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OCR for page 49
BREAKOUT SESSION 4 Expecting the Unexpected Assessing Project Risk and Its Impacts on Financing Sharon Greene, Sharon Greene and Associates (Moderator) Lowell Clary, P3 Development Company Bill Van Meter, Denver Regional Transportation District Kathleen Sanchez, Los Angeles County Metropolitan Transportation Authority Alistair Sawers, Consultant to Arup HighwayManaged Lanes Project: Transit Project: Eagle P3 Project, I-595 Managed Lanes Project, Florida Denver, Colorado Lowell Clary of P3 Development Company gave the Bill Van Meter of the Denver (Colorado) Regional first presentation of the breakout session and provided a Transportation District (RTD) discussed the innova- comprehensive overview of the I-595 Corridor Roadway tive financing approach of the Eagle P3 Project. In Improvements Project in Fort Lauderdale, Florida. 2008, RTD identified a $2.7 billion funding gap for the The express lanes are part of a 35-year term public FasTracks transit program. To address it, RTD decided private partnership (P3) featuring a designbuildfinance to pursue the Eagle P3 project and successfully applied operatemaintain (DBFOM) fixed-price contract. The for entry into the New Starts Penta-P program, which project has a 5-year construction schedule, and comple- recognized the risk transfer associated with these proj- tion is estimated for July 2014. Of the financing, $1.2 bil- ects to streamline the Federal Transit Administration lion has been allocated for construction and $1.8 billion New Starts risk reviews. The Eagle P3 is a DBFOM of a for operations and maintenance. The express lane project new commuter rail system consisting of two new com- financing includes equity, a bank loan, and a Transporta- muter rail lines, with a 46-year concession (40 years tion Infrastructure Finance and Innovation Act loan. An operating). RTD will retain ownership of all assets availability payment of $64 million (indexed to inflation) at all times, and all revenues generated by the proj- will be used. Mr. Clary emphasized that the payments ect (fares, advertising, parking, etc.) will remain with must be earned by meeting performance metrics. RTD. RTD will also retain fare policy decisions. The While a key feature of this project is reversible express total project cost is $2.48 billion, and RTD is review- lanes, additional safety, operational, aesthetic, infrastruc- ing bids from two concessionaires. The concession is ture, and engineering enhancements are being undertaken expected to finance up to 40 percent of the capital costs over several years. They include congestion pricing; state- with a combination of private-sector equity and debt. of-the-art emergency access and infrastructure; bus rapid Progress payments will be made during design and con- transit providing peak-period service during the construc- struction and availability payments during operations tion of the project; improvements to the New River section and maintenance, with all payments adjusted for per- of the Greenways System providing a countywide network formance. Mr. Van Meter also presented an illustra- of safe and clean bicycle, pedestrian, and equestrian paths tive table that shows which risks are shared, which are and nature trails, sidewalks, and waterways; ramp improve- retained by RTD, and which will be transferred to the ments; bypass bridges; auxiliary lanes; and sound barriers. concessionaire. 39

OCR for page 49
40 F I NA NC I NG S U R FA C E TR A NSPOR TA TION IN T HE U NIT ED ST A T ES Multimodal Transportation Program: ridor Light Rail, Metro Red Line Westside Extension, Los Angeles County Metro P3 Program, and the Regional Connector Light Rail). California The final presentation was given by Alistair Sawers, a consultant to Arup. He summarized his recommen- Kathleen Sanchez of the Los Angeles County Metro- dations on the transfer of project risk, including when politan Transportation Authority gave a presentation transferring risk makes sense and its impacts on financ- on LA County Metro's P3 (Alternative Project Delivery) ing. He presented a risk matrix and a value for money Program. The agency is proceeding with a P3 program analysis. He discussed the differences in financing under to accelerate delivery of projects. The public partner is AAA and BBB rating scenarios, cost contingencies, insur- assuming most of the project development risk, and the ance and bonding, required funded risk reserves, con- private partners will be asked to assume project imple- tingent liabilities, cover ratios in project finance, and mentation risks such as financing, design and construc- required equity returns for investors. tion, and facility operations and maintenance. A project Mr. Sawers described a conventional risk matrix that selection process is being used to review 85 projects and is used more to allocate than to price risk and that could determine which should be advanced for private-sector be used for fixed-price turnkey construction contracts, participation. Fourteen were selected as high P3 poten- P3 concessions agreements, project finance loan agree- tial, and six were selected by the Metro Board for initial ments, and feasibility studies. He characterized revenue acceleration. Three are highway projects (I-710 South forecasting as an imprecise science and provided a table Corridor, SR-710 North Extension, and the High Desert that demonstrated the high frequency of inaccurate Corridor), and three are transit projects (Crenshaw Cor- demand forecasts in public works projects.