New Brunswick P3s Presentation to Northern Border Finance Conference Darrell Stephenson

1. New Brunswick P3s Presentation to Northern Border Finance Conference Darrell Stephenson Stewart McKelvey Saint John, NB

2. Scope of the Projects

3. Fredericton-Moncton Highway Project204 kmOpened in 2001 New Brunswick Maine

4. Scope – Fredericton-Moncton Highway Project (FMHP) • Implemented with a P3 model • Agreements signed in January 1998 • Highway opened to traffic October 2001 • Guaranteed Maximum Price $579 Million • 204 kilometres of 4-lane highway • Developer responsible to operate, maintain and manage the highway until 2027 (average annual cost - $9 Million 1997) • Progress Payments Made Against Sign-Off By Independent Engineer • Financing: • Lease based debt • Toll based debt to be repaid by user tolls • User tolls replaced by shadow tolls

5. Trans-Canada Highway Project275 kmTo be opened November 2007 Fredericton-Moncton Highway Project204 kmOpened in 2001 New Brunswick Maine

6. 98 km built by the Developer • 47 km built by NBDOT • 130 km existing 4-lane highway Scope – Trans-Canada Highway Project (TCHP) • Implemented With a P3 Model • Agreements Signed February 2005 • Highway to be Opened by October 2007 • Guaranteed Maximum Price $543 Million • 275 km of highway No payments will be made to the Developer until the highway is opened to traffic Largest P3 Project Undertaken In Canada With No Payment Until Completion

7. Scope – TCHP (Continued…) • The Developer to Operate, Maintain and Rehabilitate all 275 km of highway until 2033 (annual fixed cost - $19 Million) • OMR work for 130 km of existing sections commenced June 1, 2005 • Financing: • By the Provision of a Debenture for the Guaranteed Maximum Price to the Developer • Developer had the Debenture S&P Rated and Sold it to Canadian Institutional Investors in consideration of Progress Advances during the construction phase • Financing Structure Won Award for Innovation and Excellence in 2006 From Canadian Council for Public Private Partnerships

8. Trans-Canada Highway Project To be opened November 2007 Fredericton-Moncton Highway Project Opened in 2001 Fundy Islands Ferry Services Project Delivery of Vessels 2009 - 2011 New Brunswick Maine

9. Scope – Fundy Islands Ferry Services Project (FIFSP) • Design-Build • Design, construct and supply three new vessels • Grand Manan – 101 AEU, 400 passengers (2009 delivery) • Deer Island – 24 AEU, 99 passengers (2010 delivery) • White Head – 12 AEU, 84 passengers (2011 delivery) • Operations For a period of 16 years: • Provide the Grand Manan, White Head and Deer Island Ferry Services • Maintain and refit the Vessels (includes both new and existing Vessels) • Operate and perform routine maintenance to Ferry Terminals • Collect passenger and vehicle fares for the Grand Manan Ferry Service set by the Province

10. Key Contractual Considerations

11. Key Contractual Considerations Contractual Considerations: • As Is, Where Is • Developer/Operator Should Accept Responsibility for Construction and Operation During the Contract Period for the Bid Price, save for Scope Changes • Identify Risks Which Should not be Moved to the Developer/Operator, but for which a Scope Change is allowed, e.g.: • Changes in Technical Standards • Failure of the Governmental Authority to perform an obligation • Unknown Contaminated Sites/Archaeological Sites/Sulphide Bearing Rock • Inflation During Operations Period • Identify Impact of Scope Changes/Force Majeure (e.g.: occurrence before a specified date does not move completion date)

12. Key Contractual Considerations (Continued…) • Clear and Expedited Time Frames for Resolution of Dispute regarding Non-Conformance, Scope Change, Force Majeure, etc. – e.g.: if the Developer/Operator does not challenge the determination of the Governmental Authority they should be deemed to have accepted its determination • Performance Based Contracts are More Work to Prepare, but Easier to Administer (ie: develop Key Performance Indicators and associated Payment Adjustments) • Bonding/Insurance Programs which Afford Reasonable Protection for Risks you Wish to Transfer to the Developer • Reasonable Protection for Lenders • Allow Proponents an Opportunity to Comment on Legal Agreements in the RFP Process

13. Lessons Learned FMHP to TCHP

14. Lessons Learned and Solutions between FMHP and TCHP FMHP TCHP Solutions • ISO Compliant Systems ISO Certification Required • Quality Management Systems Integrated Management Systems • Determination of Scope Changes – Specifically DefinedMateriality Based in Agreements • Transfer of NBDOT Built Sections Defined Time Frame - Operator Audit Rights • Arbitration Dispute Resolution Board for DB Work, Arbitration for OMR

15. Lessons Learned and Solutions FMHP TCHP Solutions • Progress Payments Completion Payment • Auditing by Independent Agent No Independent Agent - Audit by Province • Variable Operations Payments Fixed Operations Payments • Renegotiate OMM Price - Year 20 Price Bid for Term of Project • Conformance Based Performance Based - Key Performance Indicators, Payment Adjustments and Asset Management • Stand Alone Hand Back Standards Tied to KPIs and 3rd Party Inspection Added

16. Financial Models TCHP and FIFSP

17. Financial Models – TCHP and FIFSP • For TCHP, for DB Component • Completion Payment Model • Full payment after construction • Extended Repayment Model • Payment over 25 years after construction • Lowest NPV Offer Selected Model • Common Elements • Guaranteed Maximum Price for construction • OMR Payments • Term of OMR period – to June 30, 2033

18. Financial Models – TCHP and FIFSP (Continued…) • For FIFSP, Proponents Have the Option to Submit Under Two Models • Completion Payment Model • Payment for Each Vessel on Delivery • Extended Repayment Model • Payment for the Deer Island and White Head Vessels on Delivery • Proponent Retains Title to the Grand Manan Vessel and NBDOT Pays an Availability Fee over the Term • Proponents Bid Option Price for which Province has the Right to Purchase the Grand Manan Vessel at the end of the Term • Lowest NPV Offer Selected Model • Option Price Discounted 5% for Purposes of NPV Comparison

19. Forecast Demand of OMM for FMHP Operator’s maintenance schedule is driven by forecast budget Equal Annual Payments for OMR for TCHP Full responsibility on Operator to manage maintenance work and cash flow Comparison of FMHP and TCHP Annual Payments(Operations, Maintenance and Rehabilitation)

20. Risk Transfer

21. Key Risk Transfer X X X X X X X X X X X X X X

22. Business Models

23. Province NBHC 100% Project Company Project Agreements Developer/Operator Organizational Structure – Highway Projects

24. Province Project Agreements Developer/Operator Organizational Structure – Ferry Project

25. Measurements of Success • Guaranteed Delivery Date • Guaranteed Maximum Price • Key risks borne by the Developer • Environmentally responsible delivery • Safe workplace • Safe, reliable, high quality and economic service for users • Economic and Industrial benefits and Aboriginal Inclusion Plan • All applicable standards and guidelines met or exceeded • Development of expertise • Technology transfer

26. CONCLUSION P3s have delivered for New Brunswick: • Accelerated delivery • Innovation • Value for money • Resident expertise • Contractually assured service delivery

27. Contact Information • Trans-Canada Highway Project Co. Ltd. • 444-2007 telephone • 457-7332 fax • TCH web site at www.gnb.ca • keyword: Trans-Canada Highway