Monday, June 16, 2014

SouthGate Mobility Partners and Learning About P3s

Texas awarded another P3 project this week - an $847-million, 3.5-year design-build contract to expand and upgrade State Highway 183, also know as the Airport Freeway, Dallas.  Additional information is available at their website.

It is increasingly important for engineers to understand the mechanics of the P3 delivery system.  You don't have to be an expect (although some engineers will need to be an expert), but you need to understand the basics.  Don't assume this is solely about transportation projects.  The world of P3s will eventually be coming to the water and wastewater industry.

Spend some time and study the 183 project and the structure of SouthGate Mobility Partners.  Look into these issues and questions.  Do the research - the answers are out there.  I found them.
  • Understand the difference between project finance and corporate finance.  What is project finance?  Why does a deal like this utilize project finance?  Why do P3 infrastructure projects utilize project finance?  Understand a P3 project like this and reducing contamination risk from the context of the sponsors.
  • What are several reasons the Dallas Police Pension Fund would invest in infrastructure projects?
  • Understand the network of contracts in a deal like this.  Who are the sponsors and lenders?
  • See if you can track down the bank financing and be sure and understand syndicated loans. Who is lead manager, manager, comanager, participant, and documentation bank in this process>
  • What is a special purpose vehicle (SPV)?
  • See if you can identify the industrial sponsors, the public sponsors, and financial sponsors.
  • Who are the "independent" engineering firms involved in the project and what are their roles?
  • What is a concession agreement?
  • Who is providing money and who is providing know how?  Who has a duel role and what are the advantages and disadvantages?
  • What are the forms of debt capital utilized by the SPV?
  • Are project bonds being issued?
  • Can you draw the organizational chart in the context of the contract network?
  • How much public money is being utilized for this project?
  • Who are the holders of the EPCs?
  • Does the project contain an operation and maintenance agreement?
  • Is there a sales agreement?
  • What does it imply to be both a project sponsor and an O&M agent?
  • What does it imply to be both a project sponsor and a contractor?
  • Who has what responsibilities for this project?

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