value for money report

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VALUE FOR MONEY

REPORTFOR THE DESIGN,

CONSTRUCTION,

FINANCING,

OPERATION AND

MAINTENANCE OF THE

COMPLETION OF

AUTOROUTE 25

IN THE METROPOLITAN

MONTRÉAL AREA

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY 3

2. REPORT OBJECTIVES 6

3. PROJECT DESCRIPTION 7

3.1BackgroundofAutoroute25andtheexistingproblem 7

3.2Trafficproblemscausedbythecurrentsituation 7

3.3Projectobjectives 7

3.4Mainphysicalcharacteristics 8

3.5Mainstudiescarriedoutduringtheproject 8

4. SELECTION PROCESS 9

4.1RequestforQualification 9

4.2RequestforProposals �0

4.3Finalizationofthepartnershipagreement �0

5. HIGHLIGHTS OF THE PARTNERSHIP AGREEMENT ��

6. PUBLIC SECTOR COMPARATOR ��

7. PRIVATE PARTNERSHIP PROJECT �5

7.1Highlightsoftheprivatepartner’stechnicalproposal �5

7.2Commercialstructure �6

7.3Projectcalendar �7

7.4Costoftheprivatepartner’sproposal �8

8. ANALYSIS OF THE ADDED VALUE FOR THE PUBLIC FUNDS INVESTED �9

9. CONCLUSION ��

APPENDICES

1.TableIndicatingtheMainRisksandResponsibilities

2.SelectionCommitteeStructure

COVER PAGE PHOTO COURTESY OF CONCESSION A25 L.P.

THE ENGLISH VERSION OF THIS DOCUMENT IS PROVIDED FOR INFORMATION ONLY. THE ORIGINAL FRENCH VERSION SHALL BE CONSIDERED AS OFFICIAL.

M I N I S T è R E D E S T R A N S P O R T S D U Q U É B E C • P A R T E N A R I A T S P U B L I C - P R I V É Q U É B E C

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TheplanningandconstructionoftheexistingsectionsofAutoroute25(A-25)datesbacktotheearly1970’s.ThepurposeoftheconstructionofAutoroute25wasandremainscreatingafastandefficientconnectionbetweentheeastendofthecity(MontréalandLaval)andtheLanaudièreregion.Itscompletionisanessentialdevel-opmentoftheroadnetworkgiventhestrongeconomicanddemographicgrowthex-periencedoverthepast30yearsinLaval,theLaurentianandtheLanaudièreregionsaswellastheAnjou/Merciereconomichub.Inadditiontoalleviatingrecurringtrafficproblems,thecompletionofAutoroute25willfostereconomicdevelopmentoftheeastendoftheMontréalregion.

TheprojectpresentedinthisdocumentconsistsofcompletingtheconstructionofAutoroute25betweenHenri-BourassaBoulevardinMontréal,andtheA-440/A-25interchangeinLaval,covering7.2kilometres,includinga1.2kilometrebridge.

TheAutoroutewillcomprisefour(4)expresslanesdistributedovertwoseparateroadwaysandwillincludeinterchangesandoverpasses.ThebridgespanningtheRivièredesPrairieswillcomprisesix(6)expresslanesandonemultipurposelanetoenablepedestriansandcycliststocrossfreely.Furthermore,theprojectincludespreferentialmeasuresforpublictransitwiththeconstructionofreservedbuslanesinLavalandMontréal(seeFigure1).

Afullyelectronictollingsystemlocatedonthenorthsideofthebridgeisplannedandtollswillbechargedtothebridgeusers.

1. EXECUTIVE SUMMARY

Figure �


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ThecompletionofAutoroute25hasbeenthetopicofseveralstudiesinrecentyears.TheresultsofthesestudiesenabledtheMinistèredesTransportsduQuébec(Ministère)toconcludethatitsconstruction,usingaPublic-PrivatePartnership(PPP)approach,hasrealbenefits.WithOrders-in-Council1245-2005and659-2006,thegovernmentauthorizedtheMinisterofTransporttolaunchandcarryouttheselectionprocessfortheexecutionoftheprojectasaPPP.TheselectionprocessfollowedbytheMinistèredemonstratesthegovernment’swillingnesstochoosetheleastexpen-siveproposalthatsatisfiesalleligibilityandcompliancecriteria.

UnderthePPPapproach,theprivatepartner,namelyConcessionA25L.P.,isrespon-sible,foraperiodof35years,forthedesign,construction,operation,maintenance,rehabilitation,andfinancingofthehighwaysectiontobecompleted,includingtheexpresslanes,bridge,andtollsystem.

Inordertosupportthedecision-makingprocess,theMinistère,incooperationwithPartenariatspublic-privéQuébec,preparedabusinesscase.Supportedbytheinfor-mationcontainedinthisbusinesscase,itusedacomparativeapproachbetweenthepublicsectorcomparatorandtheprivatepartner’sproposal.Thesecomparisonswerecarriedoutonaquantitativeandqualitativebasis.

Tosummarize,thepublicsectorcomparatordeterminesthecostoftheprojectasifitwerecompletedbythepublicsector.Toensureafaircomparisonofthedifferentmeansofprocurement,thepublicsectorcomparatorreflectstheprocurementap-proachcommonlyusedbytheMinistèreandthefinancingmethodsthegovernmentusestofinancesuchprojects.

ThecostoftheprojectcarriedoutunderaPPPapproachincludesthepaymentsthegovernmentwillmaketoConcessionA25L.P.andtheamountrequiredtoensuremanagementofthepartnershipagreement.


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COMPARISONThisquantitativecomparisonbetweenthepublicsectorcomparatorandtheproposalsubmittedbyConcessionA25L.P.takesintoconsiderationalloftherelevantfinancialelements,namelythehigherfinancingcostsfortheprivatepartneraswellastheprofititanticipates.Despitetakingtheseelementsintoconsideration,theproposalsubmittedbyConcessionA25L.P.remainsmoreeconomical.Infact,thegovernmentwillbenefitinmorethan$226.1millioninsavingsbyoptingforthePPPapproach.Thesesignificantsavingsaretheresult,inparticular,ofashorterconstructionperiod,moreefficientworkmethods,andbetterriskmanagement.

Qualitativefactorswerealsotakenintoconsiderationinthecomparativeanalysisoftheprocurementapproaches.ThePPPapproachoffersundeniablequalitativebenefits,mostnotablythecommissioningoftheinfrastructuretwoyearssooner,andfavourstheeconomicdevelopmentoftheMontréalregionandQuébecingeneral.

Finally,itisimportanttokeepinmindthattheconstructionandmaintenancecostoverrunaswellasdelayrisks,arethefullresponsibilityoftheprivatepartner.

CONCLUSIONThecompletionofAutoroute25asaPPPrepresentsanexcellentopportunityforthegovernment.ThesavingsgeneratedbycarryingoutthisprojectasaPPPtotal$226.1millioninpresentvalueasatJuly1,2007.

Inadditiontothesavings,procurementasaPPPwillmakeitpossibletoofferusersaqualityinfrastructurewithinatimelinereducedbytwoyears.Furthermore,thecompletionofAutoroute25willgeneratemajorsocio-economicbenefitssincetheseareclearlyhigherthantheprojectcosts,thecost-benefitratiobeing3.4.Thus,theeconomicbenefitsarethreetimeshigherthantheeconomiccostsoftheproject.


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2. REPORT OBJECTIVES

Thepurposeofthisreportistoinformthereaderofthethoroughnessoftheap-proachfollowedbytheresultsobtained.Itcontributestothedesiredtransparencyoftheselectionprocess.ItdescribesthefinancialandtechnicalinformationthatsupportedtheprocessthatresultedintheselectionofaprivatepartnertocarryouttheAutoroute25project.Finally,itexplainshowthevalueformoneyforthepublicfundsinvestedhasbeenestablishedandquantified.

ThevalueformoneyanalysisforthepublicfundsinvestedisakeystepinensuringthatthePPPapproachoffersthebestvalueforthecommunitycomparedtoconven-tionalprocurement.ThisanalysisreliesonfivemainguidelinesclearlyexpressedintheOverallPolicyforPublic-PrivatePartnershipsadoptedbythegovernmentinJune2004.Theseprinciplesarethefollowing:justifiedandconfirmedneeds;emphasisonspecificresultsratherthenonthemethodsofattainingthem;financiallyfeasibleprojects;bestvalueforthepublicfundsinvested;optimalriskallocation.

ItisimportanttorememberthatthisprojectidentifiedbytheMinistèreasbeingapriorityunderitsGreaterMontréalAreaTrafficManagementPlan,holdsthebasiccharacteristicsofaPublic-PrivatePartnership(PPP)(1),specifically:

> Theimprovementofpublicservices;

> Majorfinancialcommitmentbythegovernment;

> Technicalcomplexityandahighlevelofrisk;

> Apotentialforcreativityandinnovationsusceptibletobenefitfromprivate sectorknow-how;and

> Anexistingcompetitivemarket.

(1) Source:OverallPolicyon Public-PrivatePartnerships,June2004,p.2


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3. PROJECT DESCRIPTION

3.1 BACKGROUND OF AUTOROUTE 25 AND EXISTING PROBLEMTheplanningofAutoroute25datesbacktothe1970’sfallingwithinaplanninganddevelopmentexerciseforthemajorroadsinfrastructuresservingthecity,andtoim-provelinkswithitsperipheralregions.TheobjectiveoftheconstructionofAutoroute25istoenablefastandefficientaccessbetweentheeastendofMontreal(MontréalandLaval)andtheLanaudièreregion.

ThecompletionofAutoroute25constitutesanessentialcomponentoftheroadnetworktakingintoconsiderationthestrongeconomicanddemographicgrowthinLaval,theLaurentian,andLanaudièreregions,aswellastheAnjou/Merciereconomichub.

3.2 TRAFFIC PROBLEMS CAUSED BY THE CURRENT SITUATIONTheabsenceofacontinuouslinkintheA-25corridorbetweenMontréalandLaval,requiresuserstotakeasevenkilometredetourviathePie-IXbridge,oran11kilome-tresdetourviatheCharlesdeGaullebridge(A-40).Theresultisamajoroverflowoftransitingtrafficontothemetropolitanhighway(A-40)andonthelocalroadnetwork,aswellasdeteriorationinthequalityoflifeofresidentsinMontréal-North,AnjouandRivière-des-Prairies.

TwomajorinterdependenttrendswillsignificantlyimpacttrafficbetweenMontréalandLaval.Thesearethedemographicgrowthofthemetropolitanregionandtheincreasednumberofvehiclesperhousehold.Thesetrendswillincreasetrafficinbothdirectionsalongthenorth-southaxis.AccordingtotheInstitutdelastatistiqueduQuébec,thepopulationinthemetropolitanregionisexpectedtogrowby9%between2001and2026.

Inacontextwhereroadcapacityremainsunchanged,significantaddedpressureontheroadnetworkwouldbefelt,inevitablytranslatingintoincreasedtrafficconges-tionproblems,longertrafficcongestionperiods,increasedcostsforheavygoodstransportation(supplyanddelivery),increasedtraveltimesandincreasedairpollu-tion.

3.3 PROJECT OBJECTIVES

By carrying out this project, the Ministère seeks to attain the following objectives:

WITH REGARD TO USERS OF THE AUTOROUTEReducedailytraveltimeaswellasvehiclemaintenanceandoperatingcoststhankstoshorterroutesintermsofdistanceandtime.

ON A COMMUNITY LEVELReducepollutioncausedbyvehicles,fostertheeconomicdevelopmentofeastendMontréalandLavalandmaximizetheeconomicrepercussionsforQuébecgeneratedbyconstructionandoperatingexpendituresrelatedtothisnewroadinfrastructure.


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3.4 MAIN PHYSICAL CHARACTERISTICSTheprojectentailscompletingtheconstructionofAutoroute25betweenHenri-BourassaBoulevard,inMontréal,andtheA-440/A-25interchangeinLaval,overadistanceof7.2kilometresincludinga1.2kilometrebridge.

TheAutoroutewillconsistoffour(4)expresslanesdistributedovertwoseparateroadwaysincludinginterchangesandoverpasses.ThebridgespanningtheRivièredesPrairieswillincludesix(6)expresslanesandonemultipurposelanetoenablepedestriansandcycliststocrossfreely.Furthermore,theprojectincludespreferentialmeasuresforpublictransitwiththeconstructionofreservedbuslanesinLavalandMontréal.

Finally,afullyelectronictollsystemisplanned,withthecollectionpointlocatedonthenorthsideofthebridge.Bridgeuserswillberequiredtopayatoll.

Thislinkwillenablecommuter,transit,andheavygoodstraffictouseAutoroute25fortravelthroughthenortheastpartofthemetropolitanregion.UserswhowanttoavoidthemetropolitansectionofHighway40willtherebybeabletobypassthecityviathenortheast.

3.5 MAIN STUDIES CARRIED OUT DURING THE PROJECT

Various studies have contributed to the development of the project.A summary of the two main studies is presented below.

TRAFFIC AND REVENUESAstudywascarriedoutfortheMinistèretoestimatetrafficandtollrevenuesthatcouldbegeneratedbytheuseofthebridge.ThestudydemonstratedthatthedemandforthenewAutoroute25isparticularlyhighduringpeaktrafficperiodsonweekdays.Trafficandrevenueevaluationsshowthatfollowingtheramp-uppe-riod,averagedailytrafficflowintheprojectcorridorwillbeapproximately40,000vehicles.

SOCIO-ECONOMIC ANALYSISTheMinistèrecarriedoutacost-benefitanalysisbyapplyingthemethodologyitusesforallofitsprojects.TheresultsofthisstudydemonstratethatthecompletionofAu-toroute25willgeneratemajorsocio-economicbenefitssincetheseareclearlyhigherthanthecostoftheproject.Inlightofthisanalysis,thecost-benefitratiois3.4.

C O S T- B E N E F I T R AT I O

The cost-benefit ratio is obtained by dividing economic benefits by costs. These benefits consist, among others, in lower travel time, in reduction in vehicle use costs, and in reduced pollution. Costs include those related to the right-of-way, the construction of the infrastructures as well as their operation and maintenance.


9

4. SELECTION PROCESS

Inlightofthestudiesitcarriedout,theMinistèreconcludedthatcompletingAuto-route25asaPPPwouldoffermorebenefitsthanbyaconventionalapproach.ThegovernmentauthorizedthelaunchoftheprocesstoselectaprivatepartnerandcarryouttheprojectasaPPP.

Thestrategyleadingtotheselectionoftheproposalandtheprivatepartnerinvolvedseveralstepsdesignedtoensurerobustcompetitionbetweenrespondents,withaviewofcompletingtheprojectatthelowestpossiblecostallwhilerespectingtheMinistère’srequirements.Theselectionofthebestproposaltookplaceinthreemainstepsunderthesupervisionofanindependentfairnessauditor,inthreemainsteps:requestforqualification,requestforproposals,andfinalizationofthepartnershipagreement.

SUMMARY SCHEDULE FOR THE SELECTION PROCESS

LAuNCH OF THe reQueST FOr QuALiFiCATiON December 2005

Submittalofsubmissions MARCH2006 Announcementofqualifiedrespondents MARCH2006

LAuNCH OF THe reQueST FOr PrOPOSALS July 2006

Submittalofproposals MARCH2007 Announcementofselectedrespondent JUNE2007

FiNALiZATiON OF THe PArTNerSHiP AgreeMeNT

AND FiNANCiAL CLOSe September 2007

Anticipatedcommissioningdate 2011

4.1 REQUEST FOR QUALIFICATIONThepurposeoftherequestforqualificationwastoidentifyandselectthepotentialcandidateswhoweremostqualifiedtoassumetheforeseenresponsibilities.Thefoursubmissionsreceivedwereevaluatedbyaselectioncommittee(2)basedontheircompetenciesandtheirabilityfromatechnicalandfinancialperspective.Followingtheevaluationofthesubmissions,threecandidateswereaskedtoproceedtothenextstepoftheselectionprocess,therequestforproposals.Theserespondentswere:ConsortiumNouvelleRoute,ConcessionA25L.P.(Infras-QuébecA25)andSNC-Lavalin.

Thefairnessauditor’sreportwasmadepubliconMarch22,2006.Broadly,thisreport(3)testifiestothefairandtransparentmanagementoftherequestforqualification.

(2) SeeAppendix2fortheSelection CommitteeStructure.(3) ReportNo.1fromtheFairnessAuditor, March22,2006,p.19www.mtq.gouv.qc.ca andwww.ppp.gouv.qc.ca.


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4.2 REQUEST FOR PROPOSALSTherequestforproposalsconstitutesthesecondstepintheselectionoftheprivatepartner.Thethreerespondentsqualifiedduringthepreviousstepwereinvitedtosubmitaproposal.Followingtheirevaluation,thethreeproposalsweredeemedtobeeligibleandcompliantfromacommercial,technicalandfinancialstandpoint.TheseevaluationswerecarriedoutunderthesupervisionoftheselectioncommitteeinaccordancewiththecriteriaoutlinedinOrder-in-Council659-2006.Amongtheeligibleproposalsthatweredeemedcompliant,theselectioncommitteechosetheproposalpresentingthelowestcostexpressedinthepresentvalueoftheavailabilitypayments.ThisproposalwassubmittedbyConcessionA25L.P.(Infras-QuébecA25).

Theselectionprocessfolloweddemonstratesthegovernment’swillingnesstochoosetheleastexpensiveproposalthatsatisfiedtheeligibilityandcompliancecriteria,whilefosteringcompetitionintheselectionprocess.

Itwasalsonecessarytoconfirmtogovernmentofficials,thepublic,andthepropo-nentsthattheselectionprocessfollowedtheprinciplesoffairnessandtransparency.Inthisrespect,thefairnessauditorprovidedareportindicatingthattheprocessunfoldedinafairandtransparentmannerwithregardtotheguidelinesfortheevaluationofsubmissionsandproposals.ThefairnessauditorreportconcerningtheevaluationofproposalswaspublishedonJune13,2007(4).

4.3 FINALIZATION OF THE PARTNERSHIP AGREEMENTFinalstepintheprocessinvolvingtheselectionoftheprivatepartner,thefinalizationofthepartnershipagreementconsistsessentiallyofadaptingthegenericpartnershipagreementtothespecificcharacteristicsoftheprivatepartner’sfinancialproposal.

Priortothesubmissionoftheirproposalsthequalifiedrespondentswereinvitedtosubmittheircommentsandsuggestionsforchangeswithregardtothepartnershipagreement.Inlightofthesuggestionsandcommentsreceived,afinalversionofthepartnershipagreementwasdistributedtoqualifiedrespondentstoreflectthechangesacceptedbytheMinistère.

Furthermore,withthesubmissionoftheirproposal,eachcandidatewasrequiredtosubmitaletterfromitslendersconfirmingtheircommitmenttoparticipateintheproj-ectfinancing.Thelendersalsohadtheopportunitytoexaminethefinalversionofthepartnershipagreement.

Theseopportunitiestoexamine,commentonandamendthepartnershipagreementeliminatedtheneedfornegotiationsfollowingthegovernment’sapprovaloftheselectedproponent,andsignificantlyreducedthetimerequiredtoachievefinancialclose.Thisapproachmadeitpossibleforthefinancialclosingtobereachedinlessthan90days.Thisfinalstepalsotookplaceunderthesupervisionofafairnessauditor;thelatter’sfinalreport(5)confirmsthatthefinalizationstepofthepartnershipagreementwascarriedoutinrespectoftheestablishedrules,andthattheentireselectionprocesswasequitable,impartial,andtransparent.

(4) ProgressReportNo.2from theFairnessAuditor,Evaluation ofproposals,May11,2007,P.19 www.mtq.gouv.qc.caand www.ppp.gouv.qc.ca.(5) Finalreportfrom theFairnessAuditor, September18,2007,P.15 www.mtq.gouv.qc.caand www.ppp.gouv.qc.ca.


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5. HIGHLIGHTS OF THE PARTNERSHIP AGREEMENT

ThepartnershipagreementistheembodimentoftheprojectasaPublic-PrivatePart-nership.Thepartnershipagreementgovernsthecontractualrelationshipbetweentheparties,setsouttheobligationsofeachparty,anddefinestherisksharing.

ThehighlightsofthepartnershipagreementforthecompletionofAutoroute25includethefollowing:

> Thetermofthepartnershipagreementis35years,including4yearsfordesignandconstructionactivitiesand31yearsforoperation,maintenance,andrehabilitationactivities.Accordingly,managementofthepartnershipagreementcomprisestwoseparateperiodsthatareverydifferentintermsofactivities,specificallythedesignandconstructionperiod,andtheoperation,maintenanceandrehabilitationperiod(OMR);

>Theprivatepartnerisresponsibleforthedesignandconstructionofstruc-tures,therelatedrisks,andcommissioningtheinfrastructure;

>Theprivatepartner,duringtheoperation,maintenanceandrehabilitationperiod,mustoperatetheinfrastructureinaccordancewiththepartnershipagreement.Failuretorespecttheoperation,maintenance,andrehabilita-tionrequirementsmaygiverisetodeductionsfornon-availabilityandnon-performance;

>Theprivatepartnerisresponsibleforfinancingtheactivities;

>Inexchangeforcarryingouttheseactivities,theMinistèrewillpaytheprivatepartneratotalamount,accordingtothetermsofthepartnershipagreement,thatrepresentsthesumof:

i) theconstructionpaymentof$80millionincurrentdollarspaidatcertainstagesduringthedesign-constructionperiod;

ii) theavailabilitypaymentduefromthecommissioningdate,calculatedinaccordancewiththetermsofthepartnershipagreement.Thispaymenttotals$13.4millionincurrentdollars,paidannuallyforthe31yearsofoperation;

iii) theremittanceslinkedtotollrevenues;anamountequivalenttothetollrevenuecollectedbytheprivatepart-neronbehalfofthegovernment.Thisamountissubjecttoarevenueguaranteeor,ifapplicable,tosharingoftollrevenueaccordingtoestablishedthresholds;

iv) thenon-availabilitydeductionsrelatedtotheavailabilityoftheinfrastructure;

v) deductionsfornon-performance,whicharerelatedtothefailuretorespectthemaintenance–operation–rehabilitationrequirementsfortheinfrastructure;

vi) theholdbackforendoftermrequirements,ifapplicable,thatwilltakeplaceattheendofthepartnershipagreement.


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6. PUBLIC SECTOR COMPARATOR

Thepublicsectorcomparatorrepresentstheexecutionoftheprojectbythegovern-mentusingaconventionalapproach.Itseekstoattainthesameresultsandperfor-mancerequirementsasthoserequiredoftheprivatepartner.Inordertoachieveafaircomparisonofbothmethods,thepublicsectorcomparatormustreflecttheapproachgenerallyusedbytheMinistèreandthefinancingmethodswhichthegovernmentcommonlyusesforfinancingsimilarprojects.

Thepublicsectorcomparatorwasinitiallydevelopedinthefallof2005duringthepreparationoftheinitialbusinesscase,andwasupdatedinMarch2007.ThelatestupdateofthepublicsectorcomparatorwascompletedbeforetheproposalsweresubmittedonMarch30,2007.

ThepartnershipagreementincludesthetransferofrisksfromtheMinistèretotheprivatesector.Accordingly,theproposalbyConcessionA25L.P.reflectsthecostsassociatedwiththeriskstobetransferredtotheprivatesector.Similarly,thepublicsectorcomparatormusttakeintoaccountthecostsassociatedwiththerisksthattheMinistèrewouldkeepifitweretocarryouttheprojectitself.

Appendix1outlinestheresponsibilitiesandriskstransferredbytheMinistèretoCon-cessionA25L.P.Theseriskswouldberetainedbythegovernmentshouldtheprojectbecarriedoutusingaconventionalapproach.

Forthepurposesofriskquantification,onlytheriskswithsignificantfinancialconse-quencesandhighprobabilityofoccurrencewereconsidered.Therisks,forwhichthegovernmentremainsresponsible,regardlessoftheexecutionmethod,arenotquan-tifiedsincethesehavenoeffectonthedecision-makingprocess.Underthetermsofthisproject,themostcostlyrisksarethoserelatingtocostoverrunsandthoserelatedtotollrevenues.


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The cost of the public sector comparator takes the following elements into consideration:

1. GOVERNMENT PAYMENTS: a. Thecostsfortheprojectcomponents(costforthedesign-constructionand

OMRcosts,includingtheoperationofthetollsystem).

2. OTHER RELEVANT COST ELEMENTS: a. Thetollrevenuescollectedbythegovernmentinaccordancewiththefore-

castspreparedbythetrafficandrevenueadvisor;

b. Thequantificationofrisksthatareexpectedtobetransferredtotheprivatepart-ner(underthetermsofaPPP),butthatareassumedbytheMinistèreunderaconventionalapproach;

c. Theresidualvalueoftheassets.

Thetemporalvalueofmoneyistakenintoconsiderationbydiscountingflowusinga6.5%discountratefortheitemsindicatedabove,soastoexpressthemasasingleamountasatJuly1,2007.

Asindicatedonthetable(Page14),thepresentvalueofnetcostfortheprojectcarriedoutunderaconventionalapproachisestimatedat$369.2millionasatJuly1,2007.ThisresultwillbeusedinthevalueformoneyanalysispresentedinSection8.

D I S C O U N T R AT E

The discount rate refers to the historical average of the Government of Québec’s yeald lending rates over the past 40 years, to which the Bank of Canada’s target inflation rate has been added. For the purposes of financial evaluation, it is used as a return rate required by the Ministère des transports du Québec for the completion of Autoroute 25.


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The quantification of risks was carried out by a task force comprising

experts from the public sector and external advisors. After defining

the risks, the work group determined their probability of material-

izing and their potential financial consequences. The quantification

of each risk is the result of the multiplication of the probability of

materialization by the financial consequence.

R E S I D U A L VA L U E

At the end of the partnership agreement period, the Autoroute 25 infrastruc-tures will not have reached the end of their useful life. Accordingly, a value

(referred to as the residual value) will be assigned. This value relates among other things to the value of the land, the depreciation of infrastructures, and

the condition of these depending on the maintenance carried out.

PUBLIC SECTOR COMPARATOR PRESENT VALUE AS AT JULY 1, 2007 (IN MILLIONS OF DOLLARS)

Project cost over 35 years 483.6

Toll revenues (198.2)

risk quantification

Riskofcostoverruns 68.7 Risksrelatedtotollrevenues 85.7 Otherrisks 11.1

165.5

Net execution costs 450.9

residual value (81.7)

Net project completion cost 369.2


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Thissectionaddressestheprivatepartner’sproposal,andhighlightsthecosttothegovernmentofcompletingtheprojectAutoroute25byConcessionA25L.P.

7.1 HIGHLIGHTS OF THE PRIVATE PARTNER’S TECHNICAL PROPOSALThedesignofthebridgeconsistsofcable-stayedspansforthethreemainsectionsofthebridge.Asystemcomprisingtwopylonswillbeusedwithtwoseriesofstayedwires.

Thisprojectwillbeequippedwithafullyelectronictollingsystem.Userswillnothavetostoporreducetheirspeedwhenpassingthecollectionpoint.Theselectedtechnologyfortheelectronictransponderthatcanbeinstalledinvehiclesdoesnotrequireanyelectricalpowersource.

7. PRIVATE PARTNERSHIP PROJECT


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7.2 COMMERCIAL STRUCTURE

For the partnership, Concession A25 L.P. developed the following commercial structure:

SimilartorecentPPPprojectscarriedoutinCanada,theprivatepartnerisstructuredasalimitedpartnership.Theselectionofsuchastructureisgenerallymotivatedbythewishforfiscaloptimizationsinceinalimitedpartnershiponlythelimitedpartnersaresubjecttoincometaxresultingfromtheproject.

ConcessionA25L.P.hassignedthreemaincontracts:theinfrastructuredesign-con-structioncontract,theinfrastructureOMRcontract,andthecontractfortheelectronictollsystem.

SOURCE: CONCESSION A25 L.P.

Ministère

ConcessionA25 S.E.C.

MacquarieFINANCES

Kiewit-ParsonsDESIGN-CONSTRUCTION

PARTNERSHIP

MillerOPERATING MAINTENANCE AND REHABILITATION CONTRACTOR

GENIVARDESIGN

Ciment Saint-LaurentCONSTRUCTION

TransCoreELECTRONIC TOLL SYSTEM


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7.3 PROJECT CALENDAR

The proposal submitted by Concession A25 L.P. includes the following schedule:

Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4 7 8 9 10 11 12

2007 2008 2009 2010 2011 2012-2036 2037 2038-2041 2042

PHASES

Signing of the partnership agreement

Design-Build

Commissioning of the infrastructure

Operation, maintenance and rehabilitation

inspection and end of term work

end of the partnership agreement

Handover of the infrastructure


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7.4 COST OF PROPOSAL SUBMITTED BY CONCESSION A25 L.P.

The following elements have been taken into consideration to determine the cost of the proposal submitted by Concession A25 L.P.:

1. Paymentsbythegovernment;

2.ThecostofmonitoringthepartnershipagreementincurredbytheMinistère;

3.Theresidualvalueofassets.

Aswiththepublicsectorcomparator,thetimevalueofmoneyistakenintoconsider-ationbyadjustingcashflowfortheelementsidentifiedusinga6.5%discountrateinorderforthemtobeexpressedasasingleamountasatJuly1,2007.

Consideringthepreviouslydescribedapproachandassumptions,thenetcostofcar-ryingouttheprojectasaPPPis$143.1million(inpresentvalueasatJuly1,2007).

TOTAL COST OF THE PRIVATE PARTNER’S PROPOSAL TO THE GOVERNMENT PRESENT VALUE AS AT JULY 1, 2007 (IN MILLIONS OF DOLLARS)

Payments to the private partner

Constructionpayments 64.7 Availabilitypayments 141.9

Agreement monitoring costs 19.4

execution costs 226.0

residual value (82.9)

Net project execution cost under the terms of a PPP 143.1


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Thepurposeofanalyzingthevalueformoneyforthepublicfundsinvestedistocom-paretheproposalsubmittedbyConcessionA25L.P.withthepublicsectorcompara-torinordertoquantifythebenefitsofthePPPapproachcomparedwiththeconven-tionalapproach.Althoughthecomparisonbetweenthetwoprocurementmethodsispresentedinaquantitativemanner,thequalitativeaspectsmustalsobetakenintoconsideration.

QUANTITATIVE COMPARISONTheselectionprocesswasdevelopedtotakeintoconsiderationthemagnitudeoftheprojectcostsforthegovernment.Itreflectsthedesiretochoosetheleastexpensiveproposalthatrespectsallofthetechnicalandcommercialrequirements.

Thefigurebelowpresentsthecostsforthegovernment,relatedtocarryingoutoftheproject,basedonthetwopotentialapproaches:PPPorconventional.

ThisfigureillustratesthatcompletingtheprojectasaPPPwillmakeitpossibletoreducethetotalprojectcostby$226.1million.

PRES

ENT

VALU

E AS

AT

JULY

1, 2

007

(IN M

ILLI

ON

S O

F D

OLL

ARS)

8. ANALYSIS OF THE ADDED VALUE FOR THE FUNDS INVESTED

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

143.1

369.2

Value for money of 226.1

PROCUREMENT APPROACHES

PUBLIC SECTOR COMPARATOR PRIVATE PARTNER’S PROPOSAL


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QUALITATIVE COMPARISON

Enlisting Concession A25 L.P. for the completion of the project as a PPP has the following qualitative benefits:

> ItwillenabletheMinistèretofocusonitssupervisoryrole,therebyentrustingConcessionA25L.P.withtheprovisionofservices.Thisfacilitatestheinterven-tionoftheMinistèreshouldtherebefailuretorespectperformancerequire-ments;

> FinancingoftheprojectbyConcessionA25L.P.involvestheparticipationofworldclasslenders.Theselenderswillcloselymonitortheexecutionofthedesignandconstructionworksaswellastheoperationandmaintenanceactivitiesinordertoprotecttheirinvestment;

> CompletingtheprojectasaPPPwilladvancethecommissioningoftheinfra-structurebytwoyearscomparedwiththeconventionalapproach.Thecommis-sioningoftheinfrastructuretwoyearsearlierrepresentsmajorsocio-economicbenefitsforthecommunity;

> Intheanalysisofthepublicsectorcomparator,theconstructioncalendarselectedbythegovernment’stechnicaladvisorsindicatesthatAutoroute25wouldbecompletedinsixyears.Experiencehasdemonstratedthatitispossiblethatitwouldtakelonger.Accordingtoexperienceinrecentyears,theconstructionprojectcouldtakemoretimethananticipateddependingontheannualbudgetsthatareallocated;

> UnderthetermsofaPPP,themaintenanceandrehabilitationoftheAutoroutearesetoutunderthetermsofthepartnershipagreement.Withaconventionalapproach,maintenanceandrehabilitationarecarriedoutaccordingtotheavail-abilityoftheMinistère’sbudget.

> ThetermsforremittanceofthetollrevenuesdescribedinthepartnershipagreementindicateequalsharingbetweenConcessionA25L.P.andthegovernmentofallrev-enuesexceedingthesharingthreshold,specificallythetollrevenuesexceeding120%oftheforecastspreparedbythegovernment’strafficandrevenueadvisor;

> Thegovernment’scostoftheproposalsubmittedbyConcessionA25L.P.hasnotbeenreducedbytheincomeandothertaxesthatwillbepaidtothegovern-mentbythepartnersinthelimitedpartnership.Allofthetaxescollectedbythegovernmentwillreducetheprojectcost.

CarryingoutthecompletionofAutoroute25asaPPPwillenablethegovernmentanditscitizenstoobtainbettervalueformoneyforthepublicfundsinvested.Infact,itscompletionbyConcessionA25L.P.translatesintosavingsestimatedat$226.1mil-lioninpresentvalueasatJuly1,2007.

Beyondthesavings,thecompletionoftheprojectasaPPPwillmakeitpossibletoplaceatthedisposalofusersaqualityinfrastructurewithinareducedtimeframeoftwoyears.Furthermore,thecompletionofAutoroute25willgeneratesignificantso-cio-economicbenefitsfortheGreaterMetropolitanRegionandforQuébecingeneral.Thesebenefitsforroadusersincludetoreducetraveltimeandadecreaseinvehiclemaintenanceandoperatingcosts.Fromtheperspectiveofthecommunity,theywillincludeamongotherthingstheeconomicdevelopmentoftheeastendofMontréalandLavalandinareductioninvehiclepollution.

Furthermore,thecompletionoftheprojectasaPPPwillenablethesignificanttrans-ferofriskstoConcessionA25L.P.Theseriskswouldotherwisebetheresponsibilityofthegovernment.Theserisksaremainlythoserelatedtoconstructionandmainte-nancecostoverrunsandconstructiondelays,andthoseassociatedwithtollrevenues.

Accordingly,followingathoroughanalysis,thePublic-PrivatePartnershipapproachrepresentsthesolutionthatoffersthemostbenefitsforthegovernmentandthecom-munity,aswellasforfutureusersofAutoroute25.

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9. CONCLUSION


MAIN RISKS AND RESPONSIBILITIES RISKS AND RESPONSIBILITIES ASSIGNED TO THE PRIVATE PARTNER MINISTER

OBTAININGENVIRONMENTALPERMITSANDAUTHORIZATIONS

Certificateofauthorizationfortherealizationoftheproject(CAR) • Certificateofauthorization(CAC) • • Requiredfederalpermitsandauthorizations • • AuthorizationspursuanttoAn Act respecting Land Use Planning and Development(L.R.Q.,c.A-19.1) • Otherlicences,authorizationsandroadspermits • •

DESIGNANDCONSTRUCTIONOFSTRUCTURESFORWHICHTHEPRIVATEPARTNERISRESPONSIBLE

Costoverruns • Delays • Movingpublicutilities • • Selectingthetolltechnology • Principalcontractor,asdefinedintheAct respecting occupational health and safety(L.R.Q.,c.S-2.1) • Contaminatedsoil–undocumentedandinexistencepriortoexecutionofthepartnershipagreement • Contaminatedsoil–documentedorresultingfromconstructionand OMRofthestructuresforwhichtheprivatepartnerisresponsible • Geotechnicalrisks • Acquisitionandownershipoftheright-of-way •

FINANCINGANDFINANCIALCONDITIONS

Inflationriskduringtheconstructionandoperationphases • BenchmarkInterestRatefluctuationriskeffectiveonthedayoftheFinancialClosing • Sharingprofitsfromrefinancing • •

OMROFTHESTRUCTURESFORWHICHTHEPRIVATEPARTNERISRESPONSIBLE

OMRofthestructuresforwhichtheprivatepartnerisresponsibleandtheelectronictollsystem • ConditionoftheassetsattheendofthePartnership •

TOLL

Settingthetoll • Collectionoftollsandaccessoryfees • • Tollrevenuerisk • •

APPeNDiX � — MAIN RISKS AND RESPONSIBILITIES

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APPeNDiX � — SELECTION COMMITTEE STRUCTURE


Sub-CommitteeDESIGN AND CONSTRUCTION OF MAJOR STRUCTURES

Sub-CommitteeDESIGN AND CONSTRUCTION OF AUTOROUTES

Sub-CommitteeOPERATION, MAINTENANCE, AND REHABILITATION OF ROADS AND BRIDGES; DESIGN, CONSTRUCTION, IMPLEMENTATION OPERATION AND MAINTENANCE

OF THE ELECTRONIC TOLL SYSTEMS

Sub-CommitteePROJECT MANAGEMENT AND QUALITY MANAGEMENT

Sub-CommitteeENVIRONMENTAL MANAGEMENT

Sub-CommitteeFINANCIAL CAPACITY AND PROJECT FINANCING

Due Diligence Committee

Evaluation Committee

Secretariat

Eligibility and Clarification Committee

Conflict of Interest Arbitrator

Evaluation Manager

Business Relations and Conflict of Interest

Committee

Fairness Auditor

Executive Committee

value for money report

Documents