2016 Engineering & Construction Conference. June 15 17, 2016 The Westin Austin Downtown Austin, Texas

Transcription

1 2016 Engineering & Construction Conference June 15 17, 2016 The Westin Austin Downtown Austin, Texas

2 Public-Private Partnerships: Evolution and Maturity Micah Bible Senior Manager, M&A Transaction Services Deloitte & Touche LLP Lucian Spatoliatore Partner, M&A Transaction Services Deloitte Tax LLP Todd Wilson Managing Director, M&A Transaction Services Deloitte & Touche LLP Jim Ziglar, Jr. Senior Manager Deloitte Transactions and Business Analytics LLP 9:45 10:45 a.m.

3 Contents Overview of the Market for U.S. Public-Private Partnerships (P3s) Potential Tax Implications for Companies Investing In P3s Update on Accounting and Financial Reporting Q&A Session

4 Overview of US Public- Private Partnerships (PPPs or P3s)

5 PPP Definition Public-private partnerships ( PPP s or P3 s) are contractual relationships in which the public and private sector agree to share the risks and rewards associated with a public asset. There are many types of PPP structures, but most share the following characteristics: Long-term contractual arrangement with some regulatory element Not a full legal asset sale Designed to secure value or control costs for the public sector Private sector contractor accepts risks and responsibility for (some or all of) design, construction, financing, maintenance and operations Public sector retains strategic control over service delivery, may retain certain risks that it is able to handle more efficiently than the private sector, and either cedes revenue generated from asset or makes payments for performance Payment to the private sector either comes directly from the project (revenue risk), or is a performance-based payment from the government (availability payment)

6 Range of Project Delivery / Procurement Models Traditional Approach, PPPs, and Asset Sale A PPP is a contractual relationship in which the public and private sector agree to share the risks and rewards associated with a public asset. PPP Design Build Finance Maintain Operate Own Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 More Public More Private Public Single Private Entity

7 Infrastructure Landscape Public Public/ private Surface transportation most some Private (incl. non-profit ) Ports some some Aviation U.S. Infrastructure ownership, delivery and operational models Freight rail Power/Energy some most Healthcare some most Social (education/corrections / municipal buildings ) Telecoms/Cable all all most some some Water/Wastewater most some Broadband some most all Unique U.S. characteristics State, Local and Public Authorities primarily responsible for infrastructure Robust market for subsovereign debt (municipal bonds) Diversity of legal/regulatory framework across jurisdictions Significant sectors that are privatizing overseas are already largely private in the U.S. Unique characteristics of U.S. market imply that PPP is likely to develop in markets, sectors and geographies where it brings unique value, and to continue to grow as it Copyright 2016 Deloitte Development LLC. All rights reserved. is proven out.

8 Commonly Cited Public Sector Benefits and Concerns in PPP Benefits Accelerated delivery Incentivized performance; improved project quality Whole-life costing efficiencies Optimal allocation of risk Divesting non-core assets; monetization of existing assets New capital source Risk transfer Concerns Loss of public control and flexibility Private profits at the public s expense Loss of future public revenues Risk of bankruptcy or default Accountability and transparency Pricing/regulation Non-domestic capital; foreign companies Labor concerns; loss of public sector jobs

9 Designing the Structure An involved and systematic process is undertaken to structure the partnership. Desired partnership structure Determine best owner of each project component Define project needs and priorities Determine public authority Who can and should do what? Capabilities Financial Risk Transfer What Do I Want to Do? What are my Objectives? Speed Degree of Certainty Efficiency Innovation What Am I Allowed to Do? Legal Framework Political realities Quantitative & Qualitative Analysis Design Build Finance Operate Maintain Own Project Components

10 Summary of Completed PPP Transactions Stable number (4-5 per year) of transactions in US, but overall decrease in size. Canada has slowed this year. Number of transactions Average transaction size (in USD million) 25 1, , USA Canada USA Canada Source:

11 Sectors (of PPPs closed since 2014) Transportation dominates P3s in US and Canada. (See Appendix for details) USA Canada Environment Healthcare Other Social Infrastructure Power Telecommunications Transport Other Environment Healthcare Other Social Infrastructure Power Telecommunications Transport Other Source:

12 Summary of PPP Transactions in the Pipeline (see Appendix for details) USA Canada Number of transactions Number of transactions Environment Power Environment Power Social Infrastructure Telecommunications Social Infrastructure Telecommunications Transport Other Transport Other Source:

13 Funding and Financing Funding is the revenue and capital that pay for the creation and ongoing maintenance of an asset or service. Financing is the structure and related financing instruments that are used to leverage or securitize the funding revenues. Sources of Funds: Finance Traditional Revenue bonds Federal loans Infrastructure banks Innovative Project finance loans Taxable bonds, PABs Mezzanine, sub debt Investor Equity Funding Leveraged with Tolls/Fees/Rents State and local resources Other oper. revenues Federal funds New Taxes (Sales, payroll, etc.) Uses of Funds: Construction costs O&M costs

14 Key Principles PPPs are a tool, not a panacea for infrastructure procurement PPPs can offer alternative project delivery methods or financing mechanisms, but, in the long run, do not provide new money (funding) for infrastructure. Revenues to repay the private investment must come from the same sources of public funding tolls, fees or taxes. Therefore, PPPs are: first, a procurement mechanism; second, a financing mechanism; and almost NEVER a funding mechanism. The bulk of the value in PPPs comes from efficiencies in the design, construction, operations, and maintenance of an asset or service, not from financial engineering.

15 Recent trends (1 of 2) Tight municipal budgets are driving desire for more innovative procurement and financing methods that may not impair municipal borrowing capacity. PPP activity has spread beyond a few core states and continues to grow: Active: CA, CO, FL, GA, IL, IN, MD, NC, PR, TX, VA, PANYNJ In-process: AZ, KY, NY, PA, WV Considering: MI, CT, DC U.S. market has been opening up to other types of private capital to fund infrastructure projects but the rate of growth has been uneven, largely based on local political climate (and education), and availability of creditworthy projects. Continued momentum within certain states and at the federal level (e.g. White House and the US Treasury support P3s). Also, bipartisan support in both the House and the Senate to the concept of partnering with the private sector to deliver infrastructure projects.

16 Recent trends (2 of 2) Expanding interest by the Federal government in: Procuring/ disposing of assets through PPPs Providing long-term debt capital to projects through expanded or new credit programs Most of the activity is still in the transportation sector, with social infrastructure growing in both Canada and the US. Some activity or discussion in water/wastewater infrastructure. Investors have a significant amount of dry powder and are increasingly looking at opportunities in the secondary market. Increasing consideration and use of a diversity of PPP structures Delivery method: commercial/ financial structures ranging from DB through DBFOM Revenue source: availability payment, revenue risk, hybrid Financing: grants and other contributions used to lower overall capital costs

17 Challenges to PPPs Taking Off Across the U.S. Authority to use PPP Political risk Existing capital structures and revenue pledges Timing challenges Public sector procurement processes Education of procurer Availability of long-term low-cost debt capital Accounting treatment

18 Key Success Factors Compelling benefits and credible analytical support value for money Clearly identified source for repayment funding Robust framework for protecting the public interest Clear, regular communications with all stakeholders transparency Can require long education period for some stakeholders before transaction activity begins Careful early-stage analysis and structuring Efficient allocation of risk and reward Flexibility and an understanding of available alternatives is key Robust process designed to result in competitive bids, but also allowing for reasonable private sector innovation Partnership approach begins before financial close

19 Potential Tax Implications for Companies Investing in P3s

20 Typical Forms of P3 Transportation Concessions Toll Concession vs. Availability Payments: Risk Allocations Toll Concessions Concessionaire s return is based on toll revenue collection and is therefore subject to both: Demand risk, and Toll collection revenue risk Availability Payments / Shadow Toll Arrangements Concessionaire assumes the financial risk related to its contractual obligation to design, build, finance, operate, and maintain the infrastructure assets However, concessionaire s return is based on agreed upon payments from the public entity (availability payments or shadow tolls), and not on the future use of the infrastructure assets and related revenue collection

21 Typical Forms of P3 Transportation Concessions Toll Concession vs. Availability Payments: Contractual Arrangement Toll Concessions Concessionaire typically receives three separate property rights from the State in exchange for a lump sum cash payment: A lease of the infrastructure assets (the toll road and related improvements); A grant of the right-of-way on the underlying public lands; and A grant of a franchise allowing the concessionaire to collect tolls Availability Payments / Shadow Toll Arrangements Concessionaire is contractually obligated to design, build, finance, operate, and maintain the infrastructure assets, in exchange for payment directly from the State or municipality, either as: Availability Payments: payments based on how often the infrastructure assets are open and available for use to the public; or Shadow Tolls: payments based on estimated toll revenue over a specified period pursuant to the Concession Agreement

22 Typical Forms of P3 Transportation Concessions Toll Concession vs. Availability Payments: Cash Flows Toll Concessions Government: (+) Upfront lump sum cash payment (+) If revenue sharing agreement, percentage of toll revenue Concessionaire: (-) Upfront lump sum cash payment (+) Toll revenue (-) If revenue sharing agreement, percentage of toll revenue above threshold (-) Costs associated with operating, maintenance, financing, etc. Availability Payments / Shadow Toll Arrangements Government: (-) Milestone payments during construction period (-) Availability Payments or Shadow Tolls (+) Potential toll revenue Concessionaire: (-) Costs associated with designing, building, financing, operating and maintaining (+) Availability Payments or Shadow Tolls

23 Tax Characterization of the Agreement Toll Concession Typical property rights transferred and tax characterization of interests: 1. Long-term lease of the tangible infrastructure assets Generally characterized as outright purchase of those assets for tax purposes, due to the lease term significantly exceeding their expected remaining useful life Entitlement to depreciation not determined by possession of title or nomenclature used by parties. Instead, based on facts and circumstances, including parties intent and length of lease term 2. Long-term lease/right-of-way of land underlying the infrastructure assets Characterized as long-term ground lease since land has perpetual useful life for tax purposes Not entitled to depreciation, due to indefinite useful life 3. Intangible franchise right to collect tolls Characterized as purchase of intangible asset Franchise right generally amortizable over 15 years

24 Tax Characterization of the Agreement Availability Concession Agreement is in the form of a single contract covering design, build, operations, maintenance, and financing activities. Agreement does not specifically allocate the Availability Payments between these activities Tax law may require bifurcation of the contract between the following: Long-Term Contract Activities: Portion of contract relating to building and construction, accounted for under the percentage-of-completion method ( PCM ) Non-Long Term Contract Activity: Portion of contract relating to nonconstruction activities (e.g., operations, maintenance and financing) subject to different tax accounting rules Different methodologies have been employed to allocate contract price between the Long-Term Contract Activities and Non-Long Term Contract Activities

25 Cost Recovery Issues Treatment of Assets Tangible assets General Depreciation Systems (GDS) Modified Accelerated Cost Recovery Systems (MACRS) Alternative Depreciation System (ADS) Bonus Depreciation Intangible assets Generally amortized straight-line over 15 years

26 Legal Entity Structure Tax Considerations Form of investment vehicle (e.g., corporation, partnership, disregarded entity) Tax profile of investors / sponsors (e.g., US, non-us, US tax exempt) Top side tax planning Direct investment vs. US corporate blocker vehicle Debt vs. equity capitalization Foreign Investment in Real Property Tax Act ( FIRPTA ) Cash distributions to investors

27 Financial Model Tax Considerations Impact on return on investment Entity (SPV) vs. investor level analysis Cash taxes incurred as a result of the transaction Net operating loss (NOL) and alternative minimum tax (AMT) considerations U.S. federal, state, and local income tax Non-income taxes Sales and use; Property; Payroll; Transfer and other transactional taxes; Other local taxes

28 Ownership Changes & Debt Workouts Key Tax Considerations Transaction Structures: Purchase of Blocker Entity with NOLs Possible limited utilization of tax attributes (including NOLs) postownership change. Significant due diligence. Purchase of Partnership/LLC Entity Potential for stepped-up tax basis in assets, resulting in increasing tax amortization and depreciation. More complex. Tax consequences of debt workouts Significant modifications of debt Bankruptcy Cancellation of debt income / may impact tax attributes

29 The Concession Agreement Key Provisions with Tax Implications Payment structure (e.g., availability payments vs. toll collection) Project ownership Payment of taxes Reimbursement provisions Sales and use tax Property tax Termination provisions (e.g., Force Majeure, developer default, convenience) Allocation of payments to government authority Concession payment Revenue sharing Refinancing gain

30 Sample Concession Agreement Provisions Traffic-Risk SH 130 (Texas) Key tax provisions in Concession Agreement: Allocation of payments: For federal income tax purposes, the (i) Concession Payment and (ii) Developer's cost to acquire the Facility Right of Way on behalf of TxDOT shall both be allocated for the grant to the Developer of the exclusive franchise and license pursuant to the terms of the Agreement to impose and collect tolls. Project Ownership: Developer's expenditures to construct the Facility shall be for its own account, with Developer owning such improvements for federal income tax purposes. Payment of taxes: Developer shall pay, prior to delinquency, all applicable Taxes. Reimbursement of sales tax: TxDOT shall reimburse Developer for certain State sales taxes...

31 Sample Concession Agreement Provisions Traffic-Risk Downtown Tunnel / Midtown Tunnel / MLK Extension (VA) Key tax provisions in Concession Agreement: Allocation of payments: The Cost will be allocated for all income tax purposes in the manner determined by the Concessionaire, consistent with Section 1060 (an asset acquisition). Project Ownership: Concessionaire will be treated as having acquired (i) an ownership interest in Project Assets,(ii) an interest in the Project Right of Way, and (iii) a franchise and license. Payment of taxes: The Concessionaire is solely responsible for the payment of Taxes accrued or arising out of the performance of this Agreement.

32 Sample Availability Payment Agreement Provisions Portsmouth Bypass (OH) Key tax provisions in Availability Payment Agreement: Allocation of payments: the Department will pay Developer each Milestone Payment Not a Partnership for Tax Purposes: in no event shall either Party take a position on any tax return or other writing that a partnership, joint venture or similar relationship exists. Project Ownership: Developer shall not be treated as or deemed to be the legal or equitable owner of the Project Right of Way for any purpose under this Agreement. Payment of taxes: Developer shall pay, prior to delinquency, all applicable Taxes. Reimbursement of sales tax: the Department will provide sales and use tax exemption certificates to the Developer

33 Update on Accounting & Financial Reporting Issues

34 Agenda for Update on Accounting & Financial Reporting Issues Accounting due diligence asking the right questions Considerations for PPP life cycle: pre-bid, post close, and operating period Financial Reporting for Investments in PPPs Measurement basis: cost, equity method, or fair value Consolidation considerations (if not an investment company) Accounting by the PPP Development Entity Considering availability style and toll style arrangements Overview of U.S. GAAP and ASU , Service Concession Arrangements Overview of IFRS and IFRIC 12, Service Concession Arrangements

35 Accounting Due Diligence Asking the Right Questions Pre Bid Does the financial model properly reflect the timing of cash flows and translate cash flows into U.S. GAAP or IFRS presentation? Percentage of completion accounting Development costs Debt issuance costs Financial assets and financial income (availability style) Intangible assets (toll style) Have we identified risk areas within the model where an alternative accounting or tax outcome may significantly impact IRR (e.g., proper application of IRS Section 460 contract cost or appropriate margin assumptions on POC accounting)?

36 Accounting Due Diligence Asking the Right Questions Post Close Have we assessed who will consolidate the PPP development entity? What are the initial project accounting and finance needs and who will fill these roles? Have we hired an audit firm and tax advisor that understands PPPs and whose views on proper accounting and tax treatment aligns with those that were modeled? Operating Period Are controls appropriately designed to capture and review various costs and categorize them appropriately? Are there separate reporting requirements for financing providers in addition to annual audits?

37 Financial Reporting for Investments in PPPs VIE Model Consolidation Party with power over the PPP s most significant activities and exposure to expected residual returns and losses of the PPP generally is the primary beneficiary and consolidates. Challenges for PPPs: Identifying most significant activities of the PPP Equity holders that are also service providers Interests held by investors related parties VOE Model Majority equity holder (or general partner) presumed to consolidate unless: Substantive kick-out rights held by other investor(s) Substantive participating (or noncontrolling) rights held by other investor(s) Financial Reporting Consolidation Revenues, expenses, assets, and liabilities of the PPP reflected in financial statements Specific factors to consider: Segment reporting Debt issued by the PPP to finance the project. Deconsolidation and/or derecognition if the PPP involves real estate Equity Method Single line item for the PPP investment reflected in issuer s financial statements Service Providers For investors that are also service providers to the PPP, investor s accounting may be impacted by transactions between the investor and the PPP. (e.g., elimination or deferral of revenue/profit).

38 PPP Example Structure ACME Investment Ltd (UK)* $25m Back-to-back Equity Bridge Loan - Principal injected at financial close - Principal converting into Equity 40% and shareholder Loan 60% at Year 5 - Interest capitalized until repaid at 4% ABC Consolidates PPP on a U.S. GAAP basis. ACME may require IFRS basis FS to be provided separately. ACME Hold Co (US Corp.)* ABC Inc.* (US Corp.) $25m Equity Bridge Loan - Principal injected at financial close - Principal converting into Equity at Year 5 - Interest capitalized until repaid at 4% - Interest paid off before equity Dividends as Authorized under TIFIA term sheet Toll Road HoldCo, LLC Toll Road OpCo, LLC (PPP development entity) $90m Equity - ~90:10 gearing based on long term TIFIA $25m Equity injected at Year 5 Senior/TIFIA Loan $900m $40m Subordinated Equity Loan - Injected at end of construction - Interest capitalized until repaid at 12% - Senior to Equity at HoldCo and repaid first with cash sweep Senior Debt / TIFIA Concession Agreement * Potential intermediaries may exist above Toll Road HoldCo, LLC Dept. of Transportation

39 Illustrative Summary Public Private Partnership (P3) Availability Style Transaction Basics of Availability Style transactions The PPP entity has a contractual right to receive a fixed amount of milestone payments and availability payments from the governmental entity and the payments are based on contractual amounts, as opposed to being derived from tolls or usage of the infrastructure. Demand risk on the infrastructure is borne by the governmental entity rather than the PPP development entity. Public Private Agreement Construction Period Activities Building the infrastructure specified in the PPP arrangement. It is not uncommon for the construction to be subcontracted to third-parties, who are sometimes related parties to the PPP development entity. Income Statement The PPP development entity receives cash milestone payments as predetermined construction hurdles are completed. In general, a contract that meets the definition of a long-term contract will be accounted for using the Percentage Completion Method ( PCM ). Under the PCM, the contract price is recognized in income proportionately as contract costs are incurred. Recognition of margin depends on facts and circumstances. Balance sheet Depending on the accounting model followed, the PPP development entity may record a financial asset as a loan receivable, available-for-sale asset or asset carried at fair value through the income statement. Interest income is recognized periodically on the asset and cash receipts reduce the asset. Operations & Maintenance Period Activities These activities generally include the provision of operation and maintenance services such as painting, re-surfacing, repairing and cleaning the infrastructure. Income Statement The PPP development entity receives periodic payments based on a contractual formula throughout the O&M period for keeping the project available. Revenue may be recognized on a cost-plus basis or as a percentage of completion basis. Margins should be recognized in line with those on similar work performed on a stand-alone basis. The cash amount of availability payments varies based on inputs to the formula but total cash received on the project should equal total revenues. Balance sheet Similar to construction, there would be a financial asset recorded related to the operating phase with a corresponding entry to revenue. Future cash receipts reduce the asset balance. Construction Begins Construction Expenditures 2017 Civil work, overhead, and advisors fees Development costs (e.g., legal, financial advisor, bid support fees) Insurance Quality Assurance Firm (i.e. independent engineer) Construction Ends 2022 O&M Begins 2022 O&M Expenditures Emergency services, landscaping, graffiti removal Overhead and G&A costs of the PPP development entity Rating agency monitoring costs, bond trustee fee, collateral agent fee, and bank account fees Interest payments on financing Major maintenance (treatment depends on reimbursement) O&M Ends 2052

40 Illustrative Summary Public Private Partnership (P3) Toll Style Transaction Basics of Toll Style transactions The PPP entity has a contractual right to receive the proceeds derived from tolls or usage of the infrastructure. Demand risk on the infrastructure is borne by the PPP development entity. Public Private Agreement Construction Period Activities Building the infrastructure specified in the PPP arrangement. It is not uncommon for the construction to be subcontracted to third-parties, who are sometimes related parties to the PPP development entity. Income Statement The PPP development entity has the rights to collect tolls once the infrastructure is completed. An initial revenue stream is recognized in respect of construction activities with corresponding entry to increase an intangible asset. Operations & Maintenance Period Activities These activities generally include the provision of operation and maintenance services such as painting, re-surfacing, repairing and cleaning the infrastructure. Income Statement A second revenue stream is recognized to reflect revenues earned based on cash collected from users during the operation of the infrastructure. This revenue is recognized on what is approximately a cash basis. Concurrently, the intangible asset that was set up during construction is charged against amortization expense. Balance sheet An intangible asset is recorded representing exchange of construction services for the right to charge tolls to future users. Balance sheet The intangible asset is recorded that will be charged to expense over the period of concession, usually on a straight line basis. Amortization may potentially be based on usage instead of time, depending on facts and circumstances. Construction Begins Construction Expenditures 2017 Civil work, overhead, and advisors fees Development costs (e.g., legal, financial advisor, bid support fees) Insurance Quality Assurance Firm (i.e. independent engineer) Construction Ends 2022 O&M Begins 2022 O&M Expenditures Emergency services, landscaping, graffiti removal Overhead and G&A costs of the PPP development entity Rating agency monitoring costs, bond trustee fee, collateral agent fee, and bank account fees Interest payments on financing Major maintenance (treatment depends on reimbursement) O&M Ends 2052

41 Accounting by the PPP Development Entity Existing Accounting Guidance U.S. GAAP has not specifically addressed the accounting for service concession contracts, leading to diversity in practice In the past, some operating entities accounted for PPP contracts as leases (ASC 840). ASU , Service Concession Arrangements, prohibits lease accounting. Certain U.S. GAAP entities have accounted for PPP contracts in a manner similar to IFRS guidance as a proxy. IFRS includes specific guidance for accounting for service concession contracts in IFRIC 12 Service Concession Arrangements

42 Accounting by the PPP Development Entity Summary comparison of accounting guidance: Issue Revenue Recognition IFRS IAS 11 (Construction) and/or IAS 18 (operations) U.S. GAAP ASC 605, ASC 606, ASU , ASU , and various other sources such as EITFs Accounting Models IFRIC 12 Financial Asset Model (Payments are fixed and contractual) Intangible Asset Model (Operator has right to charge users) ASC 606 Identify transaction price and allocate it among performance obligations Recognize revenue by measuring progress toward completion Development Entity s Rights over Assets IFRIC 12 Infrastructure are not recognized as PP&E of the PPP development entity ASU Infrastructure are not recognized as PP&E of the PPP development entity and arrangement is not a lease ASU is effective annual periods beginning after December 15, 2014, and interim periods therein. Applies to all contracts existing at the beginning of the period of adoption with a cumulative-effect adjustment recorded to beginning retained earnings.

43 Accounting by the PPP Development Entity The path forward for accounting for service concession arrangements under U.S. GAAP is still somewhat unclear. The firms are seeing diversity in practice Deloitte recently drafted whitepaper to the SEC; however, SEC said this is not a public company issue this time Currently, there is a combined whitepaper being put together by all the Big 4, which at best case, will be sent to the FASB by the end of 2016

44 Team resumes Infrastructure Accounting Specialist Todd Wilson Director, Mergers and Acquisitions Advisory Chicago, IL Resume text runs here this is dummy text it is not here to be read it is here to show how this document will look when populated with real text Infrastructure Tax Specialist Lucian Spatoliatore Partner, Mergers and Acquisitions Tax New York, NY Lucian leads Deloitte s East Region Infrastructure Tax practice and serves national and international clients on a wide array of transactions. Infrastructure Accounting Specialist Micah Bible Sr. Manager, Mergers and Acquisitions Advisory Atlanta, GA Micah provides pre-bid accounting due diligence to private sector clients on PPP projects and provides financial due diligence on a variety of non-ppp M&A projects. Infrastructure Transaction Advisory Specialist Jim Ziglar Sr. Manager, Transactions and Business Analytics Arlington, VA Jim advises federal, state and local governments, and private sector entities in structuring PPPs and project financings.

45 Appendix Detailed PPP Transaction Information

46 Select Completed U.S. PPP Transactions (1 of 3) The activity has shifted to greenfield transactions Transaction Name State Year Capital Delivery Payment Type Asset Type Amount ($M) Model Mechanism LaGuardia Airport Terminal New York ,930 DBFOM Greenfield Airports Building P3 (exp.) SH 288 P3 Texas DBFOM Revenue Risk Greenfield Roads Indiana Toll Road (>10% stake) Indiana 2016 Brownfield Roads Long Beach Civic Center P3 California DBFOM Greenfield Accommodation I-285/SR 400 Improvements P3 Georgia DBF Availability Greenfield Roads State Street Redevelopment P3 Indiana DBFOM Availability Greenfield Roads Kentucky Broadband P3 Kentucky Availability Greenfield Other Michigan Freeway Lighting Michigan DBFOM Availability Greenfield Street Lighting I-77 HOT Lanes North Carolina DBFOM Revenue Risk Greenfield Roads Southern Ohio Veterans Highway Ohio DBFOM Availability Greenfield Roads (Portsmouth Bypass) Pennsylvania Bridges Project Pennsylvania ,009 DBFOM Availability Greenfield Bridges and Tunnels SH Dallas-Fort Worth (Gap Texas DBOM Mixed Greenfield Roads Financing) I-4 Ultimate P3 Florida ,300 DBFOM Availability Greenfield Roads I-69 P3 Indiana DBFOM Availability Greenfield Roads US 36 P3 Colorado DBFOM Revenue Risk Greenfield Roads Georgia Northwest Corridor Georgia DBF Revenue Risk Greenfield Roads (NWC) P3 Goethals Bridge P3 New Jersey, New York ,500 DBFM Availability Greenfield Bridges and Tunnels North Tarrant Expressway Segments 3A and 3B Texas ,350 DBFOM Revenue Risk Greenfield Roads Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

47 Select Completed U.S. PPP Transactions (2 of 3) The activity has shifted to greenfield transactions Transaction Name State Year Capital Delivery Payment Type Asset Type Amount ($M) Model Mechanism Ohio River Bridges Project - East Indiana DBFOM Availability Greenfield Bridges and End Crossing Tunnels Luis Munoz Marin International Puerto Rico DBFOM Other Greenfield Airports Airport Carlsbad Seawater Desalination California DBFOM PPA Greenfield Water Plant Rialto Water System P3 California DBFOM Brownfield Water Bayonne Water & Wastewater New Jersey Brownfield Water Concession I-75 Expansion Florida DBF Availability Greenfield Roads SR 79 Florida DBF Other Greenfield Roads Ohio State University (OSU) Ohio Brownfield Car Parks Parking Facility Maryland I-95 Travel Plazas Maryland DBFOM Brownfield Other Redevelopment SR 9B Extension - Duval County Florida DBF Greenfield Roads I-95 North, SR 406 to SR 44, Florida DBF Availability Greenfield Roads I-95 HOV/HOT Lanes Virginia DBFOM Revenue Risk Greenfield Roads Presidio Parkway Doyle Drive California DBFOM Availability Greenfield Roads Concession Midtown Tunnel (Elizabeth River Tunnels Project) Virginia ,100 DBFOM Revenue Risk Greenfield Bridges and Tunnels Long Beach Courthouse California DBFOM Availability Greenfield Accommodation Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

48 Select Completed U.S. PPP Transactions (3 of 3) The activity has shifted to greenfield transactions Transaction Name State Year Capital Delivery Payment Type Asset Type Amount ($M) Model Mechanism Denver FasTracks Eagle P3 Light Colorado ,637 DBFOM Availability Greenfield Light Rail Rail Project I LBJ Freeway Texas ,600 DBFOM Revenue Risk Greenfield Roads I-485 Outer Loop North Carolina DBF Availability Greenfield Roads Seagirt Marine Terminal Maryland Revenue Risk Greenfield Ports I-4 Connector Florida DBF Greenfield Roads North Tarrant Expressway Texas ,000 DBFOM Revenue Risk Greenfield Roads Connecticut Service Plazas Connecticut DBFOM Revenue Risk Greenfield Other Miami Port Tunnel (POMT) Florida DBFOM Availability Greenfield Bridges and Tunnels I-595 Corridor Roadway Florida ,760 DBFOM Availability Greenfield Roads Improvements Santa Paula Water Concession California DBFO Revenue Risk Greenfield Water SH-130 P3 Texas ,380 DBFOM Revenue Risk Greenfield Roads I-495 Capital Beltway HOT Lane Virginia ,068 DBFO Revenue Risk Greenfield Roads Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

49 Publicly-Announced U.S. PPP Transactions (1 of 5) Project State Current Status Capital Amt Procurement Payment Type Project Asset Type ($ m) Mechanism Nature Corridor H West Virginia Preferred Proponent 209 DBF Other Greenfield Roads Delaney/Colorado River Colorado, Preferred Proponent 300 BFOM Brownfield Energy Transmission Line Delaware Transmission Maryland Stormwater P3 Maryland Preferred Proponent 100 DBFM Revenue Risk Greenfield Water Pennsylvania Compressed Pennsylva Preferred Proponent 85 DBFOM Revenue Risk Greenfield Energy Storage Natural Gas (CNG) Fueling Stations nia Purple Line P3 Maryland Preferred Proponent 2,000 DBFOM Availability-Based Greenfield Light Rail SH 288 P3 Texas Preferred Proponent 815 DBFOM Revenue or Demand Greenfield Roads Risk Denver Airport Great Hall P3 Colorado Shortlisted Proponents 500 DBF Other Greenfield Airports Emerald Coast Utilities Authority Florida Shortlisted Proponents 53 DBFO Other Greenfield Waste I-395 Corridor P3 Florida Shortlisted Proponents 620 DBF Greenfield Roads I-70 East Colorado Shortlisted Proponents 1,170 DBFOM Availability-Based Greenfield Roads Prince George's County Waste Processing P3 Maryland Shortlisted Proponents DBFOM Greenfield Waste Texas University 8MW Heat and Texas Shortlisted Proponents DBFOM Greenfield Energy Generation Power System Transform 66 (Outside the Virginia Shortlisted Proponents 2,100 DBFOM Revenue or Demand Greenfield Roads Beltway I-66) Risk Wellsburg Bridge P3 West Virginia Shortlisted Proponents 150 DBF Availability-Based Greenfield Bridges and Tunnels Chicago CNG Illinois RFQ returned DBFOM Other Greenfield Power Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

50 Publicly-Announced U.S. PPP Transactions (2 of 5) Project State Current Status Capital Amt ($ m) Procuremen t Mechanism Payment Type Project Nature Asset Type Santa Clara Expedited Purified Water P3 California RFQ returned 950 DBFOM Greenfield Water Atlanta Waste Processing Plant Georgia Transaction Launch DBFOM Greenfield Waste P3 Dana Point Harbor Revitalization California Transaction Launch DBFOM Greenfield Ports P3 Easton Police Station Pennsylva Transaction Launch Other Greenfield Accommodation nia Kent State University Student Ohio Transaction Launch Greenfield Social Housing Housing and Offices Miami Beach Wireless LRT / Florida Transaction Launch DBFOM Availability-Based Greenfield Light Rail Streetcar P3 North Tarrant Expressway 3a Texas Transaction Launch Brownfield Roads and 3b Sale (10%) (2016) Port of Newark New Transaction Launch Greenfield Ports Jersey Puerto Rico Power Projects Puerto Rico Transaction Launch Greenfield Energy Generation San Diego Airport Cargo Facilities California Transaction Launch 173 DBFO Greenfield Airports Smart Street Lighting P3 Illinois Transaction Launch Greenfield Street Lighting South Miami Heights Water Treatment Plant Florida Transaction Launch DBFOM Other Greenfield Water Thurgood Marshall Airport Hotel Maryland Transaction Launch DBFOM Greenfield Social Housing Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

51 Publicly-Announced U.S. PPP Transactions (3 of 5) Project State Current Status Capital Amt ($ m) Procuremen t Mechanism Payment Type Project Nature Asset Type University of South Carolina Social Maryland Transaction DBFOM Greenfield Education Infrastructure Projects Launch Wayne State University Student Residential Facilities P3 Michigan Transaction Launch DBFOM Greenfield Accommodation Arizona I-17 Improvements Arizona Pre-Launch 500 Greenfield Roads Arkansas I-30 P3 Arkansas Pre-Launch 600 DBF Greenfield Roads Baltimore Penn Station Redevelopment Maryland Pre-Launch DBFOM Greenfield Other Transport Boston City Hall and Plaza Massachusetts Pre-Launch Greenfield Accommodation California University Housing Projects California Pre-Launch DBFOM Greenfield Accommodation City of Wichita Water System Kansas Pre-Launch 1600 Other Greenfield Water Des Moines International Airport Terminal Iowa Pre-Launch 300 Greenfield Airports East/West 84 inch Force Main Florida Pre-Launch 180 DBF Greenfield Waste Fargo-Moorhead Area Diversion P3 North Dakota Pre-Launch 1800 Greenfield Water General Maintenance and Office Florida Pre-Launch 120 DBF Greenfield Other Facilities High Rise Bridge Virginia Pre-Launch 1400 Greenfield Bridges and Tunnels Highway 37 Improvements California Pre-Launch Greenfield Roads Honolulu Transit Center Hawaii Pre-Launch Greenfield Other Transport I-10 Mobile River Bridge and Bayway Widening Alabama Pre-Launch 850 Greenfield Bridges and Tunnels I-75 North Managed Lanes Georgia Pre-Launch 2000 Greenfield Roads LAX Consolidated Rent-A-Car (CONRAC) P3 California Pre-Launch 850 DBFOM Availability- Based Greenfield Car Parks Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

52 Publicly-Announced U.S. PPP Transactions (4 of 5) Project State Current Capital Amt Procurement Payment Type Project Asset Type Status ($ m) Mechanism Nature Lone Star Regional Rail Project Texas Pre-Launch 2500 DBFOM Greenfield Rail Los Angeles Convention Center California Pre-Launch 470 DBFOM Greenfield Leisure Merrimac Bridge Tunnel Virginia Pre-Launch 6200 Greenfield Bridges and Tunnels Miami-Dade Beach Corridor Florida Pre-Launch 529 Greenfield Other Transport Miami-Dade Krome Detention Center Florida Pre-Launch Greenfield Prisons / Training and Treatment Center Miami-Dade Rail Link Florida Pre-Launch Greenfield Rail Miami-Dade Water Distribution Florida Pre-Launch 70 DBF Greenfield Waste System Storage Tank & Main replacements Michigan Highway Pump Station Michigan Pre-Launch 165 DBFOM Greenfield Water Multimodal Passenger Terminal Georgia Pre-Launch 1100 Greenfield Other Transport Northwest Wellfield Water Treatment Florida Pre-Launch 450 DBFOM Greenfield Water Plant Peak Flow Management Facilities Florida Pre-Launch 310 DBF Greenfield Waste Pennsylvania Commercial Facilities Pennsylvania Pre-Launch Greenfield Rail Phoenix Stormwater Pump Arizona Pre-Launch D Greenfield Water Rehabilitation Project S-Line Rail Improvements Virginia Pre-Launch Greenfield Rail San Francisco Broadband California Pre-Launch Greenfield Telecom Seminole State College Buildings Florida Pre-Launch Greenfield Social Housing South Dade Wastewater Treatment Florida Pre-Launch 200 Greenfield Waste Plant Stevenson Expressway Managed Illinois Pre-Launch Greenfield Roads Lanes Texas Beaumont - Vidor Toll Road/Bridge Texas Pre-Launch 150 Greenfield Roads Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis

53 Publicly-Announced U.S. PPP Transactions (5 of 5) Project State Current Status Capital Amt ($ m) Procurement Mechanism Payment Type Project Nature Asset Type Twinning of Sagamore Bridge Massachusetts Pre-Launch Other Greenfield Bridges and Tunnels Virginia Advertising Opportunities Virginia Pre-Launch Greenfield Other Virginia Broadband within Right of Virginia Pre-Launch Greenfield Telecom Way Virginia Cellphone Towers P3 Virginia Pre-Launch 8 Greenfield Wireless Transmission Virginia Customer Service Facilities Virginia Pre-Launch Greenfield Social Infra Virginia Interstate Lighting Virginia Pre-Launch Greenfield Street Lighting Virginia Regional Airport Runway Virginia Pre-Launch DBF Greenfield Airports Maintenance Virginia Rest Area Enhancements Virginia Pre-Launch Greenfield Accommodation Virginia Route 460/58/13 Connector Virginia Pre-Launch 150 Greenfield Roads Virginia Street Lighting Virginia Pre-Launch Greenfield Street Lighting Replacements Virginia Toll Credit Marketplace Virginia Pre-Launch Greenfield Other West District Wastewater Treatment Florida Pre-Launch 2100 DBFOM Greenfield Waste Plant Twinning of Sagamore Bridge Massachusetts Pre-Launch Other Greenfield Bridges and Tunnels Virginia Advertising Opportunities Virginia Pre-Launch Greenfield Other Virginia Broadband within Right of Way Virginia Pre-Launch Greenfield Telecom Source: Infra-Americas.com, Infra-Deals.com, IJOnline.com, Deloitte Analysis