Grand Prairie Irrigation Project Public-Private-Partnership Request for Information No. P

Transcription

1 Grand Prairie Irrigation Project Public-Private-Partnership Request for Information No. P Industry Day June 29, 2016 Little Rock, Arkansas Please note that in the event of any conflict between the content of this presentation and the RFI, the terms and conditions of the RFI shall prevail.

2 Grand Prairie Demo Project Initially authorized in 1950, the Grand Prairie Region Demonstration Project aims to provide water security for drinking water, industrial and agricultural use, as well as address depletion and resiliency of the alluvial and Sparta aquifers which underlie a seven state region. Key project features include a major pumping station on the White River; conveyance channels to deliver to water depleted areas; flood management; and other environmental restoration and conservation measures. Key Public Sponsors: United States Army Corps of Engineers (USACE) is Federal sponsor. The State of Arkansas, acting through its Arkansas Natural Resources Commission (ANRC), is the non-federal sponsor. White River Irrigation District (WRID) is a legal entity created for the purpose of operating and maintaining the Project upon completion. Grand Prairie Area Demo Project Federal Investment-to-date Non-Federal Spend-to-date Total investment-to-date Project Cost Estimates Infra and Distribution System On-Farm Work Sunk PED Est. Total Project Cost Estimated completion date (at current funding levels) $137 million $75 million $212 million $433.5 million $106 million $11.5 million $551 million 34.5 years 2

3 Key Transaction Objectives PRIMARY OBJECTIVES OF P3 APPROACH Accelerate delivery to advance public benefits; Provide greater cost and schedule certainty; Leverage private sector innovation; Ensure asset life-cycle management; Minimize cost impact on end-users; Optimize risk allocation; and Maximize public benefits by Incentivizing innovative asset uses and monetization. PRIMARY OBJECTIVES OF RFI PROCESS Assess market interest in Project (and pipeline); Solicit industry Input: Transaction structure; Risk identification and mitigation; Roles and responsibilities; and Procurement process. Determine next steps. 3

4 Anticipated Transaction Structure Contracting Authority: WRID (in cooperation with ANRC and USACE) Transaction Structure: Design-Build- Finance-Operate-Maintain (DBFOM) : Design-Build Criteria Financing O&M (including existing assets) Scope of Services: Private Partner to complete off-farm system and provide for its continual operation at prescribed service levels over term of contract. Water rights: ANRC issued non-riparian permit (560,000 acre-feet per year) Payment Mechanism: Water usage revenues / ancillary revenues Water pricing and adjustments: Bid criteria / regulation by contract Anticipated Term: 50+ years Asset ownership: With public sponsors Anticipated Transaction Structure 4

5 Water Usage Project boundary contemplates approximately 300,000 acres. Within footprint, approximately 250,000 acres used for agriculture, with some 95% of those acres irrigated annually. Farming not sustainable without irrigation, which is currently deriving from a combination of on-farm capture and aquifer extraction (depletion of aquifer increasing costs). Currently no mandated water usage policy in place On-farm capture and storage systems are estimated to deliver up to 35% of these needs, at present, farmers are forced to pump from aquifers to meet remaining water needs. Project replaces need to drawfrom aquifer, providing sustainable water sources at a more affordable and predictable price. Alternative usage also possible (i.e., water fowl, etc.) Crop Acreage Estimated Water needs (acre-feet) Rice 85, ,500 Corn 25,000 50,000 Soybeans 140, , , ,500 5

6 Key Risks Key risk elements include, amongst others: 1. Traditional project risks Schedule Cost Existing assets / latent defects Operations 2. Water usage and demand risk Affordability Usage Competition from alternatives On-farm system readiness Other 3. Governance and oversight 4. Managed risks Environmental Legal Easements RISK ALLOCATION AND MITIGATION: 1. Standard project risks to be allocated to private partner 2. Consideration being given to demand risk mitigation strategies: 1. Take or pay arrangements 2. MRG 3. Others 6

7 RFI Process Request for Information RFI Appendix A I. GENERAL INFORMATION IV. SCHEDULE VIII. PROCUREMENT Description of Respondent II. INNOVATIVE PROJECT DELIVERY Ideas to optimize delivery using alternative methods, such as P3: 1. Is Project suitable as P3? 2. Payment structure? 3. Required guarantees to mitigate revenue risk? 4. Scope of O&M? 5. Optimal contract term? 6. Potential suitability of taxexempt structures or the use of tax exempt financing, such as Private Activity Bonds? 7. What do you deem the appropriate roles of the State and USACE for this Project? III. SCOPE& PHASING 1. Project elements 2. Phasing 3. How to address transfer risks associated with existing infrastructure? 1. Critical path 2. Duration V. DESIGN 1. Opportunities to employ innovation for cost and schedule efficiencies 2. Use of alternative standards VI. ANCILLARY REVENUES 1. Opportunities for ancillary revenues generated from innovative uses of Project assets 2. Rights needed to enable Private Partner to maximize ancillary revenues? VII. FINANCING 1. Availability of private sector debt and/or equity 2. Guarantees or risk mitigation strategies 3. How to address financial risk? 4. Financial close 1. Comments on potential procurement process. 2. Time period for preparing statement of qualification and proposals 3. Bid validity period IX. RISK 1. Optimal risk sharing 2. Identification of key project risks and proposals for addressing those risks X. OTHER 1. Any specific suggestions and refinements to the allocation of responsibilities 2. Any other comments or suggestions regarding the Project, transaction structure and/or anticipated process. 7

8 Schedule & Process Should project sponsors pursue a P3, a dualstage procurement will be implemented to select Private Partner; Anticipating the short-listing of 3 teams; Accelerated procurement timeline with simplified submission criteria; Not currently envisioning use of a stipend Ambitious timeline subject to Industry feedback. Desire is to simplify process and expedite contracting, while likewise ensuring transparency in decision making and providing appropriate time for preparing and evaluating proposals. Anticipated Transaction Timeline Milestone Date Industry Forum June 29, 2016 Submission of Responses July 11, 2016 Publish RFQ August 2016 Short-List Announced October 2016 Launch RFP December 2016 Contract Award / Commercial Close March/April 2017 Financial Close 3rd Quarter

9 Wrap-Up Project is critically important to Federal and non-federal sponsors: Provides a reliable, sustainable, and affordable source of non-potable water necessary for agriculture; Enhances water security; Boosts food security; and Supports economic growth. Grand Prairie Irrigation P3 is the first of many irrigation and water supply projects being considered for P3/P4 delivery in Arkansas and across the nation Project sponsors recognize that the Grand Prairie Irrigation Project entails demand risk and is working to identify the appropriate and credit-worthy risk mitigation mechanisms. Expectation is that industry will help inform this decision (for this and future projects) New U.S. P3 asset class presents both challenges and opportunities. Sponsors hope that experienced design-build, O&M, and infrastructure finance firms will provide industry input and suggestions to help ensure a successful and well-balanced transaction structure. 9