Public-private partnerships: opportunities in infrastructure. Wednesday, February 1, 2017

Transcription

1 Public-private partnerships: opportunities in infrastructure Wednesday, February 1, 2017

2 Join the conversation Tweet using #NLawMotion and connect Connect with us on LinkedIn linkedin.com/company/nortonrosefulbright 2

3 Speakers Jay LeMoine Partner Vancouver Jay LeMoine is a business lawyer whose work focuses on the commercial aspects of infrastructure projects and business transactions. His practice includes the negotiating, drafting and implementation of commercial contracts, business structures, public-private partnerships and infrastructure agreements. Greg Lewis Partner Vancouver Greg Lewis' business law practice focuses on commercial transactions in infrastructure, energy, and other industry sectors, particularly joint ventures, acquisitions and financings. He has assisted clients on a range of major projects, in a variety of sectors and related corporate and project financings. 3

4 Canadian market timeline Pre s 2016 No P3 projects 1 P3 project Rapid expansion 247 P3 projects Evolving procurement models But none leveraging use of private finance Confederation bridge (NB to PEI) Followed by 407 (ON) in 1998 Provincial agencies Partnerships BC Infrastructure Ontario Alberta infrastructure Nine provinces and Territories $119 billion Health care Transit Roads Bridges Water / Waste-water Sector diversity Corrections Justice Social housing 4

5 The Canadian market 5

6 The Canadian market (cont d) 6

7 What happened? Infrastructure deficit Now >C$130 billion C$400 billion by 2020 Growing at the provincial and municipal levels Success elsewhere United Kingdom Australia Canadianized model Government policies Procurement paradigm shift Managing costs: On time and On budget Delivering value for money Encourage innovation Couple design and construction risk with whole life cycle 7

8 What happened? (cont d) New agencies Provincial agencies or Designated units PBC, IO, Alberta Infra, SaskBuilds, NB P3 Canada Improved processes Experience Improved procurement timelines Published methodologies standardized documents Other factors Success - No longer fear of the unknown Cross-party political support (mostly) Public acceptance Stable markets Minimal counterparty risk 8

9 Canadian P3 models Design, Build, Finance, Maintain (DBFM) Accommodation projects Public sector uses and occupies Hospitals, schools, justice facilities Hard and soft FM services Road projects (non-toll) Performance based payment Deductions for Unavailability Deductions for service failure 9

10 Canadian P3 models (cont d) Design, Build, Finance, Operate Maintain (DBFO/M) Civil assets Transit Roads Waste water Resource recovery Performance based payment Deductions for Unavailability Revenue risk? 10

11 Who is investing? Equity (7-15%) EPCs/Builders: SNC Lavalin Hocthief Acciona Aecon Financial Sponsors: Plenary Fengate Gracorp Debt / Long term bonds (85-93%) Private placements: Life Cos Widely marketed bonds (rated): Often oversubscribed Pension funds: Caisse de Depot BCIMC OMERS/Borealis 11

12 Why are they investing? Stable long term returns Predicable payment stream Managed risk transfer Rated projects Strong government counter-parties Low political risk 12

13 Typical PPP structure Public authority Lenders Service payments DBFM agreement Project Co Subcontractors Investment Net operating cashflows Private finance DB M&R Sponsors (Equity) 13

14 Breakdown of responsibilities DBB approach DBFM approach Accountability for Project Accountability for Project Need and Scope Design Build Rehab Operations Maintenance Need and Scope Design Build Rehab Operations Maintenance Finance Project Own Facility Own Land Finance Project (Partial) Own Facility Own Land Owner Contractor 14

15 Canadian market opportunities Roads, bridges and transit Calgary Green Line LRT (AB) Metrolinx RER and Electrification Projects (ON) Highways 7 and 401 (ON) 100 Series Highways (NS) Health care Royal Columbian Hospital (BC) Providence St. Paul s Hospital (BC) Corner Brook Long Term Care (NFLD) Centennial and Victoria Hospital (NS) Justice and corrections OPP Modernization Phase 2 (ON) Abbottsford Courthouse (BC) Toronto Courthouse (ON) Water, wastewater and other sectors Core Area Waste Water Treatment Project (BC) Roberts Bank Port Expansion (BC) 15

16 US market Drivers Challenges Opportunities Crumbling assets Massive infrastructure deficit $3.6 trillion (by 2020) Lack of cohesive policy Federal and state issues Political Procurement policies Party division Presidential democracy Few P3 champions Competing structures Tax free bonds Municipal Private activity Growing pipeline 20 states More frequency Noteworthy success: Toll roads Airports Water and Wastewater Broadband Civic centers Courthouses Post-secondary Available private capital Canadian experience! 16

17 US report card Source: American Society of Civil Engineers 17

18 Contact Jay LeMoine Partner, Norton Rose Fulbright Greg Lewis Partner, Norton Rose Fulbright

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