, when Allen & Overy, experts in UK P3s,took over the procurement.

Technical proposals from three finalists picked inJune 2011 are due next January 13 and financial pro-posals a month later.

“We’re beginning to see some light at the PortAuthority,” says a member of one of the bid teams. Ifanybody can makes sense of the bureaucracy overthere, Foye is the guy. He’s got the vision and the ener-gy to take on the bureaucracy.” �

Gov. Pataki’s JFK Terminal Four P3

An earlier Port Authority concession to replace andexpand Terminal 4 at JFK airport involved about 20% ofthe gates at the sprawling facility. That DBFOM projectwas done in 1997 at the insistence of former Gov.George Pataki as a revenue-based concession with anupside for equity.

Over the objections of William R. DeCota, Director ofAviation at the time, Pataki’s Executive Director, GeorgeMarlin, successfully promoted the concession approach.A negotiated ageement was approved by the board and$934 million tax-exempt lease debt was issued by theprivate consortium at an all-in cost of 6.12% in May1997.

A team of Schiphol, LCOR and Lehman Bros. devel-oped the highly complex project under a $689-millioncontract, which overran by $100 million. Skidmore,Owings &Merrill designed the 1.5-million-sq-ft terminal,which was built by Fluor Daniel and Morse Diesel.

Project revenues fell after 9/11 and the deal had tobe restructured to finance the unanticipated construc-tion costs. The equity was negotiated away by the PortAuthority, which took on the $100 million as subordinat-ed debt. The terminal is now managed under an operat-ing agreement with Schipol Management Services. �

Port Authority correction: responses due Jan. 25, 2013

PWFinancing /November 2012 3

� ACS WinsControl ofHochtiefACS Group finally woncontrol of Hochtief thismonth when minorityshareholders cast theirvote with the Spanishmega-builder after itmoved aggressively toresolve big losses on twocontracts held byHochtief’s Australiancontractor LeightonHoldings.

The move apparentlyconvinced German hold-outs that they stand a bet-ter chance of improvingHochtief’s flagging prof-itability with Marcelino Fernández Verdes as CEO ratherthan with Dr. Frank Stieler. Both Steiler, CEO, andManfred Wennemer, chairman, have stepped down.

A press release announcing the move says thatHochtief’s executive board will develop strategies for theentire group and all divisions in the next three to fourmonths. The company’s website lists only MarcelinoFernández and Peter Sassenfled, CFO, as members of theexecutive board.

Marcelino Fernández is former chairman of ACS’sconstruction arm, Dragados, and the right-hand man ofFlorentino Pérez Rodríguez, ACS’s chairman. Pérez’sdecision to abandon his quest for control of Spain’slargest power company, Iberdrola, also gave confidenceto Hochtief’s shareholders, sources say.

The press release claims Hochtief will not be brokenup and that it will continue to be listed as a German com-pany headquartered in Essen.

Outside sources believe the management changes willbegin the process of Hochtief’s consolidation by ACS. Ifso, that would have the practical effect of taking one ofthe world’s most experienced P3 developers out of con-tention, especially for social infrastructure projects.Hochtief subsidiaries most active in the U.S. are HochtiefP3 Solutions, Flatiron Construction and TurnerConstruction.

� Florida, TexasWaffling on P3sFlorida DOT wasrumored late this monthto have redirected fundsintended for the $2.7-bil-lion, I-4 managed lanesconcession near Orlando.Dick Kane, chief com-munications officer forFDOT, says the availabil-ity payment project is ontrack for an industrysounding sometime soon.FDOT watchers fear oth-erwise.

“Everyone assumes”FDOT has decided not toprocure its I-75 managedlanes project as a conces-

sion, says an industry source. If the I-4 P3 is cancelledtoo, “It will kill FDOT’s program,” he says, with theexception of its DBF gap-financing projects.

Likewise, Texas DOT, which rejected a solo bid lastmonth from Cintra for a toll revenue concession on a 10-mile segment of SH 183 in Dallas, has now reduced itssubsidy for the airport approach road in what appears tobe a shift to design-build delivery.

At the same time, the North Texas Turnpike Authority(NTTA) recently declared its primacy on two major newtoll roads in the Dallas-Fort Worth metro area. StateHighway 360 and Trinity Parkway will be delivered asNTTA turnpike projects, the board said, “using a public-public delivery model.”

Early in 2012, TxDOT announced that it had an extra$2 billion for road projects. That rallied local contractorsand engineers who defeated P3 procurements for theGrand Parkway, I-35E, and now it appears, SH 183.

Still being considered as P3s are I-30 and perhaps SH114 in Dallas and SH 1604, a first-time revenue risk pro-ject in San Antonio where there has been strong anti-tollsentiment.

� Cleveland’s Innerbelt Bridge DBFQualifications are due Dec. 21 from design-build-finance(DBF) teams seeking an estimated $330-million contractfor fast-track replacement of Cleveland’s 50-year-old

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Innerbelt viaduct on I-90, including demolition of the oldstructure.

A shortlist of three teams will be announced in earlyFebruary and Ohio DOT expects to execute a contract andclose the gap financing on July 29, next year. The two unsuc-cessful bidders will receive a $1-million stipend.

The twin 4x4-lane viaducts are being replaced and work onthe conventionally procured westbound structure is underwayand scheduled for completion next fall. Ideally, the old struc-ture would be demolished soon afterwards and work on a neweastbound viaduct would start when the alignment is cleared.At programmed spending, however, the I-90 access to down-town Cleveland would be cut in half to two lanes for at leastfive years.

Adding a six-year gap-financing component to the design-build contract will allow work on the eastbound structure tostart two years earlier than currently programmed. AndODOT says the state will pay only a minimal premium forbank financing (0.4% or $1.35 million, according to an analy-sis by Ernst & Young.)

The new eastbound bridge must be designed as a compan-ion to the conventionally delivered westbound bridge being

built now, reducing innovation savings. But ODOT stillexpects to reduce its cost by 10% using a best-value design-build procurement.

Steel availability will not be a price issue, Ernst & Youngfound. There is so much unused fabrication capacity east ofthe Mississippi that all six of the major bridge projects now inprocurement (four in New York—Tappan Zee, Goethals,Bayonne, Kosciusko—and two Ohio River crossings) couldproceed consecutively without a spike in prices, the studyfound.

Industry comments and experiences with DBF in Floridaand other states have identified a number of issues related tothe gap financing. Previous transactions have not achieved apass-though credit from a public sponsor, though FloridaDOT believes it has solved that problem with the latest ver-sion of its DBF documents.

“As such,” Ernst & Young, warned, “ODOT should notethat its [Innerbelt DBF] will involve a significant degree ofdevelopment effort from the Department, and from the con-tracting, finance and surety markets for the project to be suc-cessfully executed as a DBF.”

� Mid-Currituck Iditerod ContinuesNorth Carolina‘s new governor has asked North CarolinaDOT to provide him with a public comparator price on theMid-Currituck Bridge as a check against the negotiated offeron the table from ACS Development/Iridium.

The Turnpike Authority division of NCDOT was hopingfor a commercial close during the summer but lost momen-tum when its project manager Steve DeWitt retired in April.The procurement of the 7-mile-long, low-traffic bridge forbeach residents on the Outer Banks is being conducted undera predevelopment agreement the state signed in December2008.

Since then, the TurnpikeAuthority division of NCDOT haspaid eight advisors to help it negotiate terms with ACS of a50-year DBFOM concession that combines toll revenue riskand state appropriations. HNTB, Nossaman and PublicFinancial Management are leading the advisory team.

The authority now will hire a new independent consultantto proved a benchmark NCDOT can use, presumably to nego-tiate a better price withACS. The 15-member team assembledby ACS to build the bridge includes Dragados, TraylorBrothers and Weeks Marine, plus Lochner MMM Partnershipfor engineering and environmental work, and Arup for trafficand revenue.

The value for money analysis of the P3 approach showedhigher capital cost for delivery, but large benefits from risktransfer and lower life-cycle costs, according to DavidJoyner, executive director of the authority, who spoke withPublic Works Financing in April.

Negotiating the long-term agreement through a PDA wasarduous, he says. “I’ve never seen anything like it. Welearned that things are not less expensive for a greenfield pro-ject. Risk mitigation is the key,” he says.

� Another P3 Win For Mitch DanielsRetiring Indiana Gov. Mitch Daniels will put another majorP3 project to bed on Dec. 27 when a commercial close is setfor the $763-million East End Bridge over the Ohio Riverwith a DBFOM team led by Walsh Investors, VINCIConcessions and Bilfinger Berger.

The project is the second major P3 in the U.S. to be pro-cured using an availability payment model, which relies onstate appropriations rather than toll revenues to secure debtfinancing. The I-595 express lanes in Florida was the first, in2008.

(ACS-Iridium submitted its winning bid of $1.66 billionfor Florida DOT’s I-595 project a few days before LehmanBrothers declared bankruptcy in September 2008. The finan-cial close with a 12-bank club on March 2009 was complet-ed during the most extreme period of global market disrup-tion in U.S. history. Despite that difficult start, I-595 ismonths ahead of schedule and under budget.)

Gov. Daniels won the trust of the P3 community six yearsago by sticking with a tight schedule and awarding theIndiana Toll Road lease to high bidder Cintra/Macquarieamid a legislative revolt.

Indiana’s East End procurement drew six teams comprisedof most of the world’s largest contractor-investors. Four wereshortlisted and the Walsh team, with Jacobs EngineeringGroup, Inc., was selected to negotiate a contract eight monthsafter the RFQ was issued. The Indiana Finance Authority(IFA), the public sponsor, is advised by consultants KPMG,Nossaman, Community Transportation Solutions, led by PBAmericas, and CDM Smith.

French concession giant VINCI will operate and maintainthe toll bridge and approaches in Indiana for the 35-year termof the agreement.

Walsh’s design-build price of $763 million is 23% lessthan the Indiana DOT cost estimate. In addition, Walsh’steam commits to opening the new bridge by October of 2016,

months ahead of the state’s estimate.

The project debt to be raised by Bilfinger/Walsh will besecured by state appropriations to Indiana DOT over 35 yearsand paid to Walsh’s project company by the Indiana FinanceAgency (IFA) if performance criteria are met. Annual avail-ability payments will start at $32.9 million ($2012) at com-pletion and grow at a blended rate of CPI (20%) and 2.5%(80%) a year during the term of the concession.

The East End toll bridge and approaches will complete aninterstate loop around Louisville, Ky. by connecting the GeneSnyder Freeway (KY 841) with the Lee Hamilton Highway(IN 265).

A companion project being managed by Kentucky wasalso won by Walsh this month as a design-build project. Itincludes a new I-65 northbound bridge over the Ohio Riverin downtown Louisville and reconfiguration of a major inter-change in downtown Louisville and another one inJeffersonville, Ind.

Walsh’s “apparent best value” bid included a projectedcompletion date of December 2016 at a construction cost of


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$860 million. Its price was slightly higher than the low-est bid, from Skanska/Flatiron/Dragados. But its sched-ule is more than a year and a half ahead of the owner’sdeadline.

Kentucky’s project will be financed with tax-exempt

debt secured by a gross revenue pledgeon toll revenues, backed by a commit-ment to fund O&M with state roadfunds if toll revenues are insufficient.The toll bridge will be operated under aqualified management contract or aspart of the DB contract.

After major scope changes andvalue engineering last year to reducetoll rates, the project cost estimates forthe Kentucky and Indiana componentscame out about the same—$1.3 bil-lion—so a decision was made to createa bistate agency to adopt a uniform tollpolicy, manage contractor access,rights-of-way and other issues.

Aggregate toll revenues net of O&M expenses will beheld by a trustee and distributed evenly to each state.However, each state has sent separate letters of interest fora TIFIA loan.

The Indiana and Kentucky components of the OhioRiver Bridges project involve new construction, recon-struction, and rehabilitation of poorly maintained facili-ties under traffic.

Walsh’s bids and aggressive schedules for completingthe two projects appear to rely on close coordinationbetween the two states to allow Walsh to achieve scaleeconomies and time savings.

At the same time, however, both of the public projectsponsors are requiring firm promises fromWalsh to meetbid requirements for reporting lines, dedicated personneland other criteria specific to their needs.

Managing the government risks will be a challenge,say observers.

� Columbia River Crossing’sMoment of Truth

The Columbia River Crossing (CRC) between uncom-fortable neighbors in Portland, Ore. and Vancouver,Wash., was set back on Nov. 8 when voters in Vancouverturned down a tax increase to subsidize O&M of a lightrail line that Portland insists must be part of the $3.5-bil-lion bridge replacement project.

The 0.1% increase would have provided up to $5.5million per year for rail and express bus operationsincluded in the preferred alternative approved inDecember 2011. While not a deal breaker, political oppo-

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nents of the new bridge in Vancouver areusing the vote to call for a redesign of thebridge, the plan of finance and environ-mental permits.

The plan of finance calls for $900 mil-lion from each state, $1.4 billion in toll rev-enue bonds, and a substantial federal con-tribution. None of the funds are committed.

Whether the vote against light rail is adeal killer probably will be known in a fewmonths when state budgets will be present-ed. A show of funding commitment oneither side of the river would probably keepthe project alive, says a well-placed politi-cal operative.

Unless the states step up soon, he says,the Federal Transit Administration is likely to pull out,which it may want to do anyway. As proposed now, over25% of FTA’s New Starts funding in 2014 would go to theCRC project if it is approved.

“If the states don’t pull the trigger soon and capture thefederal money for CRC, I think the window closes,” hesays.

A draft EIS was completed in 2008. Public agenciesinvolved with the pro-ject includeWashington StateDOT and OregonDOT, plus Portland’sCity Council,Vancouver’s CityCouncil, the TriMetBoard, C-TRANBoard, MetroCouncil, and theR e g i o n a lT r a n s p o r t a t i o nCommission Board.

An even largergovernment group inthe Pacific Northwestwas formed thismonth to “make iteasier to finance andbuild” the $1 trillionin infrastructure theregion needs over thenext 30 years. The

West Coast Infrastructure Exchange is a collaboration ofgovernors, treasurers, and key infrastructure developmentagencies in Oregon, Washington and California, plusBritish Columbia. Funding comes from a $750,000Rockefeller Foundation grant to the Oregon Treasury.

A call to the Exchange’s spokesman in the OregonTreasurer’s office seeking a comment about the CRC pro-ject was not returned.

REGIONAL TRANSPORTATION COMMISSION Purchasing & Contracts

600 South Grand Central Parkway Las Vegas, Nevada 89106

Fax: (702) 676-1588

REQUEST FOR INFORMATION 12-075A AND INDUSTRY MEETING

I-11 – BOULDER CITY BYPASS PROJECT – PHASE 2

Scope of Work: The Regional Transportation Commission of Southern Nevada (RTC) is issuing a Request for Information (RFI) regarding a future solicitation to participate in the proposed I-11 – Boulder City Bypass Project – Phase 2 under a public-private partnership or design/build delivery model. Potential industry participation opportunities include design, construction, financing, roadway operations and maintenance, and toll operations and maintenance. The RTC is seeking the industry’s perspective and feedback on the project. Responses to this RFI will be utilized by the RTC to advance planning and development efforts and to refine the procurement approach for the project. All Expressions of Interest should be submitted electronically to Debra Coleman, Purchasing & Contracts Analyst, at [email protected] no later than 6:00 p.m., PST on December 17, 2012. Solicitation Documents may be obtained on November 14, 2012 at: http://www.rtcsnv.com/about-the-rtc/doing-business-with-the-rtc

The RTC will hold an industry meeting on the project on January 17, 2013 from 10:00 a.m. to noon, PST. The meeting will be held at the Clark County Commission Chambers at 500 S. Grand Central Parkway, Las Vegas, Nevada 89155. Information regarding the meeting may be obtained beginning November 14, 2012 at http://www.rtcsnv.com/about-the-rtc/doing-business-with-the-rtc

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� Water WIFIA, PABs To Mimic TIFIASen. Barbara Boxer (D-Calif.) this month proposedCongress adopt a five-year pilot loan program to providelow-cost, flexible loans and credit support for both Corps ofEngineers projects and municipal projects regulated by theU.S. Environmental Protection Agency.

There is no decision yet of where the program would behoused, how much loan authority would be provided or howfunds would be split between federal water resource pro-jects and municipal water and wastewater projects.

The so-called Water Infrastructure Finance andInnovation Act (WIFIA) is modeled on USDOT’s TIFIAprogram. Until recently, TIFIAwas a small office in FHWAstaffed by about six persons who approved about two loansa year. The MAP-21 transportation bill passed in Julyincreased funding by about eight times this fiscal year andnext, and DOT Secretary Ray LaHood is touting the pro-gram as the largest infrastructure loan program in history.So far, however, no new loans have been approved.

P3 projects make up only about a quarter of the pendingTIFIA loan applications. American Water President/CEOJeffry Sterba warned earlier this year that the proposedWIFIAloan program, unless specifically targeted to P3s, would be

used mainly to replace bonds or State Revolving Fund loans.

“The WIFIA proposal itself has merit as far as it goes,”he says, “but we believe it will do little to bring significant-ly increased investment into America’s water infrastruc-ture.” Sterba proposed that loans or credit support from aproposed WIFIA be conditioned on co-investment by pri-vate operators or investors.

Sterba was basing his comments on a discussion draft ofthe water resources bill, in whichWIFIAwould be managedby the EPA. A Washington veteran believes that wouldgreatly politicize the bank’s operations. The proposed $20-million minimum project size being discussed now, forexample, would discriminate against rural systems.

A bill (H.R. 1802) eliminating volume caps for tax-exempt private activity bonds (PAB) for P3 water projectscould be taken up soon as part of the large tax bill that’sexpected to be part of the fiscal cliff solution.

An industry coalition, the Sustainable WaterInfrastructure Coalition, headed by Ed DeVeaux of UnitedWater, is leading the legislative effort. A 5.5-year water PABbill was scored a few months ago by the Joint CongressionalTax Committee at $305 million over 10 years. �


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(The San Diego County WaterAuthority Board of Directors signed a30-year water purchase agreementwith Poseidon Resources Corp. onNov. 29. The decision is supported bylocal, state and federal elected offi-cials, the regional Chamber ofCommerce, the San Diego CountyTaxpayers Association, labor andagricultural interests. What follows inan analysis of the terms of the off-takecontract by one of the authority’s advi-sors.)

After perhaps the longest gestationperiod in non-recourse financing pro-ject development history, the SanDiego County WaterAuthority (SDCWA)and PoseidonResources Corp havereached agreement onthe terms of a WaterPurchase Agreement(WPA) for the prod-uct water to be pro-duced from thePoseidon Resources’Carlsbad SeawaterDesalination Project(“Project”). TheProject consists of a50-mgd (or 56,000acre-feet per year(AF/Year) reverseosmosis seawater desalination plantand a 10-mile conveyance pipeline todeliver the product water to SDCWA’streated water distribution system. Inaddition, SDCWA will need to make$80 million of improvements to itsdistribution and treatment facilities toeffectively handle the delivered prod-uct water. The November 29 approvalof the WPA started the clock on afinancial close.

The latest installment of the negoti-

ations began in July 2010 with theapproval by SDCWA’s Board of aterm sheet establishing a frameworkfor the transaction. Over more thantwo years, each of the parties to thetransaction had to come to mutualunderstanding and then agreementupon a litany of terms and conditionsnecessary to create a WPA that meetsall the needs of a public water supplyagency, provides a financing plan thatconforms to market standards forfinancial security, and equitably allo-cates contracting and completion riskfor the desalination plant and thepipeline. The complexity of the trans-action required to harmonize the inter-

ests of a non-profit public water sup-ply agency and a private infrastructuredevelopment company was by nomeans a small undertaking, and thetransaction’s precedents and valueproposition will be closely viewed forits value as a water industry precedent.

The transaction involves Poseidond/b/a Poseidon Resources(Channelside) LP, bearing the con-tracting and completion risk for theplant and the conveyance pipeline, and

assuming the long-term operationsand maintenance responsibility for theplant under the WPA. Subordinate toPoseidon, the EngineeringProcurement Construction (EPC)Contractor, a joint venture of KiewitInfrastructure West LLC and J.F. SheaConstruction, Inc., and their ProcessServices Contractor, IDE Americas,Inc., absorbs that contracting andcompletion risk for the plant and theconveyance pipeline. Additionally, theOperations and Maintenance (O&M)contractor, also IDE Americas, Inc.,agrees to bear the day-to-day opera-tions and maintenance responsibilityand risks, to manage capital improve-

ment projects, and toprovide all neededequipment repairand replacementnecessary for theproject to meet allthe WPA perfor-mance requirementsand standards.

The financing forthe project will total$903 million andwill combine $513million in PrivateActivity Bonds, plus$164 million in pri-vate equity capital

for the Poseidon-owned plant, and$226 million in tax-exemptGovernmental Purpose Bonds issuedby the California Pollution ControlFinancing Authority for theConveyance Pipeline, which SDCWAwill own and operate. SDCWAwill beobligated to pay the pipeline debt ser-vice. However Poseidon will be oblig-ated to pay to SDCWA “ContractedShortfall Payments” in the event of itsunder-production of product water. IfPoseidon were to produce no product

Projected Water Unit Price in 2012 Dollars at Bond Rate of 5.60%

Item Unit Price Component 48,000 AF/Year 56,000 AF/Year

Fixed Charges1 Debt Service Charge $551 $4722 Equity Return Charge $280 $2403 Pipeline Installment payments $238 $2044 Fixed Operating Charge $400 $3435 Fixed Electric Charge $73 $63

Subtotal - Fixed Charges $1,542 $1,322

Variable Charges6 Variable Operating Charge $101 $1017 Variable Electric Charge $442 $4428 Poseidon Management Fee $10 $10

Subtotal – Variable Charges $553 $553

Water Unit Price $2,095 $1,875

Water Purchase Agreement SignedFor The Carlsbad Seawater Desalination Project

by Neil V. Callahan


water, their Contracted ShortfallPayments would equal all theSDCWA’s debt service payments duefor the pipeline.

This configuration of bonds andequity provides a lower cost of capitalfor the pipeline due to the lower inter-est rate available on the tax-exemptgovernmental purpose bonds to beused vs. the private tax-exempt PABsthat were originally proposed andwould otherwise have been used byPoseidon for financing the entire pro-ject (plant & pipeline).

The configuration still obligatesPoseidon to make up any shortfall inpipeline debt-service payments associ-ated with its failure to complete theplant or to deliver sufficient productwater, effectively mitigating any per-ceived “Pipeline-to-Nowhere” risk.

One of the major challenges toovercome in a non-recourse financedwater supply project is matching theproduction-related revenues (watersales) with the shape of the wateragency’s long-term demand profileand supply constraints. To overcomethese issues, the deal had to be struc-tured around a “Maximum AnnualSupply Commitment” of 56,000 acre-feet per year that Poseidon can beasked to produce, and a 48,000 acre-feet per year “Minimum AnnualDemand Commitment” that SDCWAwould agree to “Take-or-Pay.”

This creates a range of possibleproduct water costs in any yearbecause the annual fixed costs all needto be amortized over any given year’sagreed-upon Minimum AnnualDemand Commitment. This allowsSDCWA to shape its demand curve forannual and seasonal projected demandin wet weather years and to maximizewater purchases during dry years,while avoiding having to pay for prod-uct water it cannot use.

This pricing structure also provides

an incentive forSDCWA to pur-chase additionalproduct water inamounts betweenthe 48,000 acre-foot minimumand the 56,000acre-foot maxi-mum commit-ment, becausethe price for theadditional prod-uct water is onlyincluded in thevariable chargeslisted in the p. 9chart as items 6through 8.Consequent ly,the actual unitcost of productwater in any yearwould bereduced if addi-tional water ispurchased.

The deal with Poseidon was devel-oped to yield a target internal rate ofreturn overall of 9.38%-9.45%,depending on the actual bond interestrate at closing. Poseidon’s return on itsinvestment may be higher or lowerbased on its ability to manage the com-pletion risk, to ensure that the plantperforms efficiently and to meetSDCWA’s production demands andwater quality standards. SDCWA esti-mates that, if it meets all performancestandards, Poseidon could achieve anequity return of up to 13%.

SDCWA’s Board has steadfastlysupported seawater desalination,known as the “supply from the west,”as its policy to improve SDCWA’s sys-tem reliability. The approval of thewater purchase agreement bySDCWA’s Board will be largely depen-dent upon the specific rate impact fromthe project and consideration of pro-posed changes to SDCWA’s rate struc-ture design to assure economic sustain-

ability, should the project be imple-mented. Currently, the project is pro-jected to increase rates for an averagehousehold by $5 to $7 per month. �

Neil V. Callahan, is VicePresident, Water, Environment &Transportation at SAIC Energy,Environment and Infrastructure,LLC, which was the business andtechnical advisor to the San DiegoCounty Water Authority for thedevelopment and negotiations ofthe Carlsbad SeawaterDesalination Project’s WaterPurchase Agreement.

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The public works financing community is divided in itsresponse to a Brookings Institution policy paper thismonth advocating creation of a “national PPP unit to sup-port bottom-up infrastructure investment” in all types ofassets as part of a national infrastructure policy.

The PPP unit proposed by Robert Puentes, director ofMetropolitan Infrastructure Initiative at Brookings, wouldprovide state and local governments with “support andtechnical assistance needed from the procurement stagethrough long-term management of projects by helpingpublic actors determine the best Value for Money invest-ment, assess long-term economic benefit of projects, andincrease capacity to deal with contract changes over thelife of the PPP.”

There are a number of proposals on infrastructure strat-egy and planning that are circulating in Washington thatwould centralize decision-making in the White House.Brookings goes the other way: “We definitely do not thinkthe federal government should be in charge of pickinggood and bad projects,” says Puentes, “and totally agreethat the states are going to remain in charge.”

As conceived by Puentes, the “PPP unit” would belocated in the Office of Management and Budget (OMB),as part of the Executive Office of the President and mod-eled after the Council on Environmental Quality. With a$3 million annual budget, the PPP unit would perform avariety of functions: “quality control, policy formulationand coordination, technical advice, standardization anddissemination and promotion of PPPs.”

There are no immediate plans by the White House tocreate a federal PPP entity, according to Puentes. Butinfrastructure policy consultants in Washington say theObama Administration’s desire to be perceived as actingquickly on jobs and public works investment could quick-ly translate into an over-arching PPP agency, probably byexecutive order as part of a “New Federalism” agenda.

(The infrastructure emergency is real:

Fitch warned in mid-November that debt financedinfrastructure, especially back-loaded projects with littlepricing power, would suffer “dramatically” in the event ofa “fiscal cliff” recession.

Moody’s downgraded 27 GARVEE bonds on Nov. 13because of uncertainty over the ability of states to meetrepayment obligations due to falling federal gas tax rev-enues.)

Puentes’s to-do list does not include model contractsfor P3s. One assumption in Puentes’s paper is that stateand local governments are outgunned in negotiating long-term PPP contracts, especially when private financing isinvolved. “There is constant concern in the U.S. that pub-lic entities in some states, cities, and metropolitan areasare ill-equipped to consider such deals and fully protectthe public interest,” Puentes writes.

Further, he cites a recent General Accountability Office

A Federal Center of Expertise For P3s?The Pros and Cons

Upward Mobility

When infrastructure experts talk about mobility, theythink of managed lanes like Transurban’s I-495 HOTlanes, or the Metrorail extension to Dulles airport. (OrNew York City’s flooded subways.) When politicians talkabout mobility, they mean upward mobility on the incomeladder—really, they mean the lack of it.

The two meanings of mobility are not so far apart.

There’s a strong, causal relationship between the effi-cient movement of goods and people and economicgrowth. And GNP growth is the best way to narrow theincome gap.

So we’re talking about the same thing. Horizontalmobility translates into upward mobility. But someonewith a strong voice needs to make the connection. For thatwe need leadership.

And soon. We’re running out of time before the tidalwave of entitlement spending completely overwhelms ourability to even maintain what we’ve got in the ground,much less meet our obligation to give our kids as good aswe got.

William G. Reinhardt, before the National Council forPublic-Private Partnerships, Nov. 14, 2012

report that states and metro areas need help in “thinkingthrough potential costs and trade-offs [of PPPs] as well asassessing national interests.”

Under MAP-21, legal advice on PPP developmentagreements would be provided to states by USDOTthrough its Office of Innovative Program Delivery. OIPDwas formed in 2006 and run by Regina McElroy, formerdirector of FHWA’s Office of Operations.

So far, OIPD has taken no action to meet the MAP-21directive on PPP contracts. BoozAllen was recently award-ed a three-year, $900,000 contract torun a project finance center withOIPD, but that effort will notinclude model agreements, saysDeborah Brown, who is managingthe new project finance center.

Likewise, OIPD’s recent postson risk assessment, value for money and financial struc-turing (http://www.fhwa.dot.gov/ipd/forum/) don’t covercontracts.

Scott Thomasson, the Progressive Policy Institute’sformer director of economic and domestic policy (whowrites a monthly Washington column for Public WorksFinancing) says: “I don’t know that anyone in the WhiteHouse is listening to this any more than it has in the paston other infrastructure ideas. However, I wouldn’t countout their willingness to do something symbolic like thison infrastructure in the absence of congressional cooper-ation. There’s always a chance someone with the presi-dent’s ear likes one of these capital-C “Council On ThisOr That” proposals and recommends that they pursue it.”

The Brookings paper is athttp://www.brookings.edu/research/papers/2012/11/13-public-private-infrastructure-investment

Comments

Procurement/contracts: Fred Kessler, Nossamanpartner—“This is what I feared might grow out of theMAP-21 provisions for USDOT to provide assistanceand expertise and forms of agreements, etc. This is a badsolution looking for a non-existent problem.”

State program administrator: KomeAjise, who headsthe Planning & Modal Program / P3 Program in theCaltrans Director’s Office—“I wholly agree that states

are the source of innovation. But taking the paper on facevalue, it supports the intent of MAP-21 to have a strongernational center of excellence that promotes best practiceson P3s, and this would be good for the US market. TheInnovative Program Delivery group under ReginaMcElroy has already begun to do this, and any help toscale up that effort would be good.”

Financial advisor: D.J. Gribbin, Macquarie Capitaland former FHWA general counsel—“This is very closeto what I had in mind. I don’t think you can have an effec-tive office in USDOT that handles infrastructure across

all asset classes, but OMB is theperfect place for it. It’s the “M” inOMB.”

Washington policy advisor:Scott Thomasson, President,NewBuild Strategies—I think RobPuentes has done the best job of the

infrastructure “lite” proposals with the rhetoric and polit-ical angle of PPPs and “bottom up” investment, ratherthan massive spending and national “planning” rhetoric.It’s in line with positions the Mark Warner types will likeas an alternative to falling on their swords for theNational Infrastructure Bank next year.” �


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“This is a bad solutionlooking for a non-existentproblem.”

I’ve been following so-calledNational Infrastructure Bank and P3proposals at the federal level for manyyears, including before the NSTIFC(Financing Commission) report, whichaddressed them, to some extent.Generally, I have agreed with theobservations that many of the P3 pro-posals are financing solutions chasingfunding problems and do not focus suf-ficiently on the long-term benefits ofprivate operation and maintenance.The Brookings paper acknowledgesthat P3s are varied, often complicatedarrangements that have to be tailoredfor state and local projects. And I’msympathetic to the desire to accelerateand streamline the use of P3s by hav-ing some entity provide more technicalassistance to project sponsors. But I’mskeptical that a federal P3 unit (in OMBor elsewhere) is the right answer.

The Brookings solution presupposesthat the federal government, whichtypically does not own or operateinfrastructure assets, is the right entityto show state and local governmentshow best to manage procurementsand structure deals in a way that maxi-mizes long-term net benefits (many ofwhich result from the operation andmaintenance of the assets). When fed-eral funds are involved, the federalgovernment should be concernedabout federal taxpayers getting valuefor their money spent on infrastruc-ture improvements that have a signifi-cant net benefit to the economy andoverall quality of life. The traditionalway this happens is through the feder-al requirements that attach to federalassistance provided by line agencieswith subject matter expertise and cul-tural / institutional “awareness” (likeDOT) through programs with (hopeful-ly) clear parameters and transparent

rules that are consistently applied.

The OMB probably is not the rightplace to house some kind of P3 unit,either culturally or institutionally.Regarding “public-private partner-ships,” it focuses on special arrange-ments by federal agencies attemptingto avoid upfront budget scoring ofmedium- to long-term federal asset“commitments.” And most peoplewould not look to the federal govern-ment generally, or OMB specifically, forcutting edge procurement or manage-ment practices. Unless the P3 unit hada priority mission to streamline federalprocurements and reduce federalrequirements (with high-priority P3 pro-jects involving federal funds – perhapsthe P3 / procurement version of thespecial treatment to accelerate the fed-eral environmental approvals of certainprojects of national importance – a sortof Council on Procurement Streamliningand Regulatory Relief?), I don’t think itwould work as envisioned.

As for FHWA’s Office of InnovativeProgram Delivery, that entity has beenworking and continues to work to sup-port P3s and other forms of project /program development in the surfacetransportation arena. Enlarging it toencompass other infrastructure initia-tives, beyond transportation, probablydoes not make sense either (gettingback to the need for subject matterexpertise and cultural / institutionalawareness of sector-specific issues).

It seems to me that best practicesand other forms of technical assis-tance should be provided by an entitythat actually participates in public-pri-vate partnerships (practices what itpreaches, and vice versa). The bestprovider of P3 guidance is likely to be

some kind of P3 itself – not a federalcouncil or “unit” buried within OMB ora line agency. A more robust “Centerof Excellence,” perhaps with a sharperfocus on P3 technical assistance,seems like a better solution.

The third point in the Brookingspaper, dealing with creating an inte-grated national infrastructure agenda,seems to be the real issue that is beingdanced around. I agree that we need abetter-articulated infrastructureinvestment strategy and better-coordi-nated federal assistance programs.Project finance and P3 arrangementsare being employed, but unevenlyacross various levels of government.We do not have a central government-driven system. And within the federalgovernment, we have numerous pro-grams offering assistance to projectsponsors. Many point to TIFIA as amini infrastructure bank for the U.S.(regarding surface transport). In fact,the U.S. has several such mini banks indifferent sectors offering financialassistance.

If policy makers push ahead withcreating some kind of dedicated entity,it will need a clear mission. Perhaps itshould focus on better targeting feder-al assistance by identifying nationalinfrastructure investment prioritiesand coordinating the efforts of themany disparate programs that existtoday. We don’t need to createfinance tools and P3 practices fromscratch at the federal level, we “just”need to bring together and activatethe existing pockets of expertise in amore compelling and cost-effectiveway. And whatever entity might springup, it would need to actively involvestate and local governments as well asprivate sector stakeholders. �


A Federal P3 Unit Should Include States, Private Stakeholdersby Bryan Grote, Mercator Advisors

The first full fiscal year of the TIFIA 2.0 era started witha bang on day one, with USDOT’s October 1 approval of a$545.9-million loan for Los Angeles to construct theCrenshaw-LAX light rail project. The final approval wasnot surprising news, but it was still a long-awaited victoryfor L.A. Mayor Villagairosa, who made TIFIA financing akey priority for his “30/10” initiative and actively lobbiedfor expanding the program in MAP-21. It was also anopportunity for USDOT’s transit-friendly leadership to toutTIFIA’s potential for transit projects, to counter the percep-tion from many advocates that MAP-21 reforms tilted theprogram too far in favor of highway projects at the expenseof transit.

The reaction from many tran-sit advocates to the Crenshaw-LAX approval was more skepti-cal than celebratory. After los-ing the battle in Congress thisyear to preserve TIFIA’s sus-tainability and livability criteriafor selecting projects, theywarned that transit loans likeL.A.’s could become an endan-gered species under TIFIA’snew first-come-first-serveregime, which they worry willbe dominated by highway pro-jects. Advocates have taken await-and-see stance and calledfor restoring TIFIA’s old appli-cation criteria in the next sur-face transportation bill.

But where Washington-basedadvocates see problems, localtransit officials see opportunity.MAP-21’s changes to TIFIA are,on net, a positive for transit plan-ners seeking creative financingsolutions. The loss of sustainabil-ity criteria is outweighed by theprogram’s added flexibilityunder MAP-21, including:

• a higher federal share of pro-ject costs,

• the ability to bundle multiple

system expansions under a single “master credit agree-ment,” and new authority for TIFIA to waive its non-sub-ordination (springing lien) requirement when financingongoing capital improvement projects that have preexist-ing senior debt obligations—a common scenario for transitexpansion projects.

Raising the cap on TIFIA’s share of project costs from 33%to 49% is certainly a positive for transit projects, which gen-erally need all the financing help they can get. And DOT hassent signals that the higher cap may benefit transit dispropor-tionately in practice. In its recent public guidances, DOTwarned that applicants requesting higher percentages must

offer strong rationales to justi-fy the level of support. If tran-sit applicants are better able toargue that the higher supportlevel is a make-or-break issue,DOT may be inclined toreserve its extra 49% firepow-er for transit projects it feelsare most in need.

And while many advocatessee TIFIA’s new streamlinedapplication process as favor-ing a long preexisting list ofhighway projects, the promiseof faster approvals is one ofthe key features attractingattention of transit planners.TIFIA may have a waiting listthat already extends beyond its2013-14 funding, but it’s stillseen as a better route tofinancing than FTA funding,which is also mostly spoken-for and can take 5-8 years tosecure.

While these changes are animportant boon for transit,many of TIFIA’s advantagesfor financing transit projectsexisted before MAP-21expanded and reformed theprogram. TIFIA’s role as a“patient investor” is the mostimportant, as it allows the


Will TIFIA 2.0 Be A Boon For Transit?by Scott Thomasson, NewBuild Strategies LLC

TIFIA Program Status

The number of LOIs submitted in the four monthssinceMAP-21 was passed in July show the rush is on:• 12 LOIs• $19.3B in estimated eligible project costs. Includes

1 project over $5B, 2 over $2B, 3 over $1B• At 49%, $9.5B in loans, $1B in budget authority• At 33%, $6.4B in TIFIA loans, $640M in budget

authority

USDOT’s first responses to LOIs indicate:• No invitations to apply for loans• No decisions to start due diligence or request fee

or preliminary rating opinion letters• Requests for more information or further actions

to establish project eligibility• Uniform rejection of requests for more than 33%

financing• May consider public benefit in prioritizing rural

TIFIA projects

What’s next?

• USDOT responses to Notice of Funding Availabilitycriticisms

• USDOT rulemaking and revamped TIFIA ProgramGuide

• Congressional oversight and possible hearings• Next round reauthorization

Source: Nossaman

opportunity to sculpt loan repayments to match theshape of expected revenues. That is an especiallybig deal for the “value-capture” finance approachof transit-oriented development districts, whichmay have back-loaded revenue flows for dedicatedtaxes on induced economic activity years into thefuture.

And more local officials are taking notice.TIFIA’s expansion in an otherwise status-quo fund-ing bill drew a lot of attention, raising awarenessamong local planners and politicians that it is avail-able to them as a new financing tool. With enoughletters of interest already submitted to soak up all ofTIFIA’s new funding, and an April 2014 use-it-or-lose-it deadline for the program to obligate 75% ofthat funding, those who are just discovering TIFIAare also discovering that they don’t have much timeto learn how they can put this new tool to use fortheir own projects.

This shift in thinking was showcased in a recentOctober 18 seminar sponsored byWashington-basednonprofit Transportation for America, entitled“How to Make the Most of the Federal TIFIA LoanProgram For Transit and Transit-OrientedDevelopment (TOD) Projects.” Among the presen-ters was Tina Votaw, a TOD specialist with theCharlotte Area Transit System (CATS), whoexplained how the Charlotte’s Blue Line starter pro-ject was financed with FTA grants covering roughlyhalf of project costs, then offered a hypothetical planshowing how a TIFIA loan could have been used toreplace the grants with more aggressive local taxrevenue. Votow confirmed that CATS will be sub-mitting a TIFIA letter of interest for one of its pro-jects, to take advantage of TIFIA’s speed relative toFTA review, and the new flexibility under MAP-21to append TIFIA financing to the existing sales-taxand senior debt structure for the completed segmentsof Charlotte’s Blue Line.

The lesson of this seminar is instructive for TIFIAwatchers and transit advocates alike. Nick Donohueand Kevin DeGood of Transportation for Americaconcluded the program by offering their audience ofplanners the takeaway that value-capture financingusing TIFIA-style loans is "the way of the future,"and federal credit support "will be around" in oneform or another, even after MAP-21 funding runsout. That’s a very different message from the hand-wringing over sustainability criteria so many transitadvocates have been focused on. �


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TIFIA APPLICATION PROCESS

TIFIA LETTERS OF INTEREST (AS OF NOV. 20, 2012)


The number of public-private partner-ship (P3) projects in North America hasincreased significantly since the early1990s, as policymakers and transportationofficials seek alternative methods to sup-plement traditional funding sources tofinance and deliver projects. Scholars havecompared the cost and schedule overruns

of P3 projects against publicly funded pro-jects in mature P3 markets in Europe, butsimilar comparisons are lacking for theNorth American market.

A recent joint study by Arizona StateUniversity (ASU) and Arup represents afirst effort to compare the cost- and sched-ule-overrun results of 12 significant high-way P3 projects that have been completedin North America. The selected projectshad construction costs greater than~US$90 million. These 12 projects wereanalyzed and the results were comparedwith previous research studies by otherresearchers reporting on similar type andsize Design-Bid-Build (DBB) or Design-Build (DB) highway projects.

The research results indicate the costoverruns in the sample of 12 P3 projectsaveraged 0.81% and schedule overrunsaveraged -0.30%, compared with 1.49%

cost overruns and 11.04% schedule over-runs for DB projects and 12.71% costoverruns and 4.34% schedule overruns forpublicly financed large-scale DBB highwayprojects. (Figure 1).

Ten of the 12 P3 projects did not haveany cost increase associated with its con-

struction. Of the two projects thatexperienced cost increases, thosewere associated with technicalchanges, such as geotechnicalissues. Of the 12 projects studied,11 had no increase in cost and werecompleted before the contractualcompletion date. For the project thathad a schedule increase, the delaywas due to technical changes in theproject.

Given the relatively small num-ber of completed P3 projects avail-able for the analysis sample it ispremature to draw explicit conclu-sions. However, the study's resultspoint to tightercontrol of high-way construc-

tion costs and deliveryschedules when pro-jects are delivered viathe P3 method.Findings from thisstudy provide empiricalevidence for varioustheoretical advantagesand limitations of P3projects, as well asserve as a referencetool to compare theappropriateness of dif-ferent project deliverymethods.

P3s are not a one-size-fits-all solution.Moreover, there aremany features of a pro-ject’s development thatfeed into its success,not only the perspective

of cost and schedule containment, impor-tant as that may be in itself. The study sug-gests that a P3 delivery method providesmore construction cost and schedule con-tainment than DBB or DB. Future studiesare needed that include larger project sam-ples and also analyze DBB and DB projectperformance for comparison purposes. �

This study was produced under thedirection of Dr. Allan Chasey, associateprofessor in the Del E Webb School ofConstruction, School of SustainableEngineeringand theBuilt Environment, IraA Fulton Schools of Engineering, ArizonaState University. Contributing authors areWilliam E Maddex and Ankit Bansal bothCandidates for Master’s Degree.

For a copy of the study, email [email protected]

P3 Study: Over 80% Of U.S. Highway P3s Were On-Time And On-Budget


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project case studies, newsupdates, project leads,political trends, analysesof successful financings,profiles of key industryplayers, a directory of themost experiencedconsultants and much more.

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Thejourn

al ofrecor

d for

public-pri

vatepartn

erships

andinfra

structure

finance,

since1988

.

November 2012

Volume 275

1. Lagu

ardia pl

anets a

ligned

2. Goeth

alsbac

k ontrac

k

2. JFK

P3a ne

gotiated

deal

3. ACS

nowcon

trolsHoc

htief

3. FL, T

X waffle

on p3s

3. ODO

T’s first

P3 laun

ched

4. Mid-C

urrituck

delayed

again

5. P3sw

ansong

forGov.D

aniels

6. Las V

egas I-1

5 RFP so

on

7. Colum

biaRive

r Cross

ing?

8. WIFIA

, PABs i

n play

9. Carls

baddes

al deal

done

11.Fed

eralP3

office po

sed

13.Don

’t reinve

nt the w

heel

14.TIFI

A a boon t

o trans

it?

16.P3

perform

ance re

sults

Transportation Policy Review

18. Reaso

n study

: Cost o

f

all-elect

ronic to

ll collect

ion

same as

fueltax

collec-

tion—5%

by Robe

rt W. Po

ole,Jr.

20.U.S

. P3mar

ketplay

ers

Canadian Infrastructure

Finance

21.PBC

rewards

O&Msavi

ngs

European News

23.EU

bond en

hancem

ents

24.IMF,

EU force

Portugal

to

renege o

n availab

ility paym

ents

25.$1.5

b Dutch

P3 laun

ch

36.Public-Private Services

Directory

INTHIS ISSU

E�

LaGuardia Main Terminal P3 On Fast Track

Thepolit

icalplan

ets are li

nedup f

or asucc

essful fin

ancial cl

oseon th

e replace

ment

of the ce

ntralterm

inalat L

aGuardia

Airport a

s a hard m

oneybid f

or apure

revenue

riskDBF

OMconc

ession wi

th aproj

ect cost o

f over $3

billion, W

all Street

sources

say.Mos

t import

antly:

• Gov. An

drewCuo

mo is co

mmitted

to the P3

approach

;

• Patrick F

oye,the e

xecutive

director o

f theairpo

rt’sown

er, the P

ort Autho

rityof

NewYork

andNew

Jersey, h

as the pri

vatesecto

r’s trust

thathe c

an push

the pro-

jectthro

ughthe b

istate ag

ency’s fo

rmidable

bureaucr

acy.Bids

are due n

ext sum-

merand

a financi

al close

could ha

ppenby th

e end of

2013.

• Thegove

rnors of

NewYork

andNew

Jersey wo

rk well to

gether;

• Gov. Ch

ristiehas

appointed

his form

er chief o

f staff, R

ichard B

agger, to

the Port

Authority

Board as

headof th

e finance

committ

ee.

As aresu

lt, the RF

Q issued on

Oct.26

has drawn

the globa

l P3indu

stry’s top

tech-

nical tale

nt and its

investme

nt capital

. “We

nowhave

the attent

ion of the

top P3 pla

yers

in the wo

rld,”says

the finan

cialpartn

er on

oneof th

e 16team

s that res

ponded t

o the

agency’s

RFIa year

ago.“Th

e Port

Authority

willget a

great dea

l,” he say

s.

Qualific

ations are

dueJanu

ary 25, a

shortlist

willbe a

nnounced

about thr

ee month

s

later, and

detailed

proposal

s from final

istswill

be due e

arlynext

summer,

accordin

g

to targets

set in th

e RFQ ( htt

p://www.

panynj.go

v/busine

ss-oppor

tunities/p

df/LGA-

CTB-DB

FOM-Fin

al-RFQ.p

df ).

Thedesi

gn-build

estimate o

f $1.5 b

illion in

cludes a

newcent

ral termi

nal,road

s,

utilities,

andtaxiw

ays,to be

put under

construct

ion early

in 2014. T

wo large

parking

garages a

nd other

facilities

willbe b

uilt separ

atelyby th

e Port Au

thority u

singpass

en-

ger-facil

ity-charg

e bonds

andothe

r source

s ofcred

it. The p

rivate co

mponent

s will

probably

be financ

ed with a

irline ren

tal paym

entsas th

e credit f

or tax-ex

empt spe

cial

facility b

onds.

ThePort

Authority

willseek

bidswith

committ

ed finan

cingfor a

long-term

con-

cession t

hat gives

the winne

r theabili

ty tonego

tiateagre

ements w

ith the air

lineswith

gates at

the centra

l termina

l, which r

epresent

about hal

f ofall u

sersat L

aGuardia

.

(Allowin

g the pr

ivateoper

atorsto n

egotiate

withthe

airlines

could ch

ange. Th

e

“Wenow

havethe

atten-

tionof t

he top P

3 player

s

in thewor

ld.The

Port

Authority

willget

a great

deal.”

PPUUBBLLIICC WWOORRKKSS FFIINNAANNCCIINNGG newsletter

“PWF is the No. 1 must-read publicationin our industry.”

Richard Fierce, Sr. VP, Fluor Corp.

Subscribe Now . . . and get instant access to PWF’s Major Projects Database—real timeinformation about the developers, builders, bankers, advisors, plus procurement status and financial structure of

over 800 P3 projects financed and planned in the U.S. and Canada.

The single biggest problem facing the U.S. highwaysystem is inadequate funding. The U.S. DOT’s latest bien-nial “conditions and performance” report finds that just tomaintain the current state-of-repair of highways andbridges, and to prevent congestion from getting any worse,would require annual spending of $101 billion, comparedwith the current $91 billion being spent at federal, state,and local levels. And to improve performance, via projectsthat pass a basic benefit/cost filter, we could be produc-tively investing $170 billion per year.

For the Interstate system alone, the same report findswe are about $4 billion a year short of maintaining the sta-tus quo and that we could productively invest an addition-al $43 billion per year to improve Interstate perfor-mance—by reconstructing worn-out corridors, rebuildingbottleneck interchanges, and adding capacity (such astruck-only lanes and express toll lanes). Long-term P3concessions are a critically important project delivery tool,but they will only address the major funding shortfall ifthey are toll concessions, generating large amounts of newhighway revenue to supplement gradually shrinking fueltax revenues.

I’m preaching to the choir writing this for Public WorksFinancing readers, but we will never get where we need togo for reconstructing and modernizing the Interstatesunless we can persuade highway users that toll-financedmodernization is genuinely in their interest. And thatmeans persuading powerful interest groups like AAA andthe American Trucking Associations (ATA).

One of the strongest arguments raised by ATA is thatfuel taxation is a highly efficient means of raising highwayrevenue, while toll collection is highly inefficient (i.e. verycostly). In May 2007 ATA’s American TransportationResearch Institute came out with a major report on high-way funding alternatives. Its assessment of tolling assertedthat collecting and enforcing toll payments consumed 22%to 33% of the revenue generated, which they compared toan estimated 1% of revenue used to collect fuel taxes. Suchfigures have become part of the conventional wisdom,

even appearing in a 2011 report on this subject from theTransportation Research Board (NCHRP Report 689).

This conventional wisdom is being challenged by a newstudy this month from the Reason Foundation.(http://reason.org/files/dispelling_toll_and_gas_tax_collection_myths.pdf). Based on original research on the cost of col-lecting both types of revenue, it finds that the real cost ofcollecting revenue via fuel taxes is actually about 5% ofthe revenue. And it also finds that 21st-century all-elec-tronic tolling (AET) can cost as little as 5% of the revenuecollected.

The principal author of the study is Daryl S. Fleming,PhD, PE. Dr. Fleming has been helping implement elec-


Transportation PolicyReview

IS 21ST-CENTURY TOLL COLLECTION COST COMPETITIVE WITH FUEL TAXES?

by Robert W. Poole, Jr.

PWFinancing/ November 2012 19

tronic toll collection for 35 years as a researcher and con-sultant. He and one of his three co-authors helped developthe world’s first AET system, implemented 15 years agoon the then-new Highway 407 electronic toll road inToronto.

Dr. Fleming and colleagues critically analyzed threerecent reports that assessed the cost of collecting highwayrevenues via tolling, including the ATRI report andNCHRP 689. All three studies were primarily backward-looking, thereby capturing costs that are rapidly disap-pearing as toll facilities shift from cash to electronictolling. The ATRI study also misleadingly lumped ferriesand toll facilities together, and also counted one-time cap-ital investments as part of annual costs, rather than amor-tizing them over their useful life.

Fleming and his co-authors also identified and studiedin some detail three U.S. toll operators that have pioneeredcashless all-electronic tolling: Colorado DOT’s I-25 man-aged lanes, the Fort Bend County Toll Road Authority inTexas, and the Tampa-Hillsborough ExpresswayAuthority. Despite all three being small agencies, theywere able to achieve the low costs of collection that mightbe expected of much larger agencies that can spread fixedcosts over a larger volume of transactions. Extrapolatingtheir findings to larger toll roads, they estimate that AETcan achieve a cost of toll collection as low as 5% of therevenue collected, using streamlined business models.

Fleming and colleagues also used information from arecent National Cooperative Highway Research Programreport (and other sources) to re-estimate the cost of col-lecting highway revenue via per-gallon fuel taxes. Thanksin part to recent information on fuel-tax evasion andexemptions, as well as tax costs hidden within the fuel-delivery supply chain, they estimate that the true cost offuel-tax collection is close to 5% of the revenue collect-ed—i.e., in the same ballpark as best-practice AET.

These findings have major implications for the futureof highway finance and funding. They directly counter thetrucking industry argument that shifting from increasinglyinadequate per-gallon fuel taxes to a per-mile chargingsystem would be ruinously expensive. Consequently, thesefindings give advocates of mileage-based user fees astronger case for proceeding with further research on alter-native ways of making such a transition.

In this context the authors make a bold proposal. Theysuggest that this country begin the transition now, focus-ing on the limited-access highway system (i.e., urbanexpressways and major highways such as the Interstates).

Doing this would not require any expensive new technol-ogy (such as a Big Brother GPS box in every vehicle). Allit would take is today’s low-cost transponders in vehiclesand the installation of AET equipment at on-ramps andoff-ramps. Each vehicle’s miles driven would thereby berecorded and charged appropriately, based on vehicle type.

To be consistent with my recommended “value-addedtolling” principle, this transition to per-mile chargingwould be phased in, corridor by corridor, as each Interstatecorridor was reconstructed and modernized over the nexttwo decades or so. No one would be asked to pay a toll todrive on existing, unimproved Interstates. They wouldonly start paying once the corridor in question was rebuiltand modernized for better performance.

Needless to say, this report will be controversial. Thevery first media call I received upon its release was fromTransport Topics, a trucking industry publication. Thosewho favor greatly expanded use of toll concessions shouldget familiar with this important new research. �

Robert Poole, Jr. is the director of transportation stud-ies at the Reason Foundation.

The HNTB CompaniesEngineers Architects Planners

THE ULTIMATE BUILDING BLOCK.

THIS IS THE HNTB SPARK.

A

spark is something


U.S. P3 Market Attracts World-Class PlayersSource: Public Works Financing newsletter (11/12)

Investor DevelopersMeridiam (France)Macquarie Group (Australia)Infrared (U.K.)Plenary Group (Australia)Goldman, Sachs (U.S.)Morgan Stanley (U.S.)KKR (U.S.)Builder DevelopersACS Group/Hochtief (Spain)Ferrovial/Cintra (Spain)Transurban (Australia)Fluor (U.S.)FIGG (U.S.)Skanska (Sweden)VINCI (France)Bouygues (France)Lane (U.S.)Kiewit (U.S.)Walsh (U.S.)Traylor Bros. (U.S.)Bechtel (U.S.)Acciona (Spain)Odebrecht (Brazil))SNC Lavalin (Canada)OHL (Spain)Balfour Beatty (UK)Global Via (Spain)Samsung (Korea)Shikun & Binui (Israel)American Water (U.S.)United Water (U.S)Capstone Development (U.S.)Hunt Building (U.S.)

Public Advisors

Legal/procurement:NossamanHawkins DelafieldMayer BrownFreshfieldsNixon PeabodyFinancial/procurement:KPMGRBC Capital MarketsMacquarie Capital AdvisorsErnst & YoungMorgan StanleyGoldman SachsCitiSperry CapitalPublic Financial ManagementInfrastructure Management GroupScully CapitalFirst SouthwestPriceWaterhouseCoopersUBSFirst SouthwestWilliam Blair & Co.

Design-BuildersFluorGraniteKiewitDragadosWalshBalfour BeattyFlatironSkanskaFerrovialWebberTutor PeriniLane ConstructionTraylor Bros.BechtelZachrySundtClark ConstructionHerzogOdebrecht

Design PartnersParsons TransportationJacobsURSAECOMHNTBHDRParsons BrinckerhoffLochner MMMWilbur SmithPBS&JO.R. ColanMoffatt NicholRaba KistnerCH2M HillDewberry

Public AdvisorsTechnical:HNTBHDRAECOMParsons BrinckerhoffJacobsArupLochner MMM GroupCDM SmithStantecHalcrow/CH2M HillDewberrySAICBlack & VeatchSteer Davies GleaveAtkins

Private Advisorsto developers:Macquarie CapitalBarclays CapitalBMO Capital MarketsFulbright & JaworskiWhite & CaseAllen & Overyto banks:Milbank TweedLatham & WatkinsSkadden ArpsCadwaladerOrrickWinston & StrawnCleary GottliebHogan LovellsSimpson ThacherDebevoiseParsons BrinckerhoffLouis Berger

Banks/Underwriters

Deal: I-95 managed lanes, Vir-ginia, 8/12 close, ($261m 30yrPABs, toll revenue risk+shadow toll)RBC

Deal: untolled Presidio Parkway,San Francisco, CA 6/12 ($170m 3yrbank loans, TIFIA takeout, appro-priations risk) five banks

Deal: Midtown Tunnel, Norfolk,Va. 4/12 ($663m 30-year PABs, tollrevenue risk) Barclays, BMO, BoA

Deal: Long Beach, Calif., court-house 7/10 ($443m, 7-yr bank loan,state appropriation risk) BBVA, RBC,BNP Paribas, Credit Agricole,Deutsche Bank, Scotiabank

Deal: North Tarrant Express andLBJ managed lanes, Dallas 12/09and 6/10: ($400m 30-yr PABs, tollrevenue risk) for NTE and $606mfor LBJ) BoA, JPMorgan Securities

Deal: I-595, Florida managedlanes 3/09 ($526m, 10-yr bankloan, state appropriation risk) San-tander, Calyon, La Caixa, SocieteGenerale, Dexia, Caja Madrid, Na-tional Australia Bank, Banco PopularEspañol, BBVA, Banco de Sadabell,West LB, Caixa Nova

Top-ranked firms selec�vely pursuing greenfield and investment opportuni�es inthe US. public works infrastructure market in 2012


� SNC’s Duhaime Charged With FraudThe former CEO of SNC-Lavalin has been arrested andcharged in connection with a Cdn $1.3-billion DBFM hospi-tal deal in Montreal. Pierre Duhaime was charged withfraud, conspiracy to commit fraud and using false docu-ments in relation to the McGill University Health Centre.

SNC-Lavalin and British investor Innisfree financed theproject in July 2010. John Laing/OHL was the only otherteam that bid the project, which involves four years of con-struction and 30-year maintenance of a new hospital toreplace Montreal Children's Hospital and Royal VictoriaHospital on a brownfield site at the university’s GlenCampus.

Details of the allegations have not been released.

SNC-Lavalin said it has not been told about the specificsof the charges. In a terse announcement, the company said itwill cooperate with any investigation. “We have voluntarilyturned over information that we have to local and otherauthorities for them to take any actions that they may con-sider appropriate.”

Duhaime was charged along with Riadh Ben Aissa, for-mer SNC-Lavalin executive vice-president of construction,who resigned in February. Ben Aissa is in jail inSwitzerland, where he is being investigated for money laun-dering.

Duhaime resigned March 26, the same day SNC-Lavalinrevealed that Ben Aissa had been involved in payments of$58 million to mysterious parties for uncertain purposes. Inone case, Duhaime allowed a $33.5 million payment afterthe chairman and CFO of a SNC-Lavalin subsidiary refusedto approve it, the company said.

� PBC Rewards Life-Cycle SavingsPartnerships BC (PBC) has added a wrinkle to its procure-ment process that gives bidders credit for addressing futureoperating costs while staying within the project’s budget,said Sarah Clark, president and CEO. The idea has theindustry excited, said Alan Linsley, vice-president origina-tion for Plenary Group, winner of the first project to use thesystem. In hospitals, “It’s the operations where you make allthe savings,” he said. (One estimate suggests that hospitaloperating costs account for 92% of all costs over 40 years.)

Plenary won the contract for B.C.’s Interior Heart andSurgical Centre this summer. Partnerships BC said the oper-ating cost efficiencies helped cut the construction time by 13months, contributed to large value-for-money savings andmade the building more pleasant and more efficient. “It dri-ves costs and drives innovation,” said Clark. “We’re reallypleased with the results.”

The agency likes the new procurement process so muchthat it’s become standard practice. It is now being used in theprocurement of the John Hart generating station, and PBC ispreparing to use the process in the Cdn $600-million (capi-tal cost) North Island Hospitals Project.

PBC gives bidders points for incorporating designchanges based on a wish list of attributes that go beyond thereference case. The ultimate user draws up the list, and PBCthen goes through an exacting process to assign a value tothe items.

“It’s not guesswork,” Clark said. Citing a hypotheticalcase, she said a bidder’s cost may rise by $10 million afterincorporating the operating changes, but if PBC has valuedthe changes at $411 million, the bidder’s final price will fall.

Bidders face higher costs looking for ways to deliver thechanges and have more capital at risk in the bid, saidLinsley. But they have the incentive of the additional points,while keeping the bid within the affordability ceiling – themaximum net present cost of the payments the governmentwill make. That was Cdn $131.8 million for the InteriorHeart Centre.

At the hospital, cutting a floor off the four-story plan pro-duced a big gain. “That was definitely a saving over andabove what they had initially thought about,” Linsley said.Plenary also standardized 60 rooms, compared with the 52required by the original design. Other changes includedthings like keeping certain units close together to save timeand increasing the amount of daylight in the building - aproven health benefit.

Managing the competing demands is key to the efficien-cies. For example, improving sightlines from nursing sta-tions and minimizing distances to travel may lead to con-flicting designs. “It’s all in the detail,” Linsley said.

� DBF For Regina StadiumThe city of Regina, Saskatchewan, is working on a plan fora DBF stadium with a price cap of Cdn $250 million for thebuilding and the city’s process costs. There could be an RFQin early 2013 and construction start in the winter 2013-14,said Rod Smith, project manager. Potential private-sectors

CanadianInfrastructureCanadian

Infrastructure Finance


partners are already working on teams and suggested a fastprocess, he said.

The replacement for the aging Mosaic Stadium was orig-inally intended to be a DBFM, but the city concluded thatthe synergies of combining operations and maintenance dic-tated a DBF. Operations were always to be run by ReginaExhibition Association Ltd. (REAL), a city-owned not-for-profit that already runs football games, concerts and agricul-tural events at Mosaic. Under the DBF, REAL would alsomaintain the new stadium. The city estimates finance andmaintenance costs could total Cdn $664 million over 30years.

Saskatchewan will give the city a Cdn $80-million grantand will lend Cdn $100 million. That will be repaid by a sur-charge on tickets for Saskatchewan Roughriders footballteam games. The Riders, the main tenant, will also come upwith Cdn $25 million. That gives the city Cdn $205 million.Consultants Deloitte suggested that proponents would prefera Cdn $100 million financing package, but said the dealcould be structured to accommodate that, and many projectsof a similar size have much smaller private partner financ-ing.

The ZW Group is project manager, Mott MacDonald isengineer and Deloitte is financial advisor. �

. . . Latin American News

� Brazil Grants First Airport LoanBrazil’s national development bank, BNDES, has grant-

ed its first loan to an airport privatization project. The bor-rower, a consortium 90%-owned by the locally-based infra-structure investors Invepar and OAS, has a 20-year conces-sion to expand and modernize Sâo Paulo’s GuarulhosInternational Airport with new passenger and cargo termi-nals, a heliport, and expansion of the existing runway.Successful bidders for Brasilia’s and Viracopos’s airportsare also expected to secure BNDES support.

The two-year, Reais 1.2-billion (US$591 million)Guarulhos Airport bridge loan, carrying 7.4% interest peryear, covers roughly 30% of the total required investment,according to BNDES. The bank is reviewing a loan applica-tion from the consortium for the other 70%. The consortiumincludes Airport South Africa Ltd. with a 10% share.

� New Metro Line For Sâo PauloBrazil’s state of Sâo Paulo metropolitan transport depart-ment (STM) plans to invite bids next month for a 25-yeardesign, build, finance, operate and maintain contract cover-ing 15.3 km of Line 6 (Linha Laranja) of the city’s under-ground metro system. The cost is estimated to be Reais 7.75billion (US$3.75 million).

The contract will include rolling stock and 19 years ofmaintenance of the infrastructure and trains. The winningconsortium must commit at least 20% equity. Local buildersjoined with international rolling stock fabricators, includingMitsui, Siemens and Alstom.

Bids will be based on the amount the state is required tocontribute to the project’s capital cost, up to 80% of thetotal. Another bidding element is the operating subsidyrequired above the capped passenger fare of Reais 1.50

(US$0.725 cents) per trip, with an annual limit of Reais305.5 million (US$147.3 million). The state will take 20%of revenues that exceed the contractually set annual revenueplus 15%. The contractually set annual revenue is based onforecasts of ridership.

The Line 6 deal follows STM’s first 25-year metro con-cession, for the 12.2-km Line 4 (LinhaAmarilla) that closedin 2006. The Line 4 concession is held by the ViaQuattroconsortium, led by Companhia de Concessôes Rodoviarias(CCR). Construction on Line 4 is due to end in 2014.

� Sâo Paulo Sets Water Bid DeadlineBrazil’s Sâo Paulo state water company, Sabesp, has startedprocuring bulk potable water for the Sâo Paulo metropolitanregion through a 25-year PPP estimated to be worth Reais1.68 billion (US$814 million). The project includes a newreservoir, treatment plant and pipeline. Sabesp has set aJanuary 8 bid deadline for the San Lourenço water system,aiming to sign a contract in September 2013. Bids will bebased on the bulk water price within a whole life revenuecap of Reais 6.1 billion (US$2.95 billion).

The project will increase water supplies by 4,700 litersper second by 2017 to Sâo Paulo, whose population is saidto be growing at a rate of 300,000 inhabitants a year. Waterwill be taken from the Juquiá River and stored in the newCachoeira do Franca reservoir. After treatment, water willbe delivered along the new 80-km pipeline to the city.

� Sacyr On A Roll In ChileSpanish developer Sacyr Concesiones has scooped two newconcessions in Chile: the upgrade of the D-43 highway anda hospital in Antofagasta. Together, the two concessions callfor US$480 million of investment. The toll road concessionincreases to five the number of Chilean toll roads controlledby Sacyr.

A consortium led by Sacyr beat two local bidders for a


30-year, US$227-million concession to widen from two tofour lanes the existing 86-km La Serena-Ovalle D-43 high-way. The winning bid called for a US$12-million annual feeto operate and maintain the toll road.

The road connects with other Sacyr concessions that covertwo stretches of Ruta 5: the 187-km La Serena-Vallenar high-way and the 221-km Vallenar-Caldera stretch of Ruta 5Norte. Sacyr recently sold 40% of its Ruta 5 Norte concessionto Fondo de las Americas, a local investment fund.

In a consortium with Canada’s SNC Lavalin, Sacyr wonthe 15-year, US$253-million Antofagasta hospital contractagainst competition from Spain’s ACS and Ferrovial, Italy’sAstaldi, and others. The 671-bed hospital is one of fivescheduled for PPP procurement in northern Chile by the endof next year.

. . . European News

� EU’s First Project Bond GuaranteesTwo highway PPPs are among projects in line to be support-ed by the European Union’s pilot phase for infrastructurebond guarantees, started this month. The Euro 230-million(US$293 million) Europe 2020 Project Bond Initiative,launched jointly by the European Commission andEuropean Investment Bank (EIB), aims to leverage up toEuro 4 billion (US$5.1 billion) of capital market investmentin regional transportation, energy and communicationsinfrastructure.

EIB, which will manage the initiative, expects to startsigning deals early next year, says bank President WernerHoyer. The bank has been looking for suitable projects sincethe European Parliament approved the bond scheme thissummer. Transportation infrastructure is expected to attractsome 90% of the available pilot support, includingGermany’s A-7 highway and a road serving Belgium’s portof Zeebrugge.

By contributing guarantees or subordinated debt, the ini-tiative aims to raise the credit rating of a project to at leastA-, making it eligible for institutions and other long-termbond buyers. The scheme will cover funding risks associat-ed with construction and operating revenues. The extent ofcover will be assessed project by project up to a limit of20% of the total senior debt.

EU leaders believe capital markets can plug the fundinggap in infrastructure-financing that was created by the bank-ing crisis. The availability and cost of bank project financ-ing has deteriorated and maturities have shrunk from 30

years to around 10 years, according to a recent report byDeutsche Bank. However, because the entire value of abond is raised from the start, that form of financing is lesssuitable for schemes with long construction phases. In thosecases, bank debt tailored to the spending profile remains thebetter option, according to Deutsche Bank.

A prominent candidate for bond support identified by theEIB is the contract now being procured to upgradeGermany’s A-7 highway under the A-Model PPP system.The federal project calls for an estimated Euro 657 million(US$840 million) in investment to widen from six to eightlanes 65 km of highway between Hamburg andBordesholm, just north of Neumünster. The 30-year conces-sion will include operating existing sections of the highway.EIB, in its more traditional role, will provide up to Euro 250million (US$320 million) of project debt.

Another road scheme likely to employ the guaranteefacility is Belgium’s A11 Brugge PPP, being procured bythe Flanders regional government. Estimated to cost Euro550 million (US$700 million), the 11-km-long highway willlink the port of Zeebrugge with the E40 and E34 highways.The EIB is prepared to contribute up to Euro 200 million(US$255 million) of debt for the project.

While funding for the pilot is being taken from existingEU budgets, the full scheme will be part of the Union’s pro-posed Euro 50-billion Connecting Europe Facility, which


will focus on transportation, energy and digital infrastruc-ture. Transportation has been allocated nearly two thirds ofthe proposed budget with energy and broadband sharing therest roughly equally.

Because of the facility’s importance to economic growth,it will be defended “vigorously” by the EC during the cur-rent budget negotiations, says Commission President JoséManuel Barroso. The future of the communications facility,and all other EU programs, hangs on the outcome of fierce-ly contested negotiations taking place between governmentsover the Union’s future spending.

For the seven-year period 2014-2020, the Commissionhas asked for a real increase of 3.1% over the current seven-year period, to just over Euro 1 trillion (US$1.3 trillion).With governments cutting spending at home, many areseeking a smaller increases.

� Portugal To Slash Availability PaymentsThe Portuguese government wants to enshrine 30% cuts inavailability-fee payouts to operators of PPP highways aspart of a fresh set of spending cuts in next year’s budget.The move is prompted by the need for more savings to

achieve budget deficit reductions coming as part of an aus-terity program overseen by the International MonetaryFund, the Central European Bank and the European Union.

The budget reduction of Euro 250 million (US$320 mil-lion), which is to be debated in the Portuguese parliament,is highly unpopular with commercial banks. PPP road oper-ators may not be able to service their bank debt with thereduced availability payments from the government, andtoll revenue may not be sufficient to make up the differencewith an economy mired in recession.

A recent examination by the IMF, the EU and theEuropean Central Bank asked the Portuguese government toreport on savings obtained by the renegotiation of existingroad concessions. They also had questions on the cost ofrescue payments to troubled operators and compensationclaims arising from the government’s austerity program.

The call came as Portugal agreed to pay Euro 30 million(US$38 million) in compensation for its cancelled high-speed railroad concession. Among other payments, thegovernment has agreed on Euro 45 million (US$57 mil-lion) in support for the concessionaire that runs a passengerrail line on Lisbon’s 25 April Bridge. Payouts to operatorsof former shadow toll roads that were converted to real tollroads, estimated at some Euro 717 million (US$910 mil-lion), are also under review by the IMF and EU, which arebankrolling Portugal’s Euro 78-million (US$100 million)bailout.

The consortium Elos-Ligaçoes de Alta Velocidadeincludes Brisa, which is also in a group seeking Euro 1 bil-lion (US$1.29 billion) in compensation for large revenueshortfalls on its 117-km-long, A17 long highway. Brisaowns 70% of the A17 concessionaire, Brisal, Auto-estradasde Portugal, which is said to be in breach of its Euro 513-million (US$.942 million) debt covenant.

On another front, Brisa and Mota Engil are seekingarbitration over their compensation claims for the termina-tion of a 360-km highway concession. The governmenthalted bidding for the Euro 740-million (US$942 million)Auto-estradas do Centro toll road at the BAFO stage in2010.

� Portugal Lists Airport Lease BiddersThe Portuguese government has shortlisted five consortia tosubmit best and final offers for 100% of the state airportoperator ANAAeroportos de Portugal. An award is expect-ed by the end of this December.

Shortlisted teams offered between 12 and 13 timesANA’s 2011 Ebitda of Euro 199.8 million (US$255.7 mil-

Political Dinosaurs . . .

Moody’s followed S&P and downgraded Francefrom AAA to Aa1 on Nov. 19 citing “persistentstructural economic challenges.”

“I think the problem for the Western World is thatour politicians all grew up in an era when the ques-tion was how to divide the increase in governmentrevenues each year. Do you give it to roads, hospi-tals, schools? Do you reduce taxes, increase mini-mum wages, add new programs to the safety net?The fights were about who got the increases.

Now the world has changed. Given the low-growth economies of Europe and to a lesser extentthe U.S., it's about cutting programs, not "cutting"increases. Birth rates are crashing. Russia's popu-lation is shrinking, Japan's as well, and Germany'spopulation will start shrinking in about five years.The game is different now. It'll be up to another gen-eration of politicians to figure it out. This bunch arelike the dinosaurs after the comet has struck.”

George Hamiltonan American in Paris


lion), says a government spokesperson. Bidders wererequired to submit proposals to boost aircraft handlingcapacity as well as passenger and cargo capacity at ANA’sairports, including Lisbon. ANA handled some 30 millionpassengers in 2011.

The shortlist of five bidders is: Argentina’s CorporaciónAmérica, Colombia’s Odinsa (the operator of BogotáEldorado airport), Frankfurt’s Fraport, France’s Vinci, andSwitzerland’s Flaughafen Zurich, joined at the last minuteby CCR in a 49/51 joint venture. Barclays Capital, BancoEspirito Santo de Investimento, Citibank and Credit Suisseare the state’s financial advisers.

� Schiphol Airport Access Road AwardThe Dutch Ministry of Infrastructure and the Environment(Rijkswaterstaat) has awarded a 30-year availability-paydesign, build, finance and maintain contract covering theA1andA6 highways to the SAAone consortium, which plans tofinancially close the deal early next year. The roughly Euro1-billion (US$1.3-billion) project forms part of theenhanced Almere-Amsterdam-Schiphol airport highwaycorridor.

SAAone is jointly owned by local contractors RoyalBoskalis Westminster and VolkerWessels, with Germany’sHochtief and the fund DIF. The project involves new con-struction and upgrade work along over 20 km of the A1 andA6 highways between Diemen and Almere Haven, south-east of Amsterdam. Almere has been designated as an areafor new development.

Rijkswaterstaat used the competitive dialogue negotia-tion procedure with three shortlisted consortiums beforenaming a preferred bidder. International firms in the finalthree bidders are understood to have included Spain’s FCC,as well as John Laing and Barclays Bank from the U.K. TheEuropean Investment Bank has agreed to provide up to Euro200 million (US$255 million) towards the project’s financ-ing.

� Ferrovial Unloads Heathrow SharesSpain’s Ferrovial has signed a new shareholders’ deal withits partners in London’s Heathrow Airport Holdings Ltd.(HAH, formerly BAA) that opens the door for the firm tocuts its stake in Heathrow to as little as 20 percent. The dealemphasizes Ferrovial’s retreat from the U.K airport sectorafter its recent sale of shares in HAH to a subsidiary ofstate-owned China Investment Corporation (CIC).Including a sale to Qatar’s sovereign wealth fund earlier thisyear, Ferrovial’s interest in Heathrow will fall to 33.7%,when the Qatar deal closes.

In the sale to CIC, which closed late last month, Ferrovialsold 5.7% it owns indirectly in HAH to CIC’s StableInvestment Corporation for £257.4 million (US$405 mil-lion). Stable acquired another 4.3% from other indirectinvestors in HAH. HAH, which also owns Glasgow,Aberdeen and Southampton airports, is currently sellingStansted airport.

The disposal comes three months after Qatar HoldingLLC, the Gulf state’s wealth fund, agreed to acquire 20% ofthe airport group, subject to regulatory approval. Ferrovialwill part with 10%, while Britannia Airport Partners andSingapore’s sovereign Fund GIC will jointly sell 10% to theQatari fund.

The new shareholders’ agreement allows Ferrovial to sellmore of its shares in HAH without offering its partners theoption to sell their shares. Ferrovial’s partners also get toincrease their stakes or new investors could buy into HAH.

. . . And The Politics of Scarcity

Much of the transportation policy establishmentin Washington also seems to be on the dinosaurtrack. The big players are still trying to divide up thespoils rather than thoughtfully triage programs thathave outlasted their value. In transportation funding,leverage ought to be the priority rather than politics.Economic development and mobility ought to be thepriority rather than administrative earmarks. But weseem to be going the wrong way as the fear ofscarcity makes everything political.

Transportation politics runs deeper than scarcity.Divisive politics is preventing both sides—highwaysand transit—from addressing the scarcity problemwith anything more than plumber's putty.

Rep. Bill Shuster, R-Pa., in announcing his candi-dacy for the chairmanship of the House Committeeon Transportation and Infrastructure, said: “I amfocused on continuing to work together to promotecompetitiveness and economic growth, reform pro-grams, focus our resources where they are neededmost, and better manage our federal assets.”

William G. ReinhardtEditor, Public Works Financing


But for now, Ferrovial is comfortable with its stake inHeathrow, says Chief Executive Officer Iñigo Meirás.

� Acciona Wins Catalan Water DealSpain’s autonomous government of Catalonia has awardeda 50-year bulk water supply concession to a consortiumjointly controlled byAccionaAgua and the Brazilian invest-ment bank BTG Pactua. The team beat rival Agbar, theSpanish unit of France’s Suez, on the concession fee andwater pricing.

The Acciona team offered a fee of Euro 995.5 million(US$1.268 million), more than double the minimum set byCatalonia. Around 30% of the fee is payable immediatelyand the rest will be spread over the concession’s 50 years.Agbar offered a Euro 700-million (US$891.9 million) fee.

On pricing, Acciona offered to hold current rates until2015 before applying the index-linked tariff of Euro 0.7088(US$0.90) per cubic meter. Agbar bid Euro 0.79 (US$1) percubic meter. The winning team will also take on Euro 600million (US$764.5 million) of debt held by the current con-cessionaire, the regional government’s Aigües del Ter-Llobregat (ATLI).

Acciona and BTG each own 39% of the consortium withlocal investors Godés and Rodés holding the balance. Theteam will take over ATLI’s operations on January 1. Its ter-ritory will cover 23 municipal bulk buyers including Agbar,which serves some five million people in Barcelona.

� London Mega-Sewer Risks CoveredLondon’s estimated £4.2-billion (US$7 billion) ThamesTideway mega-sewer is expected to be a leading beneficia-ry of the U.K. government’s infrastructure guaranteescheme, which secured parliamentary approval last month.Though promoted by the privatized Thames Water, the util-ity will be shielded from the project’s substantial construc-tion risk, which will be assigned to a special purposeInfrastructure Provider. The Infrastructure Provider willhandle the financing for the project, and take the risk, miti-gated by the government.

According to Thames Water Chairman Peter Mason, allmajor Tideway project costs, including finance, will be“competitively sourced.” This Infrastructure Provider “isexpected to benefit from contingent financial support fromthe government for exceptional project risks that the privatesector regulated water industry was not set up to absorb,” headds.

Thames Water is 26.3% owned by Kemble WaterInternational Holdings, which is 9% controlled by ChinaInvestment Corporation and managed by Macquarie. The

U.K. BT Pension Scheme has 13% of Thames Water and anAbu Dhabi sovereign wealth fund Infinity Investments S.A.is the next largest investor with 9.9%. The Tideway project,including nearly 40 km of tunnel along the River Thames,will intercept 16 million tonnes of diluted sewage that over-flows from storm drains every year.

� Ireland Signs $175m Schools P3The government of the Irish Republic this month closed a25-year design, build, finance and maintenance contractcovering eight schools in seven counties with the permanentDutch joint venture of developer BAM PPP and the pensionfund manager PGGM. The National Development FinanceAgency (NDFA) plans to start procurement of two morecontracts covering altogether nine schools next year.

NDFA, which handles PPP procurement for several gov-ernment departments, closed the new contract, designatedBundle 3, on behalf of the Department of Education andSkills. The project, with a construction value of Euro 100million (US$130 million), calls for Euro 136.5 million(US$175 million) of investment, and will serve 5,700pupils.

The joint venture has committed Euro 15 million(US$19.2 million) in equity and secured Euro 121.5-million(US$156 million) of senior debt from the Bank of Irelandand the European Investment Bank. EIB is providing Euro50 million (US$64 million) with maturities up to 23 years.Quayle Munro was the joint venture’s financial adviser andPhilip Lee Solicitors was its lawyer.

NDFA started procurement of the new contract in sum-mer 2010 and the preferred bidder emerged in September2011. Its next two contracts, Bundles 4 and 5, will includefour and five schools respectively. Teams led by MacquariePartnerships for Ireland completed four schools in the firstbundle in August 2010 and six schools in the second bundle12 months ago.

. . . More World News

� Brisbane Airportlink Creditors CircleWithin just a few months of opening its 6.7-km-longAirportlink M7 toll road in Brisbane, the Australian conces-sionaire BrisConnections this month suspended its sharesfrom the Australian stock exchange and called on creditorsto negotiate the project’s refinancing in light of greatlyunder-performing toll revenues.

With BrisConnections’s enterprise value now feared tobe less than its outstanding debt, the project is the latest in aseries of large Australian toll road failures in recent years.Creditors on the toll road, one of Australia’s largest ever to

be funded privately, this month appointed PPB Advisory toreview BrisConnections’s troubled finances.

At about 66,000 average vehicles a day, last month’s traf-fic volume was less than half the figure forecast for the con-cessionaire by the consultant Arup in 2008, when the 45-yearconcession was signed. Opened this July, the project is a 6.7-km toll road linking central Brisbane with northern suburbsand the city’s airport. Nearly 90% of the route is in twin tun-nels.

By this June, BrisConnections had drawn down overA$2.7 billion (US$2.8 billion) from its A$2.9-billion (US$3billion) total construction senior debt facility, provided by a10-bank syndicate and due to mature in July 2018. Includingequity, BrisConnections’s total available financing amountedto around A$3.5 billion (US$3.6-billion), plus state govern-ment support.

Macquarie Bank and Deutsche Bank together own over80% of BrisConnections’s equity, which exceeds A$1 bil-lion. The project’s builders, Thiess and John Holland, bothunits of Germany’s Hochtief, have committed anotherA$200million (US$207 million) equity, payable in 2014.

The failure of BrisConnections follows two major tollroad financial disasters which have opened the door to avail-ability-pay projects in Australia, with the 27-kmMelbourne’s Peninsula Link, financially closed last year, act-ing as flag bearer. Fatal mismatches between actual revenues

and debt service costs first sank Sydney’s 3.6-km Lane Covetunnel project in early 2010 and then Brisbane’s 6.8-kmCLEM7 toll road a year later. �


Editor/PublisherWilliam Reinhardt/Westfield, NJ(908) [email protected]

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China Construction America (CCA) is a wholly- ownedsubsidiary of China State Construction EngineeringCorporation Limited, a Fortune Global 500 company pub-licly listed in China, with core businesses in construction,real estate and infrastructure development. CCA hasundergone a long process of success in local constructionand real estate markets in America. CCA has at presentmore than $2.5b building and infrastructure work includingbridge and underground structures, and is looking for PPPopportunities. We have the financial capability to accel-erate the delivery of infrastructure projects. Our team hasthe local and international expertise for any size project.We will continue to work with local authorities and profes-sionals to ensure achieving the highest possible standardfor the projects. Contact Jietai Huang at (201) 876 2788 [email protected]

PUBLIC-PRIVATE SERVICES DIRECTORY

KPMG’s Global Infrastructure professionals in the US andCanada provide specialist Advisory, Tax, Audit, Accountingand Compliance related assistance throughout the life cycleof infrastructure projects and programs. Our teams haveextensive local and global experience advising governmentorganizations, infrastructure contractors, operators andinvestors. We help clients ask the right questions and find strate-gies tailored to meet the specific objectives set for their busi-nesses. KPMG can help set a solid foundation at the outset andcombine the various aspects of infrastructure projects or pro-grams – from strategy, to execution, to end-of-life or hand-back. Contact Andy Garbutt, Practice leader for KPMG’s USteam, at +1-512 501 5329 and Brad Watson, Practice leader forKPMG’s Canadian team, at +1- 416 777 8142, or e-mail: [email protected] or www.kpmg.com/infrastructure.com

Osler, Hoskin & Harcourt LLP has one of the leading public-pri-vate partnership (P3) legal practices in Canada. Osler hasextensive experience in all types of P3 arrangements includingconcessions, outsourcing of services, and privatizations of vari-ous government agencies, crown corporations and serviceproviders. We have advised on a broad spectrum of P3 pro-jects including major transportation (highways and airports),public transit, hospitals, schools, prisons, police stations, casi-nos, waste, water treatment, power generation and transmis-sion facilities and other infrastructure projects. We representpublic and private sector participants including developers,contractors, consortiums, service providers, governmentalagencies, consultants and financial institutions. Please contactBob Beaumont at (416) 862-5861 (e-mail: [email protected]), Lorne Carson at (403) 260-7083 (e-mail: [email protected]), Tobor Emakpor at (416) 862-4268 (e-mail:[email protected]) or Rocco Sebastiano at (416) 862-5859(e-mail: [email protected]).

Raymond Tillman, P.E. has been a widely recognized toll roadexpert for over 35 years. Services he provides to a broad rangeof public and private sector clients throughout the US and LatinAmerica include: traffic and revenue forecasts (back-of-the-envelope through investment grade); quantified risk and prob-ability assessments; internal and external peer reviews; P3 advi-sory services (former president of the ARTBA/P3 Division); pro-ject development consulting, including viability assessmentsand implementation strategies; and toll road advisory services.He has worked closely with toll agencies, underwriters, lendinginstitutions, rating agencies, “greenfield” facility investors anddevelopers, and equity participants. Reports prepared underhis direction have supported over $30 billion worth of bonds,and his credibility in the financial community reflects this record.Contact information is: (917)328-2265 (cell) or (212)315-3566, [email protected]

RT


CDM Smith provides lasting and integrated solutions inwater, environment, transportation, energy and facilities topublic and private clients worldwide. As a full-service con-sulting, engineering, construction, and operations firm, wedeliver exceptional client service, quality results and endur-ing value across the entire project life cycle.

CDM Smith is internationally recognized for utility, toll roadand public-private partnership expertise, serving public andprivate sector clients on hundreds of infrastructure projectsworldwide. For more than 60 years, CDM Smith has workedto place $85 billion of revenue-based financings and pro-vide unparalleled credibility in today’s financial markets.Visit us at cdmsmith.com, or contact Ed Regan (803 251-2072), Kamran Khan (630 874-7902), Grant Holland (404 720-1283) or Joe Ridge (603 222-8320).

As part of SUEZ ENVIRONNEMENT, United Water provideswater, wastewater and asset management services to7.3 million people in 25 states through the dedication ofits 2,600 employees. In addition to owning and operat-ing 20 regulated utilities, United Water operates 200municipal and industrial systems through public-privatepartnerships and contract agreements. Founded in1869, the company’s core expertise in providing safe,clean drinking water has evolved into providing a fullrange of services, from technical assistance to totalasset ownership. We assist communities improve service,reduce costs, comply with environmental regulations,manage labor relations and provide excellent customerservice. For more information visit unitedwater.com orcontact Gary Albertson at 201-767-9300 or [email protected].


Veolia Water North America is the leading provider ofcomprehensive water and wastewater services to municipaland industrial customers, providingservices to approximately 14 million people in more than 600communities. Our services include designing, building andoperating water and wastewater treatment facilities andsystems. We operate the nation’s largest public-private part-nership for water services in Indianapolis, where we serve 1million people, as well as the country’s very first partnershipestablished in 1972 with Burlingame, Calif., anongoing customer now for more than 30 years. The compa-ny is part of Veolia Water, the No. 1 water company in theworld, serving more than 110 million customers. Veolia Wateris the water division of Veolia Environnement (NYSE:VE andParis Bourse: VIE), the largest environmental services compa-ny in the world, with more than 252,000 employees in morethan 80 countries and annual revenues of approximately$30 billion. Visit the North American web site atwww.veoliawaterna.com or call (800) 522-4774.

With over $4 billion in P3 projects, Raba KistnerInfrastructure (RKI) has established its reputation as aleader in quality management programs. We are a nation-al company that provides professional consulting andengineering services in the areas of Right of Way (ROW)Management and Acquisition, Program Management Plus(PM+) TM, Design and Construction Quality Management,Independent Engineer and Owner’s Verification andTesting, and Construction Quality Control/QualityAcceptance Programs to government and industry. Ourexpertise in quality programs goes beyond satisfying thefundamentals. We ensure that quality programs addressthe unforeseen challenges that arise in Design andConstruction QC/QA programs. Our award winning datamanagement and document control program, ELVIS, pro-vides real time management information to assist in mak-ing time-critical decisions. Contact Gary Raba [email protected] or by calling 1-866-722-2547.


OHL Concesiones, S.A. is one of the world’s leading privatedevelopers of transportation infrastructure, being active inall its modes: highways, railways, airports and seaports. Thecompany, founded as a subsidiary of the OHL Group, pro-vides expertise and state of the art technology for devel-oping under concession all types of infrastructure in anypart of the world. Currently participating in 23 concessionscomprising 2,745 miles in the highway sector, the corpora-tion is also active in urban and suburban train lines, airportsand commercial ports and marinas. In contrast to othergroups in the sector, OHL Concesiones holds control stakesin practically all of the concessions comprising its portfolio,guarantying the best quality service.

For more information please contact: Sergio Merinoat +34 (91) 348 46 42, [email protected]; or visitwww.ohlconcesiones.com.

Parsons Brinckerhoff provides a total package of consult-ing services for infrastructure projects worldwide. Weadvise senior decision-makers of private firms, public agen-cies and financial institutions in all aspects of assessing,developing and delivering projects and programs. With aworld class strategic advisory group within our leadinginternational engineering and construction managementfirm, we draw on over a century of successful experiencewith challenging and complex projects to provide cutting-edge strategic advice. From initial assessment of projectfeasibility to procurement or bid development and onthrough project delivery, we work side by side with ourclients to make you successful. Our senior team has suc-cessfully helped our clients close international transactionsthrough our Program Management, ProcurementAdvisory, Due Diligence/Owner’s Engineer, andP3/Concession Advisory services. Contact David Earley,Director of Strategic Consulting, (202) 661-5310 [email protected] or Matthew Bieschke, Investor AdvisoryServices Manager, (202) 661-5311 [email protected]


Scully Capital is a specialized investment banking andfinancial services firm providing a broad range of projectfinance and mergers and acquisitions expertise to clients inthe environmental and infrastructure industries. The firmserves public sector entities and private developers inwater, wastewater, biosolids management, solid and haz-ardous wastes disposal, power generation, transportationand infrastructure development. Scully Capital brings aunique combination of industry knowledge and financialexpertise to help your public-private partnership reach asuccessful closing. The firm is active in structuring seniordebt, mezzanine financing and equity capital through thebank and private equity markets. Please contact Brian T.Oakley or John G. Ravis, 1133 15th St. NW, Washington, D.C.20005, ph. (202) 775-3434, fax (202) 775-6049.

O. R. Colan Associates (ORC) provides a full range of realestate services related to the appraisal, acquisition and relo-cation phase of design-build highway projects. With morethan 30 offices in 18 states nationwide, the company isbroadly recognized as a leader in providing real estate solu-tions for public works projects. ORC provided the right of wayacquisition and relocation assistance for the following suc-cessful design-build highway projects: Segments 1-6 of SH130 in Texas; the Pocahontas Parkway in Virginia; Route 3North in Massachusetts; I-64 in Missouri; and portions of theIndiana Toll Road in Indiana. Currently ORC is in the finalstages of providing program management for the right-of-way acquisition phase of I-69 in Indiana and the DFWConnector project in Texas. Time is money on a design-buildproject. ORC has the proven ability to deliver the right of wayin time for construction on fast-paced projects while meetingall state and federal requirements. Contact Steve Toth, COO,at [email protected] or visit us at www.orcolan.com

PWFinancing /November 2012


Jacobs is one of the world’s largest and most diverse providersof professional technical consulting services. As a full-spec-trum lifecycle solutions provider we focus on developingclose strategic partnerships with our clients over the life cycleof their projects. Jacobs provides a distinctive range of com-prehensive planning, design and management expertisein almost every industry—public and private. We are oftencalled upon by government agencies to provide programadvisory services related to public-private partnerships (P3)including financial and economic feasibility, procurementand other related services. As project funding decreases,public-sector clients are partnering with Jacobs to identifyand implement P3 programs tailored to meet theirproject delivery and financing challenges.For more information, please contact Katie Nees at (214)

801-8822 or Pamela Bailey-Campbell at (303) 968-7897.

Arup’s transaction advice practice provides a fully integrated ser-vice that helps clients manage risk and optimize investment returns.Our technical, commercial and financial experts work with public-and private-sector clients across the built environment, addingvalue for transport infrastructure of all modes; energy and utilitiesprojects; water and wastewater facilities; institutional buildings; andmore. We take projects to market, providing comfort to investorsand lenders, or assist public agencies in their evaluations of how todeliver projects efficiently, resulting in optimal outcomes for effortssuch as Virginia’s Midtown/Downtown Tunnel and I-495 CapitalBeltway, Presidio Parkway, I-635 LBJ Managed Lanes, Long BeachCounty Courthouse P3 and the Port of Miami Tunnel.We are proud to have been named Global Technical Advisor ofthe Year by Infrastructure Journal for the past two years running(rankings are based on the enterprise value – more than US $21 bil-lion - of closed transactions). Our repertoire in the Americasincludes engagements from Canada to Chile.Founded in 1946 with an enduring set of values, our unique trustownership fosters a distinctive culture, intellectual independence,and rigor. From 90 offices in 35 countries, our 10,000 planners,designers, engineers, and consultants deliver innovative projectsacross the world with creativity and passion.Contact: Ignacio Barandiaran at [email protected] Yuval Cohen at [email protected].

We shape a better worldwww.arup.com

Flatiron, with aconstruction volume of more than $1 billion in2011, is one of the leading providers of transportation con-struction and civil engineering in North America. Flatirondevelops innovative solutions to construct infrastructure,including roads, bridges, tunnels, and rail transit andwater/wastewater treatment plants, for both public and pri-vate clients. Flatiron also operates as a contractor on design-build and public-private partnership projects. Founded in1947, the firm is a subsidiary of HOCHTIEF, one of the world'sleading international construction service providers.

Flatiron has joined forces with HOCHTIEF PPP Solutions NorthAmerica to provide clients with a single source for integratedproject development and delivery. From financing anddesign to construction and operation, Flatiron and HOCHTIEFprovide turn-key solutions for PPP projects.

Contact us to learn more about what we can offer you:Steve Small, [email protected], 604-244-7343,www.flatironcorp.com, Steve Skelton, [email protected], 647-259-3746, www.ppp.hochtief.com

Ferrovial Agroman is a leader in the global construction mar-ket. In addition to Spain, the company has significant activityin eight other countries: Poland, USA, Greece, UnitedKingdom, Chile, Puerto Rico, Ireland and Portugal. Whollyowned by the same parent company as CINTRA, the world’slargest transportation developer by invested capital, FerrovialAgroman has 80 years of construction experience in DBB, DB,and P3 projects in all types of infrastructure assets. Thesedecades of experience result in 2,300 mi highway conces-sions; 9,400 mi new roads; 16,700 mi rehab of roads; 250 mitunnels; 2,500 mi canals; 3,800 mi water pipelines; 2,200 mi gasand oil pipelines; 25 hydroelectric power stations; 145 dams;215 water treatment plants; 17 mi wharfs and ports; 35 air-ports; 20 stadiums; and 2,550 mi railways including 440 mi HSR.Contact Daniel Filer, VP of Business Development for NorthAmerica at +1-512-637-8587.



Lochner MMM Group, LLC was formed in 2007 as a partner-ship between two leaders in the delivery of large, complexinfrastructure projects – Chicago-based Lochner and MMMGroup Limited, headquartered in Toronto. Internationallyrecognized and trusted, Lochner MMM Group leads someof the largest and most challenging infrastructure projectsfor government agencies, private financiers and contrac-tors. Our multi-disciplinary capabilities include engineering,project management, environmental, and advisoryservices. With more than 2,500 employees in North America,we combine local knowledge with international bestpractices to provide our clients with solutions thatare innovative, practical and constructible.

A P3 pioneer, Lochner MMM Group’s experience spansthree decades, and includes high-profile, award-winninginfrastructure development around the world. Our team ishighly respected for our in-depth insights and capabilities,gained from our extensive experience in the developmentand delivery of public infrastructure. We champion public-private partnerships by maintaining strong relationshipswith government agencies, concessionaires and contrac-tors, helping them to recognize and capture P3 opportuni-ties, maximize value for money, and minimize financial,technical and operational risks. Our program is based onsound, financial analyses that demonstrate time and cost-savings, as well as a clear understanding of the risks, rights,responsibilities and rewards amongst public and privatepartners. Lochner MMM Group also provides alternativedelivery expertise in design-build construction and con-struction manager-general contractor projects.

Contact: Tom Stoner, PE., tel. (727) 572-7111;[email protected] or Dave Jull, P.Eng.,tel. (905) 882-7203; [email protected]: [email protected]

Nossaman LLP, a U.S. law firm dedicated to representing gov-ernment agencies, is widely acknowledged to possess thebroadest and deepest practice in the world focused on U.S.transportation infrastructure, specializing in the effectivedeployment of P3s and other forms of innovative projectdelivery, finance, operations and maintenance.Recently we helped our clients achieve significant milestones:• Port of Long Beach Gerald Desmond BridgeReplacement Project – Design-Build Contract – Financialclose, July 2012• California DOT $1.1B Presidio Parkway Project –Availability Payment Contract – Financial Close, June 2012• Virginia DOT $2.1B Midtown Tunnel Project – TollConcession – Financial Close, April 2012• Texas DOT $2.8B LBJ Express Project – Toll Concession –Financial Close, June 2010• Texas DOT $2.02B North Tarrant Express ManagedLanes Project – Toll Concession – Financial Close, December2009• Florida DOT $900M Port of Miami Tunnel Project –Availability Payment Contract – Financial Close, October2009• Texas DOT $1.02B DFW Connector – Design-BuildContract – Notice to Proceed, October 2009• Florida DOT $1.8B I-595 Managed Lanes Project –Availability Payment Contract – Financial Close, March 2009

Contact Geoffrey S. Yarema at [email protected] /213.612.7842, Patrick Harder at [email protected] /213.612.7859, or Simon Santiago at [email protected] / 202.887.1472. On the web atwww.nossaman.com and www.InfraInsightBlog.com

FFor information abouthow to list your firm in PWF’s

Public-Private Services Directory

contact William Reinhardt

at (908) 654-6572 or

[email protected]

Elias Group LLP provides legal and consulting services to gov-ernment and industry. We are a boutique law firm internation-ally recognized for our expertise in project finance, pub-lic/private partnerships, industrial outsourcing, joint venturesand strategic alliances, and M&A of regulated and non-regu-lated entities. The firm’s unique accomplishments include thefirst 20-year concession agreement executed in the U.S. for therehabilitation and operation of a municipal wastewater treat-ment facility. Our skills and practical experience are evident inthe multitude of transactions successfully completed. Contact: Dan Elias or Michael Siegel at 411 Theodore Fremd

Avenue, Rye, NY 10580; tel: (914) 925-0000; fax: (914) 925-9344;or visit our web site: www.eliasgroup.com



Herzog Contracting/Herzog Railroad Services Inc. – Design-build/CMGC for highway / heavy construction and railroadmass transit. North America’s largest rail and commuter railconstruction and maintenance contractor, provides rail masstransit operations and dispatching in North America and rail-road expertise worldwide, delivering state-of-the-art technolo-gy for Hi Speed Rail Flaw Detection and railcar and railroadequipment leasing, ballast distribution, rail re-laying and railcarunloading, railways systems and signals. Also, developmentand operation of municipal and industrial solid waste facilities.

� At (816) 233-9001, fax (816) 233-9881, or 600 S. Riverside Rd.,P.O. Box 1089, St. Joseph, MO 64507-1089, please contact:Joe Kneib, Sr. VP Market [email protected]; Tim Francis, VP Marketing, Herzog Rail [email protected] Ray Lanman, VP Corp. Development, Herzog [email protected]; Scott Norman, V.P. Estimating/Project Development, [email protected] at (816) 233-9001

Infrastructure Management Group, Inc. (IMG) is a results-dri-ven, full-service advisory firm specializing in improving themanagement, financing and operations of utilities, airports,transportation and other public-use infrastructure. IMG helpsinfrastructure owners and operators provide more and per-form better through innovation, performance managementtechnology, creative finance solutions, and public-privatepartnerships. IMG identifies and implements pragmaticapproaches and bold initiatives for superior customer servicedelivery and efficient operations. From San Diego to Bostonand from Detroit to Miami, our innovations have saved clientsbillions of dollars in operating costs and capital investment.Our corporate motto, “bringing business to government”, is atestament to both the demands of our times and IMG’s com-mitment to our clients’ public service goals. For more informa-tion, contact Steve Steckler at (301) 907-2900, fax (301) 907-2906, or at 4733 Bethesda Avenue, Suite 600; Bethesda, MD20814.

Designing and building infrastructure has been the core ofHDR’s business for nearly 100 years. An employee-ownedfirm, HDR ranks among the best in every market sector weserve, including water, wastewater, transportation, environ-mental services and power. As your partner, we help youachieve exceptional results on large capital improvementprojects through the use of alternative project delivery. We adopt your goals and vision for the project and thenwork to foster an integrated and collaborative environmentby establishing the right mix of people, systems and toolsfor success. And our application of value-driven servicessuch as risk management, cost estimating, scheduling andvalue engineering results in greater value throughout theproject life cycle.

What makes us different? We bring added leadershipto a project, backed by multidisciplinary expertise, proveninnovation and superior performance to help accomplishyour goals.

When you need a partner to deliver your vision, callHDR: 185 Offices Worldwide, 7,800 employees:

• Mel Placilla ([email protected]) at 714-730-2300for transportation or

• Andy Shea ([email protected]) at 484-612-1102 forwater.

EXPERIENCE SUCCESSInfraConsult LLC is an infrastructure consultancy whoseprofessional staff provides advisory services in strategicplanning, program management, project delivery, infra-structure financing, governmental funding strategies, andpublic-private partnerships. Our staff includes more than50 industry-renown advisors, strategists, planners and engi-neers with world-class reputations and experience on avariety of infrastructure projects spanning urban transit,intercity and high speed rail, intermodal facilities, high-ways and toll roads, managed lane programs, freight andgoods movement, and ports and aviation. As a smaller,specialized consultancy, InfraConsult provides the ultimatein objectivity and credibility in developing strategy, bring-ing projects to market, and assuring that project ownersand sponsors have viable programs for developing,improving and expanding public infrastructure.

Major clients include the Metropolitan TransportationAuthority (MTA) and Long Island Rail Road (LIRR) in NewYork, LACMTA (Metro) in Los Angeles, San Diego Council ofGovernments (SANDAG), Honolulu Authority for RapidTransportation (HART), and Arizona DOT. For further infor-mation – and to experience success – contact MichaelSchneider, Managing Partner in Los Angeles at213.312.9400, or at [email protected]

InfraConsult

Egis Projects has unrivaled experience in most types of infra-structure P3 and concessions: motorways, bridges, tunnels,urban infrastructures, and, more recently, airports. We areexperienced with all types of remuneration (real toll, shadowtoll or availability schemes). Egis Projects relies on the spe-cialized skills of its shareholders: Groupe Egis, a leader ininfrastructure engineering, and Caisse des Dépôts, a AAAfinancial institution. Egis Projects acts as promoter, develop-er and investor in concession/P3 projects, as turnkey equip-ment integrator, as operator and manager of airports, and,via its wholly owned subsidiary Egis Road Operation, as oper-ator of roads and motorways. Egis Projects has also extend-ed its activities to electronic toll collection, toll network inter-operability, and safety enforcement, as well as associatedservices for road users under the Easytrip brand.Egis Projects has financially closed 22 infrastructure projects

for a total value of Euro 12 bn. Egis Road Operation is oper-ating 27 motorways totalling 1,840 km in 15 countries. Contact: Alain Poliakoff in Paris, France at (33) 1 30 48 48 09,

fax (33) 1 30 48 48 91 or [email protected] or visithttp://www.egis-projects.com



Global challenges. Real solutions.Established in 1868, Halcrow specializes in planning designand management services for infrastructure developmentworldwide. We offer expertise in virtually all areas relatedto the built environment. Our teams are also specialists ina number of innovative areas, leading the way in marketslike public-private partnerships. Our expert strategic trans-action advice helps clients harness the potential of P3s ininfrastructure delivery through:• Strategic procurement• Due diligence• Risk management• Asset managementAt Halcrow, we’ve developed an unparalled track

record of public-private partnerships. Our ability to lis-ten and our detailed understanding of P3 transactionshave led to strong relationships with a range of clientsincluding public agencies, project promoters, conces-sionaires and financiers. For information on how we’resolving some of our clients’ greatest challenges, visithalcrow.com or email [email protected].

Hawkins Delafield & Wood LLP has the largest specialized pub-lic contract and finance legal practice in the United States. Wehave successfully negotiated and closed major infrastructuretransactions in every state. Our clients consist exclusively of gov-ernmental, non-profit and financial institutions. In the water sec-tor, Hawkins has served as special planning, procurement andnegotiating counsel to local governments on more than 75public-private partnership projects. In the transportation sec-tor, we are consistently ranked by Thompson Securities Dataas the leading finance counsel nationally. For over 30 years Hawkins has pioneered highly successfulalternative delivery approaches to public works develop-ment and implementation using design-build, design-build-operate, and design-build-finance-operate contracts, fran-chise and concession agreements, project financings and pri-vate activity bonds. The breadth and depth of our contractand finance practices provide a unique foundation for thefirm’s practical and creative counsel and strategic advice toclients seeking solutions to infrastructure challenges in thewater, transportation, solid waste and power sectors. Contact:Eric Petersen at (212) 820- 9401 or Ron Grosser (212) 820-9423 inNew York, or Rick Sapir at (973) 642-1188 in Newark, or throughour website at www.hawkins.com

With more than 40 years of experience, IRIDIUM Concesiones(formerly Dragados Concesiones) is the ACS Group companythat promotes, develops and operates public private partner-ship projects worldwide. With over 100 projects developed in21 countries, including 3,861 miles of highways, 987 miles ofrailroads, 16 airports, 18 ports and several social infrastructurePPP projects, IRIDIUM Concesiones is the world leader in thisfield. We are proud to have global presence with local com-mitment. ACS Group companies apply their unsurpassedtechnical skills to the planning, design, construction, operationand maintenance of infrastructures, using the latest technolo-gies in any area and providing the highest level of excellencethroughout. A solid financial capability combined with aninnovative approach allows IRIDIUM Concesiones to structurethe necessary financial resources for any project. ContactSalvador Myro ([email protected]) at +(34) 91 703 85 48or visit www.iridiumconcesiones.com or www.grupoacs.comfor further details

For nearly a century, HNTB has helped create infrastructurethat best meets the unique demands of its environmentand exceeds client expectations. With client relationshipsspanning decades, we understand infrastructure life cyclesand have the perspective to solve technical challengeswith clarity and imagination. Using a highly collaborativeapproach, we see and help address far-reaching issues offinancing, legislation, design, construction, community out-reach and ongoing operations. As employee-owners com-mitted to the highest levels of performance, we enableclients to achieve their goals and inspiring visions. Contact Terry Miller (816) 527-2316 or visit hntb.com.

Formed in 1922, Granite Construction Incorporated is todayone of the largest heavy civil contractors in the UnitedStates. It is positioned in all the major U.S. markets withoffices located throughout the country serving over privateand public clients. Over the past 88 years, Granite hasearned a nationwide reputation as the preeminent builderof quality projects in a timely manner. Always progressive,Granite has developed into one of the top Design-Buildcontractors in the U.S. and has recently enacted anEnvironmental Affairs Policy to take a leading role in theconstruction industry in protecting the environment andour natural resources. Through our corporate SustainabilityPlan, we actively engage in industry, and direct efforts atthe local, state, and federal levels to advocate for adequateand sustainable public infrastructure funding tomaintain and improve America’s transportation system.Granite is nationally recognized for its expertise in themajority of construction sectors including tunnels, highwaysand roadways, dams, bridges, railroads marine, airports,heavy and light mass transit, and have becomerenowned design-build and mega project constructors.Granite leads the market in the design-build turn-keydelivery of complex fast paced transportation projects.Contact Robert Leonetti, 831-728-7580, or 585 West Beach St.

Watsonville, CA 95077-5085 www.graniteconstruction.com

Global Via Infrastructure Globalvia was founded in 2007,being its shareholders (50:50) the construction and environ-mental services company Fomento de Construcciones yContratas S.A. and Spanish savings bank Bankia. Globalvia,the world’s second largest transport infrastructure developerby number of concessions, is specialized in DBFOM and DBFMprojects. Globalvia has the financial capability to acceleratedelivery of projects, as well as the construction and opera-tional expertise to meet the highest standards for the life of aproject. We take pride in working with local contractors,employing area business and individuals during operationand incorporating community feedback to deliver the bestpossible public service. Currently, the company managesmore than 41 PPP projects world wide including roads, rail-ways, ports, airports and hospitals although its objective forthe near future is focused on road and railway concessions(78% of its portfolio). Contact Michael Lapolla at (212) 618-6310 or [email protected]. www.globalvia.com.



Successful project finance requires the development and inte-gration of marketing, engineering and environmental strategiesinto the overall financial framework.The Louis Berger Group, Inc. has aproven track record and an estab-lished practice in all three areasand has developed innovativetools creating a seamless webbetween the technical and thefinancial design of projects. Thishas resulted in the successfulfinancing and execution of projects in the United States,Europe and the World. With offices in over 90 countries, theGroup brings in-depth local understanding and anunequaled ability to respond rapidly to clients’ needs.Contact: Nicholas Masucci (973) 407-1000, [email protected]

Cintra plays a leading role in transport infrastructure developmentthroughout the world, with nearly 2,000 miles of managed high-ways worldwide. This represents a total global investment in trafficcongestion improvements of more than US $25 billion. Cintra has aportfolio of 25 concessions in seven countries distributed amongSpain, Canada, United States, Portugal, Ireland, Greece and Chile.Cintra was recently selected for two projects in Dallas, the LBJExpress and North Tarrant Express. The Cintra-Ferrovial merger in2009 created one of the world's largest private operators of trans-portation infrastructure and a leading services provider. It currentlygenerates net revenues of more than $16 billion a year, has oper-ations in 49 countries and assets totaling approximately $59 billion.Ferrovial's business model is focused on end-to-end infrastructuremanagement, design, construction, financing, operation andmaintenance. To this end, the company is active in complemen-tary sectors, such as airport and toll road construction and opera-tion, as well as services. Contact: Carlos Ugarte([email protected]) (512) 637-8545. More information:www.cintra.es

Infrastructure Management Group, Inc.Steve Steckler (301) 907-2900

KPMGAndy Garbutt +1(512) 501-5329Brad Watson +1 (416) 777-8142

Louis Berger Group Inc.Nick Masucci (973) 407-1000

Scully Capital Services, Inc.Brian T. Oakley or John G. Ravis (202) 775-3434

Raymond Tillman(917) 328-2265

Wilbur Smith AssociatesEd Regan (203) 865-2191Kamran Khan (630) 434-8111Grant Holland (770) 936-8650www.wilbursmith.com

Elias GroupDan Elias or Michael Siegel (914) 925-0000;fax (914) 925-9344 or www.eliasgroup.com

Hawkins Delafield & WoodEric Petersen in NY (212) 820-9401Ron Grosser in NY (212) 820-9423Rick Sapir in Newark (973) 642-1188

Nossaman LLPGeoffrey S. Yarema (213) 612-7842Patrick Harder (213) 612-7859Simon Santiago (202) 887-1472

Osler, Hoskin & Harcourt LLPBob Bea umont (416) 862-5861Lorne Carson (403) 260-7083Tobor Emakpor (416) 862-4268 Rocco Sebastiano (416) 862-5859

Abertis Studies and Corporate CommunicationsDirection(34) 93 230 50 39

AECOM EnterprisesRegis Damour, Paris +33 1 7373 [email protected] Yelds, London +44 20 7776 2398 [email protected] Shekleton, New York +1 212 973 [email protected]

China Construction America, Inc.Jietai Huang (201)[email protected]

Cintra, S.A.Carlos Ugarte (512) [email protected]

EGIS ProjectsAlain Poliakoff in Paris (33) 1 30 48 48 [email protected]

Ferrovial AgromanDaniel Filer (512) 637-8587

FlatironSteve Small (604) [email protected] Skelton (647) [email protected]

Global Via InfrastructureRafael Nevado, [email protected] Lapolla, (908) [email protected]

Granite Construction Inc.Bob Leonetti (914) 606-3612

Herzog Contracting/Herzog Transit Services Inc.Joe Kneib, (816) [email protected] Francis, (816) [email protected] Lanman, (816) [email protected] Norman, (816) [email protected]

Iridium ConcesionesSalvador Myro in Madrid (34) 91 703 85 [email protected]

Meridiam InfrastructureJane Garvey [email protected] Aiello [email protected] Dionisio [email protected]

OHL ConcesionesSergio Merino +34 (91) 348 46 42 [email protected]

United WaterGary Albertson (201) [email protected]

URS CorporationFrank Finlayson (208) [email protected]

Veolia Water North AmericaScott Edwards (800) 522-4774

ArupIgnacio Barandiaran,[email protected] Cohen, [email protected]

[email protected]

HNTBTerry Miller (816) 527-2316

HDRMel Placilla (714) 730-2300 [email protected] (transportation)Andy Shea (484) 612-1102 [email protected] (water)

InfraConsultMichael Schneider (213) [email protected]

JacobsPamela Bailey-Campbell (303) 968-7897Katie Nees (214) 801-8822

Lochner MMM GroupTom Stoner, PE (727) [email protected] Jull, PE (905) [email protected]

O.R. Colan AssociatesSteve Toth [email protected]

Parsons Brinckerhoff Strategic ConsultingDavid Earley (202) [email protected] Bieschke (202) [email protected]

Raba KistnerGary Raba 866-722-2547 [email protected]


ADVERTISER INDEXFinancing Advisors

Legal/Procurement Advisors

Developers/Operators/Sponsors

Procurement/Technical/Financial


Meridiam is the leading equity investor in primary PublicPrivate Partnership (“PPP”) infrastructure projects with deepexpertise in North America and Europe. Meridiam has $3billion of assets under management across its three, long-term infrastructure funds. With a focus in transport, socialinfrastructure and environmental PPP assets, Meridiamstrives to establish a long-term contractual relationshipbetween the public and private sector. Meridiam has suc-cessfully developed and closed various innovative projectsglobally including the Port of Miami Tunnel in Florida, theLong Beach Courthouse Project in California and the IH 635Project in Texas. For further information, please contact JoeAiello or John Dionisio, 605 Third Avenue, 28th Floor, NY, NY10158 ph. (212) 798-8694, fax (212) 798-8690.

abertis is an international group that manages infrastruc-tures for mobility and telecommunications in three businessareas: > Tollroads > Telecommunications infrastructures >Airports. The group, with a presence in a total of 15 coun-tries, has a staff of over 11,000 employees and practically50% of its income is generated outside Spain. abertis 2010key figures: > Total net profit: 662 million Euros. >Operational income: 4,106 million Euros. > Cash-flow: 1,616million Euros. > Gross operational income (EBITDA): 2,494million Euros. > Investments: 757 million Euros.Contact: Studies and Corporate Communications

Direction (34) 93 230 50 39