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New Brunswick P3s

Presentation to Northern Border Finance Conference

Darrell StephensonStewart McKelvey

Saint John, NB

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Scope of the Projects

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Fredericton-Moncton Highway Project

204 kmOpened in 2001

Maine

New

Brunswick

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Scope – Fredericton-Moncton Highway Project (FMHP)

Implemented with a P3 model

Agreements signed in January 1998

Highway opened to traffic October 2001

Guaranteed Maximum Price $579 Million

204 kilometres of 4-lane highway

Developer responsible to operate, maintain and manage the highway until 2027 (average annual cost - $9 Million 1997)

Progress Payments Made Against Sign-Off By Independent Engineer

Financing:

Lease based debt

Toll based debt to be repaid by user tolls

User tolls replaced by shadow tolls

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Fredericton-Moncton Highway Project

204 kmOpened in 2001

Trans-Canada Highway Project275 km

To be opened November 2007

New

BrunswickMaine

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Scope – Trans-Canada Highway Project (TCHP)

Implemented With a P3 Model

Agreements Signed February 2005

Highway to be Opened by October 2007

Guaranteed Maximum Price $543 Million

275 km of highway

130 km existing 4-lane highway

47 km built by NBDOT

98 km built by the Developer

No payments will be made to the Developer until the highway

is opened to traffic

Largest P3 Project Undertaken In Canada With No Payment

Until Completion

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Scope – TCHP (Continued…)

The Developer to Operate, Maintain and Rehabilitate all 275 km of highway until 2033 (annual fixed cost - $19 Million)

OMR work for 130 km of existing sections commenced June 1, 2005

Financing:

By the Provision of a Debenture for the Guaranteed Maximum Price to the Developer

Developer had the Debenture S&P Rated and Sold it to Canadian Institutional Investors in consideration of Progress Advances during the construction phase

Financing Structure Won Award for Innovation and Excellence

in 2006 From Canadian Council for Public Private Partnerships

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Fredericton-Moncton Highway Project

Opened in 2001

Trans-Canada Highway Project

To be opened November 2007

Fundy Islands Ferry Services Project

Delivery of Vessels 2009 - 2011

Maine

New

Brunswick

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Scope – Fundy Islands Ferry Services Project (FIFSP)

Design-Build

Design, construct and supply three new vessels

Grand Manan – 101 AEU, 400 passengers (2009 delivery)

Deer Island – 24 AEU, 99 passengers (2010 delivery)

White Head – 12 AEU, 84 passengers (2011 delivery)

Operations

For a period of 16 years:

Provide the Grand Manan, White Head and Deer Island Ferry Services

Maintain and refit the Vessels (includes both new and existing Vessels)

Operate and perform routine maintenance to Ferry Terminals

Collect passenger and vehicle fares for the Grand Manan Ferry Service set by the Province

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Key Contractual Considerations

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Key Contractual Considerations

As Is, Where Is

Developer/Operator Should Accept Responsibility for Construction and Operation During the Contract Period for the Bid Price, save for Scope Changes

Identify Risks Which Should not be Moved to the Developer/Operator, but for which a Scope Change is allowed, e.g.:

Changes in Technical Standards

Failure of the Governmental Authority to perform an obligation

Unknown Contaminated Sites/Archaeological Sites/Sulphide Bearing Rock

Inflation During Operations Period

Identify Impact of Scope Changes/Force Majeure (e.g.: occurrence before a specified date does not move completion date)

Contractual Considerations:

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Key Contractual Considerations (Continued…)

Clear and Expedited Time Frames for Resolution of Dispute regarding Non-Conformance, Scope Change, Force Majeure, etc. – e.g.: if the Developer/Operator does not challenge the determination of the Governmental Authority they should be deemed to have accepted its determination

Performance Based Contracts are More Work to Prepare, but Easier to Administer (ie: develop Key Performance Indicators and associated Payment Adjustments)

Bonding/Insurance Programs which Afford Reasonable Protection for Risks you Wish to Transfer to the Developer

Reasonable Protection for Lenders

Allow Proponents an Opportunity to Comment on Legal Agreements in the RFP Process

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Lessons LearnedFMHP to TCHP

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Lessons Learned and Solutions between FMHP and TCHP

ISO Compliant Systems ISO Certification

Required

Quality Management Systems Integrated Management

Systems

Determination of Scope Changes – Specifically Defined

Materiality Based in Agreements

Transfer of NBDOT Built Sections Defined Time Frame -

Operator Audit

Rights

Arbitration Dispute Resolution

Board for DB Work,

Arbitration for OMR

FMHP TCHP Solutions

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Lessons Learned and Solutions

Progress Payments Completion Payment

Auditing by Independent Agent No Independent Agent -Audit by Province

Variable Operations Payments Fixed Operations Payments

Renegotiate OMM Price - Year 20 Price Bid for Term of Project

Conformance Based Performance Based - Key Performance

Indicators, Payment Adjustments and

Asset Management

Stand Alone Hand Back Standards Tied to KPIs and 3rd Party Inspection

Added

FMHP TCHP Solutions

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Financial ModelsTCHP and FIFSP

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Financial Models – TCHP and FIFSP

For TCHP, for DB Component

Completion Payment Model

Full payment after construction

Extended Repayment Model

Payment over 25 years after construction

Lowest NPV Offer Selected Model

Common Elements

Guaranteed Maximum Price for construction

OMR Payments

Term of OMR period – to June 30, 2033

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For FIFSP, Proponents Have the Option to Submit Under Two

Models

Completion Payment Model

Payment for Each Vessel on Delivery

Extended Repayment Model

Payment for the Deer Island and White Head Vessels on Delivery

Proponent Retains Title to the Grand Manan Vessel and NBDOT Pays an Availability Fee over the Term

Proponents Bid Option Price for which Province has the Right to Purchase the Grand Manan Vessel at the end of the Term

Lowest NPV Offer Selected Model

Option Price Discounted 5% for Purposes of NPV Comparison

Financial Models – TCHP and FIFSP (Continued…)

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Comparison of FMHP and TCHP Annual Payments(Operations, Maintenance and Rehabilitation)

FMHPOMM Payments per Year

0

5

1 0

1 5

2 0

2 5

0 2 4 6 8 10

12

14

16

18

20

22

Year

Pay

men

t (1

99

8 $

mil

lio

ns)

Forecast Demand of

OMM for FMHPOperator’s maintenance schedule

is driven by forecast budget

TCHPOMR Payments per Year

0

5

1 0

1 5

2 0

2 5

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Year

Pa

ym

en

t (2

00

4 $

mil

lio

ns

)Equal Annual Payments

for OMR for TCHPFull responsibility on Operator

to manage maintenance work

and cash flow

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Risk Transfer

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Key Risk Transfer

Risk Government Developer/Operator

Price

Schedule

Scope Change

Weather

Soil Conditions

Insurance and Bonding

Environment Impact Assessment

Environmental Permitting

Quality Management

Safety Management

Strikes

Archeological Finds (known)

Pollution

Right of Way Acquisition

X

X

X

X

X

X

X

X

X

X

X

X

X

X

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Business Models

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Organizational Structure – Highway Projects

Province

NBHC

Project Company

Developer/Operator

100%

Project Agreements

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Organizational Structure – Ferry Project

Province

Developer/Operator

Project Agreements

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Measurements of Success

Guaranteed Delivery Date

Guaranteed Maximum Price

Key risks borne by the Developer

Environmentally responsible delivery

Safe workplace

Safe, reliable, high quality and economic service for users

Economic and Industrial benefits and Aboriginal Inclusion Plan

All applicable standards and guidelines met or exceeded

Development of expertise

Technology transfer

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CONCLUSION

P3s have delivered for New Brunswick:

Accelerated delivery

Innovation

Value for money

Resident expertise

Contractually assured service delivery

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Contact Information

Trans-Canada Highway Project Co. Ltd.

444-2007 telephone

457-7332 fax

TCH web site at www.gnb.ca

keyword: Trans-Canada Highway