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Saskatchewan Chamber of Commerce P3 Summit

Saskatchewan Chamber of Commerce P3 Summit. Innovation in Financing Infrastructure Projects September 9, 2014. presented by Aon Construction and Infrastructure Services. Agenda. Canadian Public, Private, Partnerships (P3) Success Factors Factors Fueling Innovation in P3 Financing

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Saskatchewan Chamber of Commerce P3 Summit

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  1. Saskatchewan Chamber of CommerceP3 Summit Innovation in Financing Infrastructure Projects September 9, 2014 presented byAon Construction and Infrastructure Services

  2. Agenda • Canadian Public, Private, Partnerships (P3) Success Factors • Factors Fueling Innovation in P3 Financing • Public Sector Financing Innovation in P3s • Private Sector Financing Innovation in P3s • Typical Financing Solutions – Canadian P3s • Typical Credit Provisions between Lender and Project Co • Current Innovation in Performance Security • How to Creatively Finance Infrastructure Projects

  3. Canadian P3 Success Factors • Strong and Steady P3 Pipeline • Mature Market with 214 projects in various stages (completed, in operation, under construction, open RFP, open RFQ, etc.) source: C2P3 August 2014 • No one model fits all: • Delivery models include BF / DBF / BFM / DBFM / DBFOM • P3 market is broad and deep in the players it attracts • Risks allocated to the party best suited to take on the risk resulting in VFM • Payments made based on performance resulting in on-time & within budget • Continuous P3 financing innovation over the years

  4. Factors Fueling Innovation in P3 Financing • Credit and liquidity Crisis • Competition within the Financial Markets • Introduction of European Lenders • Size of Transaction

  5. Public Sector Financing Innovation in P3s • Increase in Substantial Completion Payment (SCP) • Credit Spread Benchmarking Process • Collapse of Financial Close and Commercial Close • Introduction of Milestone Payments in Ontario • EDC backed LC

  6. Private Sector Financing Innovation in P3s • Broadly Distributed Long Amortizing Bond Solution • Narrowly Distributed Private Placement Bond (Short and Long) • Broadly Distributed Bullet Bond (Short and Long) • Structured Deposit Notes (SDNs) • Hybrid Financing Solutions • Mini Perm Solutions & Refinancing • Alternative Assets posted in lieu of Letter of Credit • Modeling life cycle/other components of the monthly service payment for most cost effective bid

  7. Typical Financing Solutions – Canadian P3s • Short Term (Term 3 to 6 years): • Bank Syndicates (primarily dominated by Canadian banks + two Japanese banks) • Broadly distributed Bullet Bonds (Pension Funds, LifeCos, Asset Managers, etc.) • Narrowly distributed Private Placement Bonds (LifeCos ) • Medium Term (Term 7 to 10 years): • Narrowly distributed Private Placement Bonds • Bank Syndicates • Long Term (Avg. life - 23 to 30 years and Term – 33 to 36 years): • Broadly distributed Amortizing Bonds (Pension Funds, LifeCos, Asset Managers, etc.) • Broadly distributed Bullet Bonds (Pension Funds) • Narrowly distributed Private Placement Bonds • Long Term Bank Financing (European Bank Mini Perm)

  8. Typical Credit Provisions between Lenders & Project Co

  9. Current Innovation in Performance Security Liquid Surety / P3 Bonds • Demand Bond • Demand Bond plus Standard Performance Bond • Convertible Surety Bond • Loss Advance P3 Bond Non-Bank Letter of Credit Backstop O&M Performance Bond (standard and liquid surety) Liquidity in key insurance covers (property, professional and pollution)

  10. How to Creatively Finance Infrastructure Projects • Choose a Financial Advisor with thorough knowledge and experience with P3s, the various financing solutions available in Canada, and relationships with various P3 debt and equity investors, and rating agencies; • Ensure your Financial Advisor competes the various financing solutions overall (and performance security options within) to find the most cost effective solution with a high degree of deliverability; • Choose Insurance Advisor/Broker with thorough knowledge and experience with P3s, performance security options, rating agency criteria, and strong relationships with the insurance/surety markets and other P3 players; • Consider all available performance security options to minimize overall cost.

  11. APPENDIX: Aon Construction Services Group - Canadian Credentials • Broker/Advisor to 2,400 Canadian construction clients of all sizes • Broker/Advisor to over 50% of the Top 100 Canadian Projects • Broker/Advisor to over 84% of all Canadian P3 Projects • Long time relationships with P3 participants (Contractor, Debt, Equity, Insurance/Surety markets, Rating Agencies, Financial Advisors) • 25% of construction insurance in Canada is brokered by Aon • 97% of all Canadian Contractor Default Insurance premium placed • 23% -26% of all surety bonds in Canada are brokered by Aon (last 7 years)

  12. Contacts Michael Sali, B.Admin., CAIB  |  Vice President Construction Services Group  |  Surety 2103 – 11th Avenue, Suite 800  |  Regina, Saskatchewan S4P 3Z8 t +1.306.569.6704  |  m +1.306.502.6758  |  f +1.306.359.0387 michael.sali@aon.ca  |  aon.ca Aon Reed Stenhouse Inc. Kent Peters   |  Senior Vice President - National Director Surety Aon Risk Solutions  |  Construction Services Group 20 Bay Street  |  Toronto, Ontario M5J 2N9 t +1.416.868.5996  | m +1.416.419.6475 kent.peters@aon.ca  |  aon.ca Aon Reed Stenhouse Inc. Jim Cahill  |  Senior Vice President Aon Risk Solutions  |  Construction Services Group 20 Bay Street   |  Toronto, ON   M5J 2N9 t +1.416.868.2409  |  m +1.647.534.6526 james.cahill@aon.ca  |  aon.ca Aon Reed Stenhouse Inc.

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