REQUEST FOR INFORMATION CORRIDOR IMPROVEMENTS

RESPONSE BY TRANSURBAN TABLE OF CONTENTS

GENERAL TECHNICAL CHALLENGES COMMERCIAL AND FINANCIAL Please describe your firm, its experience AND ALTERNATIVE SOLUTIONS STRUCTURE in relation to public-private partnership Based on your experience in the Please explain your firm’s interest in the projects, and its potential interest in development of similar projects and improvement concepts discussed in the relation to the Project? characteristics of the I-66 corridor, Tier 1DEIS. What is your recommended 1 please explain the technical challenges approach for financing the capital cost of that may be encountered with the each concept? What, if any, advantages will the highway and transit improvement 9 commonwealth potentially gain by concepts described in the Tier 1 DEIS. entering into an agreement in which Please provide recommendations Please discuss your firm’s interest in: operations and maintenance, life-cycle for mitigating or overcoming those a. Accepting traffic and revenue risk in responsibility, and/or traffic and revenue challenges. a toll concession risk are transferred to the private 5 b. Accepting performance risk in an sector? How do you assess the likely availability structure magnitude of such advantages? Do you believe a bifurcated highway 10 What are the potentially offsetting system along the I-66 corridor is disadvantages? technically feasible? Please provide any What is a reasonable concession term 2 experience and supportive information for a or a bus rapid transit that you may be able to share from concept? Why? similar projects. 10 PROCUREMENT PROCESS 6 Do you have any particular concerns with or major observations about the What are the most significant cost ADDITIONAL CONSIDERATIONS milestone schedule provided in this RFI? drivers in the development and operation If your firm is a Disadvantaged Please provide your views on proposed of the managed lanes and bus rapid Business Enterprise (“DBE”) or a Small, solutions to address these concerns? transit concepts along the I-66 corridor? Women-owned, and Minority-owned 3 How can these concepts be implemented in such a way as to preserve the potential Business (“SWaM”), please provide for rail extension? any suggestions or comments on how What are the critical path items for the 7 OTP3, VDOT or DRPT can help to develop procurement of this Project and why? teaming opportunities with prime 3 What, if any interoperability issues do contractors. you foresee with the current tolling 11 Looking ahead over the next two to three system on I-495 Express Lanes? years, do you believe your firm will be 7 What additional challenges or risks interested in submitting a committed should OTP3, VDOT, DRPT or CTB be proposal for the development of the aware of in regard to the Project’s scope, Project (any or all of the build concepts)? What suggestions do you have for better procurement process, delivery method, Are there any particular concerns that coordination between this Project and term of contract, technical and financial may prevent your firm from getting other projects currently under design or feasibility, etc.? engaged in the project development? construction along the I-66 corridor? 11 How might those concerns be resolved? 8 4 What challenges are associated with ABOUT TRANSURBAN What is the minimum amount of time managing the life-cycle costs for the that your firm requires to develop and improvement concepts as described in submit a committed detailed proposal the Tier 1 DEIS? What measures would for the Project after issuance of you suggest to mitigate these risks? potential RFP? 8 4 What adjustments to the Project scope, or development strategies (including potential phasing of project elements) would you consider/recommend to reduce the upfront capital costs and/or the life-cycle costs of the overall project costs? 8 GENERAL

Please describe your firm, its experience in relation to public-private partnership projects, and its potential interest in relation to the Project?

Transurban partners with governments to deliver road-based transportation solutions that meet community needs over the long term—developing sustainable, safe, innovative and efficient projects. That means working collaboratively with all stakeholders to develop strategic transportation projects that meet the policy objectives of our government partners, and having the expertise and experience to execute projects successfully. As a long-term owner and operator, with our U.S. headquarters in , Transurban manages traditionally public assets under concessions that can last for decades. Our approach is to work closely with our government partners during every >>Transurban and its partners delivered –– Expansion of existing HOV lanes from stage of a project—from financing and the $2 billion 495 Express Lanes Project two to three lanes for 14 miles between development to construction and operation. early, on budget and with an industry- to vicinity of leading safety record. Edsall Road on I-395; This unique long-term focus has enabled >>The 495 Express Lanes project provided: –– Creation of a seamless connection Transurban to grow from a $500 million to to the 495 Express Lanes and into a $10 billion company (equity value) since its –– More contract opportunities for Virginia Tysons Corner; formation in 1996. The company generates small businesses than any single in excess of $800 million of proportional transportation project in the history –– New or improved access to and from EBITDA at industry leading operating of Virginia; the lanes at key interchanges; and margins, and has a robust balance sheet –– Introduction of HOV and reliable transit –– Technology and law enforcement and an A- credit rating. options to the Virginia side of the to keep violators out of the lanes. ; Virginia’s partnership with Transurban has >>Transurban’s community grant program generated significant transportation and –– Replacement of more than $260 million and “1,000 Trees in 1,000 Days” campaign economic outcomes for the commonwealth: of aging infrastructure, including more have supported more than 120 local than 50 bridges and overpasses; community initiatives, including programs >>Combined, the Express Lanes projects to restore streams, improve safety on local have generated over $5 billion in economic –– Replacement of existing soundwalls roadways, and promote bicycling as an activity and more than 28,000 jobs; and construction of new soundwalls to double existing noise reduction tools integral part of transportation in >>Transurban and its partners have injected for surrounding neighborhoods; . more than $500 million in private equity >>Transurban’s award-winning “Orange to help fund critical transportation –– Construction of carpool ramps Cones. No Phones.” distracted driving improvements providing congestion relief connecting I-95 with the Capital awareness campaign and dedicated and new, reliable transit options; Beltway to create a seamless HOV network; and Express Assist service crews, which have >>The 495 Express Lanes project was the first helped more than 450 drivers in the first –– Upgrades to 12 key interchanges and transportation project where private activity year, demonstrate our strong commitment new access points at Merrifield and bonds were used, and was among the first to safety in both the construction and Tysons Corner. to bring credit assistance to Virginia from operation of managed lanes projects. the Transportation Infrastructure Finance >>The 95 Express Lanes project is providing: and Innovation Act (TIFIA); –– Almost $200 million in contract >>Travelers in both the I-95 and Capital opportunities for Virginia small Beltway corridors overwhelmingly support businesses; 1 the projects, as Fall 2013 surveys show –– New ramps, lanes and active a majority believe the projects benefit management that will improve the region; and conditions for current HOV and transit users; –– Extension of existing HOV lanes 9 miles from Dumfries to Garrisonville Road in 1 KRC Research. “Optimizing Usage of the 495 Stafford County to alleviate the worst Express Lanes.” September 2013 and Povaddo. bottleneck in the region; “95 Customer Segmentation Report” October 2013.

TRANSURBAN I-66 RFI RESPONSE 1 What, if any, advantages will the commonwealth potentially gain by entering into an agreement in which operations and maintenance, life-cycle responsibility, and/or traffic and revenue risk are transferred to the private sector? How do you assess the likely magnitude of such advantages? What are the potentially offsetting disadvantages?

Transurban believes the best option for relieving congestion in the I-66 corridor is a managed lanes concept that would increase capacity, provide new travel choices, enable express bus routes and other transit improvements. Managed lanes would also improve spot locations and choke points, intermodal connectivity, safety, and communication. Advancing a partnership for managed lanes under a demand-risk model offers the commonwealth a number of benefits: >>Provides substantial capital to help fund transportation improvements in the form of an upfront private equity investment; >>Shifts traffic and revenue risk to the private sector, and away from taxpayers; >>Manages the amount of state and federal taxpayer funds required to successfully finance the project, enabling the commonwealth to direct its resources to other critical transportation improvements; >>Accelerates the delivery of major transportation improvements in the corridor; The inevitable complexity of construction in >>Provides budget certainty for the the I-66 corridor, substantial traffic levels, A demand risk model commonwealth through a firm, and likely willingness of travelers to pay for fixed, design-build price; faster travel options make the corridor an transfers long-term >>Shifts key construction and delivery risks ideal candidate for a demand-risk public- operations, maintenance to the private sector; private partnership. Under this model, the commonwealth maintains ownership and and life-cycle costs to the >>Transfers long-term operations, oversight over all aspects of the project. private sector, and puts maintenance and life-cycle costs to It also protects Virginia taxpayers from long-term performance the private sector, and puts long-term the riskier elements of any large toll road performance standards in place to ensure project. An October 16, 2013, report by Fitch standards in place to effective operations and maintenance; Ratings identifies completion, delay, cost ensure effective operations >>Does not require the commonwealth to and revenue risks as among the riskiest carry more debt on its balance sheet, or elements of toll road projects. Under the and maintenance over risk its strong credit rating; demand-risk model, these risks are largely a long period of time. >>Provides the commonwealth the shifted to the private partner and away from opportunity to share in the financial Virginia taxpayers. success of the project through revenue Finally, the government has the ability to sharing, but without assuming the risk structure a demand-risk contract that does should the project not be a financial not unreasonably limit its ability to advance success; and critical surrounding infrastructure in the >>Provides an opportunity for VDOT and future. DRPT to build on their internal expertise by drawing innovation from the private sector across the design, delivery and operations phases.

TRANSURBAN I-66 RFI RESPONSE 2 PROCUREMENT PROCESS

Do you have any particular concerns with or major observations about the milestone schedule provided in this RFI? Please provide your views on proposed solutions to address these concerns?

Transurban has significant experience in We have identified some potential challenges These challenges would likely impact the working with VDOT to successfully advance in the timeline outlined in the RFI, including: projected financial close timing of Summer major public-private transportation projects >>RFQ constraints—two months is not 2015. The commonwealth needs to ensure through the necessary development a sufficient time frame between the there is adequate time for a thorough milestones and approvals. We understand expected date of the Office of Public- end-to-end process. This will enable the level of review required for large Private Partnerships (OTP3) issuing the respondents to provide the necessary detail infrastructure projects, and the processes RFQ to the expected date to announce for the commonwealth to undertake the that need to be completed prior to getting short-listed proposers, assuming that assessment against the selection criteria approval to proceed with construction. period includes both the time for potential to enable shortlisting. Once shortlisted, We are also committed to a fully transparent proposers to prepare and submit the RFQ the timing needs to allow for the best value development process that engages the full and for VDOT/OTP3 to review and decide solution with a committed partner to be spectrum of stakeholders through on a short list. selected, the project agreements negotiated, every stage. and the financing structure resolved. >>Schedule to Financial Close—the We commend the commonwealth for proposed time frame shown between the outlining a preliminary schedule that potential final RFP issued by OTP3 and seeks to strike an important balance the Expected Commercial/Financial Close between ensuring adequate assessment is likely not sufficient. A final realistic of environmental impacts and evaluation timeline will of course depend upon the of alternatives, while moving as swiftly necessary level of engineering, costing as possible to deliver critically needed and overall detail to fulfill the scope of transportation improvements to the the RFP, and the final project funding congested I-66 corridor. mechanism chosen.

What are the critical path items for the procurement of this Project and why?

There are a number of issues that could >>Sufficient time to secure the funding >>Validate the preliminary financial impact the procurement of this project, required to initiate the project. feasibility of the defined scope of work; including: Transurban’s previous experience with >>Identify financing sources for the defined >>Completion of the Tier 2 NEPA, as to not these types of projects suggests that the scope of work, and assemble a detailed delay the submittal of the issuance of the timing allotted is not sufficient. financing plan to fund the construction; final RFP; The general sequence of activities in >>Support VDOT, as requested, in >>An appropriate RFQ that clearly assesses finalizing a project of this nature include: gaining approvals from the Federal the qualifications and ability of the proposed >>Define the scope of work for the I-66 Highway Administration, the regional respondents to develop, construct and Project through detailed engineering and Transportation Planning Board, and the operate the project solution; operational analysis; Commonwealth Transportation Board, among others; >>Sufficient time to prepare a detailed and >>Complete a detailed traffic and revenue comprehensive response to the RFP. report to assess and validate the proposed >>Partner with VDOT in an inclusive A detailed RFP is critical to document scope of work, including the proposed outreach program focused on educating proposer’s approach and pricing for access points; the traveling public, surrounding this project, which will provide VDOT communities and businesses, and other >>Assess potential operational impacts the necessary information to make an key stakeholders on the project and of the proposed project, including informed selection; associated enhancements to communities maintaining the operational integrity of in the area; >>Negotiation of scope and pricing of the the existing managed lanes network and final project prior to selection. A clearly the surrounding general purpose lanes >>Finalize process to deliver a turnkey identified and agreed to Scope of Work along the Capital Beltway and the local design-build contract with fixed price, and corresponding pricing is critical to road networks; fixed schedule features in accordance with eliminate future claims and support a current market terms and conditions; and >>Analyze and define the processes required successful outcome for all parties; and for the proposed scope of work (i.e., NEPA, >>Negotiate terms and conditions for a regional air quality, etc.); concession agreement with VDOT, subject to Commonwealth Transportation Board approval.

TRANSURBAN I-66 RFI RESPONSE 3 Looking ahead over the next two to three years, do you believe your firm will be interested in submitting a committed proposal for the development of the Project (any or all of the build concepts)? Are there any particular concerns that may prevent your firm from getting engaged in the project development? How might those concerns be resolved?

Transurban has long had a strong interest >>Support improved intermodal connectivity; Transurban’s immediate focus is on the in the I-66 corridor and believes it is a good >>Improve environmental outcomes; operations of the 495 Express Lanes candidate for managed lanes delivered and delivery of the 95 Express Lanes. >>Minimize impacts to surrounding homes, under a demand-risk public-private If the ultimate scope of the project and communities, and the environment; partnership. procurement method align with our business >>Enhance safety and incident response; model and prove to be in the best interest of To date, our team has: >>Deliver enhancements to spot locations our shareholders, Transurban would submit >>Developed a series of managed lanes and address major chokepoints; a committed proposal. concepts for the corridor; >>Improve HOV enforcement; and >>Conducted preliminary traffic analyses; >>Enhance communications, technology >>Evaluated options for effective interfaces and driver information. at key interchanges, such as Vienna/ Nutley Street; >>Prepared conceptual cost estimates; and >>Engaged in preliminary discussions with select stakeholders in the corridor to obtain early feedback on a managed lanes solution. Based on this review, we believe VDOT should work with the private sector to deliver a managed lanes, or Express Lanes, project that would effectively: >>Add capacity to the congested I-66 corridor; >>Provide travelers a new option for faster and more predictable travel; >>Create new, reliable express bus routes connecting rapidly growing population centers with Virginia’s largest employment center;

What is the minimum amount of time that your firm requires to develop and submit a committed detailed proposal for the Project after issuance of potential RFP?

Based upon past experiences and the >>Evaluating potential financing options anticipated complexity of the I-66 project, with financial institutions; we estimate that it will take up to nine >>Developing preliminary phasing months to develop and submit a detailed concepts and maintenance of traffic proposal after the issuance of a RFP. (MOT) strategies; While Transurban has already completed >>Performing preliminary survey and some preliminary work, there would be a engineering design, including the number of critical steps that would have to evaluation of intersections and access be completed before finalizing a committed and exit points; proposal, including: >>Revising and enhancing the preliminary >>Forecasting traffic projections, evaluating design to develop a final concept that proposed roadway configurations addresses the major constructability including new entry and exit points, and issues; validating the overall financial feasibility >>Preparing a detailed cost estimate; and of the project; >>Finalizing the full package for submittal.

TRANSURBAN I-66 RFI RESPONSE 4 TECHNICAL CHALLENGES AND ALTERNATIVE SOLUTIONS

Based on your experience in the development of similar projects and characteristics of the I-66 corridor, please explain the technical challenges that may be encountered with the highway and transit improvement concepts described in the Tier 1 DEIS. Please provide recommendations for mitigating or overcoming those challenges.

Transurban has considerable experience in the development of similar projects with the characteristics of the I-66 corridor. As the project advances, a significant effort will take place to evaluate the specific technical challenges, which based on Transurban’s experience may include:

Challenges Broad Strategies for Mitigation Optimizing the design to minimize right-of-way Advance a managed lanes concept that will maximize the footprint of the existing requirements to manage impacts to surrounding I-66 corridor to provide new capacity and a network for transit. Early analysis homes and businesses suggests managed lanes can be delivered with fewer right-of-way impacts than a traditional highway expansion, large BRT stations or a heavy rail project. By advancing the 495 Express Lanes as an alternative to a traditional highway expansion, Transurban and its partners reduced projected takings of more than 350 homes and businesses down to just eight homes.

Ability to provide innovative solutions and new Timely and practical assessment of innovative solutions that may require design technologies that will be assessed on their merits exceptions or design waivers, or modification to technical requirements and standards, with coordination across all stakeholders.

Understanding of any proposed improvements Detailed information provided to support any projects identified in the CLRP or other to areas adjacent to the corridor long range planning.

Design solutions triggering reevaluations of the Early definition of design technical requirements and scope to identify changes that NEPA or further studies may be required for the NEPA process.

Conceptual requirements for signing understood Clear and detailed guidelines documented in the technical requirements, with to avoid future redesign/changes agreement from all stakeholders including to support the broad guidelines established as part of the MUTCD.

Transparency in relation to scope and Clear and detailed technical requirements to ensure that the scope is understood technical requirements and all parties are in agreement as to the requirements. For example, pedestrian and cycle facilities, storm water management and retention, and lighting.

Understanding of the existing corridor conditions Provision of information related to the geotechnical conditions, known issues, including any borings to assist with the assessment of pavement, groundwater and other conditions. Provision of information related to any known hazardous materials locations, any remediation or containment and Level I and II assessments completed.

Knowledge and understanding of existing Provision of information related to known locations of utilities impacting the corridor, utility locations including contact details and other relevant information, conflict matrices and the requirement for agreements with utility owners.

Noise study and wall requirements Early completion of noise wall study and assessment and agreement of requirements, particularly related to specific community requirements. Detailed technical requirements for type of walls provided.

Stakeholder and community information Information related to stakeholder concerns and community issues, received from all public information sessions and other specific contact with community groups. For example, specific requirements for landscaping or aesthetics.

Requirements for hand-back of assets Provision of a detailed package of information related to the maintenance history, inspections and records of the condition of the existing pavement and structures, and records on as-built conditions. Specific requirements identified as part of the technical requirements.

Permitting Requirements Permit requirements identified including specific requirements from impacted counties, including early procurement of permits where practical and achievable.

TRANSURBAN I-66 RFI RESPONSE 5 Challenges Broad Strategies for Mitigation Reconstructing or adding new interchanges Incorporating appropriate constructability reviews as part of the design engineering or access into an already congested and process, including early and ongoing stakeholder reviews, developing practical confined alignment design solutions, understanding of lane closure requirements for construction activities, early identification of allowable staging areas for construction.

Design around the physical constraints of the existing Provision of detailed understanding of the WMATA requirements and specific Orange Line Metrorail in the median of I-66 and/ design and access criteria that may need to be incorporated, including any design or design of the project to provide provision for any constraints and agreement on the future state. future expansion of Metrorail in the I-66 corridor

Planning for effective traffic operations at managed Utilize a traffic signal timing software application analysis to address technical lanes entrance and egress points issues related to traffic signal timings and adequately solicit and incorporate feedback from travelers.

Managing impacts to drivers in the I-66 corridor, as Coordinate with VDOT Megaprojects to provide maintenance of traffic sequencing well as those on surrounding arterial and commuter during construction that will minimize the impacts and provide appropriate routes during construction messaging and information.

Maintain safety for travelers and workers in a Implementing proven controls and outreach to ensure that the messaging is crowded and congested work zone delivered in a timely and thorough manner. The Express Lanes “Orange Cones. No Phones.” initiative is an example of an effective safety campaign.

Do you believe a bifurcated highway system along the I-66 corridor is technically feasible? Please provide any experience and supportive information that you may be able to share from similar projects.

Transurban believes that a bifurcated highway system along the I-66 corridor is technically feasible and will be an important part of the strategy to maximize capacity in the congested corridor, while minimizing impacts to surrounding homes and businesses. The key advantage of the bifurcated highway system is the reduction in cross section required for the travel lanes, thereby reducing right-of-way impacts. The Transurban team has successfully implemented such a system on the 495 Express Lanes. The 495 Express Lanes are bifurcated as follows: >>Four-foot separation between the Express and General Purpose lanes, with solid white stripes to delineate the travel streams. >>Flexible channelizing posts at eight (8) feet One year into operations, the bifurcated without damaging vehicles when emergency on center down the length of the Express system on Transurban’s 495 Express Lanes lane diversions are required (into or outside Lanes corridor to prevent traffic from is working well. The channelizing posts of the Express Lanes), but this is done moving back and forth from the General serve as an effective wall. There have been only within proper maintenance of traffic Purpose lanes. very few instances where travelers have procedures and assistance from VDOT’s chosen to cross the barriers. A strong law Safety Service Patrol or 495 Express Given the corridor’s primary design features enforcement presence, laws with reckless Assist crews. and challenges, we believe a similar solution driving penalties, full video coverage and would be well-suited to I-66. Transurban and its partners have pioneered the risk for vehicle damage have been the use of an innovative mobile barrier in As a long-term operator, Transurban effective deterrents and have promoted the Washington D.C. region to help support understands that while the bifurcated a safe environment for travelers. the safety of travelers and workers while design plays an important role in minimizing The channelizing posts provide options for performing maintenance activities in impacts, such a system will work only if improved traffic management and incident the bifurcated environment on the strategies are in place to support driver response relative to traditional jersey walls. 495 Express Lanes. safety, effective incident response, and safe The channelizing posts on the 495 Express and efficient maintenance over the Lanes can be crossed at low rates of speed long term.

TRANSURBAN I-66 RFI RESPONSE 6 What are the most significant cost drivers in the development and operation of the managed lanes and bus rapid transit concepts along the I-66 corridor? How can these concepts be implemented in such a way as to preserve the potential for rail extension?

The most significant cost drivers for a Within the first year of operations of the 495 managed lanes project in the I-66 corridor Express Lanes, Fairfax County introduced OmniRide reports it altered would likely be: new bus routes to Tysons from Lorton, schedules because buses >>Improvements of major interchanges Burke and Springfield. OmniRide reports it along the route; altered schedules because buses are saving are saving 20 minutes per 20 minutes per trip from points in Prince >>Acquiring right-of-way; and William County to the Tysons area. trip from points in Prince >>Maintenance of traffic during construction. The advancement of managed lanes in the William County to the There is a need to address congestion and near term will not in itself prohibit a future Tysons area. mobility constraints in the I-66 corridor as expansion of Metrorail in the corridor. The quickly as possible. The Tier 1 DEIS reports commonwealth can develop a strategy that more than half of the corridor in the peak adequately balances a short-term solution direction each morning is excessively such as managed lanes with the long-term congested, with lanes nearing the point goal of Metrorail. of failure at level of service E or F. During would be removed to clear the median in the afternoon peaks, nearly two-thirds of A number of state and local transportation the event of a future rail extension. This is the travel miles fall to that level of service. improvements currently planned for the also the case for other ramps at Monument As I-66 intersects the Beltway, travelers I-66 corridor are being advanced under the Drive and Stringfellow Road. This same regularly face four to five hours of rush-hour assumption that the new facilities will need approach could be used for managed congestion in each direction. to be rebuilt should Metrorail be extended. lanes to significantly reduce right-of-way The development of the Vaden Drive requirements and costs. Managed lanes provide a cost-effective Alignment for the I-66 Vienna Metrorail solution that can be realistically delivered Accessibility and Capacity Improvements over the next few years to provide travelers project (I-66 Bus Ramp), at a total estimated relief and new choices, as well as support an cost of approximately $54 million, is expansion of transit service in the corridor. proceeding on the basis that the ramp

What, if any interoperability issues do you foresee with the current tolling system on I-495 Express Lanes?

As the long-term operator of the 495 and >>Consistency in region-wide marketing and future 95 Express Lanes, Transurban is communications efforts for customers; uniquely positioned to ensure a seamless >>Synergies and reliability derived from connection between new managed lanes on a single tolling system and operating I-66 and the existing network. platform; and A single operator across a regional Express >>Proven and tested partnership between Lanes network offers travelers, VDOT and Transurban and VDOT in developing other stakeholders significant benefits: operations strategies and coordinating >>Consistency in signage and toll day-to-day operations. pricing strategy; Transurban is using a complex dynamic >>One-stop shopping for customer service tolling algorithm to provide customers, and inquiries at ExpressLanes.com; transit operators and carpools a consistently >>Single-point communication and faster and more reliable trip on the coordination for local transit operators; 495 Express Lanes. The team has gained unparalleled experience in effectively >>Consistency in approach to enforcement managing traffic in the region and would put processes, business rules and payment this experience to work on the first day of options for customers; operations on I-66. >>Single partner for VDOT and law ® ® enforcement in managing incident The use of E-ZPass and the new E-ZPass SM response across the network through an Flex for carpools will also ensure interface already in place and working interoperability for travelers across the between Transurban and VDOT’s PSTOC; managed lanes network and along much of the East Coast. >>Single interface for VDOT in managing traffic to support construction and maintenance activities adjacent to the Express Lanes across the network;

TRANSURBAN I-66 RFI RESPONSE 7 What suggestions do you have for better coordination between this Project and other projects currently under design or construction along the I-66 corridor?

Coordination between projects is often a To lay a solid framework for this kind of Documentation should include clearly what significant issue, particularly when the coordination, the documentation prepared is required as part of this coordination. activities are taking place in close proximity by OTP3 should clearly identify: Effective coordination is not a matter of just and through the same construction seasons. >>Limits and schedules of all current and supplying design drawings—it must clearly involve the sharing of detailed information, Transurban supports VDOT’s “mega planned projects that would occur during schedules and priorities, and working projects” approach in Northern Virginia, the design and construction part of together to ensure that the work being through which the agency evaluates the this project; undertaken on any project is not delayed as impact of construction activities across >>All available plans and scoping-related a result of the other. multiple major projects across the regional documents of previous, current, and road network. planned projects that could impact Transurban and its partners have this project; substantial experience in working with VDOT, Transurban, VDOT and its partners WMATA, MWAA and other partners in the demonstrated the effectiveness of this >>Responsibilities, access rights and region to coordinate both construction and collaborative approach through the early restrictions, the project that has priority, operations activities. and on-budget delivery of the 495 Express and other requirements during the Lanes. The 95 Express Lanes Project— construction of this project; and currently being delivered under the same >>Close coordination with VDOT, localities partnership—remains on schedule and WMATA on any planned projects and at 60 percent completion. access requirements into their facilities and ROW.

What challenges are associated with managing the life-cycle costs for the improvement concepts as described in the Tier 1 DEIS? What measures would you suggest to mitigate these risks?

There are three primary challenges >>Reuse of existing bridges and structures— As a long-term operator, Transurban takes associated with managing life-cycle costs optimize repair options to improve the a comprehensive approach to life-cycle for any major infrastructure project: remaining structure life, reduce life-cycle management, including: >>Rapid changes in technology that make costs, and reduce future traffic impacts. >>Alignment to business strategies systems obsolete in a few years; The best measure to mitigate these risks and drivers; >>Accelerated major capital requirements is to have an overarching infrastructure >>A life-cycle approach (whole of life such as early bridge or structure asset management approach and make the and concession period); repairs; and following practices part of a standard life- >>Cost-effective operations and >>Fluctuation in materials costs such as cycle management program: maintenance management strategies; asphalt, concrete and steel over a number >>Stay current with new technologies >>A defined level of performance and of years. and make purchasing decisions based performance monitoring (measure, on value for money, balancing the There are some key challenges that must analyze, review effectiveness consideration between having the current specifically be addressed in advancing and implement); technology versus waiting a short time for a managed lanes project: >>Demand management and infrastructure newer, more efficient equipment; >>Pavement Management – identification, investment to meet growth; >>Use statutory inspections to inform short- evaluation and repair options to improve >>Managing residual risks; term life-cycle planning and maintenance, the overall riding surface, life-cycle as they may reveal deterioration of heavy >>Sustainability; cost, and reduce future traffic impacts; infrastructure such as bridges; and >>Continuous improvement; and mitigation by advancing a full investigation of all pavement conditions and pavement >>Research key material costs and consider >>Meeting concession, legislative history, and recommendation of best obtaining futures on items that are likely and regulatory requirements. repair options; and to rise significantly.

What adjustments to the Project scope, or development strategies (including potential phasing of project elements) would you consider/recommend to reduce the upfront capital costs and/or the life-cycle costs of the overall project costs?

There are opportunities to reduce the >>Addressing the pavement condition and solution adopted. From the managed lanes upfront capital costs and/or the life-cycle appropriate repairs to be incorporated into perspective, phasing could be adopted to costs of the overall project costs, including: the design and construction of this project incorporate other options related to transit, >>Incorporating planned projects into the to minimize life-cycle costs and future including providing better access to Metrorail. Scope of Work for this project to maximize traffic impacts. efficiency, reduce project coordination and Phasing of a managed lanes development access issues, and eliminate the potential that incorporates other improvements may for rework between the projects; and be possible but it will depend on the final

TRANSURBAN I-66 RFI RESPONSE 8 COMMERCIAL AND FINANCIAL STRUCTURE

Please explain your firm’s interest in the improvement concepts discussed in the Tier 1DEIS. What is your recommended approach for financing the capital cost of each concept?

Transurban believes a managed lanes concept that increases capacity, provides Transurban has a strong track record of delivering innovative new travel choices, enables express bus routes and other transit improvements is financing structures and techniques that deliver maximum the best option for relieving congestion in benefits for the community. We have a long history of working the I-66 corridor. Managed lanes would also improve spot locations and choke with the public sector to deliver financing packages that points, intermodal connectivity, safety, and enable us to deliver significant infrastructure assets while communication. minimizing the cost and risk to our government partners. A demand-risk partnership that injects private equity and privately backed debt would be the best financing option for the commonwealth and its taxpayers. We continually monitor and participate in While Transurban would undertake a broad Transurban has a strong track record of global finance markets to ensure that we assessment of all financial markets, it is delivering innovative financing structures are delivering cutting edge financing to all envisioned that the capital costs of the and techniques that deliver maximum our projects. We have pioneered the use I-66 managed lanes would be optimally benefits for the community. We have a long of Private Activity Bonds (PABs) in the U.S. financed through a combination of private history of working with the public sector to for road infrastructure projects and all equity, senior debt raised through the PABs deliver financing packages that enable us our projects in the U.S. have been able to market and possible subordinated debt to deliver significant infrastructure assets access affordable subordinated debt from from the TIFIA program. Depending on the while minimizing the cost and risk to our the USDOT under the TIFIA program. The scope and risk allocation of the project, government partners. successful implementation of these debt these instruments may or may not need to In addition, Transurban would be in programs has delivered significant financial be supplemented with capital contributions the unique position to work with the benefit to the government without increasing from the commonwealth. Additionally, the commonwealth to explore potential its risk profile. In addition to the PABs above is contingent on the ultimate scope opportunities to generate value using its market and TIFIA program, Transurban of the project and procurement method existing concessions in the region, including maintains an active dialogue with prominent aligning with our business model and looking at possible options to lower net bank lenders and taxable bond issuers. proving to be in the best interest of our funding requirements for the new projects. shareholders. We believe that the use of a demand-risk model and the potential value of our existing concessions would maximize the private sector contributions and minimize the cash burden on the public sector.

TRANSURBAN I-66 RFI RESPONSE 9 Please discuss your firm’s interest in: a. Accepting traffic and revenue risk in a toll concession b. Accepting performance risk in an availability structure

TRAFFIC REVENUE AND to assume additional debt to fund the of projections, VDOT would have to RISK IN A TOLL CONCESSION improvements—protecting Virginia’s credit transfer funds away from other critical rating and saving debt capacity for other improvements to make guaranteed There remains appetite in the private critical transportation projects. The private payments to the private sector; sector—among those with a longer sector would operate and maintain the road >>An availability structure would be investment horizon—to take traffic and to VDOT standards, and be obligated to considered debt of the commonwealth, revenue risk on major toll road projects. return the asset in good working order at the sit on the commonwealth’s balance Transurban, as an experienced, long-term end of the term. sheet, and could ultimately limit its toll road operator, is an industry leader in debt capacity to fund other critical managing traditionally public assets under PERFORMANCE RISK IN transportation projects; demand-risk concessions, and would be AN AVAILABILITY STRUCTURE >>Not yet used in Virginia, VDOT would interested in accepting traffic and revenue have to secure approval from the General risk for managed lanes in the I-66 corridor The availability payment model is largely a Assembly to use the availability structure should the ultimate project align with our lease arrangement that requires the private and associated commonwealth debt business model and be in the best interest operator to keep a facility open to a defined capacity – necessitating potentially long of our shareholders. level of service. The fundamental premise and uncertain approval processes before of this approach is that the government Transurban’s existing portfolio the project could advance; assumes key elements of risk relating to demonstrates a strong track record of the project, such as traffic and revenue risk, >>An availability structure would not inject partnering with governments to invest in and engages a private-sector operator to any new capital into the equation; the road transport networks. The successful operate and maintain the asset for an agreed private sector would provide upfront operations of our business and the periodic payment. capital for improvements, but with a commercial viability of the demand-risk guarantee the government will pay them model are reflected by strong EBITDA The availability payment model is best back over time; margins across Transurban’s assets, which suited for projects where the user pays >>The specific characteristics of the range between 70 percent and 90 percent component is insufficient to make a material I-66 corridor suggest it could generate for the majority of the roads we manage. contribution to the cost of funding, or the sufficient toll revenue to support a operating costs over time far exceeds the As outlined previously, the demand-risk demand-risk model – enabling VDOT capital costs, or there are significant social model offers a host of benefits for Virginia and DRPT to use the availability structure equity issues involved. taxpayers. Most notably, it provides for an (and the balance sheet capacity required) injection of substantial new capital to help While an availability structure is well- to advance projects not financially or fund improvements and shifts key delivery, suited to some transportation and social politically feasible as demand-risk operations, traffic and revenue risks to infrastructure projects, Transurban does not toll roads; and the private sector. This would enable the believe it is appropriate for a managed lanes >>Should toll revenues not be sufficient commonwealth to share in the success of project in the I-66 corridor for a number of to cover guaranteed payments to the projects through a revenue-sharing regime, important reasons. private sector, the responsibility to make but protect taxpayers from any financial >>The availability structure would require those payments would shift from users loss should toll road revenues not meet the commonwealth to make guaranteed of the road to all of the commonwealth’s projections. payments to the private sector for taxpayers – drawing from road The demand-risk model protects the state a long period of time, regardless of construction or maintenance allocations budget by shifting delivery risk to the private whether or not the toll road ultimately and diverting funds from other projects. sector through a firm, fixed-price contract. generates sufficient revenue to cover The commonwealth would not be obligated those payments. If revenues fall short

What is a reasonable concession term for a managed lane or a bus rapid transit concept? Why?

Transurban believes a long-term focus is That being said, the length of concession essential for a public-private partnership is one of many key elements government to be successful in this corridor. and the private sector must evaluate in structuring a partnership agreement. These types of projects require substantial There are opportunities to reduce upfront investment so the concession term concession lengths by making other needs to be long enough for the private adjustments in financing strategies entities to be able to recoup costs and and risk allocation. pay back debt. As such, concession terms consistent with those on the existing 495 Express Lanes and the 95 Express Lanes would be anticipated.

TRANSURBAN I-66 RFI RESPONSE 10 ADDITIONAL CONSIDERATIONS

If your firm is a Disadvantaged Business Enterprise (“DBE”) or a Small, Women-owned, and Minority-owned Business (“SWaM”), please provide any suggestions or comments on how OTP3, VDOT or DRPT can help to develop teaming opportunities with prime contractors.

Transurban is not a DBE or SWaM firm; From our experiences on the 495 Express however, we are committed to DBE Lanes and 95 Express Lanes projects, Transurban-sponsored and SWaM efforts and have a proven Transurban and our design-builder can record of significant participation of DBE draw from the many successful outreach projects in Virginia have and SWaM certified companies on our processes implemented, including: collectively generated projects. Transurban-sponsored projects >>Continual engagement with the DBE and more than an estimated in Virginia have collectively generated SWaM community, either directly with more than an estimated $659 million in our design-builders or with their major $659 million in contract contract opportunities for DBE and SWaM subcontractors and suppliers; opportunities for DBE and businesses, and put more than 450 small >>Conduct DBE/SWaM opportunity sessions contractors to work . Transurban and its SWaM businesses, and for specific contract elements; and partners have committed to and achieved put more than 450 small the most aggressive DBE/SWaM goals for >>Assist with seminar series for DBE and any major transportation project in the SWaM firms in the areas of marketing, contractors to work. commonwealth’s history. payroll, scheduling, contracts, taxes, estimating and overhead cost.

What additional challenges or risks should OTP3, VDOT, DRPT or CTB be aware of in regard to the Project’s scope, procurement process, delivery method, term of contract, technical and financial feasibility, etc.?

The most common risks for these types of A key element of overcoming all of these projects are: risks is having a private partner with the >>Feasibility—mitigated by engaging the appropriate knowledge and capability to correct partners and putting in place strong manage and mitigate these risks. Transurban strategic relationships with sponsors having has successfully achieved this on a number experience in similar projects; of projects and, as a long-term investor and operator, Transurban demands the >>Completion—mitigated by having contractors highest standards of construction quality so under a fixed price/date certain agreement, infrastructure endures throughout the life of with a robust security package, a proven the concession. track record and strong credit rating; >>Traffic and Revenue—mitigated by having Transurban also places a high priority an experienced team with knowledge of the on early and consistent stakeholder underlying assumptions and methodology outreach and understands how critical for traffic and revenue projections; this engagement can be to helping project partners manage risks, accelerate project >>Financial structuring—mitigated through delivery and improve transportation utilizing an experienced team and pursuing outcomes. The success of delivering the innovation to achieve financial flexibility 495 Express Lanes project ahead of through public funding, federal financing schedule, on budget and with an exceptional and private investment; and safety record is an example of our deep >>Operations—mitigated by having a commitment to working closely with concession operations team with a long- all stakeholders. term horizon and focus on managing through the term, not just for the construction phase.

TRANSURBAN I-66 RFI RESPONSE 11 ABOUT TRANSURBAN

Transurban partners with Our capabilities include: PUBLIC PRIVATE PARTNERSHIPS governments to deliver As a long-term toll road owner and operator, INNOVATIVE TRANSPORTATION Transurban manages traditionally public roads that meet community SOLUTIONS assets under concessions that can last needs over the long term. for decades. We work closely with our Our business delivers smart and innovative government partners during every stage of solutions to urban congestion. a project—from financing and development >>CityLink—one of the world’s first fully through construction and operations. electronic toll roads; >>Experienced in managing risk associated >>M1-CityLink Upgrade includes one of the with large-scale infrastructure projects; most advanced freeway management >>Private sector involvement allows systems in the world; governments to remove projects from >>495 Express Lanes use dynamic tolling their balance sheets and shift attention to help tackle severe congestion in the to social infrastructure or other Washington D.C. region; and needs; and >>95 Express Lanes when open will connect >> Able to deliver projects which were not to the 495 Express Lanes creating a possible with government funds alone. regional network of more than 40 miles of managed lanes.

TRANSURBAN I-66 RFI RESPONSE ABOUT TRANSURBAN

TOLLING AND CUSTOMER SERVICE ROAD SAFETY AND PERFORMANCE STRONG FINANCIAL AND We have an interest in eight toll roads in We are committed to continually improving MANAGEMENT TRACK RECORD Australia and the U.S., serving more than our road and tunnel safety systems and We have a sound financial record and 5 million customers. practices to ensure we have the most expertise in managing risk on long-term >>‘Customer-first’ ethos focusing on sophisticated measures to support safety equity investments, which helps us to efficient, seamless service; and seamless operation. provide ongoing value for money to our >>Transparent customer service targets >>Regular safety audits on our roads, stakeholders. consistently exceeded; plus several major safety enhancement >>Transurban is a business with a market projects in recent years; >>Track record of developing innovative capitalization of $10 billion with a strong, tolling products to meet customer >>Dedicated on-road services (including investment grade credit rating (A- with needs; and incident response) to ensure optimal S&P and Fitch, Baa1 with Moody’s); traffic flow and safety; and >>Robust customer education programs. >>Transurban has an established record as >>Recognized at both national and state a successful operator with interests in six level for excellence in road safety and roads in Australia and one other road in emergency planning. Virginia, with another in development; >>The efficient operations of the business are reflected by the strong EBITDA margins across the Group, which range between 70 percent and 90 percent for the majority of the roads it manages; >>As a long-term investor, Transurban takes a market-leading approach in developing traffic forecasts with the company’s dedicated in-house traffic analysts; and >>Transurban has a proven track record of partnering with governments to invest in road transport networks, with circa $5 billion invested in Australia and North America over the past 5 years.

TRANSURBAN I-66 RFI RESPONSE ABOUT TRANSURBAN

COMMUNITY PARTNERSHIPS Strong community support keeps major LONG-TERM COMMUNITY PARTNER projects on track. Transurban develops strong partnerships with local business and Transurban has a wide range of sustainability and community groups to maximize support for community-focused programs. Some of these include: projects and minimize stakeholder-related >>Sponsorship of Melbourne’s biggest annual fun run, risks and delays. Run for the Kids, which benefits the Royal >>Signature grant program helps direct- Children’s Hospital. impact neighbors manage impacts of >>Our Express Lanes Community Grant Programs construction and has awarded more than have given over 120 grants to support organizations 120 grants since its inception; and that protect or enhance the local environment and >>Recipient of numerous community awards neighborhoods in the project corridor. and recognitions. >>Reuse and recycling initiatives on some of our major projects. For example, 50,000 tons of excavated sandstone from the Hills M2 Upgrade project SUSTAINABILITY was reused under the new road pavement and in At Transurban, sustainability is one of the construction of new ramps. In addition, 85 percent key drivers of our corporate reputation and of construction materials purchased for the project return to security holders. in FY12 contained recycled input products. >>Board-approved Sustainability Framework >>Our ‘Orange Cones. No Phones.’ safety campaign formally embeds sustainability with AAA Mid-Atlantic was designed to raise commitments in the business; and awareness of distracted driving in the 495 Express Lanes construction zone and is now being replicated >>Listed in the DJSI World List of high- on other projects. performing companies from 2006 to 2010, and in the DJSI Asia Pacific list in 2011. >>The 1,000 Trees in 1,000 Days Program on the 95 Express Lanes implemented for residents impacted by project construction to benefit from newly-planted trees. >>The 495 Express Lanes Project awarded $450 million in contracts to small, women and minority contractors which represented the single largest contribution to DBE/SWaM contracts for a transportation project in the history of Virginia. >>Transurban executed a year-long educational program prior to the opening of the 495 Express Lanes to explain, promote and educate area drivers on how to use and benefit from the new travel option.

TRANSURBAN I-66 RFI RESPONSE Legal disclaimer UNITED STATES HEADQUARTERS The information contained in The Transurban Group is a triple VIRGINIA stapled security listed on the this publication does not take into account the investment Australian Securities Exchange 6440 General Green Way comprising Transurban objectives, financial situation Holdings Limited (ACN 098 and particular needs of Alexandria VA 22312 143 429), Transurban Holdings any investor. Further, the United States Trust (ARSN 098 807 419) information is not intended in and Transurban International any way to influence a person Phone +1 (571) 419 6100 Limited (ARBN 121 746 825). into the varying, acquisition or disposal of a financial product The responsible entity of the Tony Adams Transurban Holdings Trust nor provide financial advice is Transurban Infrastructure nor constitutes an offer to Vice President, Infrastructure Management Limited (ACN subscribe for securities in [email protected] 098147 678) which is the holder the Transurban Group. Any of Australian Financial Services person intending to acquire Licence Number 246 585. an interest in the Transurban Transurban Infrastructure Group is strongly recommended AUSTRALIA Management Limited is a to seek professional advice. wholly owned subsidiary The Transurban Group does MELBOURNE (HEAD OFFICE) of Transurban Limited. not warrant or guarantee the performance, repayment of Level 3 This publication has been capital or a particular return of 505 Little Collins Street prepared by the Transurban the Transurban Group. Group based on the information Melbourne available. No representation Victoria 3000 or warranty, express or implied, United States is made as to the fairness, accuracy, completeness or These materials do not constitute SYDNEY correctness of the information, an offer of securities for sale opinions and conclusions in the United States, and the Level 5 contained in this publication. securities referred to in these 50 Pitt Street To the maximum extent materials have not been and will Sydney permitted by law, neither any not be registered under the United New South Wales 2000 member of the Transurban States Securities Act of 1933, as Group, their directors, amended, and may not be offered employees or agents, nor any or sold in the United States absent MAILING ADDRESS other persons accepts any registration or an exemption from liability for any loss arising from registration. Locked Bag 28 the use of this publication or its South Melbourne contents or otherwise arising in connection with it, including Victoria 3205 without limitation, any liability arising from fault or negligence Phone +61 3 8656 8900 on the part of any member of the Transurban Group, their Fax +61 3 8656 8585 directors, employees or agents.

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