Canada Line Final Project Report
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Canada Line Final Project Report COMPETITIVE SELECTION PHASE April 12, 2006 Table of Contents Executive Summary ...............................................................................................................1 1 Purpose of the Final Project Report.......................................................................................4 2 History of the Project..............................................................................................................5 2.1 Project Governance, Funding and Ownership .............................................................6 2.2 Project Description .......................................................................................................7 3 Achieving Value for Money ....................................................................................................8 3.1 Competitive Selection Process ....................................................................................9 3.1.1 The Concession Agreement.......................................................................12 3.1.2 The Essential Elements and the Affordability Tests...................................14 3.1.3 Total Construction Cost and Funding.........................................................15 3.2 Net Cost of the Project and the Public Sector Comparator (PSC).............................16 3.2.1 Basis for the Comparison...........................................................................16 3.2.2 Public Sector Comparator ..........................................................................17 3.2.3 Risk Assessment........................................................................................18 3.2.4 Risk Assessment of the PSC .....................................................................19 3.2.5 Risk Assessment of the Project .................................................................19 3.2.6 Statistical Analysis......................................................................................19 3.2.7 Net Cost of the PSC and the Project..........................................................20 3.2.8 Impact of Ridership Revenue.....................................................................22 3.2.9 Sensitivity to Discount Rate .......................................................................24 3.3 Transportation Benefits ..............................................................................................25 Page i of ii Figures Figure 1: System Alignment .....................................................................................................7 Figure 2: The Project Structure at Financial Close ................................................................12 Figure 3: Total Project Costs and Funding – Construction Period ($ million).......................15 Figure 4: Allocation of Risk.....................................................................................................18 Figure 5: Net Cost ($ million NPV) .......................................................................................20 Figure 6: Range of Expected Cost of the PSC and Project ($ million NPV) ..........................21 Figure 7: Comparison of Total Ridership in the Corridor ($ million NPV) .............................22 Figure 8: Range of Cost – Ridership Risk Separated ($ million NPV)...................................23 Figure 9: Sensitivity of Net Cost to Discount Rate ($ million NPV)........................................24 Figure 10: Essential Elements .................................................................................................30 Figure 11: CLCO Sources and Uses of Funds - Construction Period ($ million)....................32 Figure 12: CLCO’s Net Operating Period Funding ($ million NPV) .........................................33 Figure 13: Value of InTransitBC’s Investment ($ million)........................................................34 Figure 14: Security Arrangements with InTransitBC ($ million) ..............................................35 Figure 15: Discounted Example at 5%.....................................................................................36 Appendices Appendix A: External Scrutiny of CLCO’s Work..........................................................................26 Appendix B: The Essential Elements ..........................................................................................28 Appendix C: The Affordability Tests ............................................................................................31 Appendix D: Capital At-Risk ........................................................................................................34 Appendix E: Discounting .............................................................................................................36 ii of ii Executive Summary Project Description and Purpose of Value1 (NPV) less than the PSC. The Final Project Report revenue and cost comparisons are based on forward-looking information and consequently, Canada Line is a 19km rail rapid transit the $92 million NPV differential is not an system connecting downtown Vancouver, the absolute assertion and the difference may Vancouver International Airport and Central be less or greater than expected based on Richmond. It has 16 stations, two bridges actual costs and revenues achieved over the and nine kilometres of tunnel. This is the final 35-year Concession Agreement. report for the procurement stage of the project. Its purpose is to assess value for The net cost differential should not be money. It also includes a discussion of interpreted as a savings available to fund project funding and compliance with public other government expenditures. Rather, the agency funding conditions. net cost differential arises from a comparison of forecasts of project revenue The public funding agencies for Canada and costs with forecast of the revenues and Line are: the Government of Canada costs associated with a hypothetical project (Canada), the Province of British Columbia funded and managed solely by the public (the Province), the Greater Vancouver sector (the PSC). The comparison is only Transportation Authority (GVTA), Vancouver made to assist in concluding whether or not International Airport Authority (VIAA) and the the project has delivered value to the City of Vancouver. The procurement stage taxpayer. began with the approval by the Province, GVTA and VIAA to begin a competitive Within Approved Public Sector Funding process to select a contractor to design, build, partially finance, operate and maintain Project development funding was provided the line. by the public agencies and project design and construction is jointly funded by the The procurement concluded with execution public agencies and the selected contractor, of a contract (Concession Agreement), InTransitBC. Performance payments during between Canada Line Rapid Transit Inc. the operating period are funded by GVTA (CLCO), the company responsible for and the Province. implementing the project for the public sector, and the selected contractor, InTransitBC. Value for Money CLCO concludes that value for money is 1 Costs and revenues of the project are expressed as expected to be achieved based on an cash flow projections over the term of the Concession analysis of the competitiveness and fairness Agreement (about 35 years). In order to reflect the of the selection process undertaken by time value for money, such cash flows are often CLCO and upon revenue and cost presented in Net Present Value (NPV) terms. An NPV comparisons with a public sector comparator is calculated by applying a compounding discount rate (PSC), which indicates the expected net to a stream of future cash flows. This calculation cost of the project is $92 million Net Present reduces these cash flows to a single value reflecting the time value of money. All NPV amounts in this report, unless otherwise stated, are the result of discounting annual costs and revenues to the year 2003, using a 6% nominal discount rate. 1 of 36 This report concludes that approved public History and Competitive Selection sector funding together with InTransitBC’s investment is sufficient to fund project In 2000, Canada, the Province, GVTA, construction: VIAA, and the Cities of Vancouver and Richmond agreed to participate in a three- • $1,331 million (nominal) approved phase program to evaluate the potential to public funds; build rapid transit in the Richmond-Airport- Vancouver corridor by 2010. This concluded • $720 million (nominal) InTransitBC with approval to begin the procurement. investment; CLCO commenced the procurement process in November 2002 by issuing a • total project cost within approved Request for Expressions of Interest (RFEI). funding of $2.05 billion (nominal), Ten private sector consortia of firms which is equivalent to $1.89 billion submitted responses that detailed their ($2003 real) relevant qualifications and experience. In August 2003, CLCO issued a Request for The approved funding does not fund the Proposals (RFP) to four well-qualified cost of those aspects of the project that are proponents, each of whom CLCO concluded directly funded and managed by GVTA and were capable of designing, constructing, the Cities of Vancouver and Richmond. This financing and operating the line. includes the provision of GVTA designated policing units, certain operating period One of the proponents withdrew in the fall of insurance policies, GVTA and City funding 2003. The remaining three proponents of