Leading Advisors in Project Finance


  • Operis North America Mid-Year Market Review

    By Simon Williams / 6 September 2019 / Comments

    The first six months of 2019 saw a sustained level of activity in Operis’ North American operations, underpinned by ongoing Public Private Partnership (P3) activity in transport infrastructure. Presenting an overview of Operis’ first half activity in North America, Jun Tao, the associate director heading the analytical team at the Toronto office, and Charles-André Gonthier, associate director heading its advisory team, noted a trend towards more limited DBF contracts, with operation and maintenance stages omitted.

    After P3 mechanisms were used for a flurry of social infrastructure projects in Canada in recent years, from health centres and hospitals to police stations and courthouses, the level of activity in such projects has slowed, Jun said, with a significant proportion of remaining projects relating to road and rail transit. P3 announcements in the pipeline offer a welcome boost, and will be sure to reinvigorate the market/sector.

    The secondary market was meanwhile supported by the sale of equity stakes in existing P3s, notes Charles-André. Advisory work in the renewable energy sector, both in Canada and the US, kept the advisory team in Toronto busy through the first six months of this year.


    Design-Build-Finance in transport

    Operis provided a formal financial model audit for Ottawa’s Light Rail Transit Confederation Line project – a sizeable DBF project that will add 16 new stations to the capital’s O-Train network. The project, awarded by the City of Ottawa to the consortium consisting of Kiewit and Vinci Group, closed in April and is valued at C$2.57 billion.

    In the same month, a consortium consisting of AECON, Parsons and Amico secured the DBF contract awarded by Infrastructure Ontario for the widening of an 18-kilometre section of Highway 401. The project represents an investment of C$639 million, and will provide extra lanes to ease traffic congestion in the Toronto area. Here also, Operis provided the formal model audit for the consortium, including a tax and accounting review.

    Both projects, Jun said, illustrate how “there has been a shift in procurement solutions from a full concession lasting a few decades to projects with just a construction phase and no operations and maintenance.”

    However he notes innovation in certain non-standard, quasi-public procurements, such as for the Consolidated Rent-a-Car (ConRAC) facility at the Newark Liberty International Airport based in New Jersey. In a transaction that closed in May, the private-sector Conrac Solutions sourced equity and debt financing for the 35-year DBFOM project, with Operis providing the formal model audit on behalf of the lenders and equity sponsors. Funding is to be repaid exclusively through charges applied to car rentals.

    P3s in US

    The United States can be described as an emerging market for P3s, says Charles-André. US federal funding for infrastructure has historically included an array of loans, as well as the tax-exempt Private Activity Bonds (PABS). The attitude of the Trump administration towards P3s has not been clear-cut, and at state level procurement agencies have yet to build up the same level of expertise as the dedicated P3 agencies serving Canada’s provinces. However through the first half of 2019 there was still clearly “a strong sense of urgency for better infrastructure, among the US public and also at the level of government and Congress” says Charles-André. “There’s a lot of enthusiasm for applying this methodology to future infrastructure projects,” building on current modest levels of P3 activity.



    The Toronto office continued to remain active in the renewable energy sector. The US southern states can draw on abundant sunshine, while wind power has an increasingly significant presence in both the US and Canada. Here Operis’ role in the 2019 first half was primarily as an advisor in primary and secondary financing transactions and in acquisitions, with some model auditing business also.  Renewable projects such as windfarms tend to contain a fairly high percentage of debt in their initial funding, pre-construction, notes Charles-André. They will generally be refinanced after they have been operational for a while, taking on sometimes higher levels of senior debt and/or finding new equity investors.

    Major renewable projects are, of course, attractive to energy companies seeking to highlight their involvement in green energy, and to pension funds likewise alert to environmental considerations.

    In June, Operis took part in the Proximo Canadian Power and Renewables Exchange event, where delegates highlighted the importance of new technologies for renewable energy storage, indicating that this is a sector to watch for the near future.

    In conclusion

    Overall, we anticipate that DBFM transactions may return to favour in Canada’s Alberta province, which has a new Conservative government. If the general election in October similarly brings in a Conservative federal government, it may likewise favour more comprehensive P3 modalities. Ontario Province’s procurement agency, Infrastructure Ontario, is meanwhile expected to unveil its much delayed raft of P3 projects at the Canadian Council for Public-Private Partnerships’s annual conference in November.



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