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PPP CanadaBuild Infrastructure Better

Northern Economic and Sovereignty Infrastructure Conference

Iqaluit, NunavutOctober 13, 2010

Dale BoothDale Booth Senior P3 Advisor, PPP Canada

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What is PPP Canada?

PPP Canada - A New Federal Crown Corporation Visible federal commitment to P3s Reporting through Minister of Finance CEO and Chair appointed in 2009 Providing funding and advisory support services for

the development Canadian P3 market www.p3canada.ca

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About Us

PPP Canada’s Mission:

• To improve the delivery of public infrastructure by achieving better value, timeliness and accountability through P3 procurement.

Corporate Objectives:

• More P3 projects by leveraging incentives, demonstrating success and providing expertise

• Better P3 projects by promoting P3 best-practice and capacity-building

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Strong Private-Sector Leadership

PPP Canada is led by an accomplished board with significant private-sector and procurement experience

Chair is Mr. Greg Melchin – former Alberta minister

Mr. Jacques Lamarre – former CEO of SNC Lavalin

Mr. Tony Comper – former CEO of Bank of Montreal

Mr. Bill McMackin, CA – former partner at KPMG

Ms. Carol Pennycook – law partner at Davies Ward Phillips & Vineberg LLP

Mr. Peter Armstrong – Executive Chair and CEO of the Armstrong Group

Mr. John McBride – CEO of PPP Canada

Board engaging key federal Ministers in informal discussions

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What is a P3?

A cooperative venture between the public and private sectors, built onthe expertise of each partner, that best meets clearly defined public

needs through the appropriate allocation of resources, risks and rewards.

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P3 Benefits

Budget certainty

Eliminate delays in project delivery

Transfer project risk

Accelerate capital investment programs

Unlock unrealized asset values

Generate project revenues

Innovation

Canada Line Rail

• project in Vancouver

• completed on budget

• nearly three months ahead of schedule

Dokis First Nation

• $43 million project

• upgrading an existing water control dam

• dam was on PWGSC’s surplus asset list

Sea-to-Sky Highway Improvement Project •Project in BC

•Innovative design incorporating widening, straightening, additional passing lanes, increased median barrier use and use of reflective markings

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The Canadian P3 Market

Canada is viewed as a premier market for P3s by the private sector

Significant disparities in P3 adoption/market between jurisdictions

Provinces have been early adopters of P3s:• Large infrastructure requirements• P3s regularly used in Transportation and Healthcare sectors• Beginning to see critical mass of P3 projects in operation phase

Some municipalities are adopting P3 procurement policies:• Winnipeg• Edmonton• Calgary

Federal departments are beginning to look at P3s to procure their capital asset requirements

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Recent Canadian P3s

Projects in procurement show P3 model is expanding to new sectors:

Canada: • CSE HQ• RCMP Surrey HQ

Alberta:• 14 Schools

BC: • 1 Health Centre• 1 Transportation

Ontario: 8 Health Centres 3 Courts 2 Policing 2 Transportation 1 Nuclear 1 Detention Centre

Quebec: • 2 Transportation• 2 Correctional Facilities• 1 Health Centre

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Market Outlook

Fundamentals driving Public Sector interest in P3s and growing pipeline:

• Aging infrastructure base in Canada needs replacement • Fiscal constraints

Positive Private Sector receptivity to the model:

• Maturation of the project sponsor/consortia community• Increasing investor interest in Infrastructure as asset class

Credit markets have been turbulent but appear to be coming back

• Credit spreads are coming down from Fall 08 peak of around 400bp but costs have not reached pre-crisis levels, impacting value for money

• Increased sensitivity to risk turned attention to substantial completion payments, wide equity etc. to reduce risk, challenging project affordability

Successful projects are building public confidence in the model but there are still challenges

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The P3 Canada Fund

A $1.2 Billion fund to stimulate the adoption of P3 procurement by Provinces, Territories, Municipalities and First Nations

Targeting:

• Useful public infrastructure in areas of federal interest• Well structured, value for money P3s• Projects that build the P3 market

Staged Selection and Application Process

Nature and level of funding support dependent on project:

• Maximum 25% of construction costs• Range of potential instruments including contributions, loans and loan

guarantees

Stacking rules with respect to Federal funding apply to the P3 Canada Fund

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The P3 Canada Fund – Round 2

• Round 2 Call for Submissions closed June 30, 2010• Details and Submission Guide available at www.p3canada.ca

• 73 projects – total capital cost ~$11B, from 9 provinces and territories• 7 water or wastewater projects• 13 energy or green energy projects• 18 transportation and transit projects• 12 First Nations projects• Several sports, recreation and tourism-related projects were also submitted

• Preliminary Assessments in September 2010

• Expecting to invest $200M - $300M through Round 2

• Two Round 1 funding announcements to date:

• $50M to the Maritime Radio Communications Initiative (Atlantic Provinces)

• Up to $25M to the Chief Peguis Trail Extension Project (Winnipeg, MB)

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P3 Canada Tools and Services

Advisory services and training on P3s:• P3 Canada will have a roster of pre-qualified consultative

resources that can assist P3 project development and training

“Incubator” for early stage P3 projects to grow the market and maintain a pipeline of projects

Seed funding for feasibility and business case development

P3 Officials can assist in examining your project through the “P3 lens”

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P3 Canada Fund Eligible Categories

Water and Wastewater Public Transit National Highway

System Green Energy Disaster Mitigation Solid Waste

Management Brownfield remediation

and redevelopment

Sports infrastructure Connectivity Local roads Shortline rail Short Sea Shipping Regional and Local

Airports Tourism infrastructure Cultural infrastructure

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P3 Project Team Skill Set

A P3 project team must have the necessary skills to conceive, evaluate and implement partnership arrangements. The team will: • examine feasibility and identify their preferred options, • prepare a business case to support the project, • validate options with the community and the private sector, • determine the procurement strategy to engage and select

business partners, • recommend the selection of a business model and partner to the

community, • conduct negotiations, and • create the long-term partnership structure for the project

Must be able to manage an open, fair and transparent procurement process, using P3 Best practices, to choose the partner

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PPP Canada100 Queen St.

Ottawa, ONK1P 1J9

dale.booth@p3canada.ca

(613) 992 4634www.P3canada.ca

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What Kinds of Projects Make Good P3s?

Four fundamentals to look for:

Is it public infrastructure? Size: $45 million+ capital asset NEW construction (usually) A departure from the government’s core competencies

Types of infrastructure:

New accommodations/real property (e.g. LEED office complex, specialized facilities like prisons/labs)

Major transportation projects (e.g. Confederation Bridge, Hwy 407) Other infrastructure projects, when specific performance output

requirements can be identified

Annex I:

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Success features of P3 Projects

Plan The project is suitable for a P3 approach and is outside political interference A clear and confirmed vision, guiding principles, needs and objectives All viable options explored and examined whether or not they lead to a P3 The Project must be Biddable Procure A procurement plan that draws on industry-based lessons learned and best

practices Opportunity to introduce innovation throughout the project life-cycle Checks and balances to ensure the viability and deliverability of the P3

solution The Project must be BankablePerform Implemented management tools that enhance the partnership Facilitated knowledge and skills transfers to clients’ management teams Manage the contract and relationship within a P3 Partnership The project must be Manageable

Annex II:

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Financial Requirements

An identifiable revenue stream source is required for P3s to support availability payments

The long term availability payments can be required up to 20 years depending on the P3 project

Sound financial track record will be important to private partners

Annex III:

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Private Sector Partners

Foreign firms were initial sponsors of early Canadian P3 Projects and several have established Canadian Subsidiaries:

• Bilfinger Berger (Germany)• Carillion (UK)• Plenary (Australia)• Babcock & Brown (Australia)• Acciona (Spain)

Canadian headquartered firms are starting to enter the P3 sector as Project Sponsors, including:

• Forum Equity Partners• Fengate Capital Management• Ellis Don

Foreign lenders still dominate the debt financing of P3 projects but the big 5 Canadian banks are getting in the game

Canadian construction firms are key partners in the project consortia

Private sector concerned with lack of standardized processes and documentation, which makes bidding costly and adds to bidding risk

Annex IV: