RMIT – Construction, Planning and Design 3 PPP Operations Phase Chris Clifton, 13 August 2013
Agenda
1.
Plenary Group - Overview
2.
PPP Project Phases
3.
Key elements within the Operations Phase
4.
Approach to Asset Management
5.
What makes a good contract?
6.
Conclusion
1
Overview of Plenary Group
Introduction −Infrastructure & Property Group established 2004 Cumulative Project Capitalisation
−Canadian business established 2005
12,000 10,000
−Largest specialist PPP team in both
$ millions
−Equity Investor, Developer and Asset Manager
11,154
8,000 5,721
6,000 4,489 4,000 2,021
Australia & Canada
2,711
2,000 220 0
−Manage nine Australian and eleven
2006
2007
2008
2009
2010
2011
Year
Canadian PPPs - $11bn+
2
Plenary Group Approach Success based upon extensive financing / structuring experience, maintaining relationships and a focus on long term
−Assume Sponsor and Developer role (Leadership) −Return ownership interest in projects for long term (Alignment)
−In-house project management expertise, at bid, during construction and throughout the operations phase (Stewardship) −Responsible for financing (commercial structuring, debt & equity terms, financial modelling, due diligence etc)
3
Projects - Australia
Victorian Comprehensive Cancer Centre The Victorian Government has contracted Plenary Health to design, build, finance and maintain the Victorian Comprehensive Cancer Centre (VCCC). The VCCC is a unique and ambitious endeavour; a New Centre on a landmark Melbourne site, in a famous biomedical precinct. The facility will be purpose built for cancer research, treatment and care and will be the new home for Peter MacCallum Cancer Centre. The centre brings together this powerful alliance in a collaborative work environment for world-leading research, education and clinical activities. The 130,000m2 VCCC will be built over 13 levels. Location:
Melbourne, Victoria, Australia
Client:
Victorian Government
Value (NPV):
A$1 billion
Builder:
Grocon/PCL Joint Venture
Architect:
Design Inc/Silver Thomas Hanley Joint venture with McBride Charles Ryan
Financial Close:
Dec 2011
Completion Date:
Early 2016
Duration:
25 years
Gold Coast Rapid Transit The GCRT is a $1 billion 18 year Public Private Partnership contract with the Queensland State Government to design, build, finance, operate and maintain a light rail public transportation system. Consisting of 14 light rail vehicles and 16 stations, the Gold Coast Rapid Transit project will service a 13 kilometre route between the Gold Coast University Hospital and Broadbeach. Location:
Gold Coast, Australia
Value:
$1 billion
Builder:
McConnnell Dowell
Franchise Operator:
KDR Gold Coast
Vehicle:
Bombardier
Duration:
15 years
5
Australian Defence Force’s Single Living Environment and Accommodation Precinct (LEAP), Phase 2 Plenary Group has partnered with a consortium of regional construction firms and ESS Support Services to finance, design, construct, operate and maintain 3,015 accommodation units. The accommodation units will be delivered at 14 military bases across Australia. Location:
All mainland States and Territories
Value:
$900 million
Builder:
Watpac, Sitzler, Richard Crookes, Pndan, Built Environs
FM Partner:
ESS Support Services
Duration:
33 years
Melbourne Convention Centre The Victorian Government announced on 22 February 2006 that the Plenary Group consortium was the successful bidder to deliver this landmark economic asset. The new Convention Centre is a Six Star Green Star, 5,000 seat facility. The project also includes a Hilton hotel, a new Maritime Museum, a lifestyle retail precinct with 100,000m2 of shopping, office/residential building and food and beverage precinct on the banks of the Yarra. It was completed on time and on budget in 2009. Location:
Melbourne, Australia
Value:
$1.4 billion
Builder:
Brookfield Multiplex Construction
Architect:
NH Architecture / Woods Bagot
Services:
Brookfield Multiplex Asset Management
Duration:
25 Years
6
TYPICAL CONSORTIUM STRUCTURE
Financial Advisory
Equity
Special Purpose Vehicle (SPV)
Debt
Technical Advisory
Design & Construct
Facility Maintenance
Consultants
Other Advisors
Car park or Commercial Operators
OPERATIONS
PHASE
Core vs Contracted Services “Place the risk with the party best able to manage it”
• Operator (State) retains the “Core Services” • The SPV (Private Sector) undertakes the “Contracted Services”
OPERATIONS
PHASE
Core vs Contracted Services • Typical Contracted Services include: • Help Desk and General Management Services • Building Management Services • Car Parking Services
• Utilities Procurement and Management • “Soft” Services – Cleaning, Security
HOW PPP
CONTRACTS WORK IN THE
OPERATIONS
PHASE
•
Fixed Inflation linked Quarterly Payment over the Operations Phase
•
The State pays for the “Availability” of the Asset
•
Abatements can apply for failing to meet response and/or rectification
times •
Availability failures (an area not meeting the required standard)
•
Quality Failures (a failure of process or reporting).
•
Usually 10 QF points can apply per month before an abatement is applied.
APPROACH
TO
ASSET MANAGEMENT
What does the SPV Manager do? •
More than 50 Contracts to manage – State, Finance, D&C, O&M, Others
•
State wants a single point of contact for all Project matters
•
Protect the investment – Risk and Compliance Management, Transition
Management, Certainty of delivery •
Assist partners in their understanding of the contracts and obligations
•
Foster a spirit of teamwork
APPROACH
TO
ASSET MANAGEMENT
Contracts and Agreements Securities
State Docs Project Deed Schedules (x7)
Exhibits (x13) Construction Licence DCOM Side Deed Debt Finance Side Deed
Project Co Docs
Finance Docs
Borrower Security
Securitised Lease Structure
Common Terms Deed
Project Security
XX Holdings PL
Security Trust Deed
PC Featherweight Charge
XX PL
Syndicated Facility Agreements
XX Trust Featherweight Charge
XX Holdings Nominees PL
Equity Subscription Deed
ASIC Forms (x7)
XX Asset Management Nominees PL
FC Side Letter (Debt) ISDA Agreements
XX Finance PL
IR Deed of Appointment Payment Directions Deed Securitisation Agreement State Deed of Charge
D&C Docs
D&C Contract
Equity Docs
Bank 1 ISDA
Equity Subscription Deed
Bank 2 ISDA
Contingent Loan & Equity Deed
Bank 3 ISDA
Investor Agreement
Bank 4 ISDA
Corporate Services Agreement
Bank 5 ISDA
FC Side Letter (Equity)
Bank 6 ISDA
On Loan (Project Co) Agreement
Bank 7 ISDA
O&M Docs
Bank 8 ISDA
D&C Consent Deed
O&M Contract
Fee Letters
DCOM Interface Agreement
O&M Consent Deed
Facility Agent FL
DCOM Side Deed
O&M Guarantee
XX Fee Letter
D&C Guarantee (BBA)
DCOM Interface Agreement
Security Trustee FL
D&C Guarantee (BBAG)
DCOM Side Deed
FC Side letter (D&C) Proof Engineer Deed Sub IR Deed Bank Guarantees
Bank 9 ISDA
Side Deeds D&C Consent Deed Debt Finance Side Deed
O&M Consent Deed
Asset Management •
Experienced SPV Management (PPP Specialists)
•
Risk Management – Protect the investment from Equity’s perspective
•
Subcontractor Performance Management (D&C, FM)
•
Transition Management
•
Relationship Management
•
Enterprise Management (Statutory, Company Sec, Tax and legal)
APPROACH
TO
ASSET MANAGEMENT
Need good structures in place •
Staffing
•
Management plans
•
Processes & protocols
•
Risk management controls
•
Strong relationships
(All structures need to last the test of time)
OPERATIONS PHASE RELATIONSHIPS
User / Facility Operator
State
SPV Project Co
D&C/ FM
Organisation Level
CEO
Senior Management
Board Representative
Senior Management
Project Level
Development or Service Manager
Contract Administrator
Project Company Representative
Project Director/ Asset Manager
WHAT
MAKES A GOOD CONTRACT?
“contracts cannot foresee 25 years of needs”
•
Flexibility for Government to change needs •
State Initiated Modifications
•
Appropriate Risk Allocation
•
Sensible timeframes for submissions & approvals
•
Enables the parties to work together cohesively
CONCLUSION
Relationships are Critical, especially during the Operations Phase
Choose a partner with aligned interests
Work as a team (be aware of the impact on others)
Be open to discussion & be flexible in delivery approach
Adopt a “best for project” mindset
Put sound structures in place
Communicate clearly & often (at all levels)
Manage the contract collectively