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58 A P P E N D I X A Interview Guide Interview Questions for NCHRP Project 20-05/Topic 49-13, âLeveraging Private Capital for Infrastructure Renewalâ Prepared by Bryant Jenkins, Principal Investigator Interview Question Set #1: Policies and Practices June 2018 Through publicâprivate partnership (P3) programs, departments of transportation have used alternative procurements for major highway or bridge infrastructure, mostly for large or complex projects. These procurements involve financing an infrastructure development at the project level in order to transfer some of the projectâs risks to a private concessionaire. These projects also involve the investment of private equity in the project company. This set of interview questions is part of the effort in NCHRP Synthesis Topic 49-13 to gather information on agency perspectives on evaluating the investment of private equity in transportation infrastructure and practices in managing returns or monitoring project companies. We are interested in the experience and practices of agencies regardless of whether they have successfully procured a P3 project or whether they have assessed using the procurement model but eventually chose not to. This first set of interview questions covers agency policies and practices that related to the evaluation and management of private-equity investments in infrastructure projects. General Information Agency: Address:
Interview Guide 59 City, State, ZIP: Interview Contact: Position/Title: In case of questions and to have a link for the final report sent to you, please provide: Tel: Email: Policy Questions 1. Does your state have enabling legislation for highway P3s? If so, does your enabling legislation constrain the use of equity investments in any way? 2. Does your enabling legislation require or specify an evaluation process for determining whether a highway project should use project finance or be delivered as a P3? If so, does that evaluation process include any evaluation or calculation of the return on equity of the winning proposal? 3. Does your enabling legislation prohibit or enable the use of revenue risk-sharing mechanisms that reduce the potential for excess returns on equity (and reduce risk transfer)? Office/Agency Questions 4. Does your office have responsibility for evaluating and implementing highway P3 procurements in your state? If so, does your team focus exclusively on highway P3 projects or are members also working on other procurements? Revenue Risk Sharing Mechanism Comments (optional) Shadow toll ______________________________________ Availability payments ______________________________________ Minimum revenue guarantee/excess revenue sharing (MRG/ERS) mechanisms ______________________________________ Other ______________________________________
60 Leveraging Private Capital for Infrastructure Renewal 5. Does your office operate independently from the DOT in implementing these highway projects, or is it integrated within the DOT? If your office is independent, to whom does your office report to at the DOT? 6. What specific tasks does your office manage or take part in when implementing an alternative procurement for a highway project? Procurement Activities Comments (optional) Market sounding Specification development RFQ evaluation RFP evaluation Procurement management Project assessment or value-for-money Procurement reporting and transparency Financial analysis Other task(s) â specify Questions on Practice 7. Does your agency have a target equity return for highway P3 projects? If so, is there a specific numerical range, hurdle, or level of return and how are project risks structured to help achieve these returns? 8. Does your agency calculate or review returns on equity in highway P3 RFPs? 9. If return on equity is used to compare proposals during RFP evaluation, how is it used? 10. In evaluating a P3 RFP submission, does your office conduct a sensitivity analysis that varies the outcomes of project risks to determine a range of equity returns?
Interview Guide 61 11. In evaluating proposal financial models that include revenue risk, do you assess traffic risk/forecasts and probability level of traffic projections? 12. Does your agency have a transparency policy regarding equity returns? Are the forecast returns on equity published before commercial close? Are actual annual returns on equity published or formally reported during project operations? 13. To your knowledge, does your agency conduct any ex-post monitoring of profits or equity returns of contractors in any other forms of contracting (other than P3s)? If so, what does this consist of? 14. Does your agency have a policy requiring an evaluation should an operating concession company undergo financial restructuring? 15. Would your agency require sharing in benefits such as a refinancing or secondary sale in P3 agreements you participate in? How is this issue addressed in your template P3 agreement? 16. In calculating a projected (or a range for) return on equity for a P3 project company, what of the below information or estimates does your office use? Please describe how and when in the procurement process each is used. Information Type Evaluation Use a. Your officeâs estimate of base project costs b. Your officeâs estimates of probabilities and outcomes for core project risks â risk assessment? c. A risk-adjusted combination of your base project costs and core project risks, including financing costs, under traditional procurement [public-sector comparator (PSC)] d. The base project cost estimate used in the winning P3 proposal from your procurement e. The risk assessment (probabilities and costs) included in the winning P3 proposal from your procurement (if included) f. The range of potential outcomes based on a traffic study, capital cost report, or operations and maintenance (O&M) study commissioned during the procurement (for revenue risk projects)
62 Leveraging Private Capital for Infrastructure Renewal NCHRP TOPIC 49-13 Interview Question Set #2: Questions Relating to Specific Projects June 2018 This is the second set of interview questions for use in completing NCHRP Synthesis Topic 49- 13. These questions pertain to projects that involve the investment of private equity in the project company. This set of interview questions is part of the effort to gather information on agency practices and project outcomes relating to equity investments and returns in transportation infrastructure projects. This second set of interview questions is designed to gather information on a specific project. Should the agency being interviewed have completed multiple P3s involving private equity, one set of these questions should be completed for each project. Basic Information Agency: Interview Contact: Position/Title: In case of questions and for a link for the final report to be sent to you, please provide: Tel: Email: Project Name: Date of RFQ: Date of Commercial Close: Total Financing: Equity: ____________ Debt: ____________________________ Other Financing (grant, in kind public contribution, etc.): __________________________________ Procurement Questions 1. Were project company equity returns (ex-ante estimated) a deciding consideration regarding whether to deliver the project as a P3 at any point in the procurement process? How? 2. Was return on equity, in a financial model, required to be submitted by proposers for this highway P3 project? How did you incorporate this as a part of the evaluation criteria between bidders?
Interview Guide 63 3. Was a value-for-money or other quantitative study completed to evaluate returns on equity (or public costs) based on project risks prior to awarding a contract? If so, was it published or just used internally? 4. What evaluation criteria were used to compare project proposals (subsidy required, level below affordability cap, toll caps, etc.)? 5. Did the winning P3 proposal have an ex-ante equity return projection? If so, what was it? 6. What reporting requirements (traffic volumes, throughput, capital costs, O&M costs, major maintenance, P3 developer returns) were included in the project agreements? Was this reporting required by the project company? 7. Did any equity owner of the project company also have a contractual relationship with the project company in any way? (This would be the case, for instance, if a parent company invests equity in the project company but also has a construction contract with the project company.) Operations Questions 8. Have actual operating data met or exceeded projections once the project was operational for project revenue? Operating costs? Return on equity (if reported)? 9. Has a deviation from expected returns (higher or lower) prompted a renegotiation of any part of the project agreement? If so, what was changed? 10. Has the project been restructured financially since it started operations? If so, did your agency evaluate or receive a report regarding the transaction? How did the refinancing or equity sale affect the return on equity for the original concessionaire? How did the refinancing or equity sale affect your agency? 11. If the restructuring was due to a project company bankruptcy, what were the concessions made by project lenders? Did any equity holder receive any payment? Were there any identifiable taxpayer implications? 12. If a contractual limitation on returns was included in the project contract, has the limitation or sharing mechanism been triggered? 13. Has the project companyâs return on equity been raised by politicians or stakeholders as a concern or created other problems for the procuring agency? The survey is complete. Thank you for your participation!