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infrastructure
investor
may
2014
“Innovative, pushes the boundaries.”
“It’s a traditional PPP but with the banks
taking service and demand risk. I like that, it
shows dynamism and open-mindedness.”
Youmight think that, in an established
infrastructure market like Canada,
therewouldbe few ‘firsts’ left to achieve
in the public-private partnership (PPP)
space. If so, you’d be wrong.
In June last year, Bank of Montreal,
Toronto-Dominion Bank and Plenary
Group closed the first PPP project
under InfrastructureOntario’s Alterna-
tive Financing and Procurement (AFP)
framework that involves the provisionof
services and market demand risk.
The modestly sized deal involved
the financing of driver examination
service delivery across the province of
Ontario, together with the upgrade and
maintenance of information technology
systems at all DriveTest centres to pro-
vide more efficient and secure services.
A Plenary-led sponsor group com-
mitted$75millionupfront and approxi-
mately $14.5 million in annual conces-
sion payments to the Ontario Ministry
of Transport (MTO) in return for being
entitled todriver examination revenues
(from which it pays operating costs to
international service company Serco
andcapital payments todebt andequity).
In so doing, the Ontario Drivers
deal is likely to set a benchmark for
future services deals in the PPP space
in Canada. It also offered a different
risk-sharing model from the standard
availability payment-based approach, as
well as witnessing the emergence of a
longer-tenor (ten-year) bank product
– rarely seen in the five years that had
passed since the global financial crisis.
The origins of the deal go back to
2003 when Serco struck a deal with
MTO to provide a wide range of driver
examination services including appli-
cation processing and the delivery of
vision, knowledge and road testing
across all license categories. The firm
took responsibility for overseeing
approximately 575,000 knowledge tests
and 675,000 road tests on an annual
basis at 95 testing centres acrossOntario.
Under the new 10-year contract
agreed with Plenary, Serco’s role will
expand to include upgrading and
enhancing information technology solu-
tions to improve processing, scheduling
and the delivery of services to drivers.
The contract sees Serco enter a ten-year
partnershipwith estimated revenues to
Serco of approximately C$500m over
the contract term.
According to a press release from
Serco, Plenary Group’s “significant”
financial commitments guaranteed
the consortium’s service delivery per-
formance for the concession term. The
new structure of direct customer financ-
ing replacedSerco’s previous use of cash
resources and debt facilities to finance
the partnership.
The numerous merits of the Long
Beach Courthouse PPP in California
demanded an honourable mention
from the judging panel in this category.
Nonetheless, as an availability-based
project, it was felt that this was a more
straightforward credit.
n
A driver services deal was the first in Ontario to
involve the provision of services and the assumption
of market demand risk
In the driving seat
BANKING AWARDS FOR EXCELLENCE 2013
ONTARIO DRIVER EXAMINATION SERVICES
Category:
North American social
infrastructure
Winner:
Ontario Driver Examination
Services
Nominated by:
Bank of Montreal
(mandated co-lead arranger,
administrative agent) and Toronto-
Dominion Bank (mandated co-lead
arranger, account bank)
Other participants included:
Plenary Group
(developer, equity sponsor)
Date of transaction:
27th June 2013
Size of transaction:
Approximately $122m
($105m senior debt, $17m equity)
Honourable mentions in this category:
Governor George Deukmejian Court-
house / Long Beach Courthouse
(nominated by Deutsche Bank)
WHAT THE
JUDGES SAID:
