Eric S. PetersenPartner

Hawkins Delafield & Wood LLPNew York, NY

2450058.2

United States Conference of MayorsMayors Water Council Meeting

Washington, DC May 1, 2015

WATERPUBLIC-PRIVATE

PARTNERSHIP UPDATE

Hawkins

Delafield & Wood LLP

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HAWKINS PERSPECTIVE

90 Attorney Infrastructure Procurement, Contract and Finance Boutique

Municipal Representation Exclusively

All Infrastructure Sectors

100+ Water Projects in 25 States

Alternative Project Delivery and P3 Project Overview

Cranston, San Diego and San Antonio

CRANSTON CONCESSION PROFILE

The Original Wastewater ConcessionExisting Treatment Plant, Collection

System, IPP, System Upgrade’s Private Financing – Tax ExemptPrivate Operation, Maintenance, Repair,

Replacement25 year Term

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CITY GOALS

Improved Efficiency

Single Point of Accountability

Effluent Regulation Compliance

Exit the Business

Concession Fee

What’s Old Is New: Cranston As Model For Rialto, Bayonne, Nassau County

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CONCESSION FEE

$50,000,000Determined by City, Not CompetedPresent Value of Long-Term Operation,

Maintenance, Repair and Replacement Savings

Used to Repay General Fund Loan, and Outstanding City Debt

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RATES

Set by City – No PUC RegulationRevenues Remain Property of City“Rates Didn’t Increase Beyond Level

Projected Under the No Project Alternative”

No Use of Rate Hikes to Avoid a Tax Increase

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CARLSBAD P3 PROJECT

San Diego County Water Authority

Reverse Osmosis Seawater Desalination Project

Technology Proven Internationally

50 MGD Plant and 11 Miles of Pipelines

Co-located with Encina Power Station

Privately Developed, Publicly Sponsored

Structured as a “Water Purchase Contract”

DRIVERS

California Water Availability and Allocation Uncertainties

New Water Source

Enhance Regional Water Resource Security

Sustainability

Transfer Development and Performance Risks

Drought Prospects Overcame Cost Concerns

Completion: Fall, 2015

California’s First Major Water P3 8

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KEY COMMITMENTS

Poseidon Designs, Builds, Finances, Owns and Operates the Project (P3)

30-year Water Authority “Take or Pay” Water Purchase Agreement

Water Authority Ownership at End-of-Term

56,000 Acre Feet Per Year

$1800 Per Acre Foot

Product Water Quality Guaranteed (Based on Assumed Raw Water Conditions)

Electricity Usage Guaranteed

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PROTECTION OF THE PUBLIC INTEREST

Establishment of Plant Design Requirements

Pipeline Standards

Water Quality Guarantees

Water Delivery Guarantees

State Water Permit Standards

SAN ANTONIO P3

Water Purchase Agreement – SAWS and Abengoa

Raw Groundwater Wells50,000 Acre Feet of Product Water140 Miles of Transmission PipelinePrivately Developed, Publicly SponsoredTexas’s First Major Water P3

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PROJECT COMPANY

Obtain Lease Rights to GroundwaterSecure Local Agency Production PermitsAcquire Pipeline Right-of-WayDesign, Build, FinanceOperate, Maintain, Repair and ReplaceComply with Performance GuaranteesRight to Make Available Product Water

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SAWS

Design, Build, Finance and Maintain SAWS Interconnection Improvements

Take Delivery of Product Water Made Available by Project Company

Pay for Product Water Made Available But Not Taken for Any Reason

No Off-Spec Water

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SAWS GOALS

Transfer Risk of Securing Water RightsTransfer Risk of Obtaining Groundwater

PermitsTransfer Risk of Future Permit CutbacksTransfer Financing RiskWater Price - $2,000+/AFCommercial Close – 2014Financial Close - 2016

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CONTRAST TOTRADITIONAL DELIVERY

Design-Bid-Build (DBB) Contracting

Two ContractsCompetition Only on Construction PricePublic OperationsGovernmental Obligation Municipal Bonds

(Revenue or Tax Secured)Projects Are Publicly OwnedDesign, Construction, Operation and

Financing All Separate Functions

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DBB DRAWBACKS

Not Qualifications Based

Forced Marriage of Designer, Builder

Construction Price Is Only Selection Factor

Slower Delivery

Higher Cost

Can Be Dispute Prone

Limited Long Term Focus

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ALTERNATIVE PUBLIC WORKS FINANCING AND CONTRACTING

Design-build (DB) Design-build-finance (DBF)Design-build-operate (DBO)Design-build-finance-operate (DBFO) (P3) One Point of AccountabilityPerformance-based ContractingRFQ and RFP ProcessBest Value Selection

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PRIVATE FINANCING DRIVERS

Legal Debt Limits

Government Debt Reduction Efforts

Use of Debt Capacity For Other Projects

Voter Debt Approval Rules

Avoidance of Debt-Caused Rate Spikes

Risk Transfer

Strong Security for Performance

Need for Concession Fee

Projects Involving New or Proprietary Technology

BENEFITS OF ALTERNATIVE DELIVERY AND P3

Extensive Use in Private SectorQualifications – Based SelectionLife-Cycle Cost PerspectiveLong Term ContractsSubstantial Risk TransferStriking Success of APD, P3 Projects10-20% Savings Against “Benchmark” “Faster, Better, Less Expensive”Consistent Success and Growing Acceptance

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THANK YOU

Eric S. PetersenHawkins Delafield & Wood LLP

One Chase Manhattan PlazaNew York, NY 10005

(212) 820-9401epetersen@hawkins.com

www.hawkins.com