Intermodal PPPs and Availability Payments Focus Georgia 27 April 2007.

Intermodal PPPs and Availability Payments

Focus Georgia

27 April 2007

-2-© 2007 Jeffrey A. Parker & Associates, Inc.

Intermodal and Public Transit Projects Often Differ From Toll Roads

• Service quality and usage maximization can be more important or applicable goals than revenue maximization

• Public may intend to retain direct rate setting authority

• Leveraging direct revenues may not be a feasible approach for project financing

– Project may not generate direct revenue

– Revenue potential may be limited

– Revenue or traffic volume could be difficult to predict or manage

… but this does not mean that a PPP approach is inappropriate for intermodal projects

-3-© 2007 Jeffrey A. Parker & Associates, Inc.

Examples of “True” PPPs Underway for U.S. Intermodal and Transit Projects

• Port of Miami Tunnel

• BART Oakland Airport Connector

• Miami Streetcar

• Denver RTD?

(PPP = Design-Build-Finance-Operate-Maintain)

-4-© 2007 Jeffrey A. Parker & Associates, Inc.

Port of Miami Tunnel –Cost Capped for 35 Years

MacArthur Cswy

Widening

MacArthur Cswy

Widening

Bored TunnelBored Tunnel

Watson Island

Watson Island

Port of MiamiPort of Miami

Bored TunnelUnder

Main Channel

Bored TunnelUnder

Main Channel

BridgeWidening

BridgeWidening

RoadwayImprovements

RoadwayImprovements

-5-© 2007 Jeffrey A. Parker & Associates, Inc.

Potential Intermodal Project Issues – PPP Option Belongs in the Toolkit

• Desire to deliver projects on accelerated basis

• Difficult to issue debt and/or non-recourse debt

• Need for long-term guaranteed cost structure

– Cap construction and O&M costs (and achieve lifecycle efficiency)

– Enable long-term budget planning

– Multiple funding partners

• Need for schedule adherence, phasing synchronization, etc.

• Requirements for high level of availability and/or service quality

• Unique projects – different from core systems and/or facilities

-6-© 2007 Jeffrey A. Parker & Associates, Inc.

Understanding Risk Transfer and Project Delivery Choices

Concessionaire Lenders

OperatorEPC Contractor

Government

Equity Investors

DB

FO

M

Government Muni Debt

Operator or GovernmentEPC Contractor

Des

ign-

Bui

ld

-7-© 2007 Jeffrey A. Parker & Associates, Inc.

Anticipated Public Expenditures for Traditional Design-Build

1 2 3 4 5 6 7 8 9 10

Years of Inflation Adjusted Dollars

© 2007 Jeffrey A. Parker & Associates, Inc.

35

-8-© 2007 Jeffrey A. Parker & Associates, Inc.

With Overruns?

1 2 3 4 5 6 7 8 9 10

Years of Inflation Adjusted Dollars

35

© 2007 Jeffrey A. Parker & Associates, Inc.

-9-© 2007 Jeffrey A. Parker & Associates, Inc.

Availability Payments

• Include both CAPEX and OPEX

• Cannot be earned until facility opens!

• Must be earned with high service levels (are not debt)

• Capped for contract life based on bid

1 2 3 4 5 6 7 8 9 10

Years of Inflation Adjusted Dollars

35

© 2007 Jeffrey A. Parker & Associates, Inc.

-10-© 2007 Jeffrey A. Parker & Associates, Inc.

Inherent Risk Transferand Alignment of Interests

Concessionaire Lenders

OperatorEPC Contractor

Government

Equity Investors

Availability-Based DBFOM

Ava

ilab

ility

P

aym

ents • Must be earned

• Capped at amount bid• Not debt

For additional information contact:

Michael Parker, Managing Director

1308 Spruce Street

Philadelphia, PA 19107

[email protected]

215.790.8404