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Public Private
Partnership Opportunities
Hilton Barbados Resort
Presented by: Gianni Ciufo
9th October, 2015
International Business
Week Conference
Barbados International
Business Association
Agenda
Public Private Partnership Opportunities
Introduction
Key P3 Concepts
Government Monetization
Impact Investing
2
Public Private Partnership Opportunities
Introduction
3
Introduction
Defining P3s
Public Private Partnership Opportunities
“A cooperative venture between the public and private sectors, built on the expertise of each partner, that
best meets clearly defined public needs through the appropriate allocation of resources, risks and
rewards.” - Source: Canadian Council for Public Private Partnerships
The “partnership” is a contractual relationship that spells out the roles, responsibilities and accountabilities
of both the public and private sector parties to the contract
4
Introduction
Carribean P3 Projects
There have been a number of P3 projects* in
various areas of the Carribean that reached financial
close within the last 5 years including:
• Trans-Jamaican Highway (Highway 2000
Project) Refinancing and Expansion (Jamaica) –
April 2011
• King Edward VII Memorial Hospital (Bermuda) –
December 2010
• Green Corridor Highway PPP (Aruba) – July
2015
There are also other Carribean PPP projects
currently in the transaction phase including:
• Watty Voss Boulevard (WVB) PPP (Roads PPP
in Aruba) – in the preferred proponent stage
• Norman Manley International Airport in Kingston,
Jamaica – in the preferred proponent stage
Public Private Partnership Opportunities 5
Source: http://Bermuda-online.org/kemh.htm
Source: http://www.infra-deals.com
Public Private Partnership Opportunities
Key P3 Concepts
6
Key P3 Concepts
Comparing P3s vs. Traditional delivery
Public Private Partnership Opportunities
Public-private partnerships Traditional delivery
• Public sector procures assets
• Public sector specifies its requirements in input
terms
• Components of delivery are separated (design,
bid, build, operate)
• Asset paid for at completion
• Risks typically remain with the public sector
• Public sector procures assets and services
core to the vitality of the assets
• Public sector requirements are defined in
output terms
• Components of delivery are bundled (design,
build, finance, operation and maintenance)
• Payments made over life of asset and
linked with operational performance
• Significant levels of risk transfer
7
Public Private Partnership Opportunities
What is a lifecycle approach to infrastructure?
A comprehensive asset management methodology that commits the optimal level and mix of human, financial and
technical resources to the planning, execution and management of public infrastructure projects to facilitate the
delivery of high quality public services.
Why is a lifecycle approach required for infrastructure projects?
Public infrastructure projects are complex with 25 to 100 year lifecycles (Assets with a 30 to 50 year useful life will
go through 7 to 12 political cycles)
Focus of decision-makers, planners and managers tends to be on planning and constructing a facility –
consideration of long-term management of assets is usually deferred
Condition of assets critical to delivery of quality public services and a lifecycle approach to planning and
management helps to mitigate lifecycle risks across generations of asset managers and users
8
Key P3 Concepts
The Infrastructure Lifecycle
Public Private Partnership Opportunities
CONCESSION PHASE TRANSACTION PHASE PLANNING PHASE
1. Condition of infrastructure fiscal situation
2. Legislation / regulation
3. Leadership: political, public service and
project management
4. Planning: environmental assessments and
project opportunities
5. Governance/financial model selection
6. Business Case Development
7. Communications: internal and external
8. Implementation Plan
Se
qu
en
tia
l A
cti
vit
ies f
or
Infr
astr
uc
ture
De
live
ry
1. Transaction process
2. Market sounding
3. Risk Transfer and Value for Money
Benchmarking
4. Payment mechanisms & establish
Performance Standards
5. Finalize Request for Proposal and legal
contract
6. Bidder selection and negotiations
7. Financial close
P3s are focused on a lifecycle solution for infrastructure
1. Transition to constructor
2. Construction
3. Facility operation and maintenance
(performance, contract and relationship
management)
4. Concession agreement monitoring and
management
5. Periodic audits and market testing
6. Asset hand back
9
Key P3 Concepts
The Infrastructure Lifecycle
Key P3 Concepts
Infrastructure delivery model spectrum
Public Private Partnership Opportunities
There is a spectrum of infrastructure delivery models ranging from Traditional delivery to full privatization.
Moving left to right on the spectrum illustrated in the figure below, the role of the private sector increases
as risk is transferred from the public-sector sponsor of an infrastructure project.
Infrastructure Delivery Spectrum
Public Ownership/Control Public-Private Partnership Private Control/Ownership
Governance / Ownership Models
Project Delivery Mechanisms
Traditional
(Design-Bid-
Build)
Finance-
Design-Build-
Operate &
Maintain
Design-Build-
Operate &
Maintain
Design-Build-
Finance Design-Build
Build-Own-
Operate &
Transfer
10
Benefits of P3 Infrastructure Projects
Public Private Partnership Opportunities
• P3s enable the public sector to spread cost of infrastructure investment over
the lifetime of the asset - affordable
• Payments are aligned to the delivery of project objectives - thus P3s have a
solid track record of on-time or early construction completion and on-budget
delivery
• Well-designed P3s help maintain infrastructure by transferring maintenance
requirements for a facility to the private partner
Bring construction
forward
Track Record
Ensuring that assets are
properly maintained
• The concept of “pay for performance” is at the heart of the P3 delivery
methodology Accountability
• P3s result in contracts that set out fixed payments over the life of the
contract that make it easier for governments to budget in their fiscal plans Fiscal planning certainty
11
Criticisms of P3s
Public Private Partnership Opportunities
• Relationship between the public and private sector cost of capital for a
project should be appropriate
• P3s lower costs and ensure value for money
• Private sector efficiency can generate economies that outweigh higher
costs of borrowing
Higher cost of capital
Value for Money
• P3 market matures and becomes more competitive, risk of windfall
profits decreases
• Gain share agreements can also be negotiated to mitigate this risk
Windfall profits to the
private sector
Issue Response
12
Public Private Partnership
Opportunities -
13 Public Private Partnership Opportunities
Government Monetization
• Given their dual objectives of managing the public purse and investing in priority
sectors such as infrastructure and enhanced levels of government service,
governments across Canada are exploring initiatives to maximize the value of
existing assets through:
− Asset Monetization (Sale, Lease)
− Enterprise Divestitures (Sale, Concession/License)
− Alternative Service Delivery
• These strategic partnerships with the private sector support government efforts
to generate value, reduce costs and create efficiencies in the delivery of public
services.
Government Monetization
Public Sector Monetization Initiatives
Public Private Partnership Opportunities 14
Government Monetization
Large Scale Public Sector divestitures –
Canadian History
PetroFina to Petro Canada
• Petro Canada acquired PetroFina Canada
Limited in 1981
• Allowed Petro Canada to broaden itself from a
purely Western Canadian based company, as it
took on the ownership of PetroFina’s Eastern
refinery and 940 stations in Eastern Canada.
• Increased their Canadian presence in Quebec
• Cost to acquire PetroFina approximately $1.2
Billion
Others
Public Private Partnership Opportunities 15
Province of Ontario Savings Office (POSO)
• The POSO was established in 1921 with 23
branches plus 5 smaller agencies across
Ontario, providing banking services
• 2001 budget announcement
Reasons for this divestiture:
− Private Sector expertise; and
− Not a core business of the government
• Desjardin Credit Union acquired the business of
POSO for $50 Million
Ontario is moving ahead with its plan to unlock the value of certain public assets supporting investments in transit,
transportation and other priority infrastructure projects through Moving Ontario Forward. Province's plan is to
invest more than $130 billion over 10 years in public infrastructure, the largest infrastructure investment in
Ontario's history.
The following is a list of current sales:
Province of Ontario
• Seaton Lands is a proposed new urban development on 3,100 acres of land in the City of Pickering
• Liquor Control Board of Ontario 11 acre site located at Toronto waterfront if sold is expected to generated
around $200 million
• 700 university Avenue over 1 million square feet of corporate office space
• $1.1-billion gain from the recent sale of GM shares, including the $200 million above target revenue, was
flowed into the Trillium Trust which provides dedicated funds for priority infrastructure projects across the
Province
Federal Government
• Disposition of Foreign Affairs and International Trade Canada Government Embassies
• Public Works and Government Services Canada sale of a British Columbia Port Facility
Government Monetization
Large Scale Asset Sales
16 Public Private Partnership Opportunities
The report titled “Retain and Gain: Making Ontario’s Assets work Better for
Taxpayers and Consumers” was the result of a mandate to review the LCBO,
Hydro One and OPG and determine approaches to maximize their value to the
people of Ontario
Government Monetization
Large Scale Enterprise Divestiture – Recent
Considerations for Ontario
17 Public Private Partnership Opportunities
POSO
Public Private Partnership
Opportunities -
18 Public Private Partnership Opportunities
Impact Investing
Impact Investing
What is impact investing?
19 Public Private Partnership Opportunities
An investment approach that intentionally seeks to create both
financial return and positive social impact that is actively measured
Impact
Investing
Opportunity
Many Examples of impact investing vehicles result
Enabling
Trends
Advancement of
Related Concepts
• Pay-for-Performance Contracting
• Public-Private Partnerships (PPP)
• Corporate Social Responsibility (CSR)
• Double / Triple Bottom Line
• Social Return on Investment (SROI)
• Social Innovation
• Social Enterprise
Environmental Context and
Enabling Trends
The developing impact investing market is opening a range of new opportunities
Public Private Partnership Opportunities 20
20
A range of impact investing “vehicles” are emerging
Equity Crowdfunding - The collective effort of individuals who network
and pool their money to support efforts initiated by other people or
organizations who are aiming to achieve similar objectives
Microfinancing - When an institution or group provides loans to people
or organizations at a below market rate of interest
Community Bonds - A type of loan that is structured for a non-profit
organization or social enterprise and made available for investment by
community members, often used for infrastructure projects
Direct Investment - Offers an investment avenue for investors, including
philanthropists, foundations, and high-net worth individuals, to support
initiatives that drive social and environmental change
Green Bonds - A type of loan structure that uses the traditional bond
model to encourage investment into projects with environmental benefits
Public Private Partnership Opportunities
Social Impact Bonds (SIBs) - A pay-for-performance mechanism where
the commissioner or government agrees to pay a financial return for
improved social outcomes that also result in cashable financial savings
21
How Social Impact Bonds (SIBs) are commonly structured
22 Public Private Partnership Opportunities
4. Independent evaluator determines if
outcomes are achieved and what
payment to be made to investor
$$$
Independent
Evaluator
2. Investors fund the service
Investors
$$$
Service Delivery
Organization(s)
3. The social service delivery
organization(s) receive(s) the
funds to address the social
issue
$$$
1. A contract is negotiated where the
government agrees to pay a rate of return on
invested capital for improved social outcomes
Government
Department or
Agency
Intermediary
There are a variety of benefits for the participants in a SIB model
23 Public Private Partnership Opportunities
• New source of external
funding
• Contracts are
performance-based
• Clearly demonstrate
results to citizens
• Access innovative
solutions
• Enable a reliable funding
stream
• Achieve longer planning
horizon
• Develop flexibility to
deliver innovative
approaches to complex
problems
• Scale-up effective
programs
• Demonstrate enhanced
social impact
• Establish socially-
minded capital
deployment
• Gain blended
financial and social
returns
• Demonstrate
innovative
philanthropy
Social Impact Bonds allow each participating organization to
bring their best expertise to the table to deliver social services with
more innovation and flexibility
Governments Service Delivery
Organization(s) Investors
Canada Pilot Case Study: Sweet Dreams, Saskatchewan
24 Public Private Partnership Opportunities
• “Sweet Dreams” SIB for a supported living home for at-risk
single mothers
• House between 8 to11 adults and 8 to 15 children, for a
period of 2 month to 2 years
• $1 million investment between one private investor and
one credit union
• Basic pay-for-performance contract
• Independent assessor measures success at 2nd, 4th and
5th years
“… expected to result in
savings to the Government of
Saskatchewan of between
$540,000 and $1.5 million over
five years.” – Government of SK
“… expected to result in
savings to the Government of
Saskatchewan of between
$540,000 and $1.5 million over
five years.” – Government of SK
“…[there is] value of
looking at old
problems in a new
and innovative way.” - The Star Phoenix
“…[there is] value of
looking at old
problems in a new
and innovative way.” - The Star Phoenix
“This program gives at-
risk mothers and
children a chance at a
better life…” - Government of SK
“This program gives at-
risk mothers and
children a chance at a
better life…” - Government of SK
Up to 5%
return
$1M
EGADZ’s
Saskatoon
Downtown Youth
Centre 5 year term
Saskatchewan
Ministry of
Social Services
Conexus Credit
Union; Wally &
Colleen Mah
TBD
Independent
evaluation Reporting /
project
management
SIB Overview Saskatchewan SIB Model
Deloitte eminence in the Impact Investing space
The Solution Revolution | Author: William D. Eggers and Paul Macmillan |
http://www.solutionrevolutionbook.com/
Measuring Impact: Subject Paper of the Impact Measurement Working Group Author: Social Impact Investment Taskforce, with support from Deloitte |
http://www.socialimpactinvestment.org/reports/Measuring%20Impact%20WG%20paper%20FINAL.pdf
Paying for Outcomes: Solving Complex Societal Issues Through Social Impact
Bonds | Author: Deloitte | http://www2.deloitte.com/content/dam/Deloitte/ca/Documents/insights-and-
issues/ca-en-insights-issues-paying-for-outcomes.pdf
Social Impact Bonds in Canada: Investor Insights | Author: Deloitte and the MaRS
Centre for Impact | http://impactinvesting.marsdd.com/wp-content/uploads/2014/04/SIBs-in-Canada-
Investor-Insights.pdf
From the Margins to the Mainstream: Assessment of the Impact Investment
Sector and Opportunities to Engage Mainstream Investors Author: World Economic Forum , in collaboration with Deloitte |
http://www3.weforum.org/docs/WEF_II_FromMarginsMainstream_Report_2013.pdf
Charting the Course: How Mainstream Investors can Design Visionary and
Pragmatic Impact Investing Strategies | Author: World Economic Forum, with support from
Deloitte | http://www3.weforum.org/docs/WEF_ImpactInvesting_Report_ChartingTheCourse.pdf
Public Private Partnership Opportunities 25
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