P3’s & Lessons Learned Andrew Chapman March 27, 2015

Project: New-Build A-25 Toll Bridge 1980 Buyer: Regional Water Authority 2012 Concessionaire: Macquarie Fund Enterprise: New Haven Water Company Project: PANY NJ: Goethals Bridge Replacement 1996 2013 Concessionaire: Elizabethtown Water Co. Concessionaire: Multiple Bidders Enterprise: Edison Township Water Dept. Enterprise: Midway Airport 1998 Concessionaire: Elizabethtown Water Co. 2014 Buyer: UIL Enterprise: Elizabeth City Water Dept. Enterprise: Philadelphia Gas Works 2004 Concessionaire: Macquarie Fund Project: New-Build A-25 Toll Bridge

South Central Connecticut Regional Water Authority

Who gets what? Seller Buyer Benefit Cost Premium price Risk eliminated Control over operations, capital, rates and patronage Cost Operating and capital risks shifted to customers Loss in tax revenues (Federal, State & Local)

Elizabethtown Water Company

Who gets what? City Concessionaire Benefit Cost $51 million concession fee Fixed rate escalator Operating risk shifted All employees hired Competing supplier disadvantaged 20% increase in customers Low marginal operating cost Cost Loss of Control Operating risk assumed

Chris Bollwage

Who gets what? Authority Benefit Cost Concessionaire Benefit Eliminate construction & operating risk 10% reduction in life cycle cost Avoided issuance of new debt Predictable 35 year return Cost Committed to 35 year lease payment subject to availability Retained traffic risk Assumed risk to construct & operate new bridge Counterparty risk

Chicago Midway Airport

Who gets what? City Concessionaire Benefit Cost <$3.0 billion concession fee Ongoing profit share Improved traveller experience Facility upgrade All employees retained 40+ year return Cost Loss of control Enplanement & revenue risk Construction risk on terminal upgrades

Who gets what? City Concessionaire Benefit Cost 1.5- 2.0 billion concession fee Ongoing profit share Improved traveller experience Facility upgrade All employees retained 40+ year return Cost Loss of control Enplanement & revenue risk Construction risk on terminal upgrades

Who gets what? Process Failed Public Opposition City Concessionaire Benefit 1.5- 2.0 billion concession fee Ongoing profit share Improved traveller experience Facility upgrade All employees retained 40+ year return Cost Loss of control Enplanement & revenue risk Construction risk on terminal upgrades Process Failed Public Opposition

Who gets what? City Buyer Benefit Cost $1.8 billion cash Employment commitments Pensions fully funded Bill assistance programs Main replacement program Regulated utility investment opportunity Cost Loss of control Rates Hiring Contracting Operations Operating & capital risk Rate-setting risk

Who gets what? City Buyer Benefit Cost $1.86 billion cash Employment commitments Pensions fully funded Bill assistance programs continued Operating & Capital risk Regulated utility investment opportunity Cost Loss of control Rates Hiring Contracting Operations Operating capital investment risk Rate-setting risk

Who gets what? City Buyer Benefit Cost $1.86 billion cash Employment commitments Pensions fully funded Bill assistance programs continued Operating & Capital risk Regulated utility investment opportunity Cost Loss of control Rates Hiring Contracting Operations Operating capital investment risk Rate-setting risk

Lessons Learned “Energy cannot be created or destroyed; it can only be changed from one form to another” “Value & Risk are rarely created or destroyed; often they are shifted from one party to another”

Greenfield projects have more success than Brownfield projects Lessons Learned Greenfield projects have more success than Brownfield projects

Lessons Learned Smaller concentrated interests have more clout than larger dispersed interests

Lessons Learned Every P3 needs a champion willing & able to use his/her political will to overcome obstacles

Line up the stakeholders before commencing the selection process Lessons Learned Line up the stakeholders before commencing the selection process

To be legitimate, processes must be competitive Lessons Learned To be legitimate, processes must be competitive

Competitive processes require at least 3 bidders. Lessons Learned > 3 Competitive processes require at least 3 bidders.