Concessions for New and Existing Transportation Infrastructure

1
Concessions for New and Existing Transportation
Infrastructure

• Northern Border Finance Workshop

December 12, 2006
D.J. Gribbin, Division Director, Macquarie
Holdings (USA)
2
P3s Provide Opportunity

• ILLINOIS Chicago Skyway
• INDIANA Indiana Toll Road
• TEXAS Trans-Texas Corridor
• VIRGINIA Pocahontas Pkwy, Capital Beltway, I-95
• OREGON PDA development of 3 projects

VIRGINIAN PILOTJUNE 5, 2006
CHICAGO SUN TIMESOCTOBER 28, 2004
THE INDIANAPOLIS STARMAY 24, 2006
3
Private Sector Involvement Where is it
Encouraged?
Indicates states with a broad PPP legal framework
Indicates states likely to enact PPP legal
framework in future
Indicates states with a limited PPP legal
framework
4
Opportunities for Revenue

• Increase Gas Taxes
• Federal and/or State
• Increase Sales Taxes
• State and/or Local
• Create Special Tax Districts
• Property Taxes
• Sales Taxes
• Toll/User Fee Financing
• Traditional
• Concession

5
How Do Concessions Work?

• Public sectors key role is setting the agenda
• Specify desired outcome
• Private sectors role
• Calculate financial impact of policy decisions
• Educate on concession model and how it addresses
  concerns
• Some key dials to consider
• Concession length
• Tolling schedule
• Non-compete clauses
• Revenue sharing
• Existing employees
• Maintenance Requirements

6
Why Not Self-Perform?
TRADITIONAL PROCUREMENT
CONCESSION MODEL

RevenueEfficiencies
ADDITIONAL Infrastructure EconomicDevelopment Jo
bs
CAPEXEfficiencies

OPEX Efficiencies
VS.

Equity

Additional Debt

Standalone Bonding Capacity
Standalone Bonding Capacity
Examples
States estimate of value Private Sector Valuation Additional Value
Indiana Toll Road 2.0bn 3.8bn Approx 90 more
Chicago Skyway 1.0bn 1.8bn Approx 80 more
7
Traditional Model of Tax-Exempt Bond Financing
Toll 2.00 Raises 100 M
Revenue
Debt Coverage
Bond Debt
40
Years
8
Concession Model
Toll 2.00 Raises 160 M
Stronger Growth
Revenue
Equity
Bank Debt
40
75
Years
0
9
Concession Model Designed to Lower Tolls
Raises 100 M Toll 1.40
Stronger Growth
Revenue
Equity
Debt
0
75
40
Years
10
P3s in Transportation Risks

• TOP SIX CONCERNS WITH CONCESSION AGREEMENTS
• 6. Concessionaire will go bankrupt
• 5. Concessionaire will sell to sleazy operator
• 4. State will lose toll revenue for needed
  maintenance/expansions
• 3. Concessionaire will fail to repair facility
• 2. Concessionaire will raise tolls through the
  roof

11
P3s in Transportation -- Risks

• 1. Government will squander the concession payment

12
Contact Information

• D.J. Gribbin
• Division Director
• Macquarie Holdings (USA), Inc.
• 125 West 55th Street, 22nd Floor
• New York, NY 10019
• [phone]
• dj.gribbin_at_macquarie.com