Infrastructure Development & Management Strategies

This morning the Maryland Port Commission approved a plan to lease Baltimore’s Seagirt Marine Terminal to Ports America Chesapeake.  Under the agreement, the operator will provide extensive capital improvements to the terminal, including a $105M deep-water berth expansion with four additional container cranes.  The state will also receive ongoing lease payments throughout the 50-year term, as well as a fee for each container handled in excess of 500,000 annually.

Ports America, an affiliate of the terminal’s current operator, was the sole proposer for the long-term lease; competitor Ceres Marine Terminals had expressed initial interest but declined to submit a bid.  The agreement is now pending final approval from the state’s General Assembly and Board of Public Works.

(Baltimore Sun 11/20/09)

In a news conference this morning, North Carolina Governor Bev Perdue announced the state plans to undertake its first design-build-finance highway contract to complete the final segment of the I-485 loop around Charlotte.

Under this procurement model, successfully implemented on several Florida projects, the contractor pays for construction costs out-of-pocket and is later reimbursed by the state on a pre-set timeline as funding becomes available.  Completion of the $220M I-485 segment is estimated for 2014 or 2015.

(Charlotte Observer 11/9/09)

Following the May 2009 enactment of Senate Bill 200, Georgia is continuing an ambitious restructuring of its statewide PPP strategy.  “We are developing a P3 program that will be among the best, if not the very best, in the nation,” said Georgia DOT Commissioner Vance C. Smith, Jr.

In addition to creating a new PPP division within GDOT, SB 200 also requires biennial development of a PPP project list, the first of which was completed in July 2009.  These projects will be screened to establish a pipeline of near, medium, and long-term PPP prospects; highway, rail, and rest-area concessions are among the initial candidates.

Under SB 200, GDOT will also no longer accept unsolicited proposals, focusing instead on maximizing competition and ensuring projects mesh with the state’s overall transportation plans.  The state will return six unsolicited proposals received under the previous statute.

Among the next steps is to finalize the SB 200 implementation framework, with legislative approval of these rules anticipated in January 2010.

(GDOT, www.georgiaP3.org)

Today’s Virginian-Pilot interviewed F2I2’s director, Prof. Michael J. Garvin, about the recession’s impact on the availability of financing for the $1.5 billion Midtown Tunnel PPP.  Despite investors’ decreased appetite for risk, he noted the project’s significant equity contribution (an estimated $525 million, relative to the proposed $1.2 billion debt), as well as a $600 million TIFIA loan share, will make the project more attractive to lenders.  He also noted the private developer will need to establish a tolling plan which is publicly acceptable but can still assure investors of reliable long-term returns.

Although an interim agreement between VDOT and the developer, Elizabeth River Crossings, is expected next month, the project’s financeability is likely to remain a major element in subsequent negotiations toward a comprehensive agreement.

BAA confirmed it would sell London’s Gatwick Airport for £1.51 billion to Global Infrastructure Partners (GIP). BAA earlier hoped to receive at least £1.8 billion and was reluctant to go below £1.6 billion. Ferrovial, a Spanish infrastructure company and BAA’s parent company, stated that it would lose €142 million on the disposal of Gatwick. GIP offered to pay an extra £55 million on the condition that the airport’s traffic performance and its future capital structure improve.

BAA was reported to be deep in debt and to need the sale to maintain its solvency. The decision was aided by the UK Competition Commission’s ruling for BAA to sell the asset due to antitrust concerns.

(Source: www.business.timesonline.co.uk)

Following nearly four years of procurement efforts, the Port of Miami Tunnel PPP reached financial close on October 15 after an extension of the October 1 deadline.  The financing package included $341M senior debt from a consortium of ten banks, $341M federal TIFIA loans, and $80M equity from project sponsors Meridiam Infrastructure (90%) and Bouygues (10%).

The twin two-lane tunnels, slated for completion in 2014, will not be tolled.  During the 35-year concession period (five years construction and 30 years operation), milestone and availability payments will come from the Florida DOT ($457M), Miami-Dade County ($402M), and the city of Miami ($50M).  FDOT and the municipalities will each contribute 50% of the projected $607M design and construction costs, and FDOT will cover 100% of facility operations and maintenance expenses.

The tunnel represents the second availability-payment PPP in the US, and the first such project to be a pure greenfield development.  See June 4, 2009 and December 16, 2008 articles for additional background.

(Bond Buyer 10/19/09, FDOT)

On Oct. 7, 2009, TxDOT officials announced that in response to citizen comments received during the environmental review of Trans-Texas Corridor-35 (TTC-35), the department will recommend the “No Action Alternative” on the environmental study to the FHWA. This recommendation will effectively terminate the efforts to develop TTC-35. In 2005, TxDOT awarded a $3.5 million CDA contract to Cintra and Zachry to plan the entire TTC-35.

(www.TxDot.gov)

On Oct. 6, 2009, TxDOT signed a $1.02 billion CDA with NorthGate Constructors JV, a consortium led by Kiewit and Zachry, to develop, design and construct the DFW Connector. It is the third billion dollar-plus road development contract executed by Texas this year. The other two include the $2.7 billion LBJ-635 project and the $2 billion North Tarrant Expressway phase one project.

(www.TxDot.gov)

A month after it received an unsolicited proposal to expand the congested Dominion Boulevard corridor, the city of Chesapeake, Virginia rejected the offer yesterday.  (See September 1, 2009 report.)  The city manager cited five primary deficiencies, including concerns about safety and environmental aspects, an inadequate financial plan, and potentially excessive tolls and the resulting diversion onto parallel facilities.  The proposal from the Virginia 104 consortium had estimated charges between $1.00 and $2.50 for the currently untolled road, and had forecast rapid traffic growth from the current 30,000 vehicles per day to 68,000 by 2030.

The city manager noted Chesapeake is proceeding with plans to upgrade Dominion Boulevard and the Steel Bridge bottleneck on its own, though the consortium is welcome to submit another proposal which addresses the city’s concerns.

(Virginian-Pilot 10/2/09)

Today the Virginia Department of Transportation (VDOT) finalized the long-expected transfer of Dulles Toll Road operations to the Metropolitan Washington Airports Authority (MWAA).  Although MWAA anticipates no immediate service changes, the authority has proposed raising the facility’s mainline tolls from 75 cents to $1.50 by 2012 in support of a $5 billion extension of Metro rail service to Dulles Airport.  The 14-mile highway, which connects Dulles and I-66, is expected to yield $66 million of toll revenues in 2009.

After receiving an unsolicited proposal for a 50-year concession to operate and maintain the toll road in July 2005, VDOT had obtained four competing bids in October 2005 under the state’s Public-Private Transportation Act.  Elements of the various proposals included transferring an up-front concession fee to VDOT, widening the eight-lane facility, and/or helping fund the Metrorail expansion to Dulles Airport.  VDOT suspended evaluation of these proposals in February 2006 to consider MWAA’s December 2005 offer to assume facility operations in the context of a Metrorail extension plan, to which Governor Tim Kaine agreed in March 2006.

(Washington Post 10/1/09, VDOT)