Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

PUBLIC PRIVATE PARTNERSHIP (PPP) CASE STUDIES ON PRIVATE FUNDING OF TRANSPORT INFRASTRUCTURE PROJECTS

PUBLIC OWNED AND OPERATED

Design Build Finance Maintain (DBFM) / In this model, the private sector partner (PSP) designs, builds, and finances the construction of the Delivery Model facility, and upon completion, provides maintenance services under a long-term agreement with the public authority. The public agency retains ownership of the land and facility, takes full responsibility to operate the facility, and pays regular fees to the PSP to enable it to recoup its investment. This model occupies the middle position among all PPP models including design-build, in terms of the level of public sector risk and involvement that is transferred to the private sector.

1. Tram Extension, Antwerp

This is Antwerpen’s first PPP tram project. Phase 1 was built at a cost of €48m and opened on April 14, 2012, to provide an additional 4-km new route to Fortveld Wijnegem and 13 new Hermelijn trams supplied by Siemens and Bombardier, to the existing network. The second phase is said to be completed by September 2012 at a cost of €44.6m, and will add another 4 kms of new route to Bouchhout. The project is being delivered by THV Silvius consortium through a DBFM contract, where De Lijn, the public transport company representing the Flemish government, pays fees to THV for it to be able to use the lines over the 35-year concession period and recoup its investment.

2. Cercanías Airport Rail Link, Madrid

The Spanish Ministry of Development awarded in 2007 a 20-year contract to infrastructure company Ferrovial Agromán to build and maintain an 8.8-km direct rail link between Barajas Airport’s Terminal 4 and Chamartin Station, using existing infrastructure and new alignments. It was built at a cost of €218.3m and opened in 2011 to provide direct faster rail connections from the airport to any station on the national intercity network, through Charmartin Station in the city centre, which was developed as a terminus of the new Madrid-Valladolid high-speed line. The national rail company RENFE is in charged of operating the trains and collecting fares. The DBFM model was sought to manage the connection of this line with an existing Line 8. Ferrovial receives 45% share of the fare and regular income for correct maintenance.

3. A59 Freeway, The Netherlands

This 10-km two dual lane motorway in Noord Brabant opened in 2005 and is the first PPP project to go operational in The Netherlands. Poort van Den Bosch consortium was selected in 2003 to design, build, and finance the transformation of N59 state highway into the A59 Freeway within 3 years at a cost of €218m, and to maintain it for 15 years. The State pays the consortium an annual premium based on availability. The upgrade included new bridges, roads, viaducts and underpasses. The PPP helped accelerate completion by 5 years and reduce costs by 14%, compared to the originally planned design-build procurement. It is the European Construction Industrial Active Project Awardee in 2006. 1

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

PUBLIC OWNED PRIVATE OPERATED

Design Build Operate Maintain (DBOM) In the DBOM model, the public agency assumes full responsibility for financing the construction, Concession Model building customer relationship, and ownership of the land and facility. The private investor designs and constructs the facility in behalf of the public agency, and operates and maintains it for a set duration. Private participation is compensated through technical and performance-related payments. The main advantage of DBOM and other concession models is the optimisation of life cycle costs made possible by private-led innovation and adapted design, which is not utilised in the DBFM model.

4. Lagos Rail Mass Transit (LRMT), Nigeria

This is a network of 7 intra-city rail lines envisaged to make Lagos, Africa’s model megacity. The 57- km US$1.4b Red and Blue Lines will be built first. Blue Line was recognised in KPMG’s Infrastructure 100 World Cities Edition, for its innovative financing structure based on a single concession contract. The track and station infrastructure is currently being developed by China Civil Engineering Construction Company under several design-build contracts funded by the state government, and is expected to be completed by the end of 2012. The trains, control systems, and fare collection will be provided by Eko Rail, under a 25-year equip-operate-maintain concession.

5. Fredericton-Moncton Highway (FMH), Canada

FMH is a 204km two dual lane C$638.9m public highway, which was completed in 2001, 5 weeks ahead of schedule through DBOM, to encourage the developer to promote efficiency between investment and future maintenance costs. It was financed through lease-based debt and toll-based debt, initially to be repaid by user tolls, but later replaced by shadow tolls (user charges paid by the province). Maritime Road Development Corporation (MRDC) received monthly progress payments out of the guaranteed maximum construction bid price adjusted for quality payments and agreed scope changes. MRDC will receive C$10m from the province for operating and maintaining the highway for the first 20 years, adjusted to consumer price index (CPI) after 20 years and until 2028. A not-for-profit special purpose company (SPC) was created to manage the tax implications of tolling and private sector involvement. Although seen as a model PPP, critics argue that it is costly due to shadow tolling.

6. Hudson-Bergen Light Rail (HBLR), New Jersey

This is USA’s first DBOM transit project, which was instrumental in the regeneration of the Hudson River waterfront. New Jersey Transit (NJT) in 1996 awarded 21st Century Rail the contract to design and construct the system, procure the equipment, and operate and maintain the line for 15 years, later extended to 20. The eventual cost was approximately US$2.2b, financed through state and federal government funds. The first 15-km line opened in 2002, followed by a further 10-km line in 2006, one to two years earlier than through a design-build schedule. NJT pays Century a guaranteed price in 1996 dollars for operating and maintaining the line, subject to increases in inflation indices. The lack of performance standards, however, did not provide Century the incentive to deliver quality service. 2

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Design Build Finance Operate (DBFO) / This a concession model whereby the private sector partner undertakes to design, build, finance and Concession Model operate the facility for the duration of the concession. The public authority also makes capital and financing contribution, remains the owner of the land and facility, and pays off a regular service, availability fee, or shadow tolls to the concessionaire to help repay its share of capital investment and ongoing service costs in the project. The tenure of concession models usually matches the long asset life of the infrastructure. Other availability models such as DBOM, DBFOM, and PFI, differ from other concession models like Build Operate Transfer (BOT), since private financing in the latter is repaid through user charges. DBFO and BOT can be partly public-funded while PFI fully private-funded.

7. Sea to Sky Highway, British Columbia

Completed in 2009 for the 2010 Winter Olympic Games, this 100-km C$600m upgrade project is part of destination Highway 99 and runs from West Vancouver to resort town Whistler in British Columbia. It was developed to ensure that the road allows for a consistent driving speed and meets population growth and travel demands until 2030. A 25-year DBFO performance-based contract was awarded in 2004 by the Province of British Columbia to S2S Transportation Group consortium. S2S infused C$400m of capital raised through equity and debt, while the government funded C$200m into a 30-km section of the project completed earlier in 2005. The payment to S2S consists of 80-85% availability, 10-15% traffic usage, 2.5% bonus, and an end-of-term payment. The province provided the necessary land, environmental approval, and is shielded against key risks such as force majeure and protests. The project is expected to deliver C$130m of Net Present Value (NPV) in additional user benefits.

8. Peninsula Link, Melbourne

Previously called Frankston Bypass, this 27-km 2 dual lane A$759m freeway is under construction and is expected to reduce congestion and complete the missing sections of Mornington Peninsula Freeway. The PPP is being managed by Linking Melbourne Authority (LMA) and delivered by Southern Way consortium (SW). Under the performance-based availability contract, LMA will make quarterly service payments to SW once the freeway is certified completed, with no charges to motorists. The government spent money on land acquisition, project management, and environmental compliance, to allow for the construction of the facility. This brings future public sector cost to A$2.3b. Under the contract, the service payments can be adjusted to allow for proportionate reductions from each half-hour of unavailability. Construction commenced in 2010 and is expected to complete in 2013, after which Southern Way will continue to operate and maintain the freeway for 25 years.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

9. Port of Miami Tunnel, Florida

This 1.1km US$1b project is USA’s first availability-based PPP deal. It was featured in KPMG’s Infrastructure 100 World Cities Edition for the successful use of PPP on a technically complex project. It is a mixed-use facility sought to relieve traffic from cruise, cargo, interstate-port connection, and city congestion. It commenced construction in 2010 and is expected to open in 2014. Miami Access Tunnel Concessionaire LLC (MAT) holds the DBFO contract for 30 years with Florida Department of Transportation (FDOT). Funding will come from MAT’s equity injection and US$341.5m loan from 10 banks. Under the agreement, FDOT will make milestone payments to MAT during construction, and upon completion, regular payments, contingent upon actual lane availability and service quality. The project was named 2009 Americas PPP Deal of the Year by Project Finance International.

10. M1-A1 Link, Leeds

This £269m (current £) road is the largest and most complex of the pioneering DBFO projects authorised by UK’s Highways Agency in the 1990s. It is a 30-km three-lane motorway in Leeds which opened in 1999 to connect M1 at Belle Isle with A1 at Hook Moor. The 30-year DBFO contract awarded in 1996 to Yorkshire Link Ltd (now named Connect M1-A1 Ltd) demonstrated the capability of both public and private sector in delivering this project ahead of schedule and on budget through innovative methods. Construction included the pioneering use of innovative digging techniques and integral bridges, which eliminate mechanical-joint damages to prolong the life of the infrastructure. At 6% annual discounting, the net value of private finance relative to public sector was £84m. The government reimburses the concession team a shadow toll based on the number of vehicle-kilometres travelled on the road, subject to acceptable condition and performance of the infrastructure.

11. Croydon Tramlink, UK

This is a 28-km light-rail tramway in South London which opened in 2000. The project involved upgrading of former tracks and was procured in 1996 by Croydon Council with a capital value of £205m through a 99-year DBFO concession that was originally intended to be a permanent private business. The British government contributed £205m and the concessionaire, Tramlink Croydon, £75m. The policy put in place was successful, particular on environmental management and implementation, but not on operations. The PPP proved successful for the sponsor but disastrous for the concessionaire, which absorbed a large cost overrun and revenue shortfall. Due to its integration with the Mayoral price-controlled fares regime imposed on all London public transport services, it had to compete with cheaper alternatives, at the fixed service level, service quality and fares set by the government. Transport for London inherited the project in 2000 and bought back the concession in 2008 for £98m to reduce the uncertainty over future expenditures on maintenance and renewal.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Design Build Finance Operate Maintain With the DBFOM arrangement, the private investor designs, builds, and assists in financing the (DBFOM) / Concession Model infrastructure, and provides hard and soft management services and operations under a long-term agreement with the public authority. The public authority retains ownership of the land and infrastructure, and allows the private investor to recoup its investment in building and operating the project, from user charges in the duration of the concession. The private investor is more involved and assumes more risks, including demand risk, than in the DBFM model. Although the probability of failure is not known, the negative impacts and fallouts in this model can be unexpectedly large.

12. M6 Tollway (M6-T) , UK

Also called the Birmingham Northern Relief Road, the US$1.7b M6-T is Britain’s first privately-funded tolled motorway, which was designed to relieve congestion on a section of the existing M6 motorway and allow for a 40% traffic increase to 224,000 vehicles per day. It is a 44-km six-lane divided motorway bypass to act as a regional distributor to surrounding towns, and as part of the Trans- European transport network (TEN-T). Tolls vary by vehicle type, time of day, and station passed on the journey, and can be e-tag prepaid. A 53-year concession contract was awarded 1992 to Midland Expressway Ltd (MEL), which is 75% owned by Macquarie Infrastructure Group (MIG) and 25% by Autostrade, Italy’s biggest motorway concessionaire. Project initiation delayed for 8 years due to local opposition against tolls and legal manoeuvring. Construction began in 1999 and M6-T opened to traffic in 2003. The benefits to M6-T users include 30 minutes saved on midweek days and 70 on Fridays, while users of the existing M6 enjoy reduced weekday traffic volumes by up to 10%. Critics recently argue that due to the high cost of tolls, the use of M6-T is decreasing with traffic currently switching back to M6. MIG is currently investing in local public projects to bring more traffic to M6-T.

13. Cobequid Pass Toll Highway, Nova Scotia

This is the first road project in Canada to involve private financing. It is a 45-km toll section of Highway 104 built at a cost of C$113m to reduce road accidents. First opened in 1997, Cobequid is considered successful in setting the right policy to increase traffic demand for the new road and thereby continued viability of the project. The average usage per day has been 70% higher than was originally estimated. The government not only raised the speed limit of the toll highway to 110 kph, but also lowered the speed limit on the alternative route, making Cobequid an extremely faster and viable alternative. Further, trucks were obligated to use the toll road unless they had a secondary road delivery address on their waybill. Atlantic Highways Corporation, Inc. consortium holds a DBFOM contract to build, operate, and collect toll revenues to pay for the investment, operation and maintenance of the facility for 30 years. Highway 104 Western Alignment Corp, is a government-owned business enterprise tasked to manage the PPP. Fifty percent of the construction cost was funded by toll revenue bonds underwritten by the private sector, and the other 50% by the provincial, state, and federal government. Aside from the innovative financing and cash flow arrangement, efficient project management also contributed to the project’s success, allowing it to be completed in less than 20 months. 5

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

14. Rion-Antirion Bridge, Athens

This €803m cable-stayed two dual-lane toll bridge over the Rion-Antirion Straits is the longest of its kind in the world (2.88 km). It was built primarily to integrate north-west Greece with the main economic areas along the Trans-European Network. GEYFRA S.A., a joint-venture between Greek and French companies, holds the DBFOM contract with the Hellenic authorities, based on a fixed price, fixed term concession for 42 years. The bridge was built between 1998 and 2004, with funding from the European Investment Bank (32%), state (14%), and GEYFRA (54%). The project was completed 5 months earlier and has since its opening achieved the targeted annual traffic volume of 4m vehicles, despite the high crossing toll rates of €11.70 per car. Under the contract, the concession will end earlier when GEYFRA has already achieved the predetermined Return on Equity. The success of the project can be attributed to the establishment of an “umbrella” PPP law and unit, provision of incentives to the private sector, co-financing by the public sector, and absence of an alternative non-tolled infrastructure.

15. GoldLinQ Light Rail, Gold Coast

This A$1b project has been recognised in KPMG’s Infrastructure 100 World Cities Edition for creative financing that interlocks A$365m funding from the federal government, A$464m state, and a A$120m council funding allocated to kick-start the struggling local construction industry. A total of A$170m has also been spent on property acquisition. When completed, this 16-km electric tram system will be Queensland’s first ever public light rail system, which will be integrated with TransLink, one of the world’s largest public transport network. GoldLinQ Pty Ltd. will deliver the project based on a disaggregated DBFOM contract and operate the line for 18 years. Construction commenced in January 2012, following completion of the government-funded road works. The Stage One corridor is expected to open in 2014. Planning for a future 40-km extension to Coolanggata is underway. The PPP has recently been criticised for allowing council to compensate GoldLinQ for any losses it would make on the project for the duration of the concession.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

PUBLIC-PRIVATE OWNED AND OPERATED

Share Issue Privatisation (SIP) / This scheme uses initial public offering (IPO) to mitigate public sector risk. The sponsoring public Partial Divesture Model agency can assume full responsibility for the construction, financing, and ownership of the infrastructure, and share or fully transfer the operational risk to the private sector through IPO. SIP may involve the sale of state-owned operators through public listing, whereby the facility remains publicly-owned as in the case of Rail or bundled with operations as in the Hong Kong Rail.

16. Singapore Rail

The government’s partial privatisation of the operation of its rail network can be viewed as a long-term risk mitigating strategy. The operation is owned by two publicly-listed companies - 37% by largest bus operator Singapore Bus Services (now SBS Transit Ltd) and 67% by SMRT Corporation Ltd. (LTA) financed, built, and owns the rail network, which consists of 4 mass (MRT) lines spanning 150kms and facilitating 2m trips daily. It has allocated S$40b to expand the network to 280kms by 2020. LTA entered into a License and Operating Agreement (LOA) with the operators, requiring them to pay annual lease and make annual deposits to an Assets Replacement Reserve, which will be used to fund future replacement of the original equipment. The operators will also purchase the operating assets at book value. Fares are set to cover operating but not capital costs of the infrastructure. SMRT previously operated tax-exempt for the majority of the lines but went public in 2000, to be the world’s first rail company to do so. SBS was awarded in 1999 a 30-year concession to run the S$4.6b 20-km North-East Line (NEL), which opened in 2003, and two adjoining LRT systems, to foster competition with SMRT. NEL is Singapore’s third MRT line and the world’s 2nd longest fully underground, automated and driverless line, after Singapore’s Circle MRT Line. The SIP has attracted international attention due to steady passenger growth and above-par dividend policy.

17. Autostrade, Italy

Autostrade is an example of a mixed PPP, which was subsequently converted to a BOT/O&M model and fully privatised in 1999, after 12 years of gestation. The motivation for privatisation includes long history of political corruption, financial losses, discontinuance of government funding, reform in the Italian economy, and new EU procurement rules. Autostrade operates 3,408kms of road (valued at US$8.8b in 2004 and covering 50% of the Italian motorway network), and collects tolls with a market valuation of US$14.6b to finance the construction, operation and expansion of the network, subject to a toll ‘price cap’ agreement it signed with the government in 1997. The scheme involves private assumption of ongoing O&M of the existing assets and development of new construction projects, with a broad portfolio of implicit BOO/BOT/O&M sub-contracts, made somewhat unclear by the impending decision of the government to terminate the concession, transfer assets to the state, or re-purchase them. Since significant private equity has been secured through IPO, critics say that it is highly likely that efficiency gains have been achieved in terms of construction, operation and maintenance. 7

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

18. Cofiroute, France

Cofiroute became the first and only fully private highway concessionaire company in France since 1977. After the financial crisis in the eighties, all its competitors remained either public or semi-public funded, leaving 95% of the network already in private hands. Cofiroute was created in 1970 following adoption of a law authorising motorway concessions. It manages 14 concessions ending in 2032 to build and operate 1,200kms of intercity network, 100% funded through tolls. It has the highest proportion of low-traffic yet viable sections (7,000 vehicles/day) amongst other French networks. The success may be attributed to continuous innovation and service improvements, including a permanent relationship with the public grantor shown by the 11 renegotiations made in five years, strict regulations on safety standards, and toll policy that ensures cost-efficiency and good service. Cofiroute has, amongst 20 other new projects, a new contract with the government to built 17.5kms of suburban roads with tunnels, with a concession awarded for 70 years from the expected start of operation in 2012. In 2007, Public Works Financing ranked Cofiroute 4th in total capital investment (US$24.14b) and 2nd in investment per concession (US$1.724m), among 10 other transport infrastructure developers in the world.

19. Mass Transit Railway (MTR), Hong Kong

Hong Kong’s 212-km HK$200b MTR network consists of 9 mass rapid lines, a light rail, a high-speed airport rail link, and a fleet of feeder buses, carrying an average of 4.9m passengers every weekday. Government-owned Mass Transit Railway Corporation (MRTC) was established in 1975 to construct and operate the network under prudent commercial principles. From the time the first line was opened in 1979, the network has grown to hold a share of more than 42% of the current franchised public transport market. In 2000, MRTC was partly privatised into MRTC Ltd (MRTCL), with 23% of the share issue capital sold in an IPO to private investors. Unlike Singapore’s SMRT, which privatised only its operation, MRTC’s privatisation covers all assets and operations. Capitalising on the benefit of privatisation, the government sought to merge all its railway lines to expand its market share, bring more efficient and competitive prices to rail passengers, increase profitability, and venture into new business opportunities such as property development and consultancy on foreign rail projects. In 2007, MRTCL signed a 50-year extendable service concession in return for an annual payment, for it to be able to connect with and operate the government-owned Kowloon-Canton Railway Corporation’s 113-km rail network.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Joint Venture (JV) / In a JV, the public sector agency sells its infrastructure facility or shares of its interest in the facility to Partial Divesture Model a private sector partner at the start or some point in the operation of the facility, or acquires private sector interest before the completion of the concession agreement. The private sector partner can assume ownership, financing, and operating risks, fully or in partnership with the public sector, through separate PPP packages. Each party shares in the revenues created by the project.

20. Beijing Subway Line 4, China

This 28.2-km Ұ15.1b railway is the 9th subway line and first PPP project in Beijing’s mass transit network. It began operating in 2009 and has a unique fare structure that allows unlimited transfers for a flat fare of Ұ2. Unlike other lines of the Beijing Subway, which are completely state-owned and operated, Line 4 was built and managed by a public-private JV, Beijing MTR Corp. Ltd., with stakes consisting of 49% Hong Kong MTR Corp., 49% Beijing Capital Group, and 2% Beijing Infrastructure Investment Co., a JV which was created following two agreements it signed with the Beijing Municipal Government in 2005. These are a 30-year concession agreement on operation, which involves the collection of revenues from ticket sales, and an asset leasing agreement, which includes the commercial operation of all stations and excludes development rights on the land along the line. The JV put up 30% of the investment capital ((Ұ4.6b) to procure the electrical and mechanical equipment, while the government provided the remaining 70% (Ұ10.7b) to cover hard infrastructure costs. Upon expiry of the concession, the JV will transfer its part of the project to the government. The JV was used to introduce private capital, advanced management methods, and new rules such as banning of food and beverage consumption in the trains, and has turned out to be a success.

21. Airport Link, Sydney

Designed for the 2000 Summer Olympic Games and to link Sydney Airport with Central Station, the 10-km double-tracked largely underground Airport Link began construction as a Build Own Operate Transfer (BOOT) project in 1995. It was completed and opened as a JV in 2000. It is one of the best examples of a PPP in terms of determining accurate costs but a failure in terms of financial administration. The State Rail Authority expected to contribute A$470m out of the total cost of A$600m in 1994. It ended up funding A$900m to include a default of private sector partner Airport Link Company (ALC) on a A$200m bank loan. ALC went into receivership in 2000 due to poor patronage brought about by overcrowding of carriages, lack of luggage space, and relatively high ticket prices compared to bus fares. The BOOT agreement downgraded to a less private-involved JV, with ALC ending up only building and owning 4 new stations, in return for a 30-year franchise to operate and levy a surcharge on passengers using the stations. Westpac purchased the line from the government in 2007, and awarded its operation and maintenance (O&M) to Transfield Services. ALC, Westpac, and the government effectively share in the JV’s revenue stream. Reports show that recent patronage has grown 32% to reach nearly 4m a year between 1998 and 2012, following government’s decision to reimburse station access fees, costing taxpayers, however, around A$5m yearly. 9

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

22. Manila-Cavite Toll Expressway (MCTE), Philippines

The MCTE is a 25.5-km expressway that is being completed through a JV, by the private developer UEM-Mara Philippines Corp (UMPC), a consortium of Malaysian and local companies, and the government, in order to link Manila with Cavite, an emerging satellite city in the south. It consists of three sections: (1) a 6.6-km coastal road between Manila and Las Piňas, (2) an 11.4-km coastal extension to Cavite, and (3) a 7.5-km inland extension to the South Luzon Expressway. In 1996, UMPC signed a Toll Operations Agreement to finance the project, with the government’s Toll Regulatory Board (TRB) designing and constructing the tollway, and the government’s Public Estates Authority Tollway Corporation (PEATC) operating and maintaining it for 35 years. Section 1 and part of Section 2 (totalling 14 kms) were built at a cost of US$131m, and since their opening in 1998, PEATC has been collecting toll fees in behalf of the JV. PEATC remits initially 90% of the revenues to UMPC, to pay for the P3.5b (approx US$85m) bank loan that UMPC secured in 1996, and later 40%. The sharing scheme is based on the government’s interest for acquiring the land, UMPC’s financing of the construction, and PEA’s O&M services. There are only two toll barriers in the MCTE and vehicles are charged a flat rate based on class. Traffic along Section 2 has reached only 20% of the projected 47,000 vehicles daily and the reclamation it entailed has contributed to a dramatic decline in the local aquaculture production. Due to the poor performance of Section 2 and thereby downgrading of its bond rating, UPMC plans to buy back its bonds worth US$160m, which were issued to fund the construction of Section 2.

23. Kuwait Metropolitan Rapid Transit System (KMRT)

This US$7b country-wide rail greenfield project was recognised as one of the top 100 infrastructure projects in KPMG’s Infrastructure 100 World Cities Edition due to its innovative PPP structure. It will be Kuwait’s first public transport PPP project, and will be developed in 5 phases with a total of 160kms of track and 69 stations. It will be procured as a disaggregated DBFOM project that involves not only one but 6 PPP packages - one DBFM contract for integrated rolling stock, systems and maintenance (IRS); four DBFMs for infrastructure; and one concession for operations. In accordance to Kuwait’s PPP law, up to 60% of the IRS Company will be sold to IPO shares. Financing will include a government subsidy to be provided due to project size and strategic importance, and through ticket sales, which will be shared between the participating PPP partners. Phase 1, which includes 50kms of track and 28 stations, is currently in the Request for Quotation (RFQ) stage and Partnerships Technical Bureau (PTB), the PPP agency representing the government, is seeking the services of a Transaction Advisor for the procurement process. The construction of Phase 1 is expected to begin in 2013, while the other four phases will be developed as demand grows.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

PUBLIC-PRIVATE OWNED AND OPERATED WITH TRANSFER

Build Transfer Operate (BTO) / BTOs are normally employed when relevant legislation does not allow for the private ownership of the Concession Model infrastructure facility. The private investor is involved in designing, building, and partially financing the project, and once the facility is completed and before operation starts, the ownership of the facility is transferred at no cost to the sponsoring public agency. As a condition of the transfer, the public agency allows the investor to operate the facility under a long-term concession agreement for it recover the cost of capital and earn reasonable profits. The public agency retains ownership of the land and upon transfer of the facility, full ownership of the assets. BTO is least used with only 3 of 119 projects undertaken in 1997-2001 in Asian countries adopting it. This is due to the increasing ability of governments to allow private sector ownership of infrastructure through their PPP legislations.

24. STAR Tollway, Philippines

The Southern Tagalog Arterial Road (STAR) is a 42-km 2-to-4-lane US$73m expressway built to link Southern Luzon Expressway in , the CALABARZON industrial region, and Batangas Port, and to encourage shipping companies to use Batangas Port and decongest the Port of Manila. Phase 1 opened in 2001 to initially complete the link. It was sponsored by the Department of Public Works and Highways (DPWH), funded by the Japanese government under a technical and country developmental assistance, and developed by STAR Infrastructure Development Corporation (SIDC) under a BTO contract to operate the facility until 2029. Upon completion and transfer of the facility to DPWH, SIDC subcontracted the operating concession to STAR Tollway Corporation, under the supervision of the Toll Regulatory Board. Due to the increase in user demand over the years, another PPP is being planned to develop Phase 2, which will include upgrading, installation of electronic tolling, security and lighting, and widening of the tollway to 4 lanes, all at a cost of P2b (US$48m).

25. Si Rat Expressway (Second Stage Expressway System), North Bangkok

This 38.4-km elevated 6 traffic lane cash/cashless expressway system is the first large-scale PPP construction project in Thailand, sought to alleviate traffic congestion within urban and surrounding areas of Bangkok. It consists of 4 sections and is being administered by the Expressway and Rapid Transit Authority of Thailand (ETA). ETA invested B31.2b (US$1.2b) in the project, mainly on land acquisition. The concessionaire of the 30-year BTO contract is Bangkok Expressway Public Company Ltd. (BECL), a publicly-listed toll company, which generates an average toll revenue of B20m (US$650,000) per day. BECL invested in the design and construction of Si Rat and upon its completion in 1990, vested the title of the facilities with ETA. Under the BTO agreement, BECL has the right to manage Si Rat and collect toll fees, subject to the remittance of ETA’s increasing share as follows: 40% between 1993-2002, 50% 2002-2011, and 60% 2011-2020. This scheme appears to be based on the NPV method of determining each party’s share of the future income stream. The term ends in 2020, and can be renewed twice for a period of 10 years each. 11

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Build Lease Transfer (BLT) / The private developer signs a BLT contract with the sponsoring public agency to finance, design, Concession Model build, and own the infrastructure facility. As the owner and upon completion of the facility, it will lease out the facility for operation by the public agency for a set period of time. The lease payments from the public agency will be used to recoup private sector investment in the project. On completion of the lease contract, the private developer will transfer the ownership of the facility to the public agency at a previously agreed upon or market price. The sponsoring public agency retains ownership of the land on which improvements were constructed, during the concession period.

26. MRT 3, Metro Manila

Metro Rail Transit 3 is the Philippines’ busiest elevated railway, moving half a million people daily, along a 17-km stretch of Epifanio Delos Santos Avenue. It was built at a cost of US$655m and since opening in 2000, it has provided clear guidance and lessons to the government as to what to expect in future PPP projects. The 25-year BLT project has been criticised to be a case of crony capitalism, where the private sector led by Metro Rail Transit Corp. (MRTC) takes all the advantages - a guaranteed 15% financial return and property development rights – with the government taking the complete traffic, revenue, commercial, and financial risks. Although the construction resulted in a cost over-run of only 3%, completed on time, and ridership has been 70% of forecast, the PPP’s O&M was a failure. The government pays MRTC an annual lease to cover for power consumption, general maintenance, and other overhead costs, and since revenue has not been enough due to cheaper fare prices, it subsidises every passenger to meet the guaranteed return. All this costs the government US$170m a year, on top of the debt payments to service MRTC’s obligations to its lenders. To relieve itself from further O&M risks, the government is seeking to bid out a new O&M contract with a proposal to double the rail’s capacity and increase fares to cover future equity rental payments.

27. Adams-Barrow-Cummins (ABC) Highway, Barbados

The ABC is the country’s main urban highway, which stretches from Grantley Adams International Airport in Christ Church, bypassing the capital city, Bridgetown, and on to the University of the West Indies in Saint Michael. It opened in 1989 and was upgraded between 2006 and 2007 through the Jamaican Build Own Lease Transfer (BOLT) PPP, which involved resurfacing, widening to four lanes, construction of flyovers and underpasses, protection against sea level rise, and built at a cost of Bbd$120m (US$60m). ABC Project Corp. is the special purpose company tasked to finance, design and build the facility. 3S Structural Steel Solutions signed an agreement with the government to deliver the design, construction, and traffic synchronisation system. ABC owns and sub-leases the facility for 25 years, before eventually transferring this to the government. The lease rentals will be used to repay with interest the loan ABC secured to finance the project. Reports suggest that the project contributed to the government’s high level of guaranteed debt which doubled in 2004-2006.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Build Operate Transfer (BOT)/ This is almost identical to BTO in terms of procedure and scope, except that the transfer of ownership Concession Model of the facility to the public authority happens only after completion of the concession agreement with the private investor. This is also similar to the DBFO and DBFOM concession models, except that in the BOT model, before the transfer, the public authority only owns the site and not the improvements on the site, and does not make service or availability payments to the private sector partner (PSP), but relies on user tolls and charges to generate revenues to compensate the PSP for building, financing, and operating the facility. Upon signing the BOT agreement, the demand risk is transferred to the PSP, encouraging the PSP to design, finance, and build the facility quickly and to the standards that will mitigate the demand risk and at a cost that will maximise the returns in operating the facility, before it is transferred to the public authority at the end of concession period. The BOT model differs from the PFI, which does not entail asset transfer to the public sector.

28. Country Park Motorway, Hong Kong

This is a 12-km US$930m long three-lane expressway (including a 3.5-km tunnel), built between 1995 and 1998 to strategically link Hong Kong with Southern China. The consortium led by Sun Hang Kai Properties holds the toll concession for 30 years from construction. The inclusion of the construction period provided the consortium an incentive to complete the project as early as possible and expedite generation of income from tolls to pay for the project cost. The government provided unencumbered land and developed road links and a bridge to provide access to the motorway. The PPP contract required a maximum equity to debt ratio of 65:35 and inclusion of a number of mainland Chinese partners to mitigate political risks stemming from the planned handover of Hong Kong from Britain to China in 1997. The PPP project was sought to expand economic development along the border and expedite project delivery before China finally took over Hong Kong in 1997.

29. QE2 Bridge, London

Queen Elizabeth II (QE2) is an 812-m £120m long cable-stayed bridge, which opened in 1991 to provide the southbound element of Dartford Crossing. The northbound traffic is serviced by the existing twin-tunnel crossing under River Thames. QE2 is the first fully privatised highway infrastructure project to be constructed in England in the 20th century. The PPP is based on a 20-year contract made possible through the Dartford-Thurrock Crossing Act 1988, which transferred the control of the twin-tunnel crossing to Dartford River Crossing Limited (DRC). The DRC would fund the construction of the bridge, take on the remaining debt from the construction of the tunnels, and collect toll revenues until debts were repaid and a suitable maintenance fund had been accumulated. Accordingly, by 2002, DRC was liquidated and the crossing was contracted to Le Crossing Company Limited (now Connect Plus M25), which began collecting the new road user charges on behalf of the government. The government has announced its intention to sell the crossing as part of its public sector deficit reduction strategy and following decreasing user demand compared to pre-2002 levels.

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Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

30. Cross Harbour Tunnel, Hong Kong

This 1.8-km underwater tunnel is the first road in Hong Kong to link mainland Kowloon with Hong Kong Island. It opened in 1972, after 3 years of construction. It was delivered by Cross-Harbour Tunnel Company Ltd under a 30-year BOT franchise and was transferred back to the government in 1999. The success of the PPP can be attributed to the use of innovative methods such as the immersed tube technique, the project’s strategic location for a harbour crossing, and timing with the period of Hong Kong’s rapid development. Due to sustained use of the tunnel, in just 3½ years after opening, the toll revenue collected was more than enough to pay back the construction cost. However, the tunnel has not reduced congestion due to the inability of alternative crossings to induce demand.

31. Road Concession Program, Chile

The government launched this program via Concession Law 1991 to boost investments in deteriorated and antiquated infrastructure without raising taxes or increasing public-sector debt. A concession may originate in response to a private proposal or upon a recommendation of the Ministry of Public Works. This requires the creation of a new company dedicated to purchase land from the owner on the state’s behalf, bear all risks including costs of force majeure (except during operation), and raise at least 30% equity. Concessionaires can adjust toll rates within set limits, receive government payments as operational subsidies under the minimum revenue provision, and share with the government 50% of the collected revenues when it achieves an ROI of over 15%. The concessionaire may use the NPV scheme, terminating the concession when the NPV of toll revenues equals the amount established in the contract, but subject to a maximum duration. The program manages 19 concessions and has been successful in attracting particularly foreign investors due to the guarantee of minimum revenue, elimination of competing un-tolled routes, and exchange rate protection.

32. Cross-Israel Highway, Israel

This 86-km US$1.35b sophisticated 4-lane toll bypass that connects Tel Aviv with Israel’s north and southern regions, was built in 1999 and progressively opened from 2002. It is Israel’s first toll road and 3rd in the world to operate entirely without toll booths (open-road tolling). GovCo is the state-owned special purpose corporation, which advanced the planning process and selected the concessionaire consortium Derech Eretz Highways (DEC). Funding sources include US$850m government bank debts and US$350m private placement and equity, all to be recouped from toll revenues. The state assumed the responsibility to procure land and clear sites of antiquities, environmental hazards and munitions. As with Chile, the state provides partial revenue guarantee to share with the traffic risk but also to receive a share in the better-than-forecast economic performance. If forecast exceeded actual revenue, the state pays 80% of the difference to the concessionaire. If actual exceeded forecast revenue, the concessionaire is required to pay 57% of the difference to the state. Reports suggest that since its full opening in 2003, patronage has grown in the double digit, exceeding forecasts. 14

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Build Own Operate Transfer (BOOT) / This is similar to the BOT model except that the public authority confers ownership over both the land Concession Model and facility to the private sector partner, in addition to all control and cashflow rights in the duration of the concession. As with the other transfer models, the concession agreement specifies the value of the assets under a predefined formula and agreed depreciation rate. Depending on the amount of the public authority’s financial contribution, at the end of the concession period and transfer of the assets, the authority may pay the operator a sum based on the residual value and established formula.

33. CityLink, Melbourne

CityLink is high successful and is the largest BOOT project in Australian history. The 22-km A$2.2b tollway joined four of central Melbourne’s freeways, and has the world’s largest electronic tolling system. The project began construction in 1996 and since it opened in 2000, it has changed the lifestyle and landscape of the city, setting a benchmark for PPP success. Private concessionaire and owner, Transurban CityLink Ltd consortium, generates an estimated annual income of A$129m out of its 1.5 million registered road users and 720,000 tolling transactions per work day. Private financing was secured through A$510m equity (including A$63.5m public issue), A$1.351b of debt, A$350m CPI bonds, and hedging. The government contributed approx. A$395m (US$314m). At the end of the 34-year concession period (2028), the infrastructure assets will be transferred to the government, at zero cost. The success is primarily due to a guarantee from the state that it will not build a competing road system, in return for the concessionaire accepting the demand risk in full and right to charge road tolls in order to recoup the costs of construction, maintenance, and operation, and with no call on taxpayers in the form of operating or debt subsidies. The other factors include public acceptance and Transurban’s expertise in traffic modelling and innovation, use of an independent reviewer to ensure on-time and quality delivery of construction, and availability of an independent Customer Ombudsman.

34. Confederation Bridge, Ottawa

This 13-km C$840m bridge opened in 1997 and was designed and built by 85%-foreign owned Strait Crossing Development Inc (SCDI) consortium to replace the ferry service between Prince Edward Island and mainland Canada. The government indirectly financed the construction and SCDI designed, built, owns, operates and maintains the bridge for 35 years before it will be transferred to the government. Financing was through a capital provided by crown corporations that was raised through a bond issue secured by the government, which pledged to retire the bonds with a stream of annual payments of C$41.9m (1992 dollars) until 2032 when the concession expires. This amount is estimated to be the value of annual subsidy which went to the ferry service. SCDI collects toll revenues to pay for bridge operations and maintenance for the duration of the concession, and enjoys a guaranteed annual minimum toll revenue of C$13.9m (1996 dollars) without a maximum limit. The indirect financial arrangement is criticised to have increased the cost of financing the bridge by at least C$45m. Nevertheless, the bridge has earned a gold award from the Canadian Council for PPP for engineering ingenuity and contribution to the economy and the 1994 Environmental Achievement Award from Canadian Construction Association for exceptional environmental management. 15

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

PRIVATE OWNED AND OPERATED

Private Finance Initiative (PFI) / In a PFI project, the public agency does not pay capital over the construction period, but rather pays Delivery Model for the service during the operational period. It awards a contract to the private investor to design, build, finance, operate, and maintain the facility based on specified service outcomes, in return for a payment on the successful supply of services at a predefined standard, schedule, and tenure, which the private investor uses to repay its capital investment and ongoing service costs. The payment can also be in the form of shadow toll, availability or performance fee. It is similar to the DBFOM model except that the ownership of the facility remains with the private investor. For purposes of private financing, PFI projects may require the establishment of a special purpose vehicle (SPV).

35. Nottingham Express Transit (NET), UK

The 14.5-km NET tram system was built to reduce car use and stimulate urban regeneration. It is the first PFI project procured by local authorities in the UK. The £250m 30½-year contract was awarded to Arrow consortium in 2000 and the project became fully operational in 2004. Arrow benefits from a secure income stream in the form of an availability fee for the duration of the contract subject to agreed performance standards. The public sector benefits from reduced risk on all aspects of the service and potential for innovation. An SPV, Arrow Light Rail, was created to manage pre- and post- completion activities of Arrow’s 6 shareholders. The project has been praised for successful policy, early involvement of the private sector which provided commercial due diligence, but was criticised on the lack of transport systems integration. With recent introduction of park-and-ride sites, it has proven to be highly reliable. A 17.5-km £578m PFI extension has been awarded to a new contractor, Tramlink Nottingham consortium, to build the new lines and assume Arrow’s operation of the NET for 23 years.

36. Docklands Light Railway (DLR), London

DLR opened in 1987 and has since 1996 been extended through PFI with a capital value of £605.4m. It is now 32-km long, driverless, runs along an exclusively-reserved right of way, and has been instrumental to the redevelopment of London Docklands. Transport for London (TFL) successfully used a layered and incremental contractual approach, which offered more flexibility to procure new entities for network extension and operation to match growth in demand, and reduced risk from early termination of contracts as in the case of Arrow Light Rail’s operation of the NET. The Lewisham extension opened in 1999 and was UK’s first PFI for transport, where the concessionaire is paid an availability fee for the first 10 years and assumes farebox risk for the last 11 years of concession. The contract did not include service operation and therefore failed to influence service quality beyond ensuring asset maintenance. To increase value for money and quality service, subsequent contracts for the City Airport and Woolwich extensions - which opened in 2005 and 2009, respectively - were restructured so that the concessionaires are paid an availability fee for design, construction and maintenance of the infrastructure for 30 years, leaving the responsibility for operations with TFL. 16

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

Build Own Operate (BOO)/ In the BOO model, the private sector finances, builds, owns and operates the infrastructure facility or Full Divesture Model service in perpetuity. The public constraints are stipulated in the original agreement and the public agency’s role is limited to on-going regulatory authority. BOO is second least used among other PPP models, due to lack of revenue sharing and full transfer provisions to the public sector. The potential public benefit in the BOO approach is that the operating revenue risk is assigned to the private sector for the life of the facility. To distinguish, JV involves partial transfer of public interest or ownership at the start or some point of the project to the private sector, both sharing in the revenue stream.

37. Bremen-GVZ, Germany

The project is a transhipment and logistics hub recognised as one of the world’s leading intermodal PPP. The facility combines a rail infrastructure with an inland waterway and a road transport to Bremen Airport. It consists of a 33-ha covered warehouse, 20-ha covered rail-road interchange, and 3-ha covered cold storage, all within a land area of 203 hectares. The private investor assumed the risks on project completion, demand/traffic, foreign exchange, and inflation. Private sector financing is repaid through facility rents and public subsidies. Bremen State shared in the construction risk by funding land acquisition and construction of basic transport infrastructure (US$150m), while the private service providers developed their own sites. Construction completed in 2001 at a cost of US$500m. The facility is owned by GVZ City-Logistik Bremen GmbH, representing public and private interests. Its steady expansion indicates commercial viability and sustainability. The project also shows success in terms of the stability of the concession agreement, building and upgrading assets which are well utilised, and in terms of bringing together governments and businesses in partnership. Public subsidies were also considered optimal, considering the whole-of-life concession.

38. Dulles Greenway, Virginia

This is a 22.5-km US$350m limited-access western extension of the Dulles Toll Road, which opened in 1995 to connect Washington Dulles International Airport with Route 15 in Leesburg. The highway consists of 7 interchanges, 36 bridges, a toll plaza, 12 ramp toll barriers, an administration building, and 4-6 operational lanes. It was conceived as a DBFO project established by the Virginia Public Private Transport Act 1995 with operational responsibilities reverting to the Commonwealth of Virginia in 2036, but later changed to full private financing and ownership. Toll Road Investors Partnership II (TRIP II) acquired the land at market price, built and financed all the improvements at market rates. It therefore owns the highway, pays real estate taxes (US$3.1m in 2007), and complies with the order of the Virginia State Corporation Commission. The highway is, however, being operated by Smart- Tag/EZ-Pass Customer Service Centre, which is owned by the Virginia Department of Transportation. TRIP II pays them a fee for every toll transaction that takes place on the Greenway. It also pays Virginia State Police for patrolling the highway. Greenway offers a unique congestion management toll which saves motorists money when travelling at non-congested hours. 17

Disclaimer: Any views, opinions, or preference expressed in this document are personal to the author and do not represent the views, opinions, or preference of AWDA.

39. MRT 4, Metro Manila

This is a 22.6-km (20 stations) US$1b mostly elevated double-track light railway line, which has been proposed since 1995 to run from the Recto stations of LRT 1 and LRT 2 lines in Manila City, intersect with the North Avenue Station of MRT 3, and continue on to Quirino Highway in Lagro. It is expected to move 550,000 passengers per day along the radial corridor between Manila City and the country’s most populous city and emerging technology hub, Quezon City. The sponsoring public agency is Light Rail Transit Authority (LRTA) of the Department of Telecommunications and Communications, which operates the entire rail network. The project was to delivered under a Build-Transfer-Build-Own- Operate (BTBOO) scheme - BT for infrastructure, BOO for rolling stock - by a Filipino-French consortium consisting of Bouygues, Javlon International (Phils) Inc, and SOFRETU. The scheme was estimated to provide the government net annual earnings of P3b (US$56m), posting the highest economic internal rate of return of 29.7%. The delay was due to lack of political certainty over alignment issues and the government’s simultaneous negotiations with mall developers over a competing part parallel US$3.3b MRT-7 BOT project. MRT 7 involves the construction of a 45-km road and rail network, commercial, and residential developments. The Filipino-French consortium lost the original contract in 2004, following the Justice Department’s decision declaring their failure to start construction within the prescribed 18-month validity period. MRT 7 has also delayed due to lack of funds. The latest proposal has been to shorten MRT 4 to 8kms to provide the link between the stations in Manila City and the North Avenue Station on the LRT 1 extension, and strategically service Quezon City’s highly-developed commercial precinct. MRT 7 would take over the remaining length of the original MRT 4 line and continue on to Bulacan, a province in the northeast of Metro Manila.

40. Canadian Pacific Railway (CPR), Canada

This is a 22,500-km historic transcontinental Class I rail network, which began operation in 1885. Now it serves major cities from Vancouver in the west to Montreal and US cities Chicago, Newark, Philadelphia, Washington, New York, and Buffalo, in the east. Built following British Columbia’s joining the Canadian Confederation, CPR was conceived as a BOO project with the government underwriting a mixture of C$25m in cash, 10m hectares of land, C$37m in surveying costs, and a property tax exemption for 20 years. The BOO was sought to encourage the private investor to complete the project earlier and thereby repay its investment sooner. The project was completed 6 years ahead of the expected schedule. CPR was incorporated in 1881 as a crown entity. However, it was privatised in 1995, and currently trades as CP on both the Toronto and the New York Stock Exchange, with a market capitalisation of US$7b in 2008.

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