Stave Lake Water Supply and Treatment Project Business Case for P3 Canada Fund Funding Request AMWSC April 04 2011
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Stave Lake Water Supply and Treatment Project
Business Case for P3 Canada Fund Funding Request
AMWSC April 04 2011
© Deloitte & Touche LLP and affiliated entities.
Purpose of business case
• Determine if the Project may qualify for financial support from the P3 Canada Fund– Must be a P3 delivery model including design & construction plus one
or more of operations, maintenance, financing– Must provide public benefit– Must provide “value for money” according to accepted CDN practice– Project structure and procurement process must follow best practice
• Level of support: up to 25% of eligible costs• Form of support: repayable, non-repayable, interest-free loan, other
• Business case contents guided by P3 Canada Fund submission guide• Methodology guided by Partnerships BC practices
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© Deloitte & Touche LLP and affiliated entities.
Recommended procurement option: Hybrid DBFO+DBO
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DBFO for “Bundle A”• Intake & Pump Station• Water Treatment Plant• Reservoir Expansion• Partial public, partial private
financing• Long term warranty benefit
from the private financing
DBO for “Bundle B”• Transmission Mains• No private financing
© Deloitte & Touche LLP and affiliated entities.
Recommended procurement option: Hybrid DBFO+DBO
Basis for recommendation:• Maximizes construction time and cost certainty (on-time, on-budget)• Maximizes long term cost certainty• Reduces AMWSC’s retained risk and transfers considerable risk to the contractor• Provides long term performance guarantee appropriate for each Bundle• Estimated project “value for money1” of $33.2 M or 10.6%
• Estimated “value for money” to AMWSC of up to:– $83.5 M or 26.7%
… depending on level of P3 Canada Fund contribution
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1 Net present value of cost savings over the design, construction, and operating period (approx 29 years in total), as compared to traditional design-bid-build procurement.
NPV of Costs Value for Money
Traditional DBB $ 313.1 M - -
Hybrid DBFO+DBO $ 279.8 M $ 33.2 M 10.6 %
© Deloitte & Touche LLP and affiliated entities.
Recommended procurement option: Hybrid DBFO+DBO
Key Features• AMWSC sets water quality standards and capacity of the system• One contractor is selected through a competitive process for the
combined DBFO+DBO• The contractor designs and builds, and then operates and maintains,
Bundle A and Bundle B for 25 years – for a fixed price• AMWSC pays for approximately 35% of the construction costs of
Bundle A during construction, the balance is financed by the contractor• AMWSC pays for 100% of the construction costs of Bundle B during
construction• AMWSC makes annual payments for operations and maintenance• AMWSC makes annual payments to repay the contractor’s financing on
Bundle A• Payments to the contractor are at risk: penalties are applied if the
contractor does meet the terms of the contract
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© Deloitte & Touche LLP and affiliated entities.
Comparison of procurement models
Project Responsibility
Design-Build Design-Build-Operate Design-Build-Finance-Operate
PlanningMunicipality
Municipality Municipality
DesignConsultant selected on qualifications and price
Qualified special-purpose P3 contractor selected on design, long term plan, and price. Typically a consortium of firms.
Qualified special-purpose P3 contractor selected on design, long term plan, and price. Typically a consortium of firms.
ConstructionQualified general contractor selected by tender
OperationMunicipal staff or short-term tendered contracts
MaintenanceMunicipal staff or short-term tendered contracts
RehabilitationMunicipal staff or individual contracts
FinancingMunicipal Finance Authority BC (MFABC)
MFABCPortion: contractor
Portion: MFABC
Funding Municipality Municipality
Asset Ownership
Municipality Municipality
6 CONFIDENTIAL
© Deloitte & Touche LLP and affiliated entities.
Risk allocation
Retained by AMWSC Transferred to P3 Contractor
Planning Design
Environmental approvals Construction cost & schedule
Rights to raw water Operations - water quantity
Land assembly Operations - water quality
Sizing of facilities Operations – power/chemical usage
Changes in regulation Minor maintenance
Operations - power price Rehabilitation (major maintenance)
Operations - chemical price Handback condition of infrastructure at end of operating period
Raw water quality outside defined “window”
Raw water quality inside defined “window”
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© Deloitte & Touche LLP and affiliated entities.
Funding request from P3 Canada Fund
• Funding request for 25% of eligible costs in the form of a non-refundable contribution
• Contribution would be received during the construction period and used to offset the AMWSC’s milestone payments to the contractor
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Estimated P3 Canada Fund Contribution for 25% of Eligible Costs ($millions, nominal “as-spent” dollars)
DBFO Bundle A DBO Bundle B Total Contribution
$ 49.3 M $ 21.9 M $ 71.2 M
• P3 Canada Fund investment offers incremental value for money and a resultant incremental reduction in AMWSC’s costs of water provision
Value for Money
Without P3 Canada Fund Investment (1) $ 33.3 M 10.6%
With 25% P3 Canada Fund Investment (2) $ 83.5 M 26.7%
Incremental VFM From 25% P3 Canada Fund Investment (2)-(1) $ 50.2 M 16.1%
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