Seagirt Marine Terminal P3

Maryland’s
Transportation PublicPrivate Partnership
Case Studies
October 16, 2012
1
Maryland Innovative Infrastructure Approach:
Public-Private Partnerships
•Expanding the private sector role in infrastructure
development allows the State to tap private sector technical,
management, and financial resources in new ways to achieve
greater cost and schedule certainty, utilize innovative
technology applications, obtain specialized expertise, and
gain access to private capital
• Innovative project delivery work requires the P3 evaluation,
selection and negotiation process to be fast, efficient, and
predictable
2
Major Maryland P3 Initiatives
•Seagirt Marine Terminal P3 – 50 Year Concession
Started in 2009
•I-95 Travel Plazas P3 – 35 Year Contract Executed in
March 2012
3
Seagirt Marine Terminal Infrastructure Need
 Identified need to fund critical development of 50’ deep berth in the Port of Baltimore to help
maintain global competitive position when the Panama Canal is completed in 2014
 This goal could not be achieved using existing public resources
4
Seagirt P3 Key Objectives
•
Generate upfront proceeds that can be used to fund other supporting infrastructure
projects → $140 million upfront, reinvested in shovel-ready transportation projects
along I-95 and the Chesapeake Bay Bridge, among others
•
Receive an ongoing annual payment stream and a sharing mechanism
→ Annual payment of $3.2 million, grown at inflation starting in year 5 at a minimum
rate of 1.5%, with growth capped at a maximum of 3.5% per annum; $15 per
container, for each container in excess of 500,000, rate grows at inflation with same
terms as Fixed Annual Payment
•
Select a private operator that had extensive operating experience and a favorable
relationship with the unions → Partnership with incumbent, proven operator with an
88+ year history in the Port (Ports America)
•
Generate significant economic growth and quality job creation → Significant job
(5,700) and tax revenue creation ($16 million per annum)
•
Fund critical development of 50’ deep berth in the Port of Baltimore to help maintain
global competitive position when the Panama Canal is completed in 2014
5
Managing The Seagirt PPP Process
Feb. 2009 –
Maryland Port
Administration
announces
RFP process
for 50-year
concession at
Seagirt
Jun. 14, 2009 –
Highstar / Ports
America
Chesapeake
Submit RFQ
response
Jul. 14, 2009 –
Initial
Management
Presentation
with the MPA
held
Sept. 18, 2009
– RFO
Proposal
Submitted
Dec. 16, 2009 –
Maryland
Board of
Public Works
Approval
Received
Jan. 12, 2010 –
PAC closes on
its lease and
concession of
Seagirt.
Pre-Investment Due Diligence
Jan
Feb
Mar
Apr
May
Apr. 15, 2009 –
RFQ for
Seagirt
Released by
the MPA
Jun
Jul
Jun. 26, 2009 –
Highstar / PAC
invited to 2nd
Round: MPA
releases RFO
for Seagirt
Aug
Sept
Oct
Excl.
Negot.
With
MPA
Oct. 12, 2009 –
Best and Final
Offers
Submitted to
MPA
Sept. 24, 2009 –
MPA enters into
exclusive
negotiations
with Ports
America
Chesapeake
6
Nov
Dec
Jan.
2010
Dec. 14, 2009 –
Maryland
General
Assembly
Approval
Received
Jan. 7, 2010 –
PAC prices
$260MM Tax
Exempt
Municipal
Financing
Seagirt P3 Stakeholders
Maryland General
Assembly
Maryland
General
Maryland
Department
Assemblyof
Maryland
Maryland
Economic
Development
Economic
Corporation
Development
Transportation
Maryland
General
Maryland Board
of
Public
Works
Assembly
Corporation
Maryland Port
Administration
Maryland
General
International
Longshoremen’s
Assembly
Seagirt
P3
Association
In order to ensure a smooth and well coordinated approval process, it was imperative to not
only structure a deal that would provide significant economic benefit to all parties, but to also
keep key decision makers from each party apprised of any significant developments
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Key Terms of the Seagirt P3
($ in millions)
Component of Offer
Value to the
State
Capital Reinvestment Payment
$140.0
Assumptions
»
»
»
Flows to the Maryland Department of Transportation
To be reinvested in shovel-ready transportation projects along I-95 and the
Chesapeake Bay Bridge, among others
Creates approximately 2,000 construction-related jobs
Berth IV Development
100.0
»
»
$54.3MM in Civil and Dredging spread over the period from 2012 to 2014
Commitment to purchase 4 cranes by July 1, 2014 for a total of $45.2MM,
with 2 cranes purchased in 2012 and 2 additional cranes purchased in
2014
Fixed Annual Payment
290.0
»
Annual payment of $3.2 million, grown at inflation starting in year 5 at a
minimum rate of 1.5%, with growth capped at a maximum of 3.5% per
annum
Variable Payment
465.0
»
$15 per container, for each container in excess of 500,000, rate grows at
inflation with same terms as Fixed Annual Payment
Maintenance Capital
Expenditure Commitment
260.0
» Assumption of maintenance capital expenditures of the facility over the life
of the agreement
» Includes all AECOM (1) expenses for system preservation
Capital Replacement /
Expansion Capital Expenditure
Commitment
210.0
» Capital Expenditures in addition to Berth IV build out
» Includes crane and RTG replacement, initial technology improvements,
construction of warehouse and mechanic shop, facility paving, and
alongside maintenance dredging
Total Value to the State
(1) AECOM is the MPA’s engineering advisor
$1,465.0
8
Seagirt Ground-Breaking P3 Municipal Financing
Financing Overview
Compelling Pricing
• $250 million, 25-year municipal bond
• Closed on January 12, 2010
• Average financing cost of 5.77%
Series A
Series B
Tax-Status
Call Features
Pricing
$166,920,000
MDOT Transportation
Projects
Tax-Exempt
10-Year @ 100
Coupon @ Yield
$81,755,000
PAC Terminal Facilities
Projects
Tax-Exempt PABs
10-Year @ 100
Coupon @ Yield
2020 Term
5.125% @ 5.250%
5.125% @ 5.250%
2025 Term
5.375% @ 5.500%
5.375% @ 5.500%
2035 Term
Ratings
5.750% @ 5.875%
5.750% @ 5.875%
Baa3/NR/NR
Notional
Use
• Investment grade rating
• Recourse solely to Seagirt Terminal cash
flow
Innovative Structure
Investment Grade Debt Service Coverage
MdTA
t Agre
Seagir
MdTA
ement
25
10.0 x
20
8.0 x
15
6.0 x
10
4.0 x
5
2.0 x
Lease and
Concession
Agreement
Trust
Indenture
$
Bond and
Concession
Trustee¹
Loan Agreement
Debt
Service
-
0.0 x
$
Principal
Bondholders
9
Net Interest
Debt Service Coverage
Debt Service Coverage
$
Payments
Ports America
Chesapeake
MEDCO
Assignment of Rights & $
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
MPA
Debt Service ($ millions)
Proceeds
Seagirt Achievements
•
Operational Handover
• Ports America Chesapeake assumed full
operational control over Seagirt on
January 12, 2010
• Transition occurred smoothly with no
operational challenges or union work
stoppages
•
Cargo Volume Update
• Seagirt set new cargo records in 2010,
with growth and new records continued
in 2011
• Port moved from 12th to 11th among the
nation’s ports (dollar value of cargo)
• Hapag-Lloyd recently began direct,
weekly service to Baltimore
•
Berth IV Construction Update
• $105 million project fully completed, two
years ahead of schedule
• Ribbon cutting ceremony scheduled for
October 30, 2012
10
January 2010
July 2011
August 2012
Seagirt Accolades
“I think [this agreement is] one of the best in
the country; it sets a new bar…It not only
creates jobs now but maintains this important
asset for Maryland, and it doesn't sell the
public interest short.”
- Governor Martin O’Malley
“State officials familiar with the
deal…described it as a one-of-a-kind publicprivate partnership with no clear precedent in
the port industry.”
(Baltimore Sun – November 20, 2009)
(Washington Post – November 21, 2009)
“We believe this partnership is an excellent deal
for all involved, including the Maryland
taxpayer…Now, working hand-in-hand with
Ports America Chesapeake, we move forward
from a position of strength as we compete for
business in the highly-competitive maritime
industry and preserve and grow the number of
good, family-supporting jobs at the Port of
Baltimore.”
“[A]s 2009 draws to a close, it is also possible
to point to a number of successes in how
private equity has constructively engaged with
the public sector to build public-private
partnerships that make sense to both sides. An
example is Highstar Capital's contract award
for a 50-year concession on the Seagirt Marine
Terminal at the Port of Baltimore in Maryland.”
(Infrastructure Investor Magazine – December/January 2009)
- Governor Martin O’Malley
(Press Release – January 12, 2010)
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Interstate 95 Travel Plazas Infrastructure Needs
 The two interstate travel plazas are currently some of the nation’s busiest, with 5 million visitors a
year, annual food & beverage gross revenues of $30-35 million, and annual fuel sales exceeding 20
million gallons
 Interstate 95 average daily traffic volumes passing the travel plazas are over 40,000
 These facilities were built in 1963 and 1975 and are reaching the end of their useful lives.
.
12
Travel Plazas Revised Process
•
Original RFP Issued March 2010; Cancelled November 2010
•
Determined lessons learned and strengthened team
• Input from Stakeholders, including private sector & DLS
• Examples from elsewhere, including recent Delaware deal
• Lessons from previous State P3 efforts, including Seagirt
• Engaged Laurie Mahon, Jones Lang LaSalle, and Bregman, Berbert,
Schwartz & Gilday, LLC as consultants
•
Developed new RFP to encourage greater competition
• Customer-driven focus
• Performance-based model
• Flexibility for private sector to truly innovate
• Clearly defined, concise State goals for partnership
13
Travel Plazas P3 Key Objectives
•
Enter into a 35-year concession agreement for the two Travel Plazas, during
which time the private partner will be fully responsible for all of the financial
obligations of redeveloping and then maintaining and operating the facilities.
•
Obtain new or like-new facilities to replace the current Chesapeake and
Maryland Houses.
•
Ensure that the facility design and operation will provide a positive customer
experience.
•
Provide a fair return to the State, and provide for transfer of the facilities in
satisfactory condition at the end of the term.
14
Travel Plazas P3 Process
Mar 11 2011 –
45-Day Notice
to General
Assembly
Jun 27 2011 –
Advertise RFP
RFP Development
Mar
2011
Apr
May
Jun
Nov 10 2011 –
Proposals Due
Aug
Apr 2011 –
MDTA Board
Briefings
Sept
Oct
Jan 23 2012 –
MDTA Board
Consideration
Selection of
Preferred
Proposal
Submitted for
30-Day
Legislative
Review
Evaluate
& Select
Proposal Preparation
Jul
Dec 2011 –
Evaluation
Process
Completed
Nov
Dec
Sept 2012 –
Transfer of
Operational
Control & Start of
Construction
Approvals &
Award
Jan
2012
Nov 11 2011 –
Evaluation
Process Begins
Feb
Design Coordination &
Mobilization for Transition
Mar
Apr
March 7 2012 –
BPW
Consideration
Execution of
Agreement
May 2011 –
Briefing of BPW
and DLS staff
Jul 20 2011 –
Proposer
Conference
May
Jan 2012 – Finalize
Agreement Draft
Jan 2012 –
Briefings
(Executive, MDTA
Board, DLS,
Treasurer/Compt.)
Feb 2012 –
Follow-up Round
of Briefings
15
Jun
Jul
Aug
Sept
2012
Sept 2012 –
Expiration of
Existing
Contracts
Travel Plazas Partnership Parameters
Parameter
P3 Commission Recommendation
Travel Plazas
Term Length
Agreement term not to exceed 50 years
Agreement term is 35 years
Asset Ownership
Government retains ownership and
accountability for the asset and its
ultimate service to the public
MDTA will retain ownership of the real
property during the term of the P3
Public Involvement
Proposed and final Agreements should
be posted online for review
Link to proposed Agreement currently
available on MDTA/project website
Revenue Sharing
Whenever applicable, revenue-sharing
should be utilized
Areas USA will pay annual rent to the MDTA
for the term of Agreement based on gross
sales and fuel quantities
Minority Inclusion
Minority inclusion is an important State
policy and its use should be encouraged
for all projects
-Self-imposed commitment to 27% MBE
participation in design & construction
-Maryland certified MBE franchisees to
provide fuel & c-store services for term
Prevailing Wage
Requirements for prevailing wages shall
apply to P3s
Areas USA shall pay not less than the
applicable prevailing wage rates for
construction on primary service facilities
Green Building
Requirements
State requirements for green buildings
shall apply to P3s
Travel Plazas shall achieve a silver LEED
certification
Performance
Standards
Agreement shall include minimum quality
standards, performance criteria,
incentives & disincentives
Areas USA will be required to achieve agreed
upon performance standards , as clearly
outlined in the Agreement
16
Travel Plazas Partners
17
Travel Plazas Risk Transfer
State of Maryland Receives
Areas USA Receives
Initial capital investment of $56 MM by Areas USA
requires no public subsidy or debt
Benefit: Frees up financial resources for MDTA to
invest in core program
Right to operate and maintain the Maryland and
Chesapeake Houses above current standards for
35 years
Risk: Areas USA accepts operational and sales risk
Firm commitment to complete and open two
brand-new travel plazas by September 2014
Benefit: Relieves MDTA of capital cost, schedule
risk, cost overruns
Obligation to design and build the facilities within
the MDTA’s required standards
Risk: Areas USA accepts design and construction
risk
Remediation of existing soils contamination
Benefit: Brings closure to open MDE
environmental clean-up cases
Commitment from MDTA to contribute funds if the
clean-up exceeds 10,000 cubic yards of material
Risk: Areas USA accepts responsibility for
environmental compliance of future facility
operations
Annual payments for the life of the contract, in a
range from $442 to $488 MM in cash,
Benefit: Enhanced revenue stream which grows
over time
Opportunity to provide retail services within one of
the country's most heavily-traveled corridors; all
net revenues resulting from facility operations;
partnership structure with MDTA that encourages
optimal use of the Maryland and Chesapeake
Houses
Risk: Areas USA accepts full revenue and cost risk
Lease terms give MDTA the right to cancel the
agreement if Areas USA fails to perform
Benefit: MDTA can enforce its high standards of
performance without additional cost
Full control over operations and work practices as
long as in contract compliance
Risk: Areas USA accepts operational risk
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Travel Plazas Risk Transfer (continued)
State of Maryland Receives
Area USA Receives
Relief from future maintenance expenditures
required for lifecycle asset management
Benefit: Estimated $35 MM in projected expenses
which would have been MDTA responsibility
freed up for other uses
Control over timing and nature of system
preservation costs so long as standards are met
Risk: Areas USA accepts risk that estimated costs
are too low or do not reflect actual need
Relief from funding major capital replacements
Benefit: MDTA avoids estimated $60 MM
in capital funding
Obligation to fund capital also allows Areas USA
to invest in new retail space as it sees fit
Risk: Areas assumes risk of capital and
infrastructure replacement
Economic benefit of new investment, new
capacity
Benefit: 405 total construction jobs created over
the two year construction period
Travel demand created by growth in Maryland's
tourism industry, recreational activity and
business dynamism
Risk: Areas USA accepts risk of long term
economic growth
Achieves second major P3 transportation project
Benefit: Sends clear message to the world that
Maryland is open for business
Enters into a long-term agreement to operate
destinations with high customer visibility
Risk: Areas USA accepts risk of shift in customer
preferences
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Contact Information
For additional information, please feel free to contact:
Leif Dormsjo, Acting Deputy Secretary, MDOT Office of the Secretary
410-865-1006 | [email protected]
Jodie Misiak, Manager for Innovative Finance, MDOT Office of Finance
410-865-1050 | [email protected]
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