T h e C a n a d i a n C o u n c i l f o r P u b l i c - P r i v a t e P a r t n e r s h i p s

An Overview of Public-Private Partnerships in Canada

Presentation to the Economic Developers Council of Ontario Spring Symposium

Steven Hobbs, Director, Strategic Planning and Partnerships, CCPPP

Sault Ste. Marie, May 19, 2016

P3s: What Are They?

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•  Public-private partnerships, or P3s, are partnerships between the government and the private sector to build public infrastructure like roads, hospitals or schools as well as deliver services.

•  P3s can be structured in different ways, allocating varying degrees of responsibility for design, construction, financing, maintenance or operation to the private sector, while always maintaining public ownership and control.

What is a P3?

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Design Build Finance Maintain Operate

It goes by many names (P3, AFP, PFI)

•  The government contracts with a single entity (“Project Co”) who in turn contracts with consortium partners

•  The private sector accepts responsibility for Design, Build, Finance, Maintenance and in some cases Operations of asset

•  The facilities management component covers a long-term concession period (25 – 35 years) with pre-defined hand back conditions

•  Contracting arrangements are performance based

–  Payment from Government only begins upon completion of construction or milestone payments

–  On-going payments remain subject to deduction for failures in service delivery

–  Private Sector Financing at risk for the duration of the contract

What is a P3?

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Sample Partnership Structure

Developer/ Equity Investors Lenders

Public Authority

P3 Entity (“Project Co” or “SPV”)

FM or O&M Operator Constructor

Architect

DB Agreement

FM/O&M Agreement

Debt Equity

Project Agreement

Typical P3 Timeline

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Market Sounding

2 – 3 Months

Issue RFQ

2 – 3 Months

Issue RFP

5 – 9 Months

RFP Bids Due

2 – 3 Months

Financial Close / Construction Start

3 – 5 Years

Substantial Completion

20 – 30 Years

Concession End

Teaming Phase

RFQ Phase

RFP Phase

Closing Phase

Construction Phase

Operating & Maintenance Phase

When to use P3s

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Typical characteristics that make a project more likely to make sense as a P3:

•  Project is large in size

•  Project is complex

•  The opportunity for risk transfer by the government owner

•  Long-term maintenance and/or operations component

•  Opportunity to innovate

When to use P3s

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“Spadina subway extension $400M over budget” the Toronto Star stated in 2015 “Mayor apologizes for cost overruns in construction of city hall,” reported the Guelph Mercury in 2014

Traditional Procurement

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(1) Source: Flyvbjerg, B., Bruzelius, N., and Rothengatter, W. 2003. Megaprojects and Risk: An Anatomy of Ambition. New York: Cambridge University Press - Study of cost overruns on a sample of 258 major roads, tunnels, bridges, urban transit, and interurban rail projects in 20 countries on five continents.

Traditionally procured megaprojects go over budget*

Average cost overrun of traditionally procured megaprojects*

Benefits of P3s

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On Time On Budget Better Value for Money

Well Maintained Risk Sharing Innovation

Top P3 Myths

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1.  P3s mean privatization and loss of public control

2.  P3s are more expensive

3.  P3s are bad for small and local contractors

4.  P3s maximize private sector profits 5.  P3s lack transparency 6.  Unions do not like P3s

Canadian PPP Market

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Canadian P3 Overview

• 25 year history

• 237 projects

• $94.6+ Billion

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Sector Number Value ($B) Transportation 54 48.3 Health 90 25.1 Energy 11 7.3 Justice 19 5.4 Accommodations 7 2.5 Education 15 2.5 Recreation & Culture 15 1.2 Government Services 5 1.0 Water & Wastewater 17 0.9 Information Technology 4 0.4 Total 237 94.6+

P3 Projects by Sector

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Province Number Alberta 20 British Columbia 39 Manitoba 5 New Brunswick 12 Newfoundland & Labrador 1 Northwest Territories 2 Nova Scotia 3 Nunavut 2 Ontario 115 Québec 16 Saskatchewan 10 Federal 12 Total 237

P3 Projects by Location

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Provincial 175 Municipal 49 Federal 12 Aboriginal 1 * Total 237

P3 Projects by Jurisdiction

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* Kokish River Hydroelectric Project (3 other projects also have a significant aboriginal component: Okanagan Correctional Facility, Government of Nunavut Buildings, Iqaluit International Airport Improvement Project, but ownership does not reside with the Aboriginal government)

P3 Market by Year

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0

5

10

15

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Projects reaching Financial Close by Year (n=205)

Sectors •  Urban Transit •  Water/Wastewater •  Affordable Housing •  Sustainable Infrastructure •  Broadband •  Government Services

The Next Generation of PPP in Canada

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Canadian P3 Success Factors

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•  Committed Governments

–  P3 Champions

–  Consistent Deal Flow

•  Strong Legal Framework

•  Value for Money

–  Performance-based Contracts

–  Appropriate Risk Transfer

–  Built-in Lifecycle Maintenance

P3 Success Factors

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•  Deep Financing Markets •  Public sector expertise

–  Institutionalized through dedicated agencies

–  Standardized Documentation

•  Procurement –  Competitive

–  Efficient

–  Transparent and fair

•  Labour Transition Practices

P3 Success Factors

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Canadian P3 Agencies

•  Provincial –  Infrastructure Ontario

–  Partnerships BC

–  SaskBuilds

–  La Société québécoise des infrastructures (SQI)

–  Partnerships New Brunswick

–  Alberta Infrastructure

•  Federal –  PPP Canada Inc.

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Canadian P3 Results

•  On Time

•  On Budget

Economic Impact (2003 - 2012)

•  290,680 Direct Jobs

•  $25.1B Contribution to Direct GDP

•  $9.9B Cost Savings

•  $7.5B Tax Revenue

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Public Perception of PPP

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P3 Support

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67% of Canadians Support P3s

(compares to 62% in a 2013 Nanos survey)

Nanos conducted a random survey of 1000 Canadians between Jan. 30 and

Feb. 1, 2016

HIGH PRIORITY MOST URGENT

•  Economic 75% 50%

•  Social 63% 27%

•  Green 60% 24% Nanos conducted a random survey of 1000 Canadians between

Jan. 30 and Feb. 1, 2016

Infrastructure Priorities/Urgency

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Examples of Municipal P3 Projects

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Confederation Line Ottawa, Ontario

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Goderich Water & Wastewater System Ontario

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Disraeli Bridges Winnipeg, Manitoba

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Montréal Concert Hall – Maison Symphonique, Québec

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Pan Am Athletes’ Village Toronto, Ontario

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Single Room Occupancy Project British Columbia

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www.p3-2016.ca

24th Annual P3 Conference

November 14th and 15th Sheraton Hotel and Conference Centre

Toronto, ON