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New Brunswick P3s

Presentation to Northern Border Finance Conference

Darrell StephensonStewart McKelvey

Saint John, NB

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Scope of the Projects

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Fredericton-Moncton Highway Project

204 kmOpened in 2001

Maine

New Brunswick

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Scope – Fredericton-Moncton Highway Project (FMHP)

Implemented with a P3 model Agreements signed in January 1998 Highway opened to traffic October 2001 Guaranteed Maximum Price $579 Million

204 kilometres of 4-lane highway

Developer responsible to operate, maintain and manage the highway until 2027 (average annual cost - $9 Million 1997)

Progress Payments Made Against Sign-Off By Independent Engineer

Financing: Lease based debt Toll based debt to be repaid by user tolls

User tolls replaced by shadow tolls

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Fredericton-Moncton Highway Project

204 kmOpened in 2001

Trans-Canada Highway Project275 km

To be opened November 2007

New Brunswick

Maine

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Scope – Trans-Canada Highway Project (TCHP) Implemented With a P3 Model

Agreements Signed February 2005 Highway to be Opened by October 2007 Guaranteed Maximum Price $543 Million

275 km of highway

130 km existing 4-lane highway

47 km built by NBDOT

98 km built by the Developer

No payments will be made to the Developer until the highway is opened to traffic

Largest P3 Project Undertaken In Canada With No Payment Until Completion

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Scope – TCHP (Continued…)

The Developer to Operate, Maintain and Rehabilitate all 275 km of highway until 2033 (annual fixed cost - $19 Million)

OMR work for 130 km of existing sections commenced June 1, 2005

Financing:By the Provision of a Debenture for the Guaranteed Maximum

Price to the DeveloperDeveloper had the Debenture S&P Rated and Sold it to

Canadian Institutional Investors in consideration of Progress Advances during the construction phase

Financing Structure Won Award for Innovation and Excellence in 2006 From Canadian Council for Public Private Partnerships

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Fredericton-Moncton Highway ProjectOpened in 2001

Trans-Canada Highway Project

To be opened November 2007

Fundy Islands Ferry Services Project

Delivery of Vessels 2009 - 2011

Maine

New Brunswick

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Scope – Fundy Islands Ferry Services Project (FIFSP)

Design-Build Design, construct and supply three new vessels

Grand Manan – 101 AEU, 400 passengers (2009 delivery) Deer Island – 24 AEU, 99 passengers (2010 delivery) White Head – 12 AEU, 84 passengers (2011 delivery)

OperationsFor a period of 16 years: Provide the Grand Manan, White Head and Deer Island Ferry Services Maintain and refit the Vessels (includes both new and existing Vessels) Operate and perform routine maintenance to Ferry Terminals Collect passenger and vehicle fares for the Grand Manan Ferry Service

set by the Province

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Key Contractual Considerations

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Key Contractual Considerations

As Is, Where Is Developer/Operator Should Accept Responsibility for

Construction and Operation During the Contract Period for the Bid Price, save for Scope Changes

Identify Risks Which Should not be Moved to the Developer/Operator, but for which a Scope Change is allowed, e.g.: Changes in Technical Standards Failure of the Governmental Authority to perform an obligation Unknown Contaminated Sites/Archaeological Sites/Sulphide

Bearing Rock Inflation During Operations Period

Identify Impact of Scope Changes/Force Majeure (e.g.: occurrence before a specified date does not move completion date)

Contractual Considerations:

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Key Contractual Considerations (Continued…)

Clear and Expedited Time Frames for Resolution of Dispute regarding Non-Conformance, Scope Change, Force Majeure, etc. – e.g.: if the Developer/Operator does not challenge the determination of the Governmental Authority they should be deemed to have accepted its determination

Performance Based Contracts are More Work to Prepare, but Easier to Administer (ie: develop Key Performance Indicators and associated Payment Adjustments)

Bonding/Insurance Programs which Afford Reasonable Protection for Risks you Wish to Transfer to the Developer

Reasonable Protection for Lenders

Allow Proponents an Opportunity to Comment on Legal Agreements in the RFP Process

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Lessons LearnedFMHP to TCHP

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Lessons Learned and Solutions between FMHP and TCHP

ISO Compliant Systems ISO Certification Required

Quality Management Systems Integrated Management Systems

Determination of Scope Changes – Specifically DefinedMateriality Based in Agreements

Transfer of NBDOT Built Sections Defined Time Frame -Operator Audit

Rights

Arbitration Dispute Resolution Board for DB Work,

Arbitration for OMR

FMHP TCHP Solutions

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Lessons Learned and Solutions

Progress Payments Completion Payment

Auditing by Independent Agent No Independent Agent - Audit by Province

Variable Operations Payments Fixed Operations Payments

Renegotiate OMM Price - Year 20 Price Bid for Term of Project

Conformance Based Performance Based - Key Performance Indicators, Payment Adjustments and Asset Management

Stand Alone Hand Back Standards Tied to KPIs and 3rd Party Inspection Added

FMHP TCHP Solutions

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Financial ModelsTCHP and FIFSP

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Financial Models – TCHP and FIFSP

For TCHP, for DB Component Completion Payment Model

Full payment after construction

Extended Repayment Model

Payment over 25 years after construction

Lowest NPV Offer Selected Model

Common Elements Guaranteed Maximum Price for construction

OMR Payments

Term of OMR period – to June 30, 2033

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For FIFSP, Proponents Have the Option to Submit Under Two Models Completion Payment Model

Payment for Each Vessel on Delivery

Extended Repayment Model

Payment for the Deer Island and White Head Vessels on Delivery

Proponent Retains Title to the Grand Manan Vessel and NBDOT Pays an Availability Fee over the Term

Proponents Bid Option Price for which Province has the Right to Purchase the Grand Manan Vessel at the end of the Term

Lowest NPV Offer Selected Model

Option Price Discounted 5% for Purposes of NPV Comparison

Financial Models – TCHP and FIFSP (Continued…)

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Comparison of FMHP and TCHP Annual Payments(Operations, Maintenance and Rehabilitation)

FMHPOMM Payments per Year

0

5

1 0

1 5

2 0

2 5

0 2 4 6 8 10 12 14 16 18 20 22Year

Paym

ent (

1998

$

mill

ions

)Forecast Demand of OMM for FMHP

Operator’s maintenance schedule is driven by forecast budget

TCHPOMR Payments per Year

0

5

1 0

1 5

2 0

2 5

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Year

Paym

ent (

2004

$

mill

ions

)Equal Annual Payments for OMR for TCHP

Full responsibility on Operator to manage maintenance work and cash flow

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Risk Transfer

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Key Risk Transfer

Risk Government Developer/OperatorPrice

Schedule

Scope Change

Weather

Soil Conditions

Insurance and Bonding

Environment Impact Assessment

Environmental Permitting

Quality Management

Safety Management

Strikes

Archeological Finds (known)

Pollution

Right of Way Acquisition

XX

XX

XX

X

XXX

XXX

X

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Business Models

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Organizational Structure – Highway Projects

Province

NBHC

Project Company

Developer/Operator

100%

Project Agreements

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Organizational Structure – Ferry Project

Province

Developer/Operator

Project Agreements

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Measurements of Success

Guaranteed Delivery Date

Guaranteed Maximum Price

Key risks borne by the Developer

Environmentally responsible delivery

Safe workplace

Safe, reliable, high quality and economic service for users

Economic and Industrial benefits and Aboriginal Inclusion Plan

All applicable standards and guidelines met or exceeded

Development of expertise

Technology transfer

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CONCLUSION

P3s have delivered for New Brunswick:

Accelerated delivery

Innovation

Value for money

Resident expertise

Contractually assured service delivery

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Contact Information

Trans-Canada Highway Project Co. Ltd.444-2007 telephone457-7332 faxTCH web site at www.gnb.ca

keyword: Trans-Canada Highway