BAM PPP

BAM PPP
9th December 2013
02/06/2014
1
Overview
BAM PPP
By Richard Fielder, Chief Executive
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02/06/2014
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BAM PPP overview
Active in the PFI/PPP marketplace since the mid-1990s
BAM PPP was formed in January 2006, to optimise the utilisation of knowhow and
experience available within the Group
BAM PPP employs 100 people based in 6 offices
Active in all of BAM’s European markets
Portfolio of 35 concessions (mainly availabilty based)
Significant active and imminent bid programmes
In-house bid management, operations and maintenance, legal and financial teams
JV with PGGM
BAM PPP works closely with BAM sister companies to provide integrated whole life
approach to projects: VALUE FOR MONEY
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01 I INTRODUCTION TO BAM PPP
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Benefits PPP to Royal BAM Group
Access to pipeline of European PPP projects
Short term construction revenues and profit
Short, medium and long term investment returns
Medium and long term maintenance revenues and profit
Multi disciplinarily and whole life projects
Market dominated by large European Contractors
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01 I INTRODUCTION TO BAM PPP
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portfolioand
Markets
of concessions
Portfolio of Concessions
Glasgow
Kill
Solihull
Bunnik
Brussels
BAM PPP Portfolio: 31
Projects under BAM PPP management : 35
19
Retained
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PGGM
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DIF
Frankfurt
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Our Offices
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BAM PPP Concessions
BAM PPP Current Portfolio by Country
Other; 2
Switzerland;
1
Belgium; 4
BAM PPP Current Portfolio by Sector
Health; 2
Ireland; 5
Roads; 10
Justice; 8
Germany; 4
Netherlands
;7
Rail; 2
UK; 14
C
Education; 11
Current Portfolio = 35
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01 I INTRODUCTION TO BAM PPP
Current Portfolio = 35
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BAM PPP Active Bids
Active Bids by Sector
December 2013 : Equity €m
Active Bids by Country
December 2013 : Equity €m
0
3
53,5
71
118
57
106
7,5
43
68
32
44
10
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Netherlands
Belgium
UK
Roads
Rail
Education
Ireland
Germany
Switzerland
Marine
Justice
General
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01 I INTRODUCTION TO BAM PPP
Health
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BAM PPP Imminent Bids
Imminent Bids by Sector
December 2013: Equity €m
Imminent Bids by Country
December 2013 : Equity €m
20
74
31
75
0
15
66
168
51
52
9
23
Netherlands
Belgium
UK
Roads
Rail
Education
Ireland
Germany
Switzerland
Justice
General
Marine
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01 I INTRODUCTION TO BAM PPP
Health
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BAM PPP / PGGM Joint Venture
In May 2011 BAM PPP formed a market leading innovative joint venture with
the Dutch pension fund administrator PGGM
The JV combines the capabilities of a proven developer of PPP concessions
with the skills of a major long term investor
The initial target value of the joint venture is €390m, of which €150 million for
existing projects and €240 million for new projects
Existing project mostly based on 80:20 financial split, new projects initially on
50:50 financial split
Stable platform enabling low cost recycling of investments
Provides BAM long term position
PGGM a passive partner
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01 I INTRODUCTION TO BAM PPP
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DBFM(O)
BAM PPP
By Patrick Snippe, Finance Director
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Content
Characteristics DBFM(O)
Benefits DBFM(O)
Timescales & Structures
Roles & Responsibilities
Financial model
External funding
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INTRODUCTION
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Characteristics DBFM(O)
Long term partnerships
(usually 25 – 30 years)
Output oriented
(paid for to the extent available)
Private finance
(bank debt and equity)
Risk transfer
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INTRODUCTION
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Characteristics DBFM(O)
design
build
best value
= EMVI
operations
(25 year)
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finance
maintenance
(25 year)
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Characteristics DBFM(O)
Cooperation between (semi-) governmental body and a
single purpose company (SPC)
Long term partnerships (25-30 years)
For one specific project
Fully integrated, including Financing
Project financing (and not corporate financing):




cash flow driven,
non–recourse,
business case driven by DSCR,
time value of money
Availability based payment mechanism
Incentive to perform: 'no service, no fee‘
Strict risk allocation
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INTRODUCTION
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Characteristics DBFM(O)
To minimise exposure for
Royal BAM Group
This is achieved by using:

A SPV (non recourse financing)

Liability caps for EPC & MTC (including guarantees)

Risk Management / Due Diligence

Experts in Finance & Legal
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INTRODUCTION
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Benefits DBFM(O)
What’s in it for us?
01.
02.
Turnover
Long Term Maintenance &
Operation
Design & Construction
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Turnover
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INTRODUCTION
03.
Equity
Distributions
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Benefits DBFM(O)
Contracting Authority
Risk allocation
Government budget / balance
Innovation drive
Value for money
(best price/performance ratio)
Focus on core tasks of government
Efficiency
BAM
Strategic agenda 2013-2015
Growth / profit
Diversification
Unite strengths of BAM companies
Minimise groups’ exposure
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INTRODUCTION
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Timescales
PRE-QUALIFICATION
BAM PPP (TENDER)
FINANCIAL CLOSE
BAM PPP (CONSTRUCTION)
SERVICE AVAILABILITY DATE
EXPIRY
BAM PPP (OPERATIONS)
D&B PARTNER
Tender teams
O&M PARTNER
Tender teams
CRUCIAL TRANSITIONS
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INTRODUCTION
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Typical cash flow profile
Gross Availability Payment
CAPEX
Commencement
certificate
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Availability
certificate
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Completion
certificate
INTRODUCTION
Hand Back
certificate
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Typical funding structure
Availability Date
Financial Close
Completion Date
Construction Period
End Date
Operational Period
Share Capital (pinpoint equity)
Equity Bridge Loan
Shareholder Loan
Construction Bridge Loan
Project Loan
One-off Completion Payment
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INTRODUCTION
Debt Free Tail
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Typical contractual structure
Users / stakeholders
Contracting Authority
BAM PPP
PGGM
BAM PPP PGGM Infrastructure
Coöperatie U.A.
Shareholder(s)
•
•
DBFM(O)
Shareholders’ agreement
Subordinated debt
subscription agreement
Shareholder(s)
SPC
Equity documents
D&B contract
EPC Contractor
SPC management
Management
Agreement
Lender(s)
Credit documents
•
•
•
•
•
•
MTC contract
Interface contract
MTC Contractor
Common Terms Agreement
Facility agreement(s)
Inter-creditor agreement
Security documents
Hedging documents
Direct agreements
Shareholder(s)
Soft FM contract
Subcontractors
Subcontractors
Subcontractors
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Soft FM
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Typical cash flow structure
Construction
Operations
Authority
Milestone Payments
Shareholder(s)
Equity service:
• Shareholder loan interest
• Shareholder loan repayment
• Dividend
Equity injection
Availability
SPC
Equity service
EPC Price
EPC Contractor
Payments*
SPC management
Management
Fee
Debt draw downs
Lender(s)
Senior debt service
Senior debt service:
• Senior debt interest
• Senior debt repayment
MTC fee*
MTC Contractor
Soft FM fee*
Soft FM Contractor
* = minus deductions
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Roles BAM PPP
Tenders:

Tender management

Legal and financial expertise

DBFM(O) expertise
Projects:

Project management (SPC level)

Sponsor / investor of equity

Asset management
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Roles & Responsibilities – BAM PPP
Finance (project finance & equity)
Legal
Insurance
Focal point for Client
Tender strategy (process)
Establish & management of
Project Company
Dialogue with EPC & MTC
Play client role internally
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INTRODUCTION
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Financial model
(NPV of) Availability payments
Input costs

Construction

Maintenance (and operations)

Life Cycle Costs
Finance

Debt - interest

Equity - dividend
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INTRODUCTION
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Payment Mechanism
Availability payment = gross
Availability payment - penalties
Availability penalties

E.g. Non availability one lane: €25.000
to €50.000 per 15 minutes
Performance penalties:

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E.g. Not de-icing the outside area of a building
within 1 hour: €10.000 + €1.000 per hour
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Optimal Net Present Value
Contracting Authority:
Ceiling price / target price
Milestone payment(s)
Discount Factor
Base rates
Project duration
BAM
Input costs right
No frontloading
Optimisation of Life Cycle Costs
Project IRR (ratio Loan/Equity)
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External funding / Lenders view
Project partners
Contract structure
Due diligence (Legal, technical, insurance, finance)
Robustness of financing
Scenario’s:
Base case ratio’s, Lock-up ratio’s (No payment for equity) and Default ratio’s (Entry rights
banks)
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PROJECTFINANCIERING
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PPP challenge
Balance between:

Optimal input costs




Construction
Maintenance and operations
Life cycle costs
Optimal funding
Resulting in:

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Best NPV of availability payments
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01 I INTRODUCTION TO BAM PPP
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Current affairs
BAM PPP
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PPP 2013/2014
Increasing competition in the market, threatening PQ (ballots) and
bidding strike rates
Continuing appetite from BAM Co’s to bid PPP projects supported by
BAM’s Strategic Agenda
External finance available; Increased security package requirements
Exit strategy/divestments on track
Cash flow vs profit
Directors’ valuation
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SMC 2013 I BUSINESS REVIEW I QF3 2013
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Bidding results BAM PPP
Prequalification process
2005 - 2013
Bidding process
2005 - 2013
17%
40%
60%
83%
Bidding
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Not prequalified
Won
Lost
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Royal BAM Group support
Strategic agenda 2013-2015


Operational improvement
Targeted growth initiatives




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services
multi-disciplinary projects
international niche markets
Solid financial strategy
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External Financing
Banking Market


Long term bank debt availability is increasing
Many of the banks active in the market remain keen to support BAM
Alternative sources of debt continue to be developed



Institutional investors have differing structures with or without short term bank
debt, with or without rating requirement, fixed rate or hedged, etc.
EIB bond enhancement programme ongoing but not yet established
EIB support through structured finance continuing
Security requirements are becoming more demanding

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In particular level of LC required to underpin EPC/CJV. Importance of BAM’s
capital ratio
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SMC 2013 I BUSINESS REVIEW I QF3 2013
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BAM PPP divestment program
Existing
New
(Road) N33, NL
(J) High Court, NL
(E) Irish Schools 3, Ire
(Road)N11/N7, Ire
(J)Dendermonde Prison, Bel
(J)Beveren Prison, Bel
(Road) A9, Ger
(Road)A59, NL
(Road)A12 Motorway, NL
(E)Somerset BSF, UK
(E)Bromsgrove Schools, UK
(E)Solihull Schools, UK
(E)West Dunbartonshire Schools, UK
(Road)A8 Motorway, Ger
(J)Burgdorf Prison, Swit
(E)Camden BSF, UK
(J)Bremervoerde Prison, Ger
(Rail)Liefkenshoek Rail Tunnel, Bel
(J)Schiphol Justice Centre, NL
Old
(E)Peacehaven Schools, UK
(J)Derby Police HQ, UK
(J)Cheshire Police HQ, UK
(H)Wharfedale Hospital, UK
(H)East Ayrshire Hospital, UK
(Road)N31, NL
(Rail)HSL Infraspeed, NL
(G)Ghent Student Accomodation, Bel
(G)Potsdam Parliament Building, Ger
(Road)M1 Dundalk Bypass, Ire
(Road)M7/M8 Portlaoise, Ire
(Road)N25 Waterford Bypass, Ire
(E)Bristol Schools, UK
(E)Crawley Schools, UK
(E)Dalkeith Schools, UK
(E)East Renfrewshire Schools, UK
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Profit vs Cash flow
Profit & Loss
Turnover
Project results
Bid management
Operational management
Central support
Asset management
Others
Profit before tax
Tax and minority interest
Net profit
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≈
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Cash flow
From projects
From CTC
From asset management
Cash flow from/to parent
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Directors’ Valuation Reported
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Benefits to Royal BAM Group
Access to pipeline of European PPP projects
Short term construction revenues and profit
Short, medium and long term investment returns
Medium and long term maintenance revenues and profit
Multi disciplinarily and whole life projects
Market dominated by large European Contractors
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01 I INTRODUCTION TO BAM PPP
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Thank you
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