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Definitions & Background
P3 Markets – Global & Canadian
Canada’s Infrastructure Deficit
P3 Policy Debate and Drivers
Why the debate matters
P3 Policy Framework
P3 Case Study Design & Methodology
Conclusion & Discussion
Transportation Infrastructure
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Roads
Bridges
Rail systems
Airports
Seaports
Research Focus – Edmonton Ring Roads
Early history of Public-Private Collaborations
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British Trusts – 1830s
British Roads & Turn Pikes
American Turn Pikes
French Concessions
Others
Research Focus – Edmonton Ring Roads
What are P3s (UK: PFIs, Europe/Australia: PPP)
“A co-operative venture between the public and private
sectors, built on the expertise of each partner that best
meets clearly defined needs through the appropriate
allocation of resources, risks, and rewards.”
Source: Canadian Council for PPP – http://www.pppcouncil.ca April 24, 2012.
Background to P3 Policy
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Originated in the early 1990s in Europe
UK’s Conservative Government - first to adopt P3s
P3s now popular in the UK, EU, Australia, & Asia
Canadian and US P3s are growing – number & value
Global Market Share – Major P3 Countries by Value
UK
16%
Others
28%
Spain
11%
Portugal
9%
Mexico
3%
Spain
4%
Poland
5%
Brazil
4%
Egypt
2%
Greece
3%
UK
20%
Others
19%
US
5%
Canada
6%
Australia
9%
Mexico
4%
Portugal
7%
US
10%
France
8%
Australia
15%
India
7%
Canada
5%
Source: Infrastructure Journal, 2008 & 2009
EU P3 Market 2002-2010 by Value (EURO billion)
$35
$30
$25
$20
$15
$10
$5
$0
2002
2003
2004
2005
2006
Source: European PPP Expertise Center
2007
2008
2009
2010
P3 Market Update (2010)
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UK continues to lead the P3 market
Globally there are 3,300 P3 projects valued at $1.54T*
Transportation P3s make up 1,867 or $712B (57%:46%)
P3s are now 10-20% of Canada’s infrastructure expense**
AB has 6 P3s – 3 completed, 1 On-going, 2 Approved***
[6 Transportation - Edmonton & Calgary Ring roads; 2 Education - ASAP 1 & 2. ]
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Investors are attracted by the return on investment
Source:
* Public Works Financing, October 2010, Vol. 253.
**Conference Board of Canada, December, 2010 Report
***Government of Alberta, Budget 2011
Canada’s Infrastructure Deficit
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Evidence suggests an ageing infrastructure
Life expectancy of 80% of Canadian infrastructure is exhausted*
TD Bank Economics estimates C$50-125B needed (2004)
Canadian Council for PPP estimates C$350-400B needed (2009)
Proposed infrastructure deficit bridging models:
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Devolution of tax authority
Adoption of a “User pay” model
Partnership with the private sector
* Project Finance Journal, September, 2010
Gross Government investment in Infrastructure/Utilities Sector - % of GDP
16%
14%
14%
12%
1970
12%
11%
11%
10%
10%
8%
6%
7%
6%
5%
7%
6%
5%
6%
5%
7%
1980
7%
6%
5%
5%
4%
8%
7%
5%
4%
6%
5%
1997
2%
0%
Canada
USA
UK
France
Source: Vancouver Board of Trade
Germany
1990
Australia
The P3 Policy Debate: Pro – P3
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P3s frees up government to focus on what it does best
Better performance – on-budget and on-time
Leads to improved care of public assets – whole life cycle
approach (construction/maintenance/retirement)
Maintain service quality through innovation
Risk is transferred to private sector partners as applicable
Non-financial benefits from time savings and other
efficiencies
The P3 Policy Debate: Pro – Conventional Procurement
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P3s represent another name for privatization
P3s are more expensive than traditional procurement
P3s are a way for governments to avoid reporting debt
P3s are weak in accountability and transparency (Governance)
P3s lead to public sector job losses and lower benefits
Private partners sacrifice quality to maximize profits
P3 vs. Conventional Procurement - Features
P3s
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Emphasize partnership in asset
acquisition & maintenance
More private capital engaged
Risk is shared with the private sector
Adopts a whole-of-life cycle
Mainly delivers on-time & on-budget
Taxpayers purchase a bundle of
services
Traditional (Conventional)
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Fragmented arrangements
Less innovation & competition
Prone to cost and time over-runs
Public borrowing for new assets
Taxpayers purchase assets
Inefficient procurement process
Has several players sometimes
with conflicting interests
P3 Policy Drivers
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Demand by citizens for improved public services
Need to sustain economic growth and productivity
Limited growth in public sector revenues
Private sector demonstration of superior performance
Attractive budget and financial statement impact
Why P3 Policy Debate Matters
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P3s are risky & uncertain – life span of 20-30 years
P3s could increase debt, taxes & limit competitiveness
(lower economic growth/standard of living)
P3s could spark economic growth and higher standard of
living
Bandwagon effect is taking hold among governments
Alberta’s P3 cash commitments is substantial ($6B - 2011)*
*Source: Government of Alberta, 2010-11 Annual Report
Current P3 Policy Framework
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Government’s commitment is critical
P3 financing strategies – Equity vs. Debt
Comprehensive project risk identification and
allocation
Concession selection and transparency
My Proposed P3 Policy Framework/Model
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Government’s commitment is critical
P3 financing strategy – Equity vs. Debt
Comprehensive risk identification and allocation
Concession selection and transparency
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**Governance and Community Engagement
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Case Study : Design Approach
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Focus on the Edmonton Ring Roads
3-4 cases – a mix of both policies
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South West Edmonton – Conventional Procurement ($600m)
South East Edmonton – P3 Procurement ($495m)
North West Edmonton – P3 Procurement ($1.42b)
North East Edmonton – P3 Procurement ($650m) est.
Theoretical Approaches
 Investment
 Agency
theory
theory
 Transaction
cost theory
Conclusion & Discussion
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P3s are growing at a rapid rate in almost every region,
and Canada is now a major player
Governments are attracted by the promise of P3s
(deliver a project today @ minimal cost to current taxpayers)
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P3s are not suitable for every asset/service category
P3s need careful policy analysis given their long term
implications for all citizens