Mayors Water Council Summit Public Benefits of Partnering with the Private Sector
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Mayors Water Council Summit Public Benefits of Partnering with the Private Sector Consideration of Concession/Leasing Approaches December 2, 2009
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Mayors Water Council Summit Public Benefits of Partnering with the Private Sector Consideration of Concession/Leasing Approaches December 2, 2009. “Within the water and wastewater services industry, there are a few, very large…private sector companies that can - PowerPoint PPT Presentation
Transcript of Mayors Water Council Summit Public Benefits of Partnering with the Private Sector
Mayors Water Council Summit
Public Benefits of Partnering
with the Private Sector
Consideration of Concession/Leasing Approaches
December 2, 2009
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“Within the water and wastewater services industry, there
are a few, very large…private sector companies that can
provide contract operations and maintenance and support
services…Through years of operating in a competitive
private sector environment, not constrained by many
public sector rules and procedures, these firms have
developed and refined business practices that usually
result in the lowest cost of service delivery.”
- Association of Metropolitan Sewerage
Agencies (AMSA) and Association of
Metropolitan Water Agencies (AWSA), 1998
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A Concession is one form of a Public-Private Partnership
Lake Pleasant, AZ
Seattle, W
A
Fillmore, C
A
Buffalo, N
Y; Foxboro,
MA; Tampa, FL
Jefferson County, M
O
Private PPP options Public
Elizabethtown
and Edison, NJ
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Definition
A transaction in which a private entity makes an up-front payment (or series of payments) for the right to operate municipal infrastructure assets on a long-term basis.
Typically, the private entity occupies the premises under a lease matching the duration of the concession.
Ownership of the assets remains with the municipality. At the end of the concession, control of the assets reverts to the municipality.
Think of it as an O&M contract in which future savings and enhancements are “advanced” to the municipality.
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Typical Municipal Water & W/W System
$
O&M Costs Pre-Concession
O&M Costs Post-Concession
Revenue Pre-Concession
Revenue Post-Concession
Cost Savings
Revenue Enhancements
YrsFunds are “advanced” to Municipality
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Up-Front Concession Payment
Factors• Margin Amount (O&M Savings; Revenue Enhancements)• Margin Growth (System Expansion; Inflation Factor)• Time Period (20-99 years)• Discount Rate (Concessionaire’s Return Requirements)
Representative Range
Annual O&M Savings and/or Revenue Enhancement
Up-Front Concession
Payment
$1M => $5-10M
$10M => $50-100M
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Attractions to Municipality
• Significant up-front proceeds.
• Transfer of revenue, construction/CapEx, operational and maintenance risk.
• Integrated CapEx and OpEx planning may generate further efficiencies.
• ‘Failure to perform’ addressable with municipality re-asserting control.
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Overview of Infrastructure Asset ClassesOVERVIEW OF INFRASTRUCTURE ASSET CLASSES KEY ASSET CHARACTERISTICS
TRANSPORTATION POWER, ENERGY &
UTILITIES OTHER
Airports Bridges/
Roads/ Tunnels Alternative
Energy Electric & Gas
Utilities Communications
Infrastructure
Mass Transit Parking Hedged/ Contrac
ted Generation Midstream Lotteries
Ports Rail Transmission Water &
Wastewater Social
Infrastructure
Long-lived, strategic assets
Essential services
Strong, stable cash flows
Limited commodity price risk
Inflation-hedged
Manageable operating risk
Recession resistant
Typically capital intensive
Regulated or contracted revenues
Socially productive
Low correlation to other asset classes
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