It's another anti-P3 diatribe. Sorry but this whole concept bugs me because in the end, taxpayers get ripped off and actually bear the risk of a project failing contrary to what is being claimed:
- "Macquarie's dead-parrot model
If the Macquarie model's not dead, it's surely comatose and dangling upside-down with its claws super-glued to the perch.
Despite touting a glamorous 14% yield, the latest stapled infrastructure float, BrisConnections, has tanked 60% on its sharemarket debut. The chief reason is that people have twigged to the financial engineer's lurk of the manufactured yield.
That is, they now understand they are simply being given back their own money after the Macquarie machine had slapped the structure together, raised debt with their equity and stripped out the fees up-front."
I still cannot understand why the Windsor Star refuses to publish any significant information about the P3 fiasco in British Colombia involving the Port Mann Bridge. It is not that they have to do very much research. All they have to do is reprint the news stories from their sister publication, the Vancouver Sun.
Could it be that the Star does not want us to know this information because then it could mean that there is no possibility of a P3 DRIC project, road or bridge? Oh yes, I forgot
- "We did things that newspapers can do to bring about change, positive change."
Yes, like ignoring relevant news stories because it might mean that the Bridge Company might now be able to build their Enhancement Project out of their own pocket book and not taxpayers'.
They have had a true public-private partnership with the Government for almost 80 years. They do their job and look after the bridge while the Governments do theirs and looks after the roads.
With an $18 billion deficit staring us in the face, the last thing that Ontario taxpayers need to hear is that our Government is wasting hundreds of millions of dollars more by entering into overexpensive P3 deals when traditional approaches work better.
Why do we need P3s? Better financing, better project management, assumption of risk are some of the justifications given. However, the Port Mann Bridge P3 failure blows up the myth of the need for this kind of structure.
The story below from the Journal of Commerce makes it clear that taxpayers will save money because Government can get better financing terms than can private industry if private industy can even get money these days. Fixed price construction contracts eliminate risk on the cost of the project. Interestingly, the same contractors who were going to build the P3 bridge project are going to build the Government project now.
What if the traffic decreases such that there is a revenue risk? Somehow having it in a P3 means that the risk is borne by private industry people think. I hate to break the news to people but if that happens, tolls increase. DUH!
- "Private-sector companies that operate a handful of toll roads in North America have stayed profitable despite significant declines in traffic. It would not have been possible without toll increases, company officials say..."
Macquarie and partner Cintra Concesiones of Spain formed a consortium to operate the 407 Express Toll Route in Toronto, Canada, along with the Indiana Toll Road and the Chicago Skyway.
The consortium is guaranteed toll increases at or above the rate of inflation for decades to come as part of its long-term leases for those roadways.
The 407 ETR did not see significant traffic growth in 2008, but the consortium has countered with a toll increase that took effect Feb. 1 of this year.
Traffic counts in December 2008 on the Indiana Toll Road and Chicago Skyway were down 8 to 10 percent when compared with December 2007.
A 20 percent toll increase on the Indiana Toll Road and a 27 percent toll increase on the Chicago Skyway have kept those roads profitable for the Cintra-Macquarie group."
And if the losses get too big, then bankruptcy is not unheard of such that the project has to be taken over by Government anyway.
The P3 apologists have no basis now for their business model. In another story from British Columbia the Government financing savings approached $200 million. That money goes into the taxpayer wallets to be used for other projects.
It seems to me that if the City of Windsor wants to create a new industry then we need to open up a rehabilitation centre for P3 politician addicts. They need to be cured of their P3 addiction immediately. We can only hope that we are in time to save them, and us.
- Port Mann P3 deal falls through as province turns to design-build contract
The B.C. government made a huge policy u-turn on the new Port Mann Bridge project by changing from a public-private partnership to a more traditional procurement model.
The province will now fully finance the design-build construction contract for the 10-lane super bridge.
The decision was announced after the government failed to finalize a deal with the lead proponent for the P3 contract.
For several months, Macquarie Group was having difficulties securing financing.
The global economic slowdown was behind the financing difficulties.
The government expected to reach a deal, but was forced to announce last week that negotiations between the province and MacQuarie collapsed.
The MacQuarie group was part of the Connect BC Development Group, which also included Transtoll Inc., Peter Kiewit Sons Co. and Flatiron Constructors Canada Limited.
“Over the past several weeks, negotiations continued in good faith with Connect BC Development Group,” said Larry Blain, Partnerships BC CEO in a letter dated Feb. 24 to Transportation and Infrastructure Minister Kevin Falcon.
“Despite these proceedings, a mutually satisfactory agreement could not be reached and more time will not alter this. Therefore, I recommend that this negotiation be concluded.”
The government announced on Feb 27 that it is entering into a fixed-price contract with a joint venture of Peter Kiewit Sons Co. and Flatiron Constructors Canada Limited.
The group will design and build the new, 10-lane Port Mann Bridge and Highway 1 widening at the previously agreed upon cost of $2.46 billion.
“The Port Mann/Highway 1 project has always been a certainty, but what was to be confirmed was the best way to finance it,” said Falcon.
“We have determined that a traditionally financed arrangement is the better way to proceed at the current time.”
The B.C. government reached an agreement-in-principle with Connect BC Development Group on Jan. 28, for construction of the project.
A few weeks before this, Macquarie was granted a one month extension to get their financing finalized.
The deal and final costs for the project should have been finalized in March.
The financial arrangements for the project, which were supposed to take the form of a public-private partnership, were originally scheduled for completion in early January.
Despite this, the government insists that the financial arrangements were not the problem and the negotiations broke down due to a lack of agreement on final terms.
“We said from the beginning that this was a very challenging capital market environment and that executing the project would involve complex negotiations,” said Falcon.
“Unfortunately, the parties could not agree on final terms. Partnerships BC recommended not to proceed, and the province and Connect BC have mutually agreed to end the P3 procurement process.”
Even though the parties were unable to agree on final terms, the government has retained Macquarie to provide advisory services including financing and tolling operations.
Despite the lack of arranged financing, an official ceremony unveiled the bridge’s new design and marked the start of construction. Earlier plans had called for the twinning of the existing bridge.
During the ceremony Falcon and Campbell talked about the benefits of using a private public partnership, such as the transfer of risk, innovative design, financing and the maintenance of the project over its life.
The project was supposed to be financed entirely by Macquarie, which is Australia’s largest investment bank.
However, construction on the new bridge actually started in August with geotechnical work, drilling, planning, detailed design, utility works and environmental permitting.
The fixed-price contract with Kiewit-Flatiron is designed to ensure cost overruns or construction delays are the responsibility of the contractor.
The 40 kilometre Port Mann Highway 1 project consists of the construction of a new Port Mann Bridge and widening Highway 1, as well as upgrading interchanges and improving safety and access between McGill Street in Vancouver and 216th Street in Langley.
The project should be complete by 2013 and is expected to create 8,000 jobs.
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