PPP Law

The Public-Private
The Public-Private
Partnership Law Review
Partnership
Law Review
The Public-Private Partnership Law Review
Reproduced with permission from Law Business Research Ltd.
Second Edition
This article was first published in The Public-Private Partnership Law Review – Edition 2
(published in March 2016 – Editors
editors Bruno Werneck and Mário Saadi)
BrunoForWerneck andplease
further information Mário
email Saadi
Nick.Barette@lbresearch.com
Law Business Research

The Public-Private
Partnership Law Review
The Public-Private Partnership Law Review

Reproduced with permission from Law Business Research Ltd.
This article was first published in The Public-Private Partnership Law Review – Edition 2
(published in March 2016 – editors Bruno Werneck and Mário Saadi)
For further information please email

Nick.Barette@lbresearch.com
The Public-Private
Partnership Law
Review
Second Edition
Editors
Bruno Werneck and Mário Saadi
Law Business Research Ltd

PUBLISHER
Gideon Roberton
SENIOR BUSINESS DEVELOPMENT MANAGER
Nick Barette
SENIOR ACCOUNT MANAGERS
Thomas Lee, Felicity Bown, Joel Woods
ACCOUNT MANAGER
Jessica Parsons
MARKETING COORDINATOR
Rebecca Mogridge
EDITORIAL ASSISTANT
Sophie Arkell
HEAD OF PRODUCTION
Adam Myers
PRODUCTION EDITOR
Janina Godowska
SUBEDITOR
Gina Mete
CHIEF EXECUTIVE OFFICER
Paul Howarth
Published in the United Kingdom
by Law Business Research Ltd, London
87 Lancaster Road, London, W11 1QQ, UK
© 2016 Law Business Research Ltd
www.TheLawReviews.co.uk
No photocopying: copyright licences do not apply.
The information provided in this publication is general and may not apply in a specific
situation, nor does it necessarily represent the views of authors’ firms or their clients.
Legal advice should always be sought before taking any legal action based on the
information provided. The publishers accept no responsibility for any acts or omissions
contained herein. Although the information provided is accurate as of March 2016, be
advised that this is a developing area.
Enquiries concerning reproduction should be sent to Law Business Research, at the
address above. Enquiries concerning editorial content should be directed
to the Publisher – gideon.roberton@lbresearch.com
ISBN 978-1-909830-87-5
Printed in Great Britain by
Encompass Print Solutions, Derbyshire
Tel: 0844 2480 112
THE LAW REVIEWS
THE MERGERS AND ACQUISITIONS REVIEW
THE RESTRUCTURING REVIEW
THE PRIVATE COMPETITION ENFORCEMENT REVIEW
THE DISPUTE RESOLUTION REVIEW
THE EMPLOYMENT LAW REVIEW
THE PUBLIC COMPETITION ENFORCEMENT REVIEW
THE BANKING REGULATION REVIEW
THE INTERNATIONAL ARBITRATION REVIEW
THE MERGER CONTROL REVIEW
THE TECHNOLOGY, MEDIA AND

TELECOMMUNICATIONS REVIEW
THE INWARD INVESTMENT AND

INTERNATIONAL TAXATION REVIEW
THE CORPORATE GOVERNANCE REVIEW
THE CORPORATE IMMIGRATION REVIEW
THE INTERNATIONAL INVESTIGATIONS REVIEW
THE PROJECTS AND CONSTRUCTION REVIEW
THE INTERNATIONAL CAPITAL MARKETS REVIEW
THE REAL ESTATE LAW REVIEW
THE PRIVATE EQUITY REVIEW
THE ENERGY REGULATION AND MARKETS REVIEW
THE INTELLECTUAL PROPERTY REVIEW
THE ASSET MANAGEMENT REVIEW
THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW
THE MINING LAW REVIEW

THE EXECUTIVE REMUNERATION REVIEW
THE ANTI-BRIBERY AND ANTI-CORRUPTION REVIEW
THE CARTELS AND LENIENCY REVIEW
THE TAX DISPUTES AND LITIGATION REVIEW
THE LIFE SCIENCES LAW REVIEW
THE INSURANCE AND REINSURANCE LAW REVIEW
THE GOVERNMENT PROCUREMENT REVIEW
THE DOMINANCE AND MONOPOLIES REVIEW
THE AVIATION LAW REVIEW
THE FOREIGN INVESTMENT REGULATION REVIEW
THE ASSET TRACING AND RECOVERY REVIEW
THE INTERNATIONAL INSOLVENCY REVIEW
THE OIL AND GAS LAW REVIEW
THE FRANCHISE LAW REVIEW
THE PRODUCT REGULATION AND LIABILITY REVIEW
THE SHIPPING LAW REVIEW
THE ACQUISITION AND LEVERAGED FINANCE REVIEW
THE PRIVACY, DATA PROTECTION AND CYBERSECURITY LAW REVIEW
THE PUBLIC-PRIVATE PARTNERSHIP LAW REVIEW
THE TRANSPORT FINANCE LAW REVIEW
THE SECURITIES LITIGATION REVIEW
THE LENDING AND SECURED FINANCE REVIEW
THE INTERNATIONAL TRADE LAW REVIEW
THE SPORTS LAW REVIEW
www.TheLawReviews.co.uk
ACKNOWLEDGEMENTS
The publisher acknowledges and thanks the following law firms for their learned
assistance throughout the preparation of this book:
AIRD & BERLIS LLP
ALLENS
G ELIAS & CO
GRATA LAW FIRM
HERBERT SMITH FREEHILLS LLP
KILPATRICK TOWNSEND & STOCKTON LLP
LETT LAW FIRM P/S
LIEDEKERKE
M & M BOMCHIL
MAPLES AND CALDER
MATTOS FILHO, VEIGA FILHO, MARREY JR E QUIROGA ADVOGADOS
MORI HAMADA & MATSUMOTO
PARQUET & ASOCIADOS
ROSSELLÓ ABOGADOS
SETH DUA & ASSOCIATES
SYCIP SALAZAR HERNANDEZ & GATMAITAN
TACIANA PEÃO LOPES E ADVOGADOS ASSOCIADOS
i
Acknowledgements
VELMA LAW
VIEIRA DE ALMEIDA & ASSOCIADOS,

SOCIEDADE DE ADVOGADOS, RL
WHITE & CASE
ZHONG LUN LAW FIRM
ii
CONTENTS
Editor’s Preface ��vii

Chapter 1 ARGENTINA�� 1
María Inés Corrá and Leopoldo Silva Rossi
Chapter 2 AUSTRALIA�� 10
David Donnelly, Nicholas Ng and Timothy Leschke
Chapter 3 BELGIUM�� 20
Christel Van den Eynden, Frank Judo, Aurélien Vandeburie and
Marjolein Beynsberger
Chapter 4 BRAZIL�� 35
Chapter 5 CANADA�� 47
Douglas J S Younger, Heidi Visser, Patrick Oufi
Chapter 6 CHINA�� 64
Hui Sun
Chapter 7 DENMARK�� 78
Henrik Puggaard and Lene Lange
Chapter 8 FRANCE�� 90
François-Guilhem Vaissier, Hugues Martin-Sisteron and Anna Seniuta
Chapter 9 INDIA�� 110

Sunil Seth and Vasanth Rajasekaran
iii
Contents
Chapter 10 IRELAND�� 119

Mary Dunne and Fergal Ruane
Chapter 11 JAPAN�� 129

Masanori Sato, Shigeki Okatani and Yusuke Suehiro
Chapter 12 KAZAKHSTAN�� 144

Shaimerden Chikanayev
Chapter 13 MOZAMBIQUE�� 166

Taciana Peão Lopes
Chapter 14 NIGERIA�� 173

Fred Onuobia, Okechukwu J Okoro and Bibitayo Mimiko
Chapter 15 PARAGUAY�� 184

Javier Maria Parquet Villagra and Karin Basiliki Ioannidis Eder
Chapter 16 PERU�� 195

Miguel Sánchez-Moreno Cisneros and Pierre Nalvarte Salvatierra
Chapter 17 PHILIPPINES�� 206

Marievic G Ramos-Añonuevo and Arlene M Maneja
Chapter 18 PORTUGAL�� 218

Manuel Protásio and Frederico Quintela
Chapter 19 TANZANIA�� 229

Nicholas Zervos
Chapter 20 UNITED KINGDOM�� 238

Adrian Clough, David Wyles and Paul Butcher
Chapter 21 UNITED STATES�� 255

Robert H Edwards, Jr, Randall F Hafer, Mark J Riedy,
Benjamin P Deninger and Ariel I Oseasohn
iv
Contents
Appendix 1 ABOUT THE AUTHORS�� 281
Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS�� 299
v
EDITOR’S PREFACE
We are very pleased to present the second edition of The Public-Private Partnership
Law Review. Notwithstanding the existence of articles in various law reviews on topics
involving public-private partnerships (PPPs) and private finance initiatives (in areas such
as projects and construction, real estate, mergers, transfers of concessionaires’ corporate
control, special purpose vehicles and government procurement, to name a few), we
identified the need for a deeper understanding of the specifics of this topic in different
countries. The first edition of the book was an initial effort to fulfil this need.
Brazil marked the 10th year of the publication of its first Public-Private
Partnership Law (Federal Law No. 11,079/2004) in 2014. Our experience with this law
is still developing, especially in comparison with other countries where discussions on
PPP models and the need to attract private investment into large projects dates back to
the 1980s and 1990s.
This is the case for countries such as the United Kingdom, the United States
and Canada. PPPs have been used in the United States across a wide range of sectors
in various forms for more than 30 years. From 1986–2012, approximately 700 PPP
projects reached financial closure. The UK is widely known as one of the pioneers of
PPP model; Margaret Thatcher’s governments in the 1980s embarked on an extensive
privatisation programme of publicly owned utilities, including telecoms, gas, electricity,
water and waste, airports and railways. The Private Finance Initiative was launched in
the UK in 1992 aiming to boost design–build–finance–operate projects. Canada has
developed a sustained and robust market for the development of public infrastructure
using the PPP model. Since the 1990s PPP procurement has significantly expanded to
the extent that PPP projects are now procured in the federal, provincial and municipal
levels of government across that country.
On the other hand, in developing countries with similarities with Brazil, PPP
laws are more recent. Argentina was the first country in Latin America to enact a PPP
Law (Decree No. 1299/2000, ratified by Law No. 25,414/2000). The PPP Law was
designed to promote private investment in public infrastructure projects that could
not be afforded exclusively by the state, especially in the areas of health, education,
vii
Editor’s Preface
justice, transportation, construction of airport facilities, highways and investments in

local safety. In Mozambique, Law No. 15/2011 and Decree No. 16/2012 stipulated
the Public-Private Partnerships (PPP) Law and other related PPP regulations, which
establishes procedures for contracting, implementing and monitoring PPP projects. In
Paraguay, a regulation establishing the PPP regime has recently been enacted (Law No.
5102) to promote public infrastructure and the expansion and improvement of goods
and services provided by the state; this law has been in force since late 2013.
In view of the foregoing, we hope a comparative study covering practical aspects
and different perspectives on public-private partnership issues will become an important
tool for the strengthening of this model worldwide. We are certain this study will bring
about a better dissemination of best practices implemented by private professionals and
government authorities working on PPP projects around the globe.
With respect to Brazil, the experience evidenced abroad may lead to the
strengthening of this model in the country. In this preface, we call your attention to
one specific feature of the PPP law in Brazil – state guarantees. This feature permits
payment obligations undertaken by the public party in PPP agreements be guaranteed
by, among other mechanisms authorised by law: (1) a pledge of revenues; (2) creation
or use of special funds; (3) purchase of guarantee from insurance companies that are not
under public control; (4) guarantees granted by international organisations or financial
institutions not controlled by any government authority; or (5) guarantees by guarantor
funds or a state-owned company created especially for that purpose.
The state guarantee pursuant to PPP agreements is, without question, an important
innovation in administrative agreements in Brazil; it assures payment obligations by the
public partner and serves as a guarantee in the event of lawsuits and claims against the
government. This tool is one of the main factors distinguishing the legal regimen of PPP
agreements from ordinary administrative agreements or concessions, and is viewed as
crucial for the success of PPPs, especially from the private investors’ standpoint.
Nevertheless, the difficulty in implementing state guarantees on PPP projects has
been one of the main issues in the execution of new PPP projects in the country. This
point is made worse due to the history of government default in administrative contracts.
In other jurisdictions, however, state guarantees are not a rule. On the contrary,
unlike PPP projects in developing countries, government solvency has not historically
been a serious consideration. That is the case in countries such as Australia, Canada,
France, Ireland, Japan, the United Kingdom and the United States.
We expect that the consolidation of PPPs and the strengthening of the government
in Brazil may lead to a similar model, enabling private investments in areas where the
country lacks them most.
In the first edition, our contributors were drawn from the most renowned firms
working in the PPP field in their jurisdictions, including Argentina (M&M Bomchil),
Australia (Allens), Belgium (Liedekerke), Canada (Fasken Martineau), China (Jun
He Law Offices), France (White & Case), Ireland (Maples and Calder), Japan (Mori
Hamada & Matsumoto), Mozambique (TPLA), Paraguay (Parquet & Asociados),
Philippines (SyCip Salazar Hernandez & Gatmaitan), Turkey (Paksoy), the United
Kingdom (Herbert Smith Freehills) and the United States (Kilpatrick Townsend &
viii
Editor’s Preface
Stockton LLP). We would like to thank all of them and our new contributors for their
support in producing The Public-Private Partnership Law Review and in helping in the
collective construction of a broad study on the main aspects of PPP projects.
We strongly believe that PPPs are an important tool for generating investments
(and development) in infrastructure projects and creating efficiency not only in
infrastructure, but also in the provision of public services, such as education and health,
as well as public lighting services and prisons. PPPs are also an important means of
combating corruption, which is common in the old and inefficient model of direct state
procurement of projects.
We hope you enjoy this second edition of The Public-Private Partnership
Law Review and we sincerely hope that this book will consolidate a comprehensive
international guide to the anatomy of PPPs.
We also look forward to hearing your thoughts on this edition and particularly
your comments and suggestions for improving future editions of this work.

Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados
São Paulo
March 2016
ix
Chapter 21
UNITED STATES
Robert H Edwards Jr, Randall F Hafer, Mark J Riedy
Benjamin P Deninger and Ariel I Oseasohn1
I OVERVIEW
2015 was a very active year for Public-Private Partnerships (PPPs or P3) in the US
market. Several critical legal and regulatory changes were implemented, PPP activity
increased and, quite notably, the PPP mechanism was increasingly applied in new areas
including in support of clean energy and clean technology projects – a trend which is
expected to continue.
2015 witnessed a growing utilisation of the P3 model, as predicted in last year’s
edition of this chapter.2 This progression of growth manifested itself both in the number
of projects executed using the P3 scheme as well as in a widening of the types of projects
which are being funded through the P3 mechanism. High-tech projects propelled by
innovation (e.g., setting up nationwide public safety broadband network, erecting a
state-wide high-speed internet service), or precipitated by political developments in the
sphere of environmental protection (e.g., constructing a waste processing and alternative
energy producing facility) stood out within the 2015 P3-portfolio. Recent trends indicate
that these type of projects represent a growing application of the P3 model in fields
beyond the ‘traditional’ P3 scope (i.e., transportation projects such as highways, toll
roads and bridges, as well as construction of public facilities such as airports, hospitals,
1 Robert H Edwards Jr, and Mark J Riedy are partners and co-head the energy team, and
Ariel Oseasohn is a member of energy team. Randy F Hafer is senior partner and head of
the construction and infrastructure team, and Benjamin P Deninger is a member of the
construction and infrastructure team at Kilpatrick Townsend & Stockton LLP.
2 Robert H Edwards Jr, Randall F Hafer & Mark J Riedy, Chapter 15 – United States in 1 The
Public-Private Partnership Law Review 187 (Bruno Werneck & Mario Saadi ed., 2015).
255
United States
stadiums and convention centers3). It is anticipated that this trend will accelerate in
the foreseeable future as public infrastructure needs diversity and require both the
financial strength and practical experience of the private sector to complete. For example,
initiatives under the Obama Administration’s clean cities programmes designed to make
urban living safer and more enjoyable as well as the need for accelerated deployment of
electric vehicle charging infrastructure are examples of emerging 21st-century advanced
infrastructure requirements.
Among the most important fields to demonstrate increased use of the P3 model
is the clean energy field, a trend expected to accelerate. 2015 was a banner year for
legal and policy support for clean energy technologies to reduce greenhouse gas (GHG)
emissions. First, under the Omnibus Bill the production tax credits and investment tax
credits for renewable energy (wind, solar and other renewables) were extended for five
years.4 This is the first time in recent history in the US that the renewable energy industry
has the benefit of a stable tax policy for a period of five years. Second, pursuant to the
international climate agreement reached at the Paris Conference of Parties (COP21),
all party-countries have agreed to publicly outline the post-2020 climate actions they
intend to take, ultimately to be embodied in a new future international agreement.
These actions, known as each country’s Intended Nationally Determined Contributions
(INDCs), will largely determine whether the world will be successful at forming a path
toward a low-carbon, climate-resilient future. Moreover, they will create a long-term
incentive to increase investment in clean energy as the US seeks to meet its own INDCs.
Finally, the implementation of the Environmental Protection Agency’s Clean Power Plan
(CPP) continues to move forward (although its implementation was recently stayed by
the US Supreme Court, see below) with states and utilities developing compliance plans
to significantly reduce greenhouse gas emissions from the electric sector. If the EPA’s
CPP regulations are not struck down by the US courts, the electric sector will embark
on a decades long path towards de-carbonisation requiring billions of dollars of new
investment in renewable generation, energy storage and smart grid technologies. These
important legal and policy events in 2015 will result in significantly increased investment
in clean energy in the US.
Three main forces contributed to this trend of P3s being used for clean energy and
technology projects during 2015: (1) growing domestic and international political forces
which put in place, through mandates and incentives, measures to counter climate change;
(2) important scientific developments and discoveries enabling the implementation of
high-tech solutions in commercial-scale or utility-scale proportions; (3) growing levels
of knowledge, experience and confidence in the P3 model among investors and lending
institutions, allowing for investments to be made more comfortably in projects outside
the traditional P3 wheelhouse which bear slightly higher levels of risk compared with
the ‘traditional’ P3 projects. A separate sub-chapter will be devoted to discuss the unique
developments of P3 applicability in the clean energy field, infra.
3 Id. at 171.
4 Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Title III, 129 Stat. 2242.
256
United States
However, there are some challenges that arise in the conjunction of the P3 model
with innovative high-tech type projects that must be acknowledged and remedied for
such conjunction to truly succeed. For example, owing to relatively higher risks associated
with high-tech projects, traditional application of the P3 model, as done in the context
of road projects, produces rates of return too low and risk-sharing too inefficient to
mobilise the necessary volumes of private capital, management and know-how to build
such projects. Therefore, along with innovation in the kind of projects executed with the
P3 models, innovation is equally required in the way P3 models are applied thereto. It
is for this reason that the Office of Economic Policy in the US Department of Treasury
proposed, in a report released in April 2015, to shift away from the basic ‘user fee’ (e.g.,
toll) and ‘availability payments’ models, and instead adopt other models that strive to
align public and private sector interests by better balancing the consumer’s interest in
high-quality services with the investor’s interest in rates of return adequately reflecting
the risks assumed thereby.5
In addition to the evolving type of projects implemented with the P3 scheme,
important regulatory changes were made during 2015 aimed at simplifying and
galvanising the use of P3. Such changes, along with some of the most notable P3 projects,
are described hereunder.
II THE YEAR IN REVIEW
Below are some of the most notable regulatory changes that took place in 2015, followed
by noteworthy P3 projects to reach financial closing in 2015 in all fields except the clean
energy field. The latter is discussed separately as aforesaid.
i Notable regulatory changes in 2015 (clean energy excluded)

Partnership with a public party for use of tax-exempt bonds and equity
Tax-exempt bonds have long been an important financing tool for P3 projects. The tax
treatment of these bonds, which may exempt interest on the bonds from federal or state
income taxation, allows holders of the bonds to settle for relatively low interest rates,
providing the borrower with less expensive financing.
In general, bonds will be tax-exempt for federal income tax purposes only if the
proceeds are (a) to be used by a governmental entity, or by an entity described in Section
501(c)(3) of the Federal Tax Code (i.e., entities that operate exclusively for religious,
charitable, scientific, testing for public safety, literary or educational purposes, where no
part of their earnings inure to the benefit of private individuals, no substantial part of
the activities thereof constitutes lobbying and where such entities do not participate in or
intervene in political campaigns with respect to candidates for public office (a 501(c)(3)
Entity)) or (b) to finance certain enumerated categories of projects (e.g., airports, docks
and wharves, mass commuting facilities, facilities for the furnishing of water, sewage
5 Office of Economic Policy, US Dept. of the Treasury, Expanding the Market for
Infrastructure Public-Private Partnerships: Alternative Risk and Profit sharing Approaches to
Align Sponsor and Investor Interests 11–12 (2015).
257
United States
facilities, solid waste disposal facilities, facilities for the local furnishing of electric energy
or gas, local district heating or cooling facilities, qualified hazardous waste facilities, high
speed intercity rail facilities, environmental enhancements of hydroelectric generating
facilities, qualified green building and sustainable design projects). In every case, the
issuer of the bonds has to remain the government or an entity doing so on behalf of
the government. In financings that require that the proceeds of the bonds be used by a
governmental entity or by a 501(c)(3) Entity, only a very small portion of the proceeds
(or facilities financed with proceeds) of the bonds (in general, 5 per cent) may be used
by a private party.
One of the challenges in using tax-exempt bonds to finance projects in which
there are both public and private components has been in allocating bond proceeds
between the two components. The IRS had previously issued proposed rules on this
topic that had drawn criticism from the legal community.6 In response, the IRS released
final rules in November 2015 that attempted to address the concerns of the industry.7
The final rules contain two key parts that are relevant to public-private partnerships.
The first permits allocations of bond proceeds and qualified equity that should be more
advantageous than what was previously permitted. Qualified equity is permitted to be
allocated first to the private business use of a mixed-use project and then to governmental
use, whereas bond proceeds are allocated first to governmental use and then to private
business use.
The second key part of the regulations for purposes of public-private partnerships
relates to allocations of partnership interests. Previously, partnerships were automatically
treated as private entities unless all of its members were public. Under the final rules,
partnerships are treated as aggregates of their partners. The amount of private business
use of bond-financed property is the private partner’s share of the partnership’s use of
the property. That share is defined as the private partner’s greatest percentage share of
income, gain, loss, deduction, or credit attributable to the period the partnership uses
the property. The foregoing rules will enter into effect with respect to bonds that are sold
on or after 25 January 2016, although certain special effective date rules apply as well.8
This is an important change, which should make it easier for governmental entities
and 501(c)(3) Entities to harness the invaluable capital and expertise of the private sector
for projects of great public and social significance.
6 Letter from George C Howell, chair of ABA Taxation Section, to John Koskinen,
Commissioner of the Internal Revenue Service (2 October 2004) available at:
www.americanbar.org/content/dam/aba/administrative/taxation/policy/100215comments.
authcheckdam.pdf.
7 General Allocation and Accounting Regulations Under Section 141, Remedial Actions for
Tax-Exempt Bonds, 80 Fed. Reg. 65637 (Oct. 27, 2015) (to be codified at 26 C.F.R. 1).
8 Id. at 80 Fed. Reg. 65645; see also: https://www.federalregister.gov/articles/2015/
10/27/2015-27328/general-allocation-and-accounting-regulations-under-section-141-re
medial-actions-for-tax-exempt#p-126.
258
United States
Fixing America’s Surface Transportation Act (FAST)

The FAST Act was signed into law on 4 December 2015 and constitutes the first
long-term transportation bill passed in 10 years.9 The FAST Act provides $305 billion in
funding for highways and public transportation and transportation safety during fiscal
years 2016 through 2020, an increase of approximately 11 per cent.
The FAST Act includes $225.2 billion in funds from the Highway Trust fund to
support highway investment (a $20.2 billion increase over five years compared with the
FY 2015 funding). States have discretion over a large part of the funds allocated under
the FAST Act representing a huge opportunity for P3 projects as states look to apply the
model to projects to solve more diverse needs.
$10.7 billion of the increase goes to supporting two new initiatives: (1) a National
Freight Program; and (2) a programme of Nationally Significant Freight and Highway
Projects. The remaining $9.5 billion provides small annual increases in core highway
programme funding.
The National Freight Program is a transformation of the national freight
policy provisions in Moving Ahead for Progress in the 21st century law (MAP-21)
which authorises $6.2 billion over five years to be apportioned among states by
formula. Programme funds will be directed under national and state strategic plans to
improve highway freight transportation on roads designated to be part of the national
freight network. Furthermore, states can obligate up to 10 per cent of such funds for
improvements to freight rail or ports.
The Nationally Significant Freight and Highway Projects Program will provide
approximately $900 million per year in grants of at least $25 million for highway,
bridge, rail-grade crossing, intermodal and freight rail projects costing more than
$100 million to improve the movement of freight and people, increase competitiveness,
reduce bottlenecks and improve intermodal connectivity. Projects will be awarded by the
Secretary of Transportation.
$207.4 billion of the total amount of funds will be split among the states by
formula to be used for highway and bridge improvements authorised by major
highway programmes such as the National Highway Performance Program and Surface
Transportation Black Grant Program, etc.
The remaining $17.8 billion will fund additional programmes that are directly
run by the federal government, research and development centric, fund Federal Highway
Administration expenses, or finance competitive grants to state and local governments
under Secretary of Transportation Programs.
An additional $1.05 billion has been authorised for significant projects on federal
or tribal lands as well as for the Appalachian Regional Highway Development Program.
The FAST Act increases every states formula funds by 5.1 per cent in FY 2016 and
annually by 2.1 per cent to 2.4 per cent from FY 2017 – FY 2020 in order to offset
9 Fixing America’s Surface Transportation Act of 2015, Pub. L. No. 114-94, 129 Stat. 1312.
259
United States
projected inflation. These increases represent a large source of funding for potential
P3 projects nationwide and ‘the FAST Act’s biggest impact on the highway construction
market will be the stability it provides states and the private sector’.10
The FAST Act focuses on the following:11
a Project delivery: Under the FAST Act, the speed of certain permitting processes
will increase while still protecting environmental/historic concerns and also
codifying the online system to track projects and interagency coordination
processes.
b Freight: The FAST Act establishes formula and discretionary grants to fund
critical transportation projects benefiting freight movements which will provide
a dedicated source of Federal funding for freight projects, including multimodal
projects. The Act emphasises the importance of Federal coordination to focus
local governments on the needs of freight transportation providers.
c Innovative Finance Bureau: The National Surface Transportation and Innovative
Finance Bureau (IFB) is a new entity within the Department of Transportation
(DOT) intended as the single location where state and local governments can
receive federal funding, financing or technical assistance. The IFB enhances the
work done by the Build America Transportation Investment Center as well as
helping to improve coordination across the DOT to identify innovative financing
methods and mechanisms. The IFB also works to improve permitting efficiency.
d TIFIA: Large project financing options pursuant to the Transportation
Infrastructure Finance and Innovation Act (TIFIA) Loan programme are
improved by the FAST Act’s organisational changes which provide opportunities
for structural improvements which could accelerate delivery of such projects.
e Safety: The FAST Act prohibits rental car companies from knowingly renting
vehicles subject to safety recalls and increases the maximum fine against a
non-compliant auto manufacturer from $35 million to $105 million. The FAST
Act also strengthens the DOT’s oversight of transit agency safety and gives more
flexibility to States to improve truck and bus safety through federal grants.
f Transit: The FAST Act restores the Bus Discretionary Grant Program and increases
the Buy America requirements in order to encourage domestic manufacturing.
g Ladders of opportunity: In order to increase workforce training and regional
planning the FAST Act allocates additional formula funds to local decision
makers; and gives additional design flexibility to planners. In an effort to promote
the use of public transit and walkable communities through dense commercial
10 American Road & Transportation Builders Association, 2015 ‘Fixing America’s Surface
Transportation Act’ (28 January 2016, 1:31 PM), www.artba.org/newsline/wp-content/
uploads/2015/12/ANALYSIS-FINAL.pdf.
11 Sarah Kline, Andy Winkler, 10 Things You Need To Know About the FAST Act, Bipartisan
Policy Center (27 January 2016, 10:23 AM), http://bipartisanpolicy.org/blog/10-thing
s-you-need-to-know-about-the-fast-act/.
260
United States
and residential development near transit hubs, the FAST Act makes Transit
Oriented Development (TOD) expenses eligible for funding under highway and
rail credit programmes.
Model law for enabling P3

P3s are currently limited or unavailable in many states due to lack of enabling legislation.
Thirty-three states, the District of Columbia and Puerto Rico have some statutory scheme
enabling traditional transportation P3 projects with some being more broad than others.
Therefore, in order to accelerate the trend of P3 enabling legislation nationwide,
in December 2015 the Bipartisan Policy Center published a model law for enabling
P3 engagements.12 This law has four self-proclaimed attributes: it enables P3s for a
wide range of projects; it creates a state office dedicated to providing P3 expertise and
assistance; it standardises and promotes best P3 practices; and it protects the public
interest. Similar efforts coupled with the success of P3 projects nationwide – both on
traditional transportation and new high-tech projects – should advance the trend of
more states adopting some form of P3 enabling legislation.
ii Notable legal, regulatory and policy developments – clean energy

Omnibus Appropriations Act
On 18 December 2015, Congress passed and the President signed into law the
Consolidated Appropriations Act of 2016 and the Protecting Americans from Tax Hikes
(PATH) Act of 2015,13 funding the government and providing a number of significant tax
changes, including important extensions to tax incentives available for the development
of renewable energy projects.
The legislation revises the Section 45 10-year production tax credit (PTC) to
provide that qualifying wind facilities for which construction commenced prior to
1 January 2017, will be eligible for the current PTC rate (2.3 cents per kilowatt, adjusted
for inflation). Qualifying wind facilities for which construction commences on or after
1 January 2017 and prior to 1 January 2020, will be eligible for PTCs at a reduced
rate (20, 40 and 60 per cent reduction of the current PTC rate, for projects for which
construction begins in 2017, 2018 and 2019, respectively). Qualifying wind facilities
that commence construction after 2019 will not be eligible for the PTC.
The 30 per cent investment tax credit (ITC) election in lieu of the PTC is also
preserved for qualifying wind facilities and phases down as follows: 24 per cent, 18 per
cent and 12 per cent for qualifying wind facilities for which construction begins in 2017,
2018 and 2019, respectively.
The legislation also extended the 10-year PTC at the current PTC rate for projects
for which construction commences on or before 31 December 2016 for the following:
closed loop biomass facilities, open loop biomass facilities, geothermal facilities, landfill
12 Available at: http://bipartisanpolicy.org/library/public-private-partnership-p3-model

-legislation/ (last visited on 27 January 2016, 10:17 AM).
13 Consolidated Appropriations Act of 2016, Pub. L. No. 114-113, 129 Stat. 2242.
261
United States
gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic
renewable energy facilities. The 30 per cent investment tax credit election in lieu of the
PTC is also preserved for these qualifying renewable energy facilities through 2016.
The legislation also provides for an extension of the 30 per cent ITC rate for
qualifying solar facilities if construction commences prior to 1 January 2020. This
change is a significant departure from prior law, which required that qualifying solar
facilities be placed in service during the applicable credit year. Qualifying solar facilities
for which construction commences on or after 1 January 2020, will be eligible for ITCs
at a reduced rate, as set forth on the following schedule: 26, 22 and 10 per cent for
projects for which construction begins in 2020, 2021 and after 31 December 2021.
The revised rules further provide, that unless the qualifying solar facility is placed
in service prior to 1 January 2024, any project for which construction begins before
1 January 2022, will be entitled to a 10 per cent ITC. The Section 25D credit for
residential solar energy systems is also extended for systems placed in service prior to
2 January 2022, and is subject to the same reduced rates as the ITC.
All the above incentives and tax credits provide a very strong tail-wind for the
clean energy sector. This in turn will significantly boost the use of the P3 model, which as
explained infra is increasingly utilised in the realm of high-tech innovative projects such
as in the clean energy sphere.
Paris Agreement
Parties to the UN Framework Convention on Climate Change (UNFCCC) reached
a landmark agreement on 12 December 2015 in Paris, charting a fundamentally new
course in the two-decade-old global climate effort.14
Culminating a four-year negotiating round, the new treaty ends the strict
differentiation between developed and developing countries that characterised earlier
efforts, replacing it with a common framework that commits all countries to put forward
their best efforts and to strengthen them in the years ahead. This includes, for the first
time, requirements that all parties report regularly on their emissions and implementation
efforts, and undergo international review.
The agreement and a companion decision by parties were the key outcomes of
the conference, known as the 21st session of the UNFCCC Conference of the Parties, or
COP 21. Together, the Paris Agreement and the accompanying COP decision:
a reaffirm the goal of limiting global temperature increase well below 2 degrees
Celsius, while urging efforts to limit the increase to 1.5 degrees;
b establish binding commitments by all parties to make ‘nationally determined
contributions’ (NDCs), and to pursue domestic measures aimed at achieving
them;
c commit all countries to report regularly on their emissions and ‘progress made in
implementing and achieving’ their NDCs, and to undergo international review;
14 Center for Climate and Energy Solutions, UNFCC Negotiations – COP 21 Paris Preview,
(30 January 2016, 1:02 PM), www.c2es.org/category/keywords/unfccc-negotiations.
262
United States
d commit all countries to submit new NDCs every five years, with the clear
expectation that they will ‘represent a progression’ beyond previous ones;
e reaffirm the binding obligations of developed countries under the UNFCCC to
support the efforts of developing countries, while for the first time encouraging
voluntary contributions by developing countries too;
f extend the current goal of mobilising $100 billion a year in support by
2020 through 2025, with a new, higher goal to be set for the period after 2025;
g extend a mechanism to address ‘loss and damage’ resulting from climate
change, which explicitly will not ‘involve or provide a basis for any liability or
compensation’;
h require parties engaging in international emissions trading to avoid ‘double
counting’; and
i call for a new mechanism, similar to the clean development mechanism under
the Kyoto Protocol, enabling emission reductions in one country to be counted
toward another country’s NDC.
This international agreement will further encourage increasing levels of investment in clean
energy. Developers, investors and financiers of clean energy projects will undoubtedly
explore new and innovative financing mechanisms to accelerate deployment of clean
energy infrastructure. Expect PPPs to be used with greater frequency in the coming years
for clean energy infrastructure such as electric vehicle charging infrastructure.
Clean power plan

On 23 October 2015, the US Environmental Protection Agency (EPA) published in
the Federal Register a highly anticipated final rule implementing its Carbon Pollution
Emission Guidelines for Existing Electric Utility Generating Units, also known as the
Clean Power Plan (CPP).15 A prepublication version of the final rule has been available
since 3 August 2015. However, the rule’s official publication starts the clock on
compliance with the CPP and also opens the rule to legal challenges.
The CPP is among the most important of the Obama administration’s many
regulatory measures to combat climate change. The standards dictated by the plan
demand modest improvements in the GHG emissions performance of coal-fired electric
generating units by reducing carbon emissions by approximately 28 per cent below
2005 levels by 2025 and 32 per cent by 2030.
The CPP establishes state-specific CO2 reduction goals and requires states to submit to EPA plans
for achieving these goals on an interim and final basis. State goals are expressed both in terms of
reductions in CO2 emissions per megawatt of electricity generated in the state (a ‘rate-based’ goal)
15 Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility
Generating Units; Final Rule, 80 Fed. Reg. 64662 (23 October 2015) (to be codified at
40 C.F.R. 60).
263
United States
and in terms of an equivalent total mass of CO2 emission reductions (a ‘mass-based’ goal). [E]ach
state must submit either (i) a final plan; or (ii) an initial plan with a request for an extension, to
the EPA by 6 September, 2016.16
The implementation of these state goals during the 2022 to 2030 time period presents a
huge opportunity for P3 projects focusing on clean energy, renewable energy and energy
efficiency nationwide. Because such projects are typically extremely expensive, and the
electric utility sector is in the midst of a significant transformation, the P3 structure may
be explored by utilities, states and municipalities as a way to raise significant amounts
of capital to fund the transition of the electric sector to a cleaner and more resilient
grid. As result of the publication of the final rule the States’ energy offices are working
with utilities to develop plants to de-carbonise the electric sector and meet the state
requirements. While the Final Rule is still subject to some legal challenges, if upheld by
the US court system, the Clean Power Plan will require massive investments in clean
energy.
iii PPPs reaching financial closing in 2015 (clean energy excluded)

North Carolina I-77 HOT Lanes
Owing to the 135 per cent increase in population in Charlotte, NC during the past
25 years, the North Carolina Department of Transportation (NCDOT) has decided
to convert existing HOV lanes to express lanes and build an additional express lane
alongside the existing ones.17 Drivers can use the new express lanes or HOT lanes for a
fee and motorcycles, buses and cars with three or more occupants may use the express
lanes for free. The project will also resurface existing general-purpose lanes which will
remain free. NCDOT partnered with Cintra, a JV composed of F.A. Southeast, W.C.
English and the Louis Berger Group to construct the project for an estimated cost of
$647 million. The project began in summer 2015 and is estimated to be completed
sometime in 2018. Utilising the PPP structure allowed the project to be constructed
with NCDOT only contributing $95 million in state and federal funding. Without the
PPP structure NCDOT would not have had the financial means to complete the project
for at least 20 years. Cintra will manage design, construction, finance and operation of
the project although the state will still own the road. The project achieved financial close
on 20 May 2015.
Pennsylvania Rapid Bridge Replacement Project

Pennsylvania has approximately 4,000 structurally deficient bridges and decided to utilise
a PPP structure to bundle 558 of the worst and address them in one project known
as the Rapid Bridge Replacement (RBR) Project.18 Using Pennsylvania’s 2012 P3 law,
16 ‘EPA issues Clean Power Plan Final Rule’, Environmental Finance, 1 December 2015.
17 North Carolina Department of Transportation, I-77 Express Lanes (30 January 2016,
1:07 PM), www.ncdot.gov/projects/i-77expresslanes/.
18 Plenary Walsh Keystone Partners, What is the Pennsylvania RBR Project? (30 January 2016,
1:07 PM), http://parapidbridges.com/whatisthepennsylvaniarbrproject.html.
264
United States
PennDOT partnered with Plenary Walsh Keystone Partners (PWKP – a consortium

composed of the Walsh Group, Granite Construction Company and HDR) to replace
these bridges in three years (by the end of 2017). Because of the various locations – many
of which cross small state highways in rural areas – PennDOT decided to attempt to
bundle all of these bridges together. PWKP will standardise design and construction
methods and is also responsible for financing and maintenance risks over the 28-year
term of the project. Using the PPP structure allows the project to be completed more
quickly and generated savings to the state by using standardised construction methods
and economies of scale. Financial close on the $899 million project was achieved in
March of 2015.
Kentucky Broadband Internet

The KentuckyWired Project will bring high-speed internet to every county in the state.19
It is the first non-transportation P3 to use a tax-exempt governmental purpose bond
structure to achieve full risk transfer. The state partnered with Macquarie and First
Solutions for the open-plan network which endeavors to complete the first portion of
fiber construction in 2016. The project will be designed, built, operated and maintained
by Macquarie Capital and partners for 30 years. The total project cost is $324 million,
with the state contributing $30 million as well as $23.5 million in federal funds with the
consortium partners contributing the rest. The project will also try to attain at least a 60 per
cent Kentucky workforce. The project reached financial close on 3 September 2015.20
iv Clean energy projects reaching financial closing in 2015

Natural Gas Cogeneration Facility
ARES EIF Group and Toyota reached financial closing on 30 November 2015, for a
700MW St Joseph Energy Center gas-fired combined cycle project in Indiana. Highly
efficient gas-fired power plants such as the St. Joseph Energy Center are expected to
replace many of the aging coal-fired power plants in the nation.
Michigan Highway lighting system21

The first freeway lighting system P3 in the US closed on 24 August 2015, with the
Michigan Department of Transportation (MDOT) and Freeway Lighting Partners, LLC,
(FLP) reaching simultaneous commercial and financial close. There are approximately
15,000 antiquated lights on freeways in Detroit’s tri-county area and the MDOT decided
19 Kentucky Finance & Administration Cabinet, Kentuckywired (30 January 2016, 1:08 PM),
http://finance.ky.gov/initiatives/nextgenkih/pages/default.aspx.
20 InfraAmericas, Deal Profile: Kentucky Closes Broadband P3 (30 January 2016, 1:08 PM),
www.polsinelli.com/newsevents/news-article-infra-americas-kentucky-project.
21 National Council for Public-Private Partnerships, Blackrock Infrastructure Joins Michigan’s
Freeway Lighting P3 (30 January 2016, 1:09 PM), www.ncppp.org/blackrock-infrastructur
e-joins-michigans-freeway-lighting-P3/; see also Corey Boock & Elizabeth Cousins, P3 Turns
the Lights on in Detroit, Michigan, InfraInsight (30 January 2016, 1:09 PM),
www.infrainsightblog.com/2015/08/articles/ppps/P3-turns-the-lights-on-in-detroit-michigan/.
265
United States
to use a P3 structure to replace 87 per cent of them with energy-efficient LED lights.
This is the first freeway lighting project to utilise a PPP structure. MDOT partnered with
FLP – a consortium of Star America Fund, Aldridge Electric, Parsons Brinckerhoff and
Cofely Services – who will operate and maintain the lights for 15 years. The contract on
the $145 million project is structured as pay-for-performance (i.e., 90 per cent of the
new lights must work within one year of installation and 98 per cent after two years to
obtain the maximum payments). Financial close was reached on 26 August 2015.
Chicago issued a request for qualifications for a streetlight P3 in September.
Others considering street lighting P3s include Virginia, Arizona, Washington, DC, and
Baltimore.
Renewable Energy Procurement for NY Renewable Portfolio Standard

The New York State Energy Research and Development Authority (NYSERDA)
procured $160 million in renewable energy as part of an ongoing effort to meet the state’s
renewable portfolio standards. A request for proposal (RFP) (containing two stages) was
released in April 2015, with deadlines in May and June (for those who clear stage 1).
Winners were declared in July 2015 and were granted funding from NYSERDA. The
awarded facilities include the Ball Hill Wind Farm in Chautauqua County; an anaerobic
digester at Orbit Energy in Staten Island; a fuel cell at Morgan Stanley headquarters in
New York City; and hydroelectric projects at Lyons Falls Mill Hydroelectric project in
Lewis County and Fulton Unit 2 in Oswego County.
III GENERAL REVIEW
i Regulatory changes in the market in 2016

Potential amendments to WIFIA and TIFIA
In the 2015 edition of this chapter, we elaborated on two essential legislative tools
providing key financial support to water and road infrastructure initiatives, and thereby
facilitating the use of the P3 model for such projects.
As may be recalled, the Water Resources Reform and Development Act (WIFIA)
of 2014 was enacted as part of the Water Resources and Reform Development Act, and
among many of its provisions it provides low-interest federal loans for up to 49 per
cent of the costs for large drinking water, wastewater, storm water and water reuse
projects. However, the law prohibited the use of proceeds originated from tax-exempt
bonds from funding the remaining 51 per cent of any given project. In light of the
foregoing, a bill was introduced in October 2015 by the House of Representatives with
the purpose of repealing the prohibition on financing qualifying projects with proceeds
of tax exempt-bonds.22 The bill was referred to various House committees’ consideration.
Earlier in 2015 the House of Representatives put forward another bill seeking to amend
WIFIA such that the financial assistance thereunder be amplified for water projects in
states where emergency was declared owing to droughts.23
22 H.R. Res. 3756, 114th Cong. (2015).

23 H.R. Res. 1710, 114th Cong. (2015).
266
United States
The TIFIA, which was also enacted in 2014, prescribed long-term financing
tools to highway and transit projects that feature dedicated revenue sources. Since its
enactment, a slew of bills were proposed to amend various portions of it, some of which
became law (such as the FAST Act above-mentioned). The following are two notable
bills among those currently being discussed by Congress.
A bill introduced by the House of Representatives in October 2015 geared to
further augment national surface transportation infrastructure, reform programmes
enumerated in the TIFIA, and refocus those programmes on addressing national
priorities such as safety and innovation.24 The bill focuses heavily on the freight system
and is targeted to achieve the following main targets:
a creation of the Nationally Significant Freight and Highway Projects programme,
funded with $4.5 billion for fiscal years 2016–2021, serving mainly large-scale
projects;
b commerce encouragement by augmenting of the National Highway Freight
Network mileage from 27,000 to 41,000 and by allowing 91-foot-long trucks
onto all US highways;
c extension of the deadline by which US railroads must execute positive train
control technology; and
d creation of a truck and bus safety grant programme.
A bill passed by the Senate in July 2015,25 and another bill passed in November 2015 by
the House of Representatives bearing the exact same title26 seek to make specific budget
allocations for defined transportation purposes. Despite some similarities, which include
lowering the project-cost threshold for TIFIA loans from $50 million to $10 million,
these bills differ in a few key components: (1) the Senate bill, as opposed to the House
bill, revises and makes permanent the reservation of a specified amount of transportation
enhancements programme funds apportioned to a state for surface transportation
alternatives, recreational trails programme, and safe routes to school programme projects;
(2) The Senate bill, as opposed to the House bill, includes a TOD infrastructure financing
provision making them eligible to apply for TIFIA loans.
At the time this is written, it is hard to predict whether the foregoing bills will
become law. It is, though, safe to say that should they become law, a more sound platform
for a wider verity of pertinent projects and a more flexibility financing approach for such
projects will be put in place, which in turn will buttress the use of the P3 model to deliver
such projects.
ii Regulatory changes in the market in 2016 in the clean energy sector

For our international readers, we thought it would be useful to understand the regulatory
and legal pathway and the balance of power between the Executive Branch and the
24 H.R. Res. 3763, 114th Cong. (2015).

25 S. Res. 1647, 114th Cong. (2015).
26 H.R. Res. 1461, 114th Cong. (2015).
267
United States
Judicial Branches of the US government in putting in place a critical element of US law

and policy which, if ultimately upheld by the courts, will undoubtedly increase the use
of PPPs in the renewable energy and clean energy sectors.
As explained, the US Supreme Court’s decision in Massachusetts v. EPA27 in
2007 determined that the Clean Air Act required EPA to determine whether the emissions
of GHGs endanger public health or welfare. After carefully studying the scientific
literature and soliciting public comment, the EPA in December 2009 determined that
GHGs do endanger us by contributing to global warming and climate change. This
endangerment finding triggered the EPA’s legal obligation to regulate GHG emissions
under the Clean Air Act. Opponents of EPA’s regulation attacked the endangerment
finding in the US federal courts. In June 2012, the US Court of Appeals for the District
of Columbia upheld the EPA’s endangerment finding and tailpipe rule (regulating
emissions from vehicles).
In June 2014, the EPA unveiled its proposed Clean Power Plan to regulate GHG
emissions from existing power plants.28 The EPA’s opponents again filed legal suits in
various US District Courts, even though the law in the United States is clear that judicial
review of an administrative action is not permitted until regulations are adopted in final
form. These lawsuits failed.
In August 2015, the EPA issued its Final Rule on the Clean Power Plan.29 The
EPA adopted the Clean Power Plan only after considering 4.3 million comments, the
most the EPA has ever received in any rule-making during its 45-year history.
Following the issuance of the Final Rule, utility companies, coal miners and more
than two dozen states filed lawsuits in various federal courts in an effort to vacate the CPP.
All such legal challenges were consolidated in the US Court of Appeals for the District of
Columbia (the DC Circuit). Those opposing the CPP also asked the DC Circuit to stay
EPA’s implementation of the CPP pending the outcome of legal challenges on merits.
On 21 January 2016 the DC Circuit declined to issue a stay,30 over which the plaintiffs
filed an appeal to the US Supreme Court.
On 9 February 2016, in a 5-4 vote (along ideological lines), the US Supreme
Court granted a temporary stay to the implementation of the CPP by the EPA until
such time as the arguments regarding the EPA’s authority to regulate GHGs have been
settled on the merits by the US court system.31 This somewhat unusual and controversial
decision reflects a departure from the large body of legal precedent which gives deference
to agency actions. It also is a substantial setback for the Administration’s ambitious carbon
dioxide emission reduction plan, and a hindrance in the efforts to back the American
commitments under the COP21 with action.
27 Massachusetts v EPA 549 US 497, 1275 CT 1438 (2007).

Generating Units, 79 Fed. Reg. 34,830 (18 June 2014).
Generating Units, 80 Fed. Reg. 64,662 (23 October 2015).
30 West Virginia v. EPA, No. 15-1363 (D.C. Cir. 21 January 2016) (order denying stay).
31 West Virginia, et al. v. EPA, No. 15A773, 2016 WL 502947, ___ S. Ct. ___ (2016).
268
United States
With the stay in place, the US Court of Appeals for the District of Columbia will
begin hearing oral arguments on the lawfulness of the CPP in June of 2016. This very
plausibly could mean that a final ruling on the CPP’s fate (including a likely appeal to
the Supreme Court) will be handed down during 2017. This also means that the next
Administration, which will take office in early 2017, will have a greater say on whether
to defend the CPP or not.
iii Projects expected to reach financial close in 2016 and beyond (clean energy
excluded)
Maryland Purple Line Rail32
A planned 16-mile 21-station light rail line extending from Bethesda to New Carrollton
providing a direct connection to the Washington DC metro rail. Project construction
is planned for 2016–2021 at an estimated cost of $2.448 billion. The project is still in
a bidding stage with four competing contractor teams and, as low price seems to be
a priority, the state has allowed the bidders a great deal of flexibility with design. The
winning bidder will need to line up approximately $700 million in financing and, once
completed, the state will be the private-sector operator regular payments over 35 years
to cover the operations or long-term debt costs. On 19 January 2016 it was reported
that the front-runner among the bidders is Purple Line Transit Partners, comprised
of Meridiam Infrastructure North American Corp.; Fluor Enterprises, Inc.; and Star
America Fund GP LLC.
Long Beach Civic Center P333

In the second major recent P3 project in Long Beach, CA, the city selected
Plenary-Edgemoor Civic Partner to construct the $533 million project with a
P3 structure. The project is complex and, after city hall, the main library and courthouse
are demolished, a new port headquarters and a city hall with underground parking, both
of which would be 11 storeys tall, will be built with a 73,000-square-foot civic plaza
between them. The plan also calls for construction of a main library, redesigned park,
and mixed-use tower that would accommodate retail and residential uses and possibly a
hotel. Plenary Edgemooor will design, build, finance, operate and maintain the project
– leasing it to the city for 40 years – which will be primarily financed with tax-exempt
32 Maryland Department of Transportation, Purple Line (30 January 2016, 1:29 PM),
www.purplelinemd.com/en/; see also Katherine Shaver, Report: Maryland has ‘frontrunner’
for Purple Line contract, Wash. Post, 19 January 2016, available at:
https://www.washingtonpost.com/news/dr-gridlock/wp/2016/01/19/report-maryland-
has-frontrunner-for-purple-line-contract/.
33 National Council for Public-Private Partnerships, Long-Awaited Long Beach Civic Center
Clears Final Hurdle (30 January 2016, 1:33 PM), www.ncppp.org/long-awaited-long-beach
-civic-center-clears-final-hurdle/; see also National Council for Public-Private Partnerships,
Public Works Financing Exclusive: Long Beach Approves Plenary’s Hybrid P3 for
$500 Million Civic Center (30 January 2016, 1:33 PM), www.ncppp.org/public-works-
financing-exclusive-long-beach-approves-plenarys-hybrid-P3-for-500-million-civic-center/.
269
United States
debt through a non-profit corporation. Plenary’s tax-exempt structure involves City

debt issuance through a non-profit corporation, a contract for development services to
Plenary’s project company, and Plenary purchased subdebt to backstop effective risk
transfer. The project is expected to reach financial close in April 2016.
LaGuardia Airport Central Terminal Building Replacement Project34

The Port Authority of New York and New Jersey operates the LaGuardia Airport whose
operations are centralised around its central terminal building (CTB) which opened
in 1964. Owing to its antiquated design and the fact that much of its infrastructure
is approaching the end of its useful life, the Port Authority of NY/NJ selected the
P3 structure as the most efficient means to demolish the existing CTB and construct
a new 1.3 million sq. ft. unified terminal building and associated infrastructure. In
2015 the Port Authority of NY/NJ selected LaGuardia Gateway Partners – a consortium
of Vantage Airport Group, Skanska, Meridiam, Parsons Brinkerhoff, Walsh and HOK
– to construct the $3.6 billion project. The private sector will contribute more than
$2 billion with financial close expected in early 2016.
I-70 East Project in Denver35

The Colorado Department of Transportation’s (CDOT) High Performance
Transportation Enterprise (HPTE) decided to pursue this project as a design, build,
finance, operate, maintain P3 to widen, lower and partially cover the I-70 corridor
running through the northern part of Denver. The HPTE pursues innovative means
of efficient financing for transportation projects and operates as a government-owned
business within CDOT. The project is estimated at $1.17 billion and, owing to the
nature of some anticipated work, required CDOT to prepare an environmental impact
statement which was released in January 2016. If approved, the final RFP is anticipated
to be released in summer 2016 with developer selection as early as autumn 2016 and
financial close anticipated in early 2017.
34 Port Authority of New York & New Jersey, LaGuardia Airport Redevelopment Program
(30 January 2016, 1:34 PM), www.panynj.gov/airports/lgareimagined/index.html; see also
LaGuardia Gateway Partners, About the Team (30 January 2016, 1:34 PM),
http://laguardiagatewaypartners.com/team/; Reuters, Update 2-Skanska consortium preferred
bidder for $3.6 billion LaGuardia project (30 January 2015, 1:35 PM), www.reuters.com/
article/skanska-laguardia-idUSL5N0YK0VR20150529.
35 National Council for Public-Private Partnerships, Colorado Issues RFQ For I-70 P3
(30 January 2016, 1:36 PM), www.ncppp.org/colorado-issues-rfq-for-i-70-P3/; see also
Colorado Department of Transportation, I-70 East Environmental Impact Statement
(30 January 2016, 1:36 PM), www.i-70east.com/reports.html#feis; Cathy Proctor, CDOT’s
$1.17 billion I-70 plan draws international array of interested firms, Denver Business Journal
(23 June 2015), available at: www.bizjournals.com/denver/blog/earth_to_power/2015/06/
cdot-s-1-17-billion-i-70-plandraws-international.html.
270
United States
Pennsylvania CNG Fueling Stations P3

PennDOT has developed an RFP for a project to develop compressed natural gas fueling
stations at public transit agencies throughout the state for use by buses and the public.36
In January 2016 three teams submitted proposals to design, build, finance, operate and
maintain up to 37 such filing stations statewide.37 Award of the project is anticipated in
late February or March 2016. Of note, AZDOT is also considering a similar project in
Arizona.38
iv Clean energy projects expected to reach financial close in 2016 and beyond
Ohio State University Energy Management Project
Ohio State University embarked on a multi-facet energy project, aimed at improving the
university’s resource efficiency (including energy) and securing long-term commitments
to purchase clean renewable energy under reduced rates. RFQ and RFI phases resulted in
shortlisting 10 teams. An RFP may be issued in the first quarter of 2016 and the winner
is likely to be selected this year as well. Financial closing may be required during 2016 or
early 2017.
Philadelphia CNG Fueling for Transit Agencies Partnership Project

The project will be administered by the Pennsylvania Department of Transportation
(PennDOT). In the beginning of 2015, an RFQ was issued to identify firms qualified
to undertake the CNG station development programme. An RFP was issued in late
2015. Under the agreement to be executed with the winner, who has yet to be selected,
a contractor will sell CNG to the transit agencies. Revenue from sales of CNG to the
public at fueling stations will be shared between the contractor and PennDOT based on
a formula set forth in the agreement. Selection of a winner and financial closing thereby
is expected for 2016.
School districts in Florida installing CNG infrastructure for its bus fleets
In 2014 the Pasco School District issued an RFQ for the fueling of its school bus fleet
with CNG. The CNG fueling company to be awarded will finance the infrastructure
and recover its costs plus profit from fueling agreements as well as public CNG sales.
Pasco school district is following in the footsteps of the Board of Commissioners of St.
Johns County, Florida, which approved a P3 agreement in 2014 that will see Nopetro,
36 National Council for Public-Private Partnerships, PennDOT Announces Finalists for Natural
Gas Fueling Stations P3 (30 January 2016, 1:37 PM), www.ncppp.org/penndot-announce
s-finalists-for-natural-gas-fueling-stations-P3/; see also Pennsylvania Department of
Transportation, CNG Fueling Stations Project (30 January 2016, 1:37 PM), www.penndot.
gov/ProjectAndPrograms/P3forpa/Pages/CNG-Fueling-Stations-.aspx#.VqZrBrEo45s.
37 Marc J. Felezzola, Proposals Submitted to PennDOT for CNG Fueling Station P3 Project,
LawBlogConstruction.com (30 January 2016, 1:44 PM), www.lawblogconstruction.com/
construction-contracts/proposals-submitted-to-penndot-for-cng-fueling-station-P3-project/.
38 Arizona Department of Transportation, P3 Initiatives (30 January 2016, 1:44 PM), https://
www.azdot.gov/business/programs-and-partnerships/Public-PrivatePartnerships(P3)/P3-projects.
271
United States
under a 20-year agreement, build, own, and operate and finance a $3 million public
CNG station at the county’s public works facility. Nopetro has also executed similar
P3 agreements with Florida’s Leon County School District, serving Tallahassee, and the
Charlotte County Public Schools, on Florida’s Gulf Coast. During the same year the
Jacksonville Transportation Authority (JTA) has also announced plans to move ahead
under an approved 15-year P3 agreement with Clean Energy Fuels for construction of a
CNG station to support JTA’s planned deployment of 100 CNG transit buses. Some, if
not all these projects, are expected to close in 2016 and beyond.
Virginia Solar Energy Development Project

The Virginia Department of Transportation (VDOT) announced that the Virginia
Office of Public-Private Partnerships (VAP3) will move a proposal to develop and run
a P3-driven solar energy system, using VDOT property and facilities, into the project
development phase. The RFI was issued on 15 January 2015 with a deadline which
should have been set in Q2 of 2015, the RFQ and RFP are set to follow shortly.
Prince George’s County waste processing and alternative energy facility (MD)
A P3 to construct a new waste processing and conversion facility for Prince George’s
County. In November 2014, Prince George’s County issued an RFQ for a new waste
processing and alternative energy facility. The initial term of the project agreement
will not exceed 20 years, with two optional five-year extensions (subject to the mutual
agreement of the parties). The deadline to respond to the RFQ was 12 March 2015. Due
to Maryland’s new goals on waste diversion and recycling, the county’s existing Brown
Station Road Sanitary Landfill is scheduled to close in 2020. The proposed waste-to-
energy project would partially replace this landfill.
St Mary’s County, MD PV Project

The St. Mary’s County government has launched an RFQ to develop turnkey PV systems
on County property, where the winner would be required to install, own, operate,
maintain and finance the PV systems. Responses were submitted by October 2015,
and are currently reviewed by a technical board on behalf of the St. Mary’s County
Department of Public Works & Transportation (DPW&T). The process is expected to
culminate in selection of a winner, that will be expected to reach financial closing during
2016.
Army Energy Project

The US Army plans to lease 8.13 acres of land on the Schofield Barracks and Wheeler
Army Airfield on the island of Oahu to the Hawaiian Electric Company, which will
build, operate and maintain a 50-megawatt, biofuel-capable energy generating station,
power poles and transmission lines and other equipment. If it continues as planned,
financial closing may be achieved during 2016.
Navy Solar Project

The Navy plans to provide lighting in parking lots at Joint Base Anacostia-Bolling in
Washington, DC, by hiring a contractor to build and maintain solar panels on rooftops
and in open spaces. The photovoltaic system would be privately built, owned, operated
272
United States
and maintained on base property and the Navy would buy electricity the system produces
under a 25-year power purchase agreement. The project’s owner would also have the
option of selling solar renewable energy certificates. An RFP was issued on 25 June, and
a winner is expected to be chosen and to reach financial closing during 2016.
Announcing a public-private partnership to achieve 99.7 per cent clean energy.
In the coming days, Kodiak Island will begin testing a renewable-energy-powered
shipping crane in a $3 million public-private partnership that will enable the island
to become the first in the world to put flywheel and battery energy storage together to
stabilise its variable electric power from wind turbines. The nation’s second largest island
recently achieved 99.7 per cent renewable-powered electricity from wind, hydro and
now augmented by flywheels. The City of Kodiak, Matson, Inc. and Kodiak Electric
Association (KEA), a nonprofit member-owned rural electric cooperative, combined
efforts to finance this renewable power source for a newly arrived shipping crane that is
replacing the current diesel-powered crane. KEA completed a conversion to 99.7 per cent
renewable electricity by adding the energy storage to 9MW of wind that complements
the utility’s hydropower plant. Wind is now supplying approximately 20 per cent of
KEA’s load, displacing more than 2 million gallons of diesel every year. This conversion
from fossil fuels has been supported by the State of Alaska’s Renewable Energy Fund,
managed by the Alaska Energy Authority, in conjunction with strong local leadership
from the Kodiak Electric Association.39
Chicago retrofitting its swimming pools for energy conservation

In June 2014, the Chicago Infrastructure Trust approved a P3 to make over 100 city-owned
swimming pools more energy efficient. The private team will refurbish the water
filtration and heating systems, air ducts and other mechanical improvements, with a
view to reducing the electricity and gas consumption. The costs have been estimated at
up to $50 million, with the private party being repaid via the energy savings generated by
the project. The project arose from an unsolicited proposal from the winning team and
despite some setbacks, may reach financial closing in 2016.
IV BIDDING AND AWARD PROCEDURE
i Expressions of interest
While each state has specific procedures for PPP bidding, the Federal Highway
Administration (FHWA) has created a ‘PPP toolkit’ containing exemplary procedures
and recommendations for public entities modelled around highway projects. While not
binding on any state, the FHWA recommends that the public partner solicit bids by
using: ‘a multi-stage “best value” procurement process. This approach intially includes
39 Kodiak Electric Association, President Obama Highlights KEA’s Achievements in Recent

Speech (30 January 2016, 1:45 PM), https://kodiakelectric.wordpress.com/2015/09/03/
president-obama-highlights-keas-achievements-in-recent-speech/.
273
United States
a public request for qualifications, followed by a selection of qualified bidders and

the issuance of a request for proposals.’ Thereafter, the public entity selects a bid and
negotiates with the private entity with the winning bid.
ii Requests for proposals and unsolicited proposals

A common approach for a public entity seeking a private sector partner for a PPP is
‘the “two-step request for qualification” and “request for proposals” to obtain a qualified
pool of candidates’. Many public entities also conduct interviews with potential private
partners. Some public entities even receive unsolicited bids for PPPs depending on
applicable regulations. For instance, Miami-Dade County allows potential private
partners to submit unsolicited proposals containing specified information, as well as a
fee, to contract for public works over $15 million. The county has a specified period of
time to consider such proposals and, if selected, issues a competitive solicitation asking
for proposals for the same project.
iii Evaluation and grant

Regardless of solicitation methodology, selection of a preferred bid also can occur based
on criteria ‘such as the lowest net present value of gross revenues required, the shortest
proposed length of the concession term, the lowest subsidy or availability payment
required, or the dollar value of the offer’. Evaluation and selection of PPP bids are
typically governed by procedures that achieve transparency in procurement due to the
public nature of the public partner. For instance, some states require an independent
review panel comprised of members from stakeholder groups to review PPP project
proposals. The financial stability of all partners is also of great importance and ‘complete
due diligence [confirming] the potential private partner’s resources and its financial
viability’ is common. Most states also require contractors to maintain various levels of
insurance or bonds for PPPs.
V THE CONTRACT
i Payment
A variety of payment models have been implemented in US transportation PPPs
including: (1) ‘toll concessions’ whereby the private partner takes on a project in
exchange for receiving tolls (the public party usually limits the rate of toll increase
in some manner); (2) ‘shadow toll concessions’ whereby the private partner receives
payment for each vehicle that uses the facility (sometimes payment is adjusted based on
safety, congestion, or pre-established floors and ceilings); and (3) ‘availability payments’
whereby the private partner receives payment based on the availability of the facility at a
specified performance level.
Two of the most important payment mechanisms are: revenue-based payments
and availability payments. Under revenue-based payments PPP contracts, the private
entity recoups its development and construction costs from user fees generated by the
asset. For example, if the asset is a road, the user fee would be the toll charged for usage.
The PPP agreement typically details the structure of the toll and the extent to which
274
United States
the private entity can modify the toll. The contract often limits the profit of the private
entity by establishing a cost-sharing structure with the government when a certain
threshold is reached. On the other hand, if toll revenues are below a certain threshold,
the government may be contractually required to cover the difference.
Owing to the private sector’s limited appetite to take on this market risk,
availability payments have become increasingly popular. Availability payments are a
means of compensating a private concessionaire for its responsibility to variously design,
construct, operate and maintain a tolled or non-tolled roadway for a set period. They are
made by a public project sponsor based on project milestones such as facility completion
or facility performance standards such as lane closures or snow removal. Availability
payments are often used for toll facilities not expected to generate adequate revenues
to pay for their own construction and operation, and the public sponsor retains the
underlying revenue risk associated with the toll facility.
Because availability payments also carry less overall risk to the private entity
than does a full concession, a concessionaire also can rely on the public agency’s credit
to secure financing or rather than unpredictable toll revenue. In a typical availability
payment model, the government makes periodic payments, often contingent on the
achievement of project milestones, to the private contractor over an extended period of
time (often 20 to 30 years). Owing to the potential burden of availability payments on
the public sector entity, should usage fall below the predicated base case model, certain
states may place limits on the scope and size of availability payments.
ii State guarantees
In general, US states do not offer state guarantees. Unlike PPP projects in developing
countries, the solvency of the government has not historically been a serious consideration.
In addition, financing for many US PPP projects is obtained through TIFIA and similarly
federally guaranteed funds.
Most state guarantees to the private entity are contractually based. The most
common such guarantee is a revenue guarantee. A revenue guarantee assures a certain level
of usage or revenue for a project. For example, it may guarantee the revenue generated
by a toll road per year. If the actual revenue falls below this amount, the state makes up
the difference. In support of the state PPPs, the federal government offers various credit
enhancements and in some cases guarantees. See Section VI, infra.
iii Distribution of risk

The table opposite provides a comprehensive summary of the various risk sharing
approaches implemented under US PPP arrangements. For each project delivery model,
various functional responsibilities are shifted to the private sector. The risk transfer to the
private sector increases along a spectrum ranging from the design–build project delivery
model to the build–own–operate–transfer model.
275
United States
Project delivery models Functional responsibilities and project risks

Design–build Final design, construction and construction inspection
Final design, construction, construction inspection and long-term
Design–build with warranty preservation
Operate and maintain Maintenance and operations
Construction management Preliminary design, final design, construction and construction
at risk inspection
Design–build–operate– Finance, final design, construction, construction inspection,
maintain maintenance, operations and traffic revenue
Design–build–finance– Finance, final design, construction, construction inspection,
operate maintenance, operations and traffic revenue
Finance, maintenance, operations, long-term preservation and
Brownfield concession traffic revenue
Finance, final design, construction, construction inspection,
maintenance, operations, long-term preservation and traffic
Greenfield concession revenue
Finance, preliminary design, final design, construction,
construction inspection, maintenance, operations, long-term
Build–transfer–operate preservation and traffic revenue
Planning, environmental clearance, land acquisition, finance,
preliminary design, final design, construction, construction
inspection, maintenance, operations, long-term preservation,
PPP Build–own–operate–transfer traffic revenue and asset ownership
Traditional design–bid–build Final design and construction
Planning, environmental clearance, land acquisition, finance,
preliminary design, final design, construction, construction
inspection, maintenance, operations, long-term preservation,
Build–own–operate traffic revenue and asset ownership
Finance, maintenance, operations, long-term preservation, traffic
Non-PPP Asset sale (not a PPP) revenue and asset ownership
iv Adjustment and revision

PPP contracts are carefully calibrated to help balance the ability of the private party to
make its return on investment while simultaneously ensuring that the public service is
delivered in an efficient and cost-effective manner. Accordingly, PPP contracts frequently
contain adjustment of payment levels including floors to help ensure a minimum return
for the private sector and ceilings designed to protect the public and avoid excess profits
or over compensation to the private party. Further, in many toll PPPs, there are sharing
mechanisms that may be triggered by revenue or return targets.
PPP contracts frequently contain adjustment provisions for unforeseen
circumstances, force majeure, change of law and other events that were beyond the
reasonable contemplation of the contracting authority and the private sector participant.
Adjustment provisions also may be included and allow the public entity to request changes
to the scope or timing of services or adjustments to the design of the delivered systems.
When market conditions change dramatically making the assumptions underlying the
original contract unworkable, it is helpful if the PPP contract itself provides mechanisms
for the parties to orderly make acceptable contractual amendments.
276
United States
v Ownership of underlying assets

The public sponsor generally has control of the underlying asset in US PPPs.
In a PPP, the public agency retains ownership of the asset or enterprise, oversight
of the operations and management of the asset, and controls the amount of private
involvement. Through a PPP, the public sector sets the parameters and expectations
for the partnership and the private sector uses access to capital markets to address the
public agency’s needs. If the PPP does not live up to the contractual expectations of the
partnership, the public agency can regain complete control of the asset or enterprise
system.
vi Early termination
With respect to early termination, most US PPP contract provisions address the
following key issues: termination for public entity default; termination for developer
default; termination for extended force majeure events; and termination for convenience
by the public entity. PPP contracts must anticipate default, compensation for default and
orderly unwinding of the PPP in the event of termination.
VI FINANCE
In the US PPPs are frequently financed through a combination of private (debt and
equity) and public funds including federal, state and local funds. Under many PPP
structures, the public entity requires that the private sector place equity at risk. In the
event that the private sector fails to perform on time and or on budget, the entity may
lose part or all of its equity investment.
At the centre of a PPP project is a special purpose vehicle formed to undertake the
PPP. Under many typical PPP arrangements, the equity investments from the investors,
along with bonds and loans benefiting from various federal and state enhancements are
used to fund the initial design, development, procurement and construction of the PPP
project. That is, the necessary up front investments required to enable the project to
reach commercial operation.
Historically, there have been varied sources of equity in PPPs. A recent survey
determined that the sources of equity investments in PPPs in the US from 2008 to
2013 are as follows: contractor–developer 37 per cent, fund manager 32 per cent, operator
19 per cent, and institutional direct investor 12 per cent. The funding from ‘lenders’
described as bonds and loans are usually supported by federal programmes, or benefit
from tax-exempt status as described below.
With respect to federal funding, two of the most important programmes include
TIFIA and WIFIA.
i TIFIA
TIFIA provides long-term, flexible financing to highway and transit projects that feature
dedicated revenue sources. Each dollar of TIFIA can support about US$10 in loans,
loan guarantees, or lines of credit. TIFIA plays a significant role in financing surface
transportation projects and focuses on attracting substantial private and non-federal
co-investment by providing supplemental and subordinate capital. In many cases, the
277
United States
lower cost of capital and flexible terms offered by TIFIA are critical factors in determining
whether a PPP is a viable and cost-effective option for a project. For example, from
2008–2013, TIFIA accounted for about 23 per cent of total PPP project value (and
35 per cent of PPP debt). With a recently expanded budget, the programme can support
approximately $9.2 billion in lending capacity in FY 2014, which translates into
approximately $20 to $30 billion in total project value. Eligible applicants for this credit
assistance include state and local governments, transit agencies, railroad companies, as
well as private entities.
TIFIA offers three forms of financial assistance:
a Secured loans for up to 49 per cent of the total project cost with a static interest
rate set at the Treasury note equivalent. ‘Repayment of a TIFIA loan must begin
by five years after the substantial completion of the project, and the loan must be
fully repaid within 35 years after the project’s substantial completion or by the
end of the useful life of the asset being financed, if that life is less than 35 years.’
b Loan guarantees backed by the federal government to institutional investors.
c Lines of credit available during the first 10 years of the project. The total amount
available is no more than 33 per cent of the project cost.
ii WIFIA
WIFIA is a low-interest loan programme administered by the Environmental Protection
Agency (EPA), with a parallel programme administered by the US Army Corps of
Engineers for flood-control projects. The EPA programme:
a will support water and waste-water-related infrastructure projects, including pipe
replacement or rehabilitation, construction or rehabilitation of treatment plants,
desalination projects, groundwater replenishment projects, energy efficiency
improvements, and others;
b is aimed at larger projects, in which eligible projects must cost at least $20 million
(US$5 million for communities serving no more than 25,000 people);
c provides loan guarantees and direct loans at long-term Treasury rates. Projects
must be deemed creditworthy, with loans repayable from a dedicated revenue
source within 35 years of substantial project completion;
d limits WIFIA support of a project to 49 per cent of the project’s costs, with an
overall limitation of 80 per cent for all federal assistance in any project (with an
exception for certain federally funded projects in Indian tribal communities), and
provides that tax-exempt debt cannot be used to pay the non-federal share of
project costs. However, in any year the EPA Administrator may use up to 25 per
cent of appropriated funds in projects exceeding the 49 per cent limitation;
e reserves 15 per cent of appropriated funds each year for projects in communities
with a population of no greater than 25,000. By 1 June of each year, any such
reserved funds that have not been obligated shall be available for projects in
communities of any size; and
f authorises $20 million in year one of a project, which should support at least
$200 million in loan guarantees or low-interest loans. The authorisation level rises
to $50 million in year five, which should support up to $1.65 billion in assistance,
according the Office of Management and Budget.
278
United States
In addition to the two federal programmes described, infrastructure in the US, including
PPPs, has long taken full advantage of tax-exempt financing, which has been a mainstay
of infrastructure financing over the years. One such financing source is qualified (private
activity bonds – PABs). PABs are tax-exempt bonds issued by state or local governments
on behalf of private developers of a project. PABs are a significant component of many
PPP arrangements; from 2008 to 2013 PABs accounted for 17 per cent of total PPP
project value and 25 per cent of project debt. To be eligible for tax-exempt status,
95 per cent or more of the bond’s net proceeds must be used for a qualified purpose,
such as surface transportation projects that receive federal funding or credit assistance.
Transportation PPPs are increasingly pursuing PABs as a senior debt vehicle for their
project financing. In FY 2014 alone, almost US$3 billion in PABs authority has been
allocated to public-private partnership projects, while nearly $500 million in bonds has
been issued. In many cases, project sponsors are pursuing PABs in conjunction with
TIFIA.
Another source of funding for PPPs are direct-pay bonds, which are taxable bonds
issued by state and local governments for which interest expense is directly subsidised
by the federal government. These bonds are designed to attract investment in US
infrastructure from the private sector that is not subject to US income tax. From 2009 to
2010, as part of ARRA, over $185 billion of ‘Build America Bonds’ (BABs) were issued
by state and local governments. A 2011 Department of the Treasury analysis found that
issuers of BABs achieved approximately $20 billion in savings relative to what their
borrowing costs would have been from issuing tax-exempt debt.
Besides federal funding, PPPs are also funded by the state itself, either through
funding itself from the state’s department of transportation or through taxes. For example,
a state may levy or increase a fuel tax to generate enough funding for a large project.
PPPs also issue bonds to fund projects, which are often tied to future project
revenue; in addition, state and local governments issue PABs to fund projects.
With approval from the US Department of Transportation (DOT) to issue
PABs, the state or local government issues tax-exempt debt on behalf of the private
entity undertaking the project. The private entity finances and delivers the project and is
responsible for debt service on the PABs. As of June 2014, over 73 per cent of the authorised
$15 billion in PAB allocations had been approved by DOT for twenty projects. The first
project for which bonds were issued is the Capital Beltway/I-495 high-occupancy toll
(HOT) lanes project.
Finally, private investment is also used to fund PPPs.
VII OUTLOOK
The market for P3 projects in the US is expanding steadily in both new and traditional
fields due to both diverse public infrastructure needs; and constrained public budgets
(State and Federal) nationwide. As concisely stated by one commentator:
After decades of underinvestment and an increasing population, today’s infrastructure needs are
large and continue to grow. Federal, state and local governments are finding it difficult to finance
new projects on their own due to decreased tax revenue and shrinking budgets. These two factors
279
United States
have increased the political will and desire to seek alternatives to the traditional ‘design-bid-
build’ procurement methodology. Many states and the federal government agree the P3 model
maximizes value for their constituents, delivers a lower total cost, and can be delivered quicker.”40
In 2015, increasing public infrastructure need and the perceived benefits of the
P3 structure drove public owners to both (1) use the model in new fields such as providing
internet infrastructure or building clean energy/energy efficiency improvements to
existing infrastructure; as well as (2) using the model in new ways such as bundling
multiple smaller projects into one large project and allowing the private sector to utilise
economies of scale to reduce price.
Despite the potential of the US P3 market, the extent of its actual growth depends
on the following:
a political cycles, particularly the implications of gubernatorial elections;
b the federal government’s continued ability to offer loans and other forms of
financial assistance in P3 transactions; and
c the extent to which other funding sources (e.g., gas taxes) grow and lessen the
catalysts for P3s.41
While the need for infrastructure development and investment in the United States
remains strong – and will likely continue to be for many years – both the trend of
expanding uses of the P3 model as well as the adoption of P3 enabling legislation
must continue. If public owner’s ability to use the P3 model grows along with their
confidence in the model’s success and private sector cooperation remains strong then the
US P3 market will continue to grow. Based on the trends presented and analysed in this
chapter it is anticipated that the US P3 market will continue to grow as the potential to
do so is large, particularly in the emerging area of clean and renewable energy.
40 Dan McNichol, The United States: The World’s Largest Emerging P3 Market
(30 January 2016, 1:45 PM), www.aig.com/Chartis/internet/US/en/FINAL%20P3%20
AIG%20Whitepaper_tcm3171-664767.pdf.
41 Andrew Deye, US Infrastructure Public-Private Partnerships: Ready for Takeoff?,
Kennedy School Review (27 January 2016, 10:59 AM), http://harvardkennedyschoolreview.
com/us-infrastructure-public-private-partnerships-ready-for-takeoff/.
280
Appendix 1
ABOUT THE AUTHORS
ROBERT H EDWARDS JR
Kilpatrick Townsend & Stockton LLP
Robert H Edwards Jr is a partner at Kilpatrick Townsend & Stockton LLP resident
in Washington, DC. Mr Edwards is co-head of the energy, project finance and clean
technologies practice. In this role he collaborates with colleagues to bring innovative
structuring and financing solutions to technology and energy companies clients of the
firm.
During his more than 25-year career as a practising attorney, senior presidential
appointee in the US Department of Energy, an as an executive with the JP Morgan
Global Commodities Group in New York City, Mr Edwards has closed more than
US$10 billion in energy, infrastructure and auto industry project financings. His clients
include developers, contractors, utilities, equity investors and other project participants.
He counsels a wide range of energy-storage, solar and smart grid companies. He played
a leading role in the deployment of more than US$35 billion into the US clean-energy
sector during the American Recovery and Reinvestment Act (2009–2011). He is
recognised as a leader in clean and renewable energy finance and policy.
In 2015, Mr Edwards was one of 20 professionals nationwide selected to
participate in the National Renewable Energy Executive Program (NREL EnergyExecs).
In 2016, Mr Edwards was selected as a Washington, DC Super Lawyer in the areas of
energy and natural resources and utilities.
Mr Edwards received his JD from Stanford Law School where he was an associate
managing editor of the Stanford Journal of International Law, an MBA from the
Stanford Graduate School of Business, and an AB magna cum laude, in economics from
Harvard University where he was a John Harvard Scholar for all semesters during his
undergraduate career.
281
About the Authors
RANDALL F HAFER
Randall F Hafer is a senior partner and leader of Kilpatrick Townsend’s construction &
infrastructure projects team. The team was named 2015 Construction Team of the Year
by Chambers USA, 2012 Team of the Year by US News – Best Lawyers, and is consistently
ranked Tier 1 nationally by Chambers, Best Lawyers and The Legal 500. Throughout
his entire career Mr Hafer has focused his practice exclusively on issues related to the
construction industry. He has been involved in matters in most of the fifty states and
internationally on a wide variety of construction projects, including tunnels, wastewater
treatment plants, airports, power plants, mass transit systems, mining facilities, bridges
and highways, hospitals, office buildings, sports arenas, resort condominiums, universities
and schools, manufacturing and processing facilities and military facilities. He is a panel
member on the AAA’s roster of arbitrators and mediators, he is a fellow of the American
College of Construction Lawyers (ACCL), a member of the International Institute for
Conflict Prevention and Resolution (CPR) Construction Advisory Committee, and the
primary author of Dispute Review Boards and Other Standing Neutrals, Achieving ‘Real-
Time’ Resolution and Prevention of Disputes’ for CPR.
MARK J RIEDY
Mark J Riedy is a partner at Kilpatrick Townsend & Stockton LLP in Washington, DC
and co-leads its energy, project finance and clean technologies practice team. For more
than 37 years, he has focused his practice on complex project development and finance,
private placement, M&A, investment fund structuring and related investments, and
regulatory and legislative compliance representation in more than 60 countries worldwide
for renewable and conventional energy and chemicals, clean energy technology, energy
storage, data centre, environmental and infrastructure clients. His clients represent
developers, lenders, EPCs, O&Ms, equipment providers, private equity, venture capital
and infrastructure funds.
Mr Riedy received his JD from the Georgetown University Law Center and
graduated Phi Beta Kappa and summa cum laude from the University of Michigan with
a BA. He has received numerous awards over his career including Biofuels Digest as a
Top 100 World Bioenergy Leader (#42 in 2015–2016, #49 in 2014–2015, #56 in 2013–
2014, #50 in 2012–2013 and #67 in 2011–2012), Legal Leaders as one of Washington,
DC & Baltimore’s Top Rated Lawyers for Business and Commercial Law (2011–2016)
and Martindale-Hubbell as an AV Pre-eminent rated attorney (past 20 years). Mr
Riedy also is one of the five founders and General Counsel of the American Council
On Renewable Energy (2001–present) and is the Vice Chairman of the American Bar
Association’s Project Finance and Program Committees in the Energy, Environment and
Natural Resources Section (2010–present).
BENJAMIN P DENINGER
Ben Deninger is an associate and focuses his practice on construction law and construction
litigation.
282
About the Authors
Prior to joining the firm, Mr Deninger worked as an associate in the Tampa office
of a Florida-based law firm where he focused his practice on construction, land use law,
and premises liability working with design professionals, developers, contractors and
subcontractors in both state and federal litigation. Ben is a Certified Information Privacy
Professional (CIPP/US) and is a member of the American and Hillsborough County Bar
Associations. He is admitted to practise law in Georgia and Florida. Ben is a graduate of
the University of Maine School of Law and holds an LLM degree from the University of
Texas, graduating with honours.
ARIEL I OSEASOHN
Ariel Oseasohn is an energy transactions analyst in the firm’s energy, project finance and
technology team. His practice focuses on the development and financing of projects
in the clean and renewable fields, including solar-thermal, photovoltaics, biofuel, bio-
chemicals and natural gas fired facilities.
Prior to joining the firm, Mr Oseasohn worked as an associate for Yigal Arnon &
Co. out of Jerusalem, Israel, where he counselled governmental, regulatory, and private
sector actors in the renewable energy and infrastructure spaces. Ariel has extensive
experience in advising on all facets of renewable energy projects, from the procurement,
through the development and financing (including when done as project finance) stages
thereof. Ariel received his LLB from the Hebrew University of Jerusalem and is a member
of the Israeli and New York Bar Associations.
KILPATRICK TOWNSEND & STOCKTON LLP

607 14th Street NW
Washington, DC 20005-2018
United States
Tel: +1 202 508 5819
Fax: +1 202 585 0044
rhedwards@kilpatricktownsend.com
rhafer@kilpatricktownsend.com
mriedy@kilpatricktownsend.com
www.kilpatricktownsend.com/en.aspx
283

PPP Law

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PPP Law

Uploaded by

Copyright:

Available Formats

The Public-Private

Law Business Research

The Public-Private Partnership Law Review

For further information please email

Law Business Research Ltd

THE RESTRUCTURING REVIEW

THE PRIVATE COMPETITION ENFORCEMENT REVIEW

THE DISPUTE RESOLUTION REVIEW

THE EMPLOYMENT LAW REVIEW

THE PUBLIC COMPETITION ENFORCEMENT REVIEW

THE BANKING REGULATION REVIEW

THE INTERNATIONAL ARBITRATION REVIEW

THE MERGER CONTROL REVIEW

THE TECHNOLOGY, MEDIA AND

THE INWARD INVESTMENT AND

THE CORPORATE GOVERNANCE REVIEW

THE CORPORATE IMMIGRATION REVIEW

THE INTERNATIONAL INVESTIGATIONS REVIEW

THE PROJECTS AND CONSTRUCTION REVIEW

THE INTERNATIONAL CAPITAL MARKETS REVIEW

THE REAL ESTATE LAW REVIEW

THE PRIVATE EQUITY REVIEW

THE ENERGY REGULATION AND MARKETS REVIEW

THE INTELLECTUAL PROPERTY REVIEW

THE ASSET MANAGEMENT REVIEW

THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW

THE MINING LAW REVIEW

THE ANTI-BRIBERY AND ANTI-CORRUPTION REVIEW

THE CARTELS AND LENIENCY REVIEW

THE TAX DISPUTES AND LITIGATION REVIEW

THE LIFE SCIENCES LAW REVIEW

THE INSURANCE AND REINSURANCE LAW REVIEW

THE GOVERNMENT PROCUREMENT REVIEW

THE DOMINANCE AND MONOPOLIES REVIEW

THE AVIATION LAW REVIEW

THE FOREIGN INVESTMENT REGULATION REVIEW

THE ASSET TRACING AND RECOVERY REVIEW

THE INTERNATIONAL INSOLVENCY REVIEW

THE OIL AND GAS LAW REVIEW

THE FRANCHISE LAW REVIEW

THE PRODUCT REGULATION AND LIABILITY REVIEW

THE SHIPPING LAW REVIEW

THE ACQUISITION AND LEVERAGED FINANCE REVIEW

THE PRIVACY, DATA PROTECTION AND CYBERSECURITY LAW REVIEW

THE PUBLIC-PRIVATE PARTNERSHIP LAW REVIEW

THE TRANSPORT FINANCE LAW REVIEW

THE SECURITIES LITIGATION REVIEW

THE LENDING AND SECURED FINANCE REVIEW

THE INTERNATIONAL TRADE LAW REVIEW

THE SPORTS LAW REVIEW

AIRD & BERLIS LLP

GRATA LAW FIRM

HERBERT SMITH FREEHILLS LLP

KILPATRICK TOWNSEND & STOCKTON LLP

LETT LAW FIRM P/S

MAPLES AND CALDER

MATTOS FILHO, VEIGA FILHO, MARREY JR E QUIROGA ADVOGADOS

MORI HAMADA & MATSUMOTO

PARQUET & ASOCIADOS

SETH DUA & ASSOCIATES

SYCIP SALAZAR HERNANDEZ & GATMAITAN

TACIANA PEÃO LOPES E ADVOGADOS ASSOCIADOS

VIEIRA DE ALMEIDA & ASSOCIADOS,

Chapter 9 INDIA�� 110

Chapter 10 IRELAND�� 119

Chapter 11 JAPAN�� 129

Chapter 12 KAZAKHSTAN�� 144

Chapter 13 MOZAMBIQUE�� 166

Chapter 14 NIGERIA�� 173

Chapter 15 PARAGUAY�� 184

Chapter 16 PERU�� 195

Chapter 17 PHILIPPINES�� 206

Chapter 18 PORTUGAL�� 218

Chapter 19 TANZANIA�� 229

Chapter 20 UNITED KINGDOM�� 238

Chapter 21 UNITED STATES�� 255

Appendix 1 ABOUT THE AUTHORS�� 281

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS�� 299