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Transcript of P3
Innovative Mechanism for Financing Highway Projects: A Review on Public Private Partnership and Some Future Suggestions.
Graduate Student # 7746677
Department of Civil Engineering
University of Manitoba
What is PPP/P3?
According to The Federal Highway Administration (FHWA),
P3s are contractual agreements formed between a public agency and private sector entity that allow for greater private sector participation in the delivery of transportation projects.
The benefits of Public-Private Partnerships
a) Better performance in the construction phase through delivery on time and on budget
b) Improvements in customer service
c) Increased scope for innovation in infrastructure delivery
d) Improved care of public assets
e) Governments focused on infrastructure outcomes
Common concerns about Public-Private Partnerships
a) P3s are too costly because the public sector can borrow at a lower interest rate than the private sector.
b) Transaction costs—the costs of doing business—in P3s are higher than conventional procurement, making them more costly overall.
c) P3s diminish accountability and transparency to the public.
d) P3s produce low-quality services.
e) P3s result in a loss of policy flexibility for the government.
f) P3s are risky because the private partner could go bankrupt.
g) P3s result in foreign ownership of domestic infrastructure.
h) P3s are a threat to public-sector workers.
The Electronic Superhighway, CityLink, Melbourne
Location of CityLink Project
Six Lane Freeway
& 2 Tunnels
Widened to six lanes
Tullamarine Freeway has been upgraded and widened to eight lanes
New Six-lane Freeway
Description of the Project
Key features of the project have been listed as follows:
• Total distance of roadway 22km;
• Southern Link: 8.4km (east), 6.6km (west);
• Western Link: 12.2km;
• Total new road tunnel: 5km (two tunnels constructed one in each direction 3.4km and 1.6 km respectively;
• Total new road elevated/bridge: 4.2km (Flemington to Bolte);
• Total length of existing road land level road improved: 8km (Tullamarine Freeway);
• Total length of elevated road improved: 5km (Monash Freeway).
Purpose of the Citylink Project
The key purposes of City Link Project were to
1. Link the three freeways,
2. Enhance the capacities of the two older freeways (Tullamarine and Monash),
3. Link Melbourne’s airport, seaport and interstate rail terminal,
4. Provide western and southern inner bypasses of the city, and
5. Remove heavy traffic from some of the nicer parts of inner Melbourne.
May 1992, the project was named as Citylink
bidding for the project was offered
. In response,
were received in
and in response two consortiums were shortlisted based on some predetermined selection criteria. In
, these consortiums
Transurban and CHART roads
were announced. The
Transfield Construction and the Obayashi Corporation
Clough Engineering, John Holland Construction and Engineering, Roche Brothers and Theiss Contractors
After the long process of tender submission and evaluation,
was ultimately selected and
announced as preferred
was given as active reserve status.
• Transurban had responsibility for the construction of the CityLink;
• Related property acquisitions, specified roads works and landscaping would be financed by the State at an estimated cost of $266 million;
• The land on which the project was to be constructed would be leased to Transurban by the State; and
• Transurban would
collect road tolls
34 year period (ending 14 January 2034)
for public usage of the 22 kilometre length of the CityLink. At the end of this period, the ownership of the CityLink will revert to the State at
(Victorian Auditor General 1996, p. 117).
Financing and Operating Structure of Citylink. (Source:Muhammad and Low (2006))
Total Funding Requirement was 1.776 bn.
At the end of the project, the declared total cost of the project is AUD 2.2bn (2006 prices).
Equity- Total AUD 0.51bn (actual 2006).
Project debt-a syndicate of banks provided total bank debt of $1.3 billion which includes of Tranche A ($1.2 billion) during the construction phase with a 17 year maturity and Tranche B ($97.5 million) that will provide additional liquidity for the operation phase of the project.
Subordinated debt- Total AUD 51m (actual 2006), which facilitates the finance for purchase of transponders used for electronic tolling.
CPI Bonds- AUD 0.35bn provided long term borrowings.
72,000 m2 of absorptive and reflective noise panels
Electronic Tolling System (E tag)
Lessons learned from the project
In recent times, Metropolitan Planning Council of Melbourne reported about the lessons learned from the Citylink project. It says that, Citylink project has achieved a range of social, economic and environmental benefits. Now, traffic flows spontaneously which results a
noticeable improvement in downtown, port, airport and rail facilities
Average travel times
reduced to 10 to 20 minutes
, which resulted
$187 million in travel time savings yearly
. There are other economic benefits listed below (source: Metropolitan Planning Council of Melbourne 2011).
6,000 to 8,000 jobs
have been created during the construction phase.
• More efficient movement of vehicles, which
lowers highway maintenance costs by more than $3 million per year
• Freight savings of
$50 million per year
, saving approximately
$13 million per year
Industrial benefits in excess of $40 million per year
including increasing the efficiency of warehouse operations, improving links between industrial zones, and creating more flexible labour markets.
Enhanced property values of $25 to $30 million
The environmental benefits of CityLink include more than
two million trees, plants and shrubs that were planted
along the toll road and its new bike and pedestrian paths.
The Citylink project has emerged as aground-breaking project having an innovative and seemed to be successful finance mechanism. Basically, it's a P3, design, build, operate, finance, and maintain type of project having some extra quality like automatic tolling mechanism, where the users are directly paying the temporary owner of the infrastructure for 34 years.
However, in some studies some contradiction has been arisen that, whether the Citylink project was of use for Melbournians or not. Some studies also claimed that the Citylink project increased the traffic congestion because the vehicle ultimately uses the other local reads after using the freeway. Therefore, the problem remains the same that, users are saving time in freeway whereas wasting more time in congestion in local roads and highways. Hence, the necessity of further development of the planning of the whole transportation infrastructure is being felt.
Disraeli Bridges Project
The design and build phase of the project includes:
• Construction of six lane approach streets;
• Traffic interchanges;
• A right of way overpass for pedestrians;
• Four lane bridge spanning CPR mainline;
• A four lane bridge spanning Red River;
• Reorganized and improved vehicular access and exit points;
• Revitalized landscaping and entrance points for adjacent communities;
• Improved lighting, landscape features and aesthetic elements to create a more attractive and residential feel for adjoining neighbourhoods; and
• A lower elevation pedestrian bridge connecting with existing cycling paths at Brazier Street and Annabella Street.
The maintenance phase of the project includes:
• Inspection and reporting;
• Emergency maintenance;
• Operational maintenance;
• Pavement surface, bridge structure, drainage and landscape maintenance;
• Snow clearing and ice control.
Procurement Process of the Project
Based on the
qualitative and quantitative benefit analysis
in preliminary analysis, design, build, finance and maintain
was found to give the
highest potential to provide saving
compared to other methods. Key reasons for selecting the P3 model are (Source: 2012 National award case study, CCPPP, Raising the Bar on Replacing Municipal Infrastructure):
• To maximize taxpayer value of money;
• To ensure on time and on budget delivery;
• To transfer certain risks to the private sector; and
• To ensure that a well maintained asset is transferred back to the city of Winnipeg in good condition at the end of the 30 year maintenance term.
On November, 2008,
three highest scoring respondents
were shortlisted in response of the
. They were,
KMC Winnipeg, Plenary Roads Winnipeg and SNC-Lavalin Inc.
on January, 2010;
Plenary Roads Winnipeg was finally selected
as preferred proponent. On April, 2010 the construction commenced and on October, 2012 the construction completed.
Structure of the Project Agreement
A 32 years and eight months agreement was signed between City of Winnipeg and Plenary Roads Winnipeg where there was a
32 month design and construction period
30 years maintenance period
Roles and Responsibility
The project is being financed by a mixed type of private sector debt and equity funding. Plenary sourced
private debt financing to fund approximately 90% of the costs of construction
during the Project. The other
10% of the construction cost is being funded by equity
debt and equity will be paid by the fund received from City of Winnipeg after the completion of the construction of the project over 30 years period.
City's Payment to Plenary
Value for Money Assessment
The Final VFM results demonstrate that the PPP approach provides the City with estimated
value savings of approximately $47.7 Million
, in comparison to the
Traditional delivery approach
. This represents a
. (Deloitte & Touche LLP, Winnipeg, Disraeli Bridge Project value of Money, 2013).
Risk Transfer to the Private Partner
Following risks have been transfer to the private partner from City of Winnipeg into this project.
• Design compliance with the technical requirements;
• Construction price certainty;
• Scheduling, project completion and potential delays;
• Design coordination;
• General contamination;
• General permitting and approvals
• Design and life cycle responsibility;
• Construction financing;
• Schedule contingency;
• Commissioning and traffic readiness; and
• Safety and emergency response protocols.
Lesson Learned from the Project
City of Winnipeg had a very little experience on dealing with P3 projects. Disraeli Bridge project was a good example to learn lesson from a successful project which has completed on time with maximized value for money achievement. Also, during construction, possible minimum hindrance has been caused in transportation due to construction work using very efficient construction technology. The project has been considered for a great accomplishment for City of Winnipeg.
Thanks Everyone....... Questions?
Missing link among existing Freeways