This presentation was made by Nathan Flynn, Director of Infrastructure Investment Banking Department at William Blair & Company at the ironically named conference, "Beyond Parking Meters: The Future of Public-Private Partnerships in Illinois."
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Presentation by Willaim Blair at Privatization Conference
1. March 14, 2012
The Civic Federation and
The Federal Reserve Bank of Chicago
Beyond Parking Meters: the Future of
Public-Private Partnerships in Illinois
3. Availability Payment Structures - Overview
An Availability Payment combines the design, construction, financing,
operation and maintenance of an asset into a single agreement and
payment stream funded by a payment from a governmental entity
Often utilized for “social infrastructure” or assets that generate no revenue
Can be utilized for assets that produce revenue when the governmental
entity does not want to give up revenue control of the asset
40
Operating Cost Profile
30 Capital Costs
$ 20
Operating Costs
10
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Years
1
4. Availability Payment Structures - Valuation Analysis
Value for Money = Traditional
Cost – P3 Cost
Net Present Value Cost
Potential cost impacts of P3
Procurement
Transferred Value for Money
Risks
Financing
Retained Retained
Life Cycle Costs
Risks Risks
Operating Efficiencies Capital Capital
Transferred Risks
Expenses Expenses
Operating & Capital
Expenditures
State of Good Repair
Operating Operating
Retained Risks
Expenses Expenses
Policy
Regulatory
Traditional Financing P3 Procurement
2
5. Revenue Monetization Structures - Overview
A Revenue Monetization combines the design, construction, financing,
operation and maintenance of an asset into a single agreement with a
payment stream funded from asset revenues
Revenue-Sharing
Augmented availability payments
Generally speaking, the governmental entity agrees to a specific set of
revenue terms
60
Net Operating Profile
Gross Operating
50
Net Operating Income Income
40
$ 30 Capital Costs
20
Operating Costs
10
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Years
3
6. Revenue Monetization Structures – Valuation Analysis
Asset valuation, in its most simple form, is the net preset value of asset cash
flows
Operating Expenses
Capital Expenses
Revenue
Value for Money analysis of a revenue monetization is similar to an Availibity
Structure analysis with the addition of both asset revenue and transferred
revenue risks
The reserve price of an asset monetization should reflect the risk-adjusted
value of the asset
William Blair utilizes a multi-variable analysis to produce a range of valuation
outcomes
By virtue of a competitive procurement process, the winning bidder will
often be the one with the most optimistic/aggressive valuation
assumptions
4