summary corporate plan for the 2015-16 to 2019-20 planning period

PPP CANADA

PPP CANADA Summary Corporate Plan 2015-16

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Summary Corporate Plan for the 2015-16 to 2019-20 Planning Period

Operating Budget for the 2015-16 Budget Year Capital Budget for the 2015-16 Budget Year

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TABLE OF CONTENTS

1. Executive Summary ........................................................................................................ 4 2. The Canadian P3 Marketplace in 2014 ............................................................................ 8

3. Delivering Value for Canadians ...................................................................................... 29

3.1 Knowledge Development and Sharing ................................................................... 30

3.2 Advancing Federal P3s........................................................................................... 36

3.3 Advancing Provincial, Territorial, Municipal and First Nations P3s ........................ 40

4. Corporate Excellence .................................................................................................... 47

5. Operating and Capital Budget ....................................................................................... 57

Annex 1 – Corporate Profile .............................................................................................. 67

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1. EXECUTIVE SUMMARY

Public-private partnerships (P3s) have continued to demonstrate their ability to achieve value for money for taxpayers in the delivery of much needed public infrastructure. P3s enable the discipline of private capital, an integrated whole life-cycle approach, and increased innovation to deliver value. New skills in the public sector are critical to achieving and realizing successful P3s. As the lead on the federal government’s P3 agenda, PPP Canada works with all levels of government to build and deliver expertise, and to leverage incentives to broaden the effective use of the P3 model. PPP Canada delivers on its mandate through three interrelated business lines which are fully aligned with its corporate objects: P3 Knowledge Development and Sharing (KDS): The development and sharing of P3 knowledge is foundational to achieving value for taxpayers and underpins the success of PPP Canada’s other business lines. The Corporation has developed significant expertise over its first five years. It has established an effective network with P3 agencies and P3 practitioners to acquire, distill and apply P3 Best Practices. It has gained significant practical project experience through the P3 Canada Fund and its work on federal projects. Over the last six years, PPP Canada has shared its growing expertise with inexperienced jurisdictions, focusing in particular on municipalities, provinces and territories new to P3s such as the cities of Saint John and Barrie as well as Saskatchewan and Nunavut. It has collaborated to pair experienced agencies like Infrastructure Ontario and Partnerships BC with new players to leverage and share expertise. It has also collaborated with the private sector and the Canadian Council on Public-Private Partnerships to develop and share knowledge. This has resulted in the production of an array of knowledge products, primarily aimed at enabling the delivery of the P3 Canada Fund and advancing federal P3s. These have included methodology and best practice guides for business case development and procurement as well as P3 sector studies. The Corporation undertook additional efforts to provide smaller municipalities with information, guidance and tools to support P3s and promote the bundling of projects, as directed in Economic Action Plan 2014.

OUR MANDATE

PPP Canada’s mandate is to improve the

delivery of public infrastructure by achieving better value, timeliness and accountability to

taxpayers, through P3s. PPP Canada will deliver more P3s by leveraging

incentives, demonstrating success, providing expertise and by promoting P3 best-practice and

capacity-building.

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Over the 2015-16 planning period, the Corporation will continue to develop its leadership role in P3 expertise in a manner consistent with the increasing recognition and credibility that the Corporation has gained, and will build on its effort to learn from others and by focusing on operational enablers. This means a more strategic effort to assess and address key knowledge gaps through the continued efforts under the KDS Strategy outlined in Section 3.1. Advancing Federal P3s: PPP Canada has a mandate to assess P3 opportunities at the federal level in accordance with criteria established by the Treasury Board and to advise on the execution of P3s. TBS guidelines require all projects in excess of $100 million with a useful life of 20 years or longer to be assessed for P3 suitability. PPP Canada has worked closely with TBS and key federal departments to ensure all projects are assessed on a timely basis. Over the planning period, PPP Canada will continue to deliver this service with the objective of meeting or exceeding service standards within existing resources. Federal departments and agencies pursuing projects that demonstrate P3 suitability through the Federal P3 Screen are required to develop a full Procurement Options Analysis (POA), often referred to as a P3 Business Case. PPP Canada has established the development of POAs as an optional cost-recovered service to federal departments. Over the last year, PPP Canada generated $2,620,000 in revenues through this business line by working with seven departments and agencies on the development of their POAs and their procurement process. Much of this work will continue into the 2015-16 planning period, in addition to potential new federal projects. Over the 2015-16 planning period, PPP Canada will strive to be the provider of choice on POAs to further support its role as an advisor on the execution of P3s. To that end, it will be introducing improved client satisfaction measurement strategies to enable continuous improvement. PPP Canada will continue to build its relationship with key capital intensive departments. In Economic Action Plan 2014, the Government indicated that it will take measures to lever the expertise of PPP Canada to strengthen the execution of federal P3 projects. PPP Canada is playing a key role in the procurement of the New Bridge across the St. Lawrence (NBSL) in collaboration with Infrastructure Canada and Public Works and Government Services Canada. PPP Canada’s expertise has played a key role in meeting an accelerated timetable, engaging the private sector and ensuring the financial and commercial structure of the project maximizes value for the government. During the 2015-16 planning period, the NBSL will remain a top priority for the Corporation through financial close which is expected in June 2015. The Corporation’s role beyond this milestone will be defined during the planning period. The Corporation expects that, over the 2015-16 planning period, it will play a key role in the procurement of key federal projects. The Corporation is committed to working with the Government to fulfill its Budget 2014 commitment to lever PPP Canada’s expertise in the execution of federal projects.

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Advancing Provincial, Territorial, Municipal and First Nations P3s: PPP Canada has a mandate to work with other levels of government to broaden the use of effective P3s. It achieves this by leveraging and sharing its expertise; managing the P3 Canada Fund; and working with Infrastructure Canada to assess and develop projects submitted for funding under the New Building Canada Fund (NBCF) that are captured by the P3 Screen. In 2013-14, PPP Canada committed the last portion of the initial $1.2 billion P3 Canada Fund to 24 projects levering $6.8 billion in total investment. These projects will deliver an estimated $861 million in extra value to taxpayers when compared to traditional procurement. The objective of the P3 Canada Fund is to expand the use of P3s. It does this by building a showcase of effective P3 projects targeting inexperienced jurisdictions, and new sectors and models. It also targets full scale P3 projects (Design-Build-Finance-Operate-Maintain [DBFOM]/Design-Build-Finance-Maintain [DBFM]) and projects that are directly linked to job creation and economic growth. PPP Canada works with P3 Canada Fund clients through project development, procurement, construction and into the operating period. Over the 2015-16 planning period, PPP Canada will continue to work with clients on the successful execution of the twenty-four projects under the initial P3 Canada Fund. During the planning period, approximately $3.9 million of P3 Canada Fund projects will reach financial close, the largest annual amount to date for the Corporation. PPP Canada will also continue to implement the renewed $1.2 billion Fund. In 2014-15, PPP Canada launched Round Six, the first annual investment round of the renewed P3 Canada Fund. Over the 2015-16 planning period, PPP Canada will continue to target inexperienced jurisdictions, full scale P3s and projects directly linked to job creation and economic growth. In practice, this means engaging new jurisdictions in P3 projects and broadening the sectors targeted by those already familiar with P3s. PPP Canada also began managing its new responsibilities to assess projects with over $100 million in eligible costs submitted for consideration under the NBCF’s P3 Screen. To date, PPP Canada has met or exceeded service standards established for the P3 Suitability Assessment. Over the 2015-16 planning period, it is anticipated that there will be an increase in the volume of projects to be assessed as Infrastructure Canada continues to advance their dialogue with provinces and territories. PPP Canada is undertaking the P3 Screen, with no incremental operating resources, but rather from business process efficiencies in the management of the P3 Canada Fund. PPP Canada will continue to work with Infrastructure Canada and others to maximize the use of P3s where it is the most cost effective approach. PPP Canada strives to be a leader in all parts of its business. Over the past six years, it has made significant investments in governance and management processes and policies and

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practices. Over the 2015-16 planning period, PPP Canada will continually review and improve its management practices.

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2. THE P3 MARKETPLACE

2.1 The Canadian P3 Market in 2014 Since the establishment of provincial and federal P3 agencies, Canada’s reputation as one of the world’s most mature and stable P3 markets has progressively become established and apparent. The key factors that have contributed to the growth of the Canadian market over the years have remained:

• The rigour of the Canadian Value for Money Analysis; • The strong role the provincial P3 agencies which have contributed to the development

of standardized procurement processes; • The federal government’s establishment of its own P3 agency, and the establishment of

the P3 Canada Fund and the Federal P3 Screen; • Canada’s deep and well-functioning financial markets have meant that financing has

been available for a wide range of project sizes; and, • The Canadian P3 market’s ability to attract both domestic and international firms to bid

for projects. These factors have contributed not only to the strength and stability of the Canadian P3 market, but also to its increasing diversification. The concerted efforts of PPP Canada and the provincial agencies to extend the use of the P3 model into new sectors and jurisdictions have resulted in a balanced pipeline consisting of small, medium and large projects across a variety of sectors. The strength of the Canadian market has been well documented and is evidenced further by the projects successfully being realized. Across the country, and at all levels of government, successful P3 projects are delivering on-time and on-budget public infrastructure. In practical terms, this means that:

• Governments do not pay for the asset until it is built and operational; • A substantial portion of the contract is paid out over the long term, and only if the asset

is properly maintained and performs well; and, • The lifetime cost of the asset is known upfront, meaning that taxpayers are not on the

hook for costs that arise unexpectedly during the contract period. Over the past couple of years, traditionally strong provincial P3 markets have experienced a slower than historic growth, while others have been quickly building their pipeline. Growth is being seen once again in Ontario and British Colombia where both provinces launched large hospital projects into the market and began pre-procurement activities for several transportation projects. According to the Federation of Canadian Municipalities (FCM), Canada’s cities own over 60% of the country’s public infrastructure that touches the everyday lives of Canadians. Every year, billions of dollars are invested by all levels of government to provide Canadians with the public

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infrastructure that contributes to the improvement of their quality of life. The FCM states that most urgently needed are investments in public transit, water/wastewater treatment facilities, new roads and bridges and solid waste management infrastructure - priority sectors under the P3 Canada Fund.1 Going forward, there is no doubt that the demand for investment in both new and aging municipal infrastructure will continue to grow. Faced with already strained capital budgets, municipal, provincial and territorial governments will continue to face fiscal challenges in the future. A review of the 14 P3 projects that entered procurement in Canada in 2014 illustrates that the needs of municipalities are currently influencing the P3 agenda. As illustrated in Table 1, of those 14 projects that entered procurement, half were directly related to the needs of municipal populations in the transportation, water treatment and solid waste management sectors. Furthermore, of the 34 P3 projects which were in various stages of procurement in Canada throughout 2014, nearly half of the total projects (14) were municipal. Table 1 – Projects Entering Procurement in 2014

Project Name Procuring

Jurisdiction

P3

Model

Sector RFQ Release

Date

P3 Canada

Fund

Mackenzie Vaughan Hospital Project ON DBFM Health Mar 2014 -

Seneca College – King Campus

Expansion

ON DBF Education Apr 2014 -

Saskatchewan Hospital North Battleford

– Integrated Correctional Facility

SK DBFM Health Apr 2014 -

Edmonton Valley Line LRT Expansion

Project

Edmonton (AB) DBFOM Transit Apr 2014 $250M

Regina Bypass Project SK DBFOM Transportation May 2014 $200M

Saint John Safe Clean Drinking Water

Project

Saint John (NB) DBFOM Water/Wastewater Jul 2014 $57.3M

New Bridge for the St. Lawrence Gov’t of Canada DBFOM Transportation Jul 2014 -

Saskatoon North Commuter Parkway

and Traffic Bridge Replacement

Saskatoon (SK) DBFOM Transportation Jul 2014 $66M

Joint-Use Elementary Schools Project SK DBFM Education Jul 2014 -

Campbell River Waste Facility Campbell River

(BC)

DBFOM Solid Waste Sep 2014 -

Penticton Regional Hospital Patient

Care Tower Project

Penticton (BC) DBFM Health Sep 2014 -

Southwest Transit Stage 2 Winnipeg (MB) DBFOM Transportation Sep 2014 $137.3M

Etobicoke General Hospital

Redevelopment, Phase I

ON DBFM Health Oct 2014

Stoney CNG Bus Storage and Transit

Facility

Calgary, AB DBFM Transportation Dec 2014 $48.4M

* Projects highlighted in blue were procured in order to meet the growing needs of municipalities.

1 Pre-Budget Consultation 2014. Testimony before the House of Commons Standing Committee on Finance (8 Oct 2014). http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=6723776&Language=E&Mode=1

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Of the 14 municipal projects, 11 are going forward using the Design-Build-Finance-Operate-Maintain (DBFOM) model, demonstrating that the majority of municipalities are procuring full-scope P3s which transfer the maximum amount of risk to the private sector. The growing influence of municipalities in the delivery of P3 projects is also evident when reviewing applications to the P3 Canada Fund. As illustrated in Table 2, since Round One, launched in 2009, applications to the Fund by municipalities have risen from 30% of the total applications received to nearly 70%. Table 2 - Applications to the P3 Canada Fund

In the lead up to the launch of Round Four in 2012, PPP Canada refined its pre-launch activities to include tailored outreach and intake assessment strategies. These efforts resulted in the Corporation receiving a far greater number of quality P3 project submissions from municipalities and a fewer number of non-viable P3 projects. Since the launch of Round Four, applications have been received from municipalities across every province and territory, with the exception of Prince Edward Island, Yukon and Nunavut. This trend continued into Round Five, and once again, applications received in 2014 under Round Six clearly illustrate that municipalities continue to focus on three sectors: water/wastewater; transportation and transit; and solid waste management. A sectorial breakdown of the municipal applications to the P3 Canada Fund is presented on the next page in Table 3.

0 20 40 60 80 100 120 140

Round 1 (30%)

Round 2 (38%)

Round 3 (66%)

Round 4 (57%)

Round 5 (47%)

Round 6 (69%) Provinces

Municipalities

First Nations

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Table 3 - Municipal Applications to the P3 Canada Fund by Sector

Municipal applications under the P3 Canada Fund are following the broader municipal trends across Canada: municipalities in the more populated provinces of Ontario, British Columbia and Alberta are considering the use of the P3 model more than municipalities in other provinces; and, that municipalities are focusing on P3 projects in economic growth sectors. Municipal needs cut across multiple sectors. Canada’s municipalities, as a whole, own and manage more than $200 billion worth of infrastructure. Perhaps capturing this diversity in infrastructure needs was a January 2014 article by InfraAmericas which described Canada as a “study in contrasts”.2 Not only is the country seeing very large infrastructure projects entering the market, but decision makers are also “thinking small” as less populated provinces and municipalities are beginning to explore the use of P3s through the bundling of projects.

THINKING BIG: MEGA INFRASTRUCTURE PROJECTS Canada is witnessing an increase in the number of “mega” infrastructure projects, or projects close to or over the one billion dollar mark. This is especially true in the rapid transit sector. There are currently eight light rail projects in various stages of procurement in Alberta, British Columbia and Ontario ranging in cost from the $800 million Waterloo to Kitchener light rail to the $3.5 billion Eglinton Crosstown project in Toronto. Other mega infrastructure projects that entered the Canadian pipeline in 2014 were the $3

to $5 billion New Bridge over the St. Lawrence in Montréal (NBSL) and the $1.2 billion Calgary

Health Centre. Currently in pre-procurement are the George Massey Tunnel Replacement Project and the Detroit River International Crossing (DRIC). Also expected to enter procurement in the near future are the replacement of the Patullo Bridge in Metro Vancouver and the construction of a second Okanagan bridge.

2 InfraAmericas. Canada Enters 2014 with Diverse Set of P3s; http://www.infra-americas.com/analysis/news-analysis/1327487/canada-enters-2014-with-diverse-set-of-p3s.thtml

0 1 2 3 4 5 6 7 8 9 10

Water/Wastewater

Transportation

Solid Waste

Green Energy

Brownfield Redevelopment

Tourism / Culture

Connectivity & Broadband

Round 6

Round 5

Round 4

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THINKING SMALL IN A BIG WAY: BUNDLING Given that small projects, or projects under $50 million, are not always viable through the P3 model due to their difficulty in attracting private financing, discussions surrounding the possibility of “bundling” small projects into one large project are beginning to amplify across the country as small municipalities look to P3s to address their infrastructure needs. A few Canadian municipalities have already bundled different asset classes into one procurement. For the Civic Operations Centre project, the City of Saskatoon relocated its Transit Operations and constructed a permanent Snow Management Facility for the City’s southwest quadrant. The Eglinton Crosstown light rail transit project will see bundled together the light rail transit system and its maintenance and storage facility. Furthermore, the provinces, of Alberta, Ontario and Saskatchewan, have either launched or successfully delivered bundled P3 projects. As these provincial projects move forward and best-practices are developed and shared, Canadian municipalities will be able to benefit from their experiences and develop better bundled P3 projects. In Alberta, the Province has launched three phases of the Alberta Schools Alternative Procurement (ASAP) project, which will see the construction of over 40 schools throughout the province. In 2012, the Province of Ontario delivered 18 new Ontario Provincial Police (OPP) detachments, regional headquarters and forensic identification services in 16 communities across Ontario. In the spring of 2014, Ontario announced its intention to launch a second OPP modernization phase, the details of which are not yet publically available. Saskatchewan launched the procurement of its first bundled project in 2014, nine new joint-use schools in four communities experiencing unprecedented growth.

2.2 The Canadian Pipeline While the Canadian pipeline has remained relatively strong over the years, 2014 saw a reduction in the number of projects entering the market with only 14 projects launching a Request for Qualifications using, at a minimum, the Design-Build-Finance (DBF) model. This represents a drop in nearly half since 2013, which saw 20 projects enter the market. This reduction, however, is not representative of the overall health of the Canadian P3 market. While the number of projects entering procurement may be smaller, Canada is seeing an increase in P3 projects near or over the $1 billion mark demonstrating an increase in overall capital costs in 2014 and demonstrating the ability of capital and labour markets to absorb such large projects. In addition, there were over 30 projects in various stages of procurement in 2014, reflecting the high level of activity in the previous year.

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Table 1 on page 9 provides a list of all the P3 projects which entered the market in 2014. These projects represent interesting trends:

• Four, or 28%, of the projects to enter procurement were in Saskatchewan. • Seven, or 50%, of the projects will go forward as DBFOMs and six as DBFMs and

increase from 30% in 2013. • Of the seven DBFOM projects, four, or 57%, received commitments from the P3

Canada Fund. This trend continues to demonstrate the impact that PPP Canada’s best-practices and the P3 Canada Fund are having on the Canadian market in ensuring the greatest private sector participation in the project.

2014 also saw more projects reach financial close with 14 projects achieving that milestone compared to six in 2013 when traditionally strong P3 markets such as British Columbia and Ontario went through a period of slower-than-historic growth. This past year marked a period of transition for both of these provinces as they emerged from provincial elections and began planning for their next wave of P3s. Table 4 – Projects to reach Financial Close in 2014

Project Name Procuring Jurisdiction

Model Sector Capital Costs

P3 Canada Fund

Contribution

John Hart Generating Station Replacement

BC DBF Energy $1B -

Okanagan Correctional Centre BC DBFM Justice $196.5M -

Hamilton Health Sciences McMaster Children’s Hospital

ON DBF Health $44.9M -

BC Children’s and BC Women’s Redevelopment Project

BC DBFM Health $676M -

Peel Memorial Centre for Integrated Health and Wellness

ON DBFM Health $491M -

Mosaic Stadium Regina (SK) DBF Social $278.2M -

Waterloo to Kitchener Light Rail Transit

Region of Waterloo (ON)

DBFOM Transit $818M -

North Island Hospitals BC DBFM Health $606.2M -

Regina Wastewater Treatment Plant

Regina (SK) DBFOM Water/Wastewater $181M $58.5M

Swift Current Long Term Care Centre

SK DBFM Health $108.5M -

Barrie Transit Facility Project Barrie, ON DBFOM Transit $23.5M $5.8M

Sheridan College ON DBF Education $67.3M -

Joseph Brant Memorial Hospital ON DBF Health $353.6M -

ErinOak Kids Treatment Centre ON DBF Health $163.3M -

In order to fully understand the Canadian market and determine the potential for a pipeline going forward, it is essential to review the status of the individual markets at all levels of government.

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FEDERAL PROJECTS One federal project entered procurement in 2014 – the NBSL. The Request for Qualification was released in July and resulted in three bidders being successfully shortlisted for the Request for Proposals process. Financial close is expected in 2015 and substantial completion in 2018. A second federal project, the Detroit River International Crossing, is currently in pre-procurement. In September 2014, the Government of Canada named the members of the Board of Directors and the CEO for the Windsor-Detroit Bridge Authority (WDBA). The WDBA will deliver, procure and fund the project through a P3, while the International Authority will oversee the project procurement and the compliance with the Crossing Agreement signed in June 2012.

PROVINCIAL PROJECTS

ALBERTA The Government’s Building Alberta Plan (2014-17) committed $19.2 billion to infrastructure in the province.3 Highlights included: $5.1 billion in municipal infrastructure; $5 billion for the provincial highway network (including the ongoing construction of the Edmonton and Calgary ring roads); $2.6 billion to build new, and maintain existing, health care facilities; $334 million for water and wastewater management projects. In its 2014 budget the Government of Alberta reiterated its commitment to P3s by declaring its desire “to continue explor[ing] these types of opportunities”. According to Casgrain, the P3 model “will grow in importance [in Alberta] from 3.12% of total capital plan financing in fiscal year 2015 to 7.72% in fiscal year 2017.”4 The province is planning to move forward on three large P3 projects:

• The $1 billion Calgary Health Centre, Alberta’s first healthcare P3 project; • The construction of a ring road in Southwest Calgary; and, • An affordable housing project in Calgary and Edmonton.

Alberta’s P3 market, however, continued to face difficulties due to a saturated construction market trying to cope with the demands of the population growth and the reconstruction efforts following last year’s devastating floods. The Alberta Schools Alternative Procurement IV Project (ASAP IV), which would have resulted in the construction of 20 new schools, suffered a setback when the government received only one bid. Initially planning to continue moving the project forward as a P3, the Government of Alberta issued a Request for Proposal in November 2013 to the sole bidder. However, in June 2014 the Government announced that

3 Government of Alberta. Capital Plan. http://finance.alberta.ca/publications/budget/budget2014/fiscal-plan-capital-plan.pdf 4 Casgrain, Infrastructure Newsletter, March 2014.

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ASAP IV would be delivered as a Design Bid Build as it was determined by the province that a traditional procurement would deliver the project at a lower cost to taxpayers.5

BRITISH COLUMBIA The province continued to maintain a substantial and stable pipeline as its economy continued to grow and its unemployment levels dropped. In February, the government announced a three year, $17.7 billion capital spending plan which focuses on the education ($1.5 billion for K-12 and $2.3 billion for post-secondary education), health ($2.6 billion) and transportation ($3.4 billion) sectors.6 At the municipal level, the Regional Transportation Investments – A Vision for Metro-Vancouver was published in June by the City of Vancouver, which will provide a ten year blueprint for its transportation needs.7 The blueprint, which calls for $7.5 billion in new capital spending, outlines the need for significant road, light rail and bus service expansion to help alleviate congestion in Metro-Vancouver. Included in the blueprint are three major projects for the region:

• The expansion of the light rail system in Surrey and The Langleys; • The replacement of the Patullo Bridge; and, • An extension of the Broadway Corridor Rapid Transit to Arbutus Street.

In 2014, the Province launched two P3 projects, the Campbell River Organic Waste and Biosolids Facility (DBFOM) and the Penticton Regional Hospital Patient Care Tower Project (DBFM). The launch of the Campbell River Facility followed a continuing trend by the province of investing in waste management and water treatment facilities - entering procurement the previous year were the Surrey Biofuel Processing Facility and the Biosolids Energy Centre in Victoria. The province also saw four P3 projects reach financial close in 2014: the John Hart Generating Station Replacement; the BC Children's and BC Women's Redevelopment Project; the Okanagan Correctional Centre; and, the North Island Hospitals. British Columbia continued to demonstrate leadership and innovation in its P3 procurements. In July 2014, it became the first Canadian province to issue a green bond for a P3 project (for further information on green bonds, please see section 2.4). The 32.3-year bond was issued by Tandem Health Partners, the consortium delivering the North Island Hospitals Project, and raised approximately $231.5 million.8 As highlighted by Inspiratia, “this development demonstrates the strength and innovation of the Canadian financing market.”9

5 InfraAmericas. Alberta Opts Against P3 for Schools Project. http://www.infra-americas.com/news/canada/1384627/alberta-opts-against-p3-for-schools-project.thtml 6 Government of British Columbia. Budget and Fiscal Plan. http://bcbudget.gov.bc.ca/2014/bfp/2014_budget_and_fiscal_plan.pdf 7 Mayors’ Council of Regional Transport. Mayors’ Council Vision. http://mayorscouncil.ca/wp-content/uploads/2014/06/MayorsCouncil_Vision_June-12-2014.pdf 8 Partnerships BC. News Release, 2 July 2014. http://www.partnershipsbc.ca/files-4/documents/2014FIN0023-000901_North-Island-Hospitals-Project.pdf?utm_content=kristy.darragh%40p3canada.ca&utm_source=VerticalResponse&utm_medium=Email&utm_term=Read%20more%2E%2E%2E&utm_campaign=North%20Island%20Hospitals%20Project%20green%20bond%20issue%20a%20firstcontent 9 Inspiratia. British Columbia: Going Green. http://www.inspiratia.com/north-america/canada/infrastructure/intelligence/british-columbia-going-green/countries/

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The experience and expertise of Partnerships BC was visible through its advisory role in P3 projects in other Canadian provinces and in the United States. The Agency continued to work closely with SaskBuilds to help grow the new P3 Agency, advised on the procurement process for the Iqaluit Airport Expansion, which began construction in July, and began working with the Yukon government on the procurement of a hospital in Whitehorse. In the United States, the agency continued to participate in the West Coast Infrastructure Exchange and provided advisory services to the State of Oregon.

NEW BRUNSWICK 2014 marked the completion of the Restigouche Hospital Centre Project (DBFM), a mental health facility, and the reach of financial close on the Moncton Entertainment Complex (DBFOM), which is targeted to begin operations in August 2017. Discussions also began surrounding a $3-$5 billion dollar dam replacement project in the City of Saint John. Although the procurement method has not yet been determined, the provinces P3 screening process means a P3 is likely to be considered as a potential delivery model. This past year also saw the launch of the Request for Qualification for the Saint John Safe Clean Drinking Water Project (DBFOM). While this project is not a provincial project, Partnerships NB was retained to advise the City of Saint John through its first P3 procurement.

ONTARIO In the 2014 budget, the Government committed over $130 billion to infrastructure needs over ten years, including:

• $29 billion for transportation infrastructure; • $2.5 billion for highway rehabilitation and expansion projects; and, • The establishment of a new permanent $100 million fund to support municipal roads

and bridges.10 In December, the Ontario Auditor General released its audit report on Infrastructure Ontario (IO) and the province’s Alternative Financing and Procurement. The audit report, which examined systems and processes with respect to P3 procurements, found that ‘tangible costs… were estimated to be nearly $8 billion higher under the AFP approach’ for 74 projects completed or underway.” In addition, the report found that there was “no empirical data to support key assumptions” with respect to assigning costs to risks and that two of the risks used should not have been included: “asset residual” risk; and “planning, process and allocation practices” risk. In response, IO stated that it will undertake the Auditor General’s recommendations, in particular will continue to look at ways to improve its Value for Money methodology. Having successfully delivered 36 hospital projects, IO began shifting its focus away from social infrastructure towards meeting its transit and transportation needs. Entering pre-procurement

10 Government of Ontario. Budget 2014. http://www.fin.gov.on.ca/en/budget/ontariobudgets/2014/

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in 2014 were two major highway projects: the Highway 401 High Occupancy Vehicle Lanes Project and the Highway 427 Extension Project, both of which are expected to cost an estimated $500 million each. Also reaching a significant milestone in 2014 was the East Rail Maintenance Facility (Go East Transit) Project, which saw its RFP issued. Another large transit project to enter the market, was the York Viva Bus Rapid Transit Project (DBF) which will see the expansion of the Viva rapidways to the cities of Vaughan and Markham. 2014 also saw significant construction advancement on the Ottawa Light Rail Transit System (DBFM), a $2.1 billion municipal project in which Infrastructure Ontario is playing an advisory role. Reaching financial close was the $800 million Waterloo to Kitchener Light Rail Project which is set to be delivered as a DBFOM. In April, Infrastructure Ontario announced its intention to procure its first energy transmission project, the North West Transmission Line, a 430 km, single-circuit 230 kV transmission line in northwestern Ontario using the P3 model.

QUÉBEC In November 2013, the Province of Québec established the Société québecoise des infrastructures (SQI) by amalgamating Infrastructures Québec and the Société immobilière du Québec. Reporting to Treasury Board, the SQI reviews all infrastructure projects with capital costs over $50 million and reports on potential P3 viability. The ten-year Plan Québécois des Infrastructures 2013-23 identified many large infrastructure projects in the health and transportation sectors; the Plan does not however indicate whether the P3 model will be utilized to meet the province’s urgent infrastructure needs. One municipal project entered procurement in 2014, the Sorting and Waste Treatment Centre for the Regional County Municipality of Haute-Yamaska (DBFO) for which the Request for Qualification was issued in June. Several projects continued to advance through the construction phase, especially in the healthcare and transportation sectors.

SASKATCHEWAN In 2012, the provincial government created SaskBuilds, a specialized Crown corporation with a mandate to advance major infrastructure projects through innovative approaches. SaskBuilds launched four projects into the market:

• Saskatchewan Hospital in North Battleford (DBFM); • Swift Current Long Term Care Centre (DBFM);

• Regina Bypass Project (DBFOM); and, • Joint-Use Elementary Schools Project (DBFM) which will see 20 schools built in high‐

growth areas. The emergence of the Saskatchewan market can be attributed to a number of factors. The provincial government has made a clear commitment to exploring use of the P3 model for its public infrastructure needs. The corporation’s continued outreach to more experienced P3 agencies such Partnerships BC and the Alberta Strategic Partnerships Office has contributed

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significantly to the development of P3 expertise in the province. Also contributing to the success of P3s in the province is the public’s increased awareness and understanding of this alternative procurement method. The 2013 referendum on the Regina Wastewater Project stimulated debate between citizens and government officials, and has brought greater attention to the model across the Province. Furthermore, the province’s private sector is increasingly becoming informed on P3s. In September, the Saskatchewan Chamber of Commerce held its second annual P3 Summit which saw business and community leaders gather to hear presentations from Canada’s foremost experts in the area of P3s.

MUNICIPAL PROJECTS As indicated in Table 1, six municipal P3 projects entered procurement in 2014:

• Edmonton Valley Line LRT Expansion Project (DBFOM); • Saint John Safe Clean Drinking Water Project (DBFOM); • Saskatoon North Commuter Parkway and Traffic Bridge Replacement (DBFOM); • Campbell River Waste Facility (DBFOM); • Winnipeg Southwest Transit Stage 2 (DBFOM); and, • Calgary Stoney CNG Bus Storage and Transit Facility (DBFM).

2014 saw cities like Winnipeg and Saskatoon further develop their P3 expertise as they launched their fifth and second P3 projects, respectively. Having completed the Chief Peguis Trail Extension Project in 2010, the City of Winnipeg approved the $590 million Southwest Transit Stage 2 (DBFOM) Project and released the Request for Qualifications in September. The project will see the development of a Bus Rapid Transit System between downtown Winnipeg and the southwest of the City. As traffic to southwest Winnipeg will increase by a projected 50% by 2031, the project is seen as a necessity by the City and is the first project to go through Manitoba’s new P3 legislation. The Public-Private Partnerships Transparency and Accountability Act requires: a detailed risk and Value-for-Money Analysis; the establishment of conflict rules for consultants; public consultation prior to initiating the bidding process; an independent fairness monitor to oversee the bidding process; and, the public entity to report on the results of the project and to make terms of the P3 arrangement public.11 The year also saw three municipalities launch their first P3 procurement: the City of Edmonton (AB), the City of Saint John (NB) and the City of Campbell River (BC), demonstrating the adaptability of the P3 model to different sized cities. The Edmonton light rail transit project is currently one of Canada’s largest P3 projects at a total cost of $1.8 billion. As Canada’s fastest growing city, Edmonton and its outlying areas will grow by half a million more people in the next 30 years.12 The project includes a light rail which will span 13 kilometres, include 12 new stations, a new operations and maintenance facility, park and ride facilities and

11 TDS LLP. http://www.tdslaw.com/knowledge-center/manitoba-legislation-regulating-p3-projects-proclaimed-into-force/#sthash.grVd38hk.dpuf 12 City of Edmonton. Backgrounder. http://www.edmonton.ca/transportation/Backgrounder_Valley_Line_LRT_Final.pdf

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transit centres. The City of Saint John went to market with its Safe Clean Drinking Water project, which will see the construction of a 100 million litre per day drinking water treatment plant, three new 11 million litre storage reservoirs and 15 other water transmission system improvements. The City of Campbell River also went to market with its first P3 project, the Campbell River Organic Management Facility. The project will see to the processing of sewage biosolids, yardwaste, household and commercial organic waste from communities throughout the region. Other Canadian municipalities also saw their projects move through the procurement process, especially in the transportation sector:

• Saskatoon North Commuter Parkway (entered procurement) • Southwest BRT Stage two in Winnipeg (entered procurement)

• Saskatoon Civic Operations Centre (reached financial close) • Waterloo to Kitchener Light Rail Transit (reached financial close) • Barrie Transit Facility (reached financial close)

Furthermore, the City of Regina saw its water treatment facility project enter its construction phase, this after the project underwent a referendum in September 2013.

2.3 Canada Moving Forward Going forward, there is no doubt that the demand for infrastructure by all levels of government will remain very strong so as to ensure the continued economic growth of Canada’s provinces, territories, municipalities and First Nations communities. With urban growth and new wastewater treatment regulations coming into force, there is potential for a broadening of the Canadian market. As P3 expertise continues to develop and best-practices shared, the market will likely witness opportunities in new cities and regions begin to unfold. This trend has continued over the past two years. In 2014 players such as Surrey, Campbell River and Saint John entered the P3 market for the first time. The Canadian P3 market is also likely to see a growing number of mega infrastructure projects enter the market as the procurement model continues to prove its ability to deliver such projects and the capital markets demonstrate their capacity for large debt issue. In recent federal budgets, the Government of Canada reaffirmed its commitment to encouraging the use of P3s where it makes sense. In addition to the renewal of the P3 Canada Fund, the 10-year New Building Canada Fund (NBCF), announced in Economic Action Plan 2013, includes a P3 Screen for all projects with total eligible costs over $100 million. Should the P3 Screen determine that a project could be viable as a P3 and that it will generate positive value for money, federal funding will be conditional on the project being delivered as a P3. The P3 Screen will help ensure that P3 procurement is taken into

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consideration by other levels of government across the country, before proceeding with large infrastructure projects that involve a federal contribution. The additional efforts on the part of the federal government combined with existing provincial, territorial and municipal P3 Screens and programs may contribute to a continued pipeline of projects over the coming years.

2.4 Canadian Capital Markets

Following a year of modest growth, financial markets entered 2014 with a more positive outlook as global economies continue to emerge from fiscal tightening.13 Throughout, Canada has continued to be recognized as having weathered the financial crisis due to the option of long-term bond financing in addition to bank financing for P3 infrastructure projects, as well as the availability of financial market liquidity. Reflecting the market’s comfort with the Canadian P3 model was the continued lowering of bond spreads over the course of the past year. Furthermore, with many mega infrastructure projects set to enter procurement in the coming years, Canada’s market has already demonstrated capacity for large debt issues in precedent transactions, such as the Canada Line and the Evergreen Line Extension Project. The successful financing of the John Hart Generating Station project at the beginning of 2014 confirmed “the strength of the Canadian capital markets and the ability of its institutional investors to grasp and lend to complex projects.”14 The project involved the design, build, finance and maintenance of a replacement 132MW hydroelectric plant on the Campbell River in British Columbia. The project’s bond was a 19 year senior secured amortized bond priced at $299 million in February with a spread on 190 bps over the 2024 and 2029 interpolation curves. The bond was rated ‘BBB (high)’ becoming only the second bond to tap the primary market with this rating.15 Canada’s first light rail project to tap into the rated bond market was the Waterloo to Kitchener project.16 The project’s bond was a 20.1 year senior bond priced at $103 million with a spread on 195 bps. Debt for the light rail transit project consisted of a combination of long-term senior bonds and short-term bank debt rated BBB+ by Standard & Poor. The long term bonds are coupled with a short term bank facility of $41 million which will be repaid at substantial completion. The unique aspect of this project was that the Alberta Treasury Branches was the sole provider of the short-term senior bank facility.

13 http://www.dwpv.com/en/Resources/Publications/2014/Canadian-Capital-Markets-Report-2014 14 Casgrain, Infrastructure News, March 2014. 15 Ibid. 16 Casgrain, Infrastructure News, June 2014.

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Balfour Beatty's Tandem Health Partners priced $231.5 million in senior secured fixed rate bonds with a spread on 165 bps to finance the $500 million North Island Hospital project. The project’s consortium, THP Partnership, achieved the lowest bond issue spread post financial crisis. According to Casgrain, the project managed this record low spread through four factors: tightening of secondary markets; first A-rated bond in which British Columbia was the government counterparty; the participating firms were well known to investors; and, the relatively low number of projects to hit the market in 2013. Receiving a preliminary A- rating from Standard & Poor's, the bonds have a maturity of 31 October, 2046 and National Bank Financial and Scotiabank are arranging the financing. The Peel Memorial Centre for Integrated Health and Wellness which were issued on the unrated private market. Issued by Plenary Health in June, the 20 year, $112.7 million Series A Senior Bonds, carried a spread of 175 bps over the 2037 curve. The bond was sold to a small group of life insurance companies.17 In secondary markets, spreads continued to tighten as they went down to 161bps from 173bps on January 1st 2014 and from 178bps 1 year ago. Table 5 P3 Bonds Issued in 2014

Project Name Bond Spread Value Issue Date Long- vs Short-Term

John Hart Generating Station 190 bps $299 M Feb 2014 Long-term

Waterloo to Kitchener Light Rail Transit Project

195 bps $103 M Jun 2014 Long-term

North Island Hospitals 165 bps $232 M June 2014 Long-term

Peel Memorial Centre for Integrated Health and Wellness

175 bps $112.7 M June 2014 Long-term

2014 also saw green bonds issued for one P3 project in Canada, with the potential for a second project in early 2015. Green bonds can be either “labelled” or “unlabelled”. A labelled green bond is designed to produce specific environmental benefits, where as an unlabelled green bond is a financial instrument that just happens to facilitate an environmental benefit.18 This approach to project financing is gaining traction and may play an important role in the infrastructure sector going forward into 2015. Although there are not yet many standards for labelling green bonds, “Solactive, a German index provider, launched the first green bonds index, which is a rules-based, market value weighted index engineered to mirror the green bond market.”19 Eligibility criteria for bond inclusion under Solactive’s index include:

• Being defined as green bonds by the Climate Bond Initiative; • Amount outstanding of at least USD $100 million; • Time to maturity of at least six months; and,

17 Infra-Americas. Plenary Reaches Financial Close on Ontario Hospital. http://www.infra-americas.com/news/canada/1387797/plenary-reaches-financial-close-on-ontario-hospital.thtml 18 ReNew Canada. Tackle Climate Change with Green Bonds, July/August 2014.

19 Casgrain, Infrastructure News, July 2014.

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• Exclude inflation linked bonds and convertible bonds.20 The North Island Hospitals Project marked the first time that a green bond was used to fund a P3 project in North America and the first time a green bond was issued to finance public infrastructure in Canada.21 Issued by the project’s consortium, Tandem Health Partners, the AAA rated, 32.3-year bond, raised about $231.5 million. The bond issued for this project was an “unlabelled” green bond, as its benefits are indirect and not specifically designed to produce specific environmental benefits. The Government of Ontario is set to issue up to $500 million in green bonds to cover a portion of the financing for the Eglinton Crosstown light rail project. Ontario launched its green bond program in October, making it the first government in Canada to issue green bonds. Under the green bond program, eligible categories will include: transportation/public transit projects; energy efficient infrastructure; clean energy projects; forestry, agriculture and land management projects; and, climate adaptation projects.

2.5 The Global P3 Marketplace in 2014

Based on PPP Canada’s interpretations of the state of the global P3 market place, we have identified the following developments among P3 pioneers and emerging markets:

P3 PIONEERS

AUSTRALIA After a lull in 2013, the Australian market showed signs of improvement as the government began planning for the implementation of its Real Plan for Action, which includes building more roads and infrastructure to boost the national economy. In July 2014, the Australian government gave Infrastructure Australia the mandate to develop a 15 year Infrastructure Plan for economic and social infrastructure. The Plan will seek innovative and practical ways of improving infrastructure funding in order to fill the country’s infrastructure gap. An example of such innovation was the decision to place greater attention on recycling capital by selling or leasing old federal assets and injecting the proceeds into new assets. Infrastructure Australia itself also underwent significant changes in 2014 as it began its transition as an independent advisory body. Its first task will be to oversee the completion of Australia’s infrastructure audit and to publish the 15 year Infrastructure Plan.22

20 Casgrain, Infrastructure News, July 2014. 21 ReNew Canada, http://renewcanada.net/2014/b-c-s-north-island-hospitals-project-issues-green-bond/ (Accessed 29 Sep 2014) 22 Infrastructure Australia. http://www.infrastructureaustralia.gov.au/media/2014_09_02.aspx

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At the state level, where much of the country’s infrastructure is undertaken, the three largest states, New South Wales. Victoria and Queensland, are all active in the P3 market.

• New South Wales (NSW): The NSW government announced a Aus$60 billion infrastructure commitment over the next five years, with P3s expected to be utilized in the transport, health, education, port, justice and social infra sectors.23 The NSW government approved plans for the development of the Sydney Rapid Transit (SRT) rail project, which will see the development of a 30km system, extending the North West Rail Link under Sydney Harbour through the central business district, to Bankstown.

• Victoria: In the 2014-15 budget, the state government increased its infrastructure commitments to almost Aus$1.5 billion. This is to help several deals that are currently working their way through procurement as well as planned projects, mainly in the roads, ports, schools and health sectors.24 The Victoria Government signed an agreement with Transurban to deliver the CityLink Tulla Widening project; a Aus$850 million project will see the design, upgrade and widening of Melbourne's CityLink toll road.

• Queensland: The Queensland government carried out an extensive consultation of the

state's population regarding plans to limit the state's debts which are the highest of any state in Australia. In a bid to reduce the debt and balance its budgets, the state began focusing on asset sales. The government has promised not to push ahead on major asset divestiture until after the June 2015 election. However, the government did sell the Queensland Motorways, which brought in over Aus$7 billion in revenue.25 The largest deal to reach financial close in 2014 was the Aus$7.1 billion sale of Queensland Motorways.

Internationally, Australia, by way of the G-20, spearheaded the establishment of the Global Infrastructure Hub (GIH), an infrastructure “knowledge hub” located in Sydney. The Hub is meant to support the implementation of certain elements of the GII, including: 1) building a knowledge sharing network; 2) developing a consolidated database of projects; 3) addressing data gaps; and 4) sharing and developing model documentation for implementing G20 endorsed best practices, on a voluntary basis.

EUROPE According to the European PPP Expertise Centre, the first half of 2014 saw 12 countries reach financial close on 34 P3 transactions, significantly more than the 24 transactions that closed during the same period last year by ten countries.26 Once again, the UK, with 11 deals, was the largest P3 market in value terms followed by Germany with five, France with four and Greece with three. 2014 marked the return of Greece to P3 market after a five-year absence. The transportation sector, which saw 12 deals close, accounted for approximately

23 Ibid. 24 Ibid. 25 Ibid.

26 European PPP Expertise Centre. Market Update 2014. http://www.eib.org/epec/resources/epec_market_update_2014_h1_en.pdf

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85% of the overall market value. Twelve transport transactions reached financial close. The education sector, which accounted for seven closed deals was the second biggest P3 market both in value terms and number of transactions. This represents a significant decrease in the number of transactions in that sector compared to 2013, when it was the most active sector. Healthcare was the third most active sector. A number of European countries also either began, like France, or completed, like Portugal and the UK, a review of their P3 policies and institutional frameworks. According to Inspiratia, France has shifted its policy on PPP, taking a more positive approach as it looks to get infrastructure projects moving.27

UNITED KINGDOM In March 2014, the House of Commons’ Treasury Committee released a report on the new Private Finance 2 (PF2) program that highlighted a number of concerns,28 including:

• The introduction of a “control total”, meaning that government spending on P3s cannot surpass a total of £70 billion over five years. The Committee concluded that the control total will create an incentive for departments to bring forward investment decisions under PF2 as soon as possible in order to include the projects within the £70 billion cap. This, it is believed, will likely reduce the quality of decision making within government on investment projects.

• The government’s withdrawal of the Value for Money Assessment Quantitative Assessment Tool for comparing private finance and conventional procurement options. The Treasury is currently updating its Value for Money methodology under PF2, but until this is completed, procuring authorities are still required to provide a qualitative assessment when appraising whether projects should be funded by private finance. The Committee concluded that it should only be considered a supportive tool and in conjunction with a quantitative component.

The UK’s 2014 budget did not present any new P3 projects, but did paint a more positive picture of the economy and public finance forecast, thus setting the ground work for future infrastructure investment. While some projects did reach financial close in 2013 and 2014, these were mostly older legacy deals and make up the end of the original PFI program. The PF2 program did get a few projects into procurement in 2014, including the first Priorities Schools batch which will include eight schools, and Sandwell and West Birmingham Hospitals project. Furthermore, the government confirmed support for the Thames Tidway Tunnel super sewer project (estimated to cost £4.2 billion) for which will go forward as a P3. Although PF2 still has a long way to go to before it can offer a robust pipeline, it has the potential to create momentum if coupled with government leadership and the right levels of capital investments.

27 Inspiratia. France PPP Policy Shuffle. http://www.inspiratia.com/infrastructure/intelligence/france-ppp-policy-shuffle/#sthash.0OSSPtZf.dpuf 28 PPP Forum. http://www.pppforum.com/news/treasury-committee-publishes-report-pf2

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NEW AND EMERGING P3 MARKETS

SOUTH AMERICA - BRAZIL AND COLOMBIA Leading the region in 2014 were by far Brazil and Colombia, both of which have outlined ambitious infrastructure investment agendas and embraced the P3 model. With nearly 35 projects in its pipeline in 2014, the year saw four projects reach financial close with most activity coming from the transportation sector, followed by the energy sector. According to Infra-Deals, it is expected that the government will award 20 projects by the end of 2015. As for Brazil, the government focused on opening up their market to foreign investors. Long seen as being closed to international developers, Brazil began courting the international community by launching a campaign to showcase the government’s support for P3s. Leading the showcase was Finance Minister, Guido Mantega, who unveiled a strong pipeline of projects in February to international developers. With this initiative, the government is actively seeking to engage private investors to play a significant role in upgrading and operating the country's infrastructure.29

ASIA PACIFIC ECONOMIC COOPERATION REGION P3 projects in the Asia-Pacific region continued to be large with an average transaction value of $509 million. Significant room remains for private sector investment in P3 projects throughout the region as governments are continuing to provide significant funding to projects. Over a couple of years, the Asia Pacific Economic Cooperation (APEC) forum has been used as the vehicle for global efforts to begin or refine P3 programs in APEC member countries. The Government of Canada, among others such as China, Japan and Indonesia have invested time and resources into a number of initiatives, such as the implementation of a PPP Implementation Roadmap and P3 case studies.

TURKEY

Turkey will be celebrating its centennial in 2023 and is an emerging market to watch going into 2015. In order to mark the centennial, the government launched its 2023 Vision which includes:

• becoming one of the top ten economies in the world and improving per capita income; • achieving a GDP of US$2 trillion; • achieving a universal healthcare system; • increasing exports and foreign direct investment; • Reducing unemployment; and, • making Turkey the fifth largest tourist destination.

29 Inspiratia. http://www.inspiratia.com/latin-america--caribbean/brazil/infrastructure/intelligence/brazil-intelligence-update-3/countries/

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In order to achieve this vision, Turkey has pledged to invest US$200 billion in infrastructure projects in the sectors of billion in transportation, airports, health and energy; and is expecting the private sector to invest a further US$150 billion. Having already experienced some success in delivering airport and port development projects using the P3 model, Turkey turned its attention towards the healthcare sector by announcing a series of new projects. In order to support its healthcare initiatives, the government has put forward changes to its healthcare PPP legislation. Other major legislative changes were initiated by the Turkish government in hopes of attracting foreign investment as the country’s infrastructure market has traditionally been dominated by local companies on both the equity and debt side. Initiatives currently underway are expected to improve transparency and bring contractual provisions up to international standards.

NORTH AMERICA − UNITED STATES OF AMERICA U.S P3s have been led and developed at the state level. States such as Virginia, Florida and Texas have established the requisite factors to launch their own individual P3 markets, much like many Canadian provinces in the early 2000s. In July 2014, the President announced the creation of the Build America Transportation Investment Center to be housed in the Department of Transportation. This centre will serve as a one-stop shop for state and local governments, public and private developers and investors seeking to utilize innovative financing strategies for transportation infrastructure projects. Furthermore, the Water Resources Reform and Development Act was passed into law in May paving the way for a series of new P3s and establishing the Water Infrastructure P3 Program. The legislation requires the Army Corps of Engineers to establish a P3 pilot program allowing non-federal partners to carry out water resource development projects, including coastal harbor improvement, channel improvement, inland navigation, flood damage reduction, aquatic ecosystem restoration and hurricane and storm damage reduction.30 It is believed that the pilot program will allow up to 15 projects to move forward as P3s. There are currently no standards across States for contracts and pricing, risk sharing and returns.31 Federal and State governments are actively seeking Canadian input on P3s and learning for the experiences of their neighbours to the north. In April, the U.S. House of Representatives’ Transportation & Infrastructure Committee held a panel on International Experience with P3s. Canadian experts from Infrastructure Ontario and Partnerships BC were invited to appear before the panel. Furthermore, groups such as the West Coast Infrastructure Exchange will likely contribute to the standardization of the P3 process across the west coast and create a platform from which experience and knowledge can be shared.

30 National Council for Public-Private Partnerships. http://www.ncppp.org/house-includes-p3-pilot-initiative-in-water-resources-infrastructure-bill/ 31 ReNew Canada. The Way Forward. July/August 2014.

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CONCLUSIONS

While traditional markets, such as Western Europe, continued to deal with financial uncertainty and slowed infrastructure investments, there are many new areas of growth. Canada continued to forge ahead with a steady pipeline of projects, new jurisdictions and new asset classes as well as the mega projects. Globally similarities can be observed as new countries are placing themselves at the forefront of a global effort to develop strong P3 markets in new regions such as the APEC region, Latin America and Eastern Europe.

2.6 Looking Ahead: Risks, Challenges and Opportunities

PPP Canada continues to operate in a diverse environment, with varying levels of knowledge and capacity across multiple jurisdictions in Canada and internationally. The overall Canadian market is demonstrating a significant cultural shift, paving the way for an increased pipeline through new jurisdictions, new asset classes and a new way of thinking about the procurement of public infrastructure. Nevertheless, as the overall Canadian market and future pipeline is varied, there is still much work to be done to ensure a consistent application of the P3 model as well as best practices Canada-wide. There are risks to the Corporation that fall into two different categories:

• Business/Program Risks – As more inexperienced jurisdictions enter the Canadian P3 market, PPP Canada has a reputational risk related to the potential lack of knowledge and capacity of the procuring authorities, especially in small municipalities, leading to the potential failure of projects to achieve VfM or be successful in the Canadian market.

• Operational Risks – As business grows under all three PPP Canada business lines, (P3 Knowledge Development and Sharing; Advancing Federal P3s; and Advancing Provincial, Territorial, Municipal and First Nations P3s), PPP Canada must ensure that staff have the skills and knowledge needed to advance the mandate of the Corporation and serve its clients. Ensuring the recruitment and retention of a highly skilled workforce is vital to the success of the Corporation.

PPP Canada has many opportunities to grow the Canadian P3 market, to bring awareness to the P3 model and the benefits of its application; and to expand the Canadian P3 market into new areas:

• Increased Interest – Strategic outreach and awareness programs targeting federal departments and agencies as well as provinces, territories and municipalities through activities related to the delivery of the P3 Canada Fund have brought about an increase in interest in P3s from all levels of government across the country. The increased use of the P3 model has also brought greater attention to the model through the local media.

• Increased Recognition as a source of expertise – Having reviewed more than 300 P3 Canada Fund applications, provided advice on federal suitability assessments

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and P3 business cases, as well as performing due diligence on more than 20 projects in various stages of procurement, PPP Canada is recognized as a source of expertise. Additionally, PPP Canada’s experience is recognized internationally as a model for other developing P3 programs, as evidenced by the increased requests for information exchanges and training opportunities from other governments.

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3. DELIVERING VALUE FOR CANADIANS

Integrating a whole life-cycle approach to project delivery and encouraging private sector discipline and innovation, P3s continue to demonstrate their ability to achieve value for taxpayers in the delivery of much needed public infrastructure at all levels of government. The 2015-16 Corporate Plan sets out strategies to build on the Corporation’s success to date in continuing to broaden and deepen the successful use of P3s in Canada. These strategies are grounded in a steadfast commitment to generating value for taxpayers and recognition that success requires continued efforts to change the culture at all levels of government. Traditional procurement approaches are deeply embedded in the policies, practices and culture of the public sector. Changing culture requires concerted efforts to increase visibility and exercise influence. Since its establishment in 2009, PPP Canada has grown and matured both in size and experience. Starting with a small complement of just four employees, to an organization of over 60 people, the Corporation’s evolution is a reflection of the growth of the Canadian P3 market. Focusing first and foremost on establishing its place in Canada’s P3 market through our expert guidance on projects from development through to substantial completion and beyond, and becoming a recognised leader in the process, PPP Canada continues to cultivate its success and influence by furthering its own knowledge and perfecting its processes in order to continue providing high quality advice – the foundation of all of the Corporation’s work. Experience has taught us that a flexible organization, capable of seamlessly adapting to the changes of the Canadian P3 market, is crucial to ensuring that PPP Canada remains a trusted advisor and dependable source of expertise. As such, the Corporation’s business lines have evolved significantly over the past five years. Focusing first on managing the P3 Canada Fund, the Corporation dedicated most of its time and efforts to investing the first tranche of the $1.25 billion Fund and developing the necessary tools and products to support this investment. In the following years, the Corporation worked on meeting its remaining five corporate objects, which included cementing its project assessment processes and growing Federal Business Line. In order to support federal clients, the Corporation re-directed resources and staff towards developing tools and guides targeted to federal needs, and thus begin integrating P3s into the federal procurement discourse. The experiences gained during these development years, allowed PPP Canada to meet its sixth and final corporate object: to act as a source of expertise and advice on PPP matters.

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3.1 P3 Knowledge Development and Sharing

PPP Canada is mandated to act as the Government of Canada’s centre of P3 expertise. Developing and sharing this expertise is essential to successfully procuring public infrastructure and realizing value for taxpayer dollars. By developing tools and guides based on P3 best-practices, transaction costs are minimized, the time needed for up front planning is lowered, and procurement practices are streamlined, thus ensuring better value for money for Canadians. Just as the P3 market has evolved according to the needs of Canadians, PPP Canada has kept pace and is preparing to enter a new phase in its development: sustaining its leadership. Key to this next phase in our evolution will be the P3 Knowledge Development and Sharing (KDS) Business Line which was established through the 2012-13 Corporate Plan. Contribution to the KDS Business Line is the responsibility of the entire Corporation. Focus is placed on internal knowledge and growth in addition to the knowledge needs of our clients through all phases of a project’s lifecycle, thus enabling the Corporation to fully deliver on its mandate.

STATUS As a knowledge-based organization, PPP Canada places importance on the development of P3 knowledge to ensure high quality advice and expertise grounded in best practices to our clients across all levels of Government as well as our broader stakeholders. Initially driven by the immediate needs of our other two business lines, we have begun to focus our efforts on developing tools and guides to meet the evolving needs of the Canadian P3 market more broadly. This evolution in the Corporation’s knowledge development efforts lead us to define a third business line, P3 Knowledge Development and Sharing.

During the 2014-15 planning period, the Corporation further refined its KDS Business Line, by developing a corporate wide strategy and structuring its governance just as it had for the other two business lines which saw the establishment of the KDS Committee to oversee all knowledge development and sharing initiatives. The Committee will continuously monitor in-progress initiatives as well as identify new priorities and their associated timelines. PPP Canada has significantly increased its efforts to build, develop and share tools and products to cultivate its own internal capacity and P3 knowledge, as well as that of its clients and broader audience.

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While previously these items were presented to other management level committees for approval, this new forum provides a broader engagement across the Corporation, ensuring significant input into developing products that meet our needs as well as those of our stakeholders. Over 30 new initiatives were launched by the KDS Committee in 2014-15. Some of these initiatives are as follows: Other Levels of Government:

• A study on the impact of engaging communities as provinces, territories, municipalities and First Nations look to procure P3 projects;

• A planning guide for municipalities to assist in the reduction of upfront planning costs;

• Template documentation such as procurement documents (Request for Qualification [RFQ], Request for Proposals [RFP] and Project Agreement [PA]) and Project Specific Output Specifications (PSOS) for water/wastewater projects to assist in the reduction of transaction costs;

• A study on the potential for bundling projects; and, • A study on the best practices in concession management.

Federal Departments and Agencies:

• Template documentation such as a financial model, procurement documents (RFQ, RFP and PA); and,

• A study on risk quantification methodology. Shareholder:

• Review of P3 project audits and a study on best practices in audit reports. These new KDS initiatives continue to evolve in the 2015-16 planning period. In 2014, PPP Canada consulted on a number of tools and guides with both the public and private sectors. In September, the Corporation published the Energy-from-Waste Sector Study. The Corporation also worked with the Canadian Urban Transit Association (CUTA) on the Rapid Transit Sector Study which will be published in the 2015-16 planning period. Building on the success of Energy-from-Waste and the Water/Wastewater studies, the Rapid Transit Sector Study offers guidance on assessing rapid transit opportunities under P3 delivery models. 2014 also saw PPP Canada partner with the Council of the Great Lakes to produce a study on the potential viability of a P3 market in the Great Lakes Region to be launched in April 2015. The study was funded by both public and private stakeholders in Canada and the U.S. and will be the first regional study on P3 potential and P3 viability in which PPP Canada has participated. By partnering with the Council of the Great Lakes, PPP Canada is contributing to the development of the regional knowledge of both the public and private sector.

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While work continued to implement new KDS initiatives, the Corporation also completed and published a number of other initiatives to support projects already in progress, such as the Schematic Design Estimate Guide as well as the completion of the first three components of the Federal Suite of Tools:

• Identifying P3 Potential, a guide for assessing P3 suitability of projects; • P3 Business Case Development, a guide to developing comprehensive P3 business

cases to support decision making; and, • Procurement Options Analysis Methodology, a guide to assist officials through the

analytical process of selecting the optimal procurement option. The fourth and remaining tool, the Federal P3 Procurement Guide, will be finalized to capture lessons learned and best-practices from the Corporation’s experience to date on federal projects. Complementing the release of the Federal Suite of Tools was the development of Request for Qualification (RFQ), Request for Proposal (RFP), Project Specific Output Specifications (PSOS) and Project Agreement (PA) templates directed towards the Corporation’s federal clients. Providing federal clients with standardized tools and templates will not only help them deliver successful projects, but will attempt to minimize transaction costs and help lower the amount of up front planning time needed to meet Treasury Board expectations . PPP Canada also published new tools in order to support the work of clients applying to the New Building Canada Fund (NBCF). The NBCF Suitability Assessment Guide and the Procurement Options Analysis Guide were published in April to coincide with the launch of the new program. Having experienced working with the University of New Brunswick on the development of a P3 101 curriculum and the University of British Columbia, on the establishment of an infrastructure institute, PPP Canada recognizes the importance of fostering academic thinking and research on P3s. Partnering with the Telfer School of Management at the University of Ottawa, the Corporation initiated a Systematic Review of P3 Literature, a review of academic writings on P3s since 2013. PPP Canada also partnered with Ryerson University on a paper entitled: “Understanding the Effect of Public Private Partnerships on Innovation in Infrastructure Projects.” To help advance the understanding of P3s, this publication identifies P3 projects where innovative solutions were used and identifies the factors that led to the innovation being implemented. In order to support these research and publication initiatives, the Corporation will implement an Outreach and Communications Strategy and will take the first steps in developing a Digital Marketing Strategy. These strategies will ensure that the Corporation’s public engagement contributes to informing stakeholders and sharing knowledge on the ability of P3s to deliver public infrastructure projects. They include approaches to communications activities such as media relations, social media and stakeholder relations as well as event and conference

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participation; which represent both learning and teaching opportunities. Also on the market development front, the Corporation produced a promotional video which will be used as part of an integrated marketing communications plan that includes publications, industry events and signage. Most significantly however, was the launch of the new PPP Canada website in April, 2014. This new website provides PPP Canada with a better platform for an extensive resource library and connected to the Digital Marketing Strategy will make the dissemination of information to a variety of audiences, simpler and more effective. This is a key component of the KDS strategy. In 2014-15, the Corporation also continued its participation and attendance of annual industry events such as the Canadian Council for Public-Private Partnerships conference, the Organization for Economic Cooperation and Development (OECD) Senior PPP Officials Network meetings, the Federation of Canadian Municipalities Conference and Annual Meeting, the Canadian Urban Transit Association conferences and others. On the international front, PPP Canada officials met with representatives from Morocco, Ethiopia, China, Japan, South Korea, the Philippines, New Zealand, Mozambique and the Caribbean Development Bank. Furthermore, the Corporation continued its efforts to actively participate in the sharing of P3 expertise within the OECD, and engaged on the development of a P3 framework for the Asia-Pacific Economic Cooperation (APEC). As the Government of Canada’s centre of expertise, the Corporation has not only met with international delegations, but has worked closely with officials from the Department of Foreign Affairs, International Trade and Development (DFATD) and the Department of Finance to provide information, and to support a variety of Government of Canada initiatives related to P3s.

STRATEGY PPP Canada will continue to evolve the KDS Business Line in accordance with its corporate objects and the strategic approach developed during the 2014-15 planning period. Specifically, we will ensure that we focus on areas that support our employees, clients and other stakeholders throughout all levels of our business process – from market development to concession management. The Corporation’s governance structure was amended during the 2014-15 planning period to introduce the KDS Business Line as a permanent fixture of our decision making processes, thus ensuring that it will continue to play a vital role in the Corporation moving into 2015-16 (please see Section 4.5 for further details). Recognizing the Corporation’s role as the Government of Canada’s centre of expertise, PPP Canada is continuing to increase capacity to develop overall knowledge of P3s, to produce the necessary products as identified in the KDS Strategy to support the growing portfolio of projects at all levels of government. As a number of new tools and guides were initiated during the 2014-15 planning period, PPP Canada will focus on evolving and completing these new knowledge products. PPP Canada will work internally with industry and other interested stakeholders to move 2014-15 initiatives forward.

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PPP Canada will also continue to assess and determine KDS priorities and initiatives through the Committee during the 2015-16 planning period, amending and adding to the workplan as older initiatives evolve or are completed. Each initiative undertaken will contribute to furthering P3s across the country, identify best practices, and refine processes. Identified as current priorities are products which will lower procurement costs and drive greater consistency in the Canadian market, such as templates and engagement strategies. Additionally, as more and more P3 Canada Fund projects reach substantial completion and enter their operational phase, PPP Canada will increase efforts to develop tools aimed at ensuring continued success of P3 projects during the concession management phase. These tools will focus on developing and sharing best practices for maintaining value for money, ensuring successful audits and fostering qualified project managers. Identified as future priorities are tools and guides that will help address challenges faced during the procurement stage, such as best practices on issues such as site contamination, geotechnical analysis, permitting and utilities. Efforts will also be increased on the market awareness front in order to improve the overall P3 knowledge of the Canadian general public. P3 projects can, at times, attract negative media attention and public opposition. PPP Canada will produce promotional materials which aim to better inform broader audiences and emphasise the value of the P3 model over traditional procurement when appropriate. This will be incorporated in the Communications and Outreach Strategy. As directed under Economic Action Plan 2014, PPP Canada is increasing efforts to provide small municipalities with information, guidance and tools to support P3s and the bundling of projects. In order to meet this directive, the Corporation initiated efforts to develop a planning guide for small municipalities which will assist with the upfront planning of P3 projects. This guide will be complemented by the development of Request for Qualification, Request for Proposals and Project Agreement templates aimed at lowering the costs associated with P3 projects, which can be significant for the Procuring Authority. These templates, which will be published during the 2015-16 planning period will also contribute to developing capacity and cost savings measures for small municipalities. Moving into 2015-16, PPP Canada will focus on finalizing these documents and ensuring their timely dissemination. This will be accomplished through newly developed strategies to engage small municipalities to share our knowledge. The Corporation will also work to develop strategic partnerships with regional associations and collaborate with provincial agencies in order to define the needs of small municipalities and inexperienced jurisdictions. Building on previous experiences, PPP Canada recognizes that part of ensuring the success of the P3 model is developing P3 knowledge within universities and the student population. PPP Canada will increase its outreach to the academic community, which will include

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partnering on research in various areas of study such as business, engineering, public affairs and law. In addition, PPP Canada continues to engage the provincial P3 agencies and offices to discuss successes, issues and best practices currently faced by each jurisdiction. By meeting regularly, the Corporation and the provinces will develop strategic and coordinated initiatives and will continue to promote the exchange of information.

PERFORMANCE MEASURES • Development of one new case study; • Implementation of a Digital Marketing Strategy; • Publish four new products; • Four requests per month for information seeking our expertise; • Represent Canada at three international events, conferences, or symposiums; and, • Participate or speak in 15 events, conferences, or symposiums per year.

PRIORITIES 2015-16 • Expand partnerships with the academic community in order to foster research and

knowledge both at the professorial and student level; and, • Development of a 2015-16 KDS Workplan.

2015-20 • Partner with the academic community to develop knowledge of P3s among students; • Continuously update P3 tools and documentation to accurately reflect the current

market; and, • Network domestically and internationally with leading P3 practitioners.

RESOURCE ALLOCATION PPP Canada will allocate $1,136,000 in operating funds ($1,150,000 in 2014-15) and 5 FTEs to the KDS Business Line in 2015-16 (unchanged since 2014-15).

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3.2 Advancing Federal P3s

PPP Canada is mandated to assess P3 opportunities at the federal level in accordance with criteria established by the Treasury Board and to advise on their execution. In 2012, following the Budget 2011 commitment, the Treasury Board Secretariat (TBS) established criteria for the assessment of P3 opportunities at the federal level, the Federal P3 Screen. In particular, TBS guidelines require all projects in excess of $100 million with a useful life of 20 years or longer to be assessed for P3 suitability. PPP Canada has worked closely with TBS and key federal departments to ensure all projects are assessed on a timely basis. We employ a strategy based on a self-reinforcing cycle of visibility, credibility and influence in order to successfully assess and advise on the execution of P3 projects at the federal level.

STATUS P3 expertise underpins all of PPP Canada’s work and is visible at all phases of a project’s life-cycle, permeating all aspects of its work with federal clients. To this, the Corporation began developing the Federal Business Line Strategy in the fall of 2014, which aims to make PPP Canada an integral part of the capital delivery apparatus of the federal government. Sustaining this goal can only be achieved through meaningful and purposeful action, and mutually beneficial relationships. PPP Canada continued to focus its efforts on driving the culture change necessary to institutionalize P3s as an approach to delivering federal infrastructure.

GENERAL AWARENESS & MARKET DEVELOPMENT The 2014-15 planning period saw continued focus on ensuring the consideration of the P3 model at the federal level. PPP Canada continued its efforts on developing P3 knowledge at both the working and executive levels within capital intensive departments and agencies. The CEO continues to focus outreach efforts on capital intensive departments by regularly meeting with their DMs as well as reaching out to new DMs when they move into new roles in departments and agencies with a pre-existing relationship with the Corporation. The Chief Financial Officer (CFO) network, established by PPP Canada’s CFO in 2012-13, is designed to bring a greater understanding of PPP Canada and its role in the federal context. The sessions also covered the P3 model in general, the P3 structure, the value of

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a P3 over a traditional procurement, as well as the tools and guides produced by the Corporation. Planning for an early 2015 session is currently underway. Additionally, the Corporation held three Federal P3 Primer Session with 1) Infrastructure Canada in March, 2) Treasury Board Secretariat in September and the 3) Department of National Defence. Planning is also underway for a primer session with DFATD. While DFATD is not a capital intensive department, many of its internal branches are involved in the development of P3 frameworks and policies, such as the World Bank Global Infrastructure Facility and the G20’s Global Infrastructure Hub. PPP Canada reached out to representatives from across the organization to provide them with information on the Corporation, its role as the Government of Canada’s centre of expertise, its advisory services, and also provided participants with an introductory presentation on P3s.

PROJECT IDENTIFICATION: THE FEDERAL P3 SCREEN Building on initial outreach strategies, PPP Canada continued its work with federal departments and agencies on the screening of potential federal projects

PROJECT DEVELOPMENT AND DUE DILIGENCE PPP Canada is working closely with several screened-in federal departments in the development of their P3 Business Case. PPP Canada has formalized its advisory role with several federal departments and agencies by entering into a Memorandum of Understanding (MoU) to delineate the relationship, roles and responsibilities between PPP Canada and the project managers. The Corporation also continued to deliver on its existing MoUs on the development of their projects. PPP Canada continued to deliver on its existing MoU with Transport Canada on the Detroit River International Crossing (DRIC) project. As an internal knowledge sharing initiative, the expertise garnered during the launch to market of the New Bridge over the St. Lawrence (NBSL) project will be applied to DRIC by members of the project team, in concert with members from the NBSL project team.

PROCUREMENT PPP Canada continued its work on the federal government’s largest infrastructure projects, the NBSL. PPP Canada played a key role on the Integrated Project Management Team. As the project moves towards financial close, we will continue to play a leading role.

STRATEGY

The Corporation is committed to working with the Government to fulfill its Budget 2014 commitment to leverage PPP Canada’s expertise in the execution of federal projects. The Corporation will: continue to work with key stakeholders to move beyond a project by project approach to defining its role in the execution of federal projects; and continue to

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build its relationship with key capital intensive departments and agencies. We will also strive to become the provider of choice on the development of a P3 Business Case. Feedback from our clients is a crucial aspect of understanding how they view our value added throughout the implementation of the Federal Screen, the development of the P3 Business Case and the procurement of the project itself. In this vein, PPP Canada initiated the development a Federal Client Survey to be advanced during the 2015-16 planning period. The Survey will assess the Corporation’s value proposition and measure the perception of the level and quality of service delivery of PPP Canada to determine whether service expectations defined in the MOUs are being met. Specifically, the Survey will:

• determine overall client satisfaction with our products and services; • identify client perceptions of “key areas of strength” and “key areas for

improvement”; • measure and prioritize areas where improvement will most affect client satisfaction; • measure increased capacity of federal clients that is attributable to PPP Canada; • determine the fairness and competitiveness of PPP Canada’s pricing; and, • measure the ease of communication with PPP Canada and the ease of

understanding of the PPP Canada tools.

MARKET DEVELOPMENT In keeping with the Federal Business Line Strategy, PPP Canada will continue its CEO and CFO outreach initiatives as well as its P3 primer sessions with capital intensive departments and agencies. Such an approach will continue to position the Corporation to demonstrate its value added to the federal procurement process.

PROJECT IDENTIFICATION & PROJECT DEVELOPMENT PPP Canada will continue to work with federal partners in order to ensure the continued successful application of the Federal P3 Screen. On 24 November 2014, the Government of Canada announced investments of $5.8 billion on federal infrastructure assets and on-reserve schools. PPP Canada is currently working with departments and agencies as they develop projects in order to assess their potential for P3 viability.

PROCUREMENT PPP Canada will continue to advise on the execution of additional federal P3 projects during the 2015-16 planning period as departments develop their POAs and prepare for the procurement of their projects. In particular, the Corporation will use the new federal suite of tools, including the federal VfM methodology, to ensure best practice application to federal P3 projects. Just as with the 2014-15 planning period, the 2015-16 period will see continued advancement on the NBSL, and the DRIC projects. We believe that we have a significant

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value to add to the procurement process of these projects, as demonstrated with the NBSL. The Corporation will also continue to work with other federal clients as their projects continue to develop and guide them towards a successful procurement. As PPP Canada navigates the procurement process, the Corporation will be able to draw on lessons learned that can be applied to future federal procurements, solidifying its advice on the execution of federal P3s. These projects will mark a significant turning point in the evolution of the Federal Business Line and for the Corporation overall, and will be important as other federal projects currently in the P3 Business Case development phase prepare for their own procurement launch in the near future.

PERFORMANCE MEASURES

• Assist all departments and agencies with potential P3 projects in applying the Federal P3 Screen;

• Assist all departments and agencies with potential P3 projects in developing a P3 Business Case;

• Hold two department specific P3 Primer sessions; • Host one CFO session; and, • Execution of Project Agreement and financial close of the NBSL project.

PRIORITIES 2015-16

• Completion of work as outlined in signed MoUs; and, • Ensure dedicated resources to both the NBSL and DRIC project teams.

RESOURCE ALLOCATION PPP Canada will allocate $4,923,000 in operating funds ($4,900,000 in 2014-15) and 23 FTEs to the Federal Business Line in 2015-16 (unchanged from 2014-15).

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3.3 Advancing Provincial, Territorial, Municipal, First Nations P3s

3.3.1 P3 Canada Fund

PPP Canada is mandated to manage the P3 Canada Fund and negotiate, sign and administer agreements to be funded through the Fund in accordance with the policies and authorities established by the Treasury Board. The Fund has built a showcase of effective P3 projects targeting inexperienced jurisdictions, new sectors and models. It also targets full scale P3 projects (DBFOM or DBFM) and projects that are directly linked to job creation and economic growth. Corporate Plan 2014-15 saw the eligibility criteria of the P3 Canada Fund amended to allow Inuit organizations and self-governing First Nations to access the Fund. This amendment mirrors the Terms and Conditions of the New Building Canada Fund.

STATUS Over the years, PPP Canada has created a solid pipeline of projects which has allowed us to fulfill our mandate to commit the entirety of the first tranche of the P3 Canada Fund by the end of the 2013-14 planning period. These 24 projects have leveraged over $6 billion in total investments and will deliver an estimated $861 million in extra value for taxpayer dollars when compared to a traditional procurement. This was achieved through Corporate-wide efforts to improve the quality and P3 feasibility of projects submitted through the Fund. Targeted pre-procurement activities such as tailored outreach and intake assessment strategies have greatly contributed to development of the Canadian pipeline, especially over the last three rounds. The complete list of projects recommended or approved in the 2014-15 planning period is listed below:

Project Name Contribution Amount Model Round

Winnipeg BRT $137.3M DBFM Five

North Commuter Parkway Traffic Bridge Project $66M DBFOM Five

In January 2015, PPP Canada began developing the Other Levels of Government Business Line Strategy. Under this Strategy, the Corporation will streamline its outreach initiatives across business lines with a purpose of guiding the Corporation’s efforts over the next five years to build a strong portfolio of projects in inexperienced jurisdictions, projects that have significant private sector involvement (i.e. DBFOM), and projects that promote job creation and economic growth. As with the Corporation’s other two business lines, work under the P3 Canada Fund follows the life-cycle of a project as illustrated in the figure below:

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GENERAL AWARENESS & MARKET DEVELOPMENT PPP Canada’s focus in Round Five, as it had in previous Rounds, was on public infrastructure projects that promote jobs and stimulate economic growth, and provide optimal Value for Money (VfM) through P3 procurement, and that include long-term financing (i.e. DBFOM). In this context, the CEO centred his Round Six outreach activities on the heads of the provincial agencies and the mayors and city managers of Canada’s 25 largest municipalities, in particular new jurisdictions. PPP Canada sought to target its outreach efforts on municipalities with the greatest likelihood of developing a project over $100 million in capital costs. In order to facilitate the consideration of the model, PPP Canada undertook a number of P3 101 workshops in a number of new jurisdictions. A P3 101 workshop for the City of Toronto was held prior to the Round’s intake period. This strategy was consistent with that taken in Round Five and aligned with the Corporation’s focus on attracting full scope P3s (i.e., DBFOM or DBFM models) in the three designated priority areas: water and wastewater; transportation; and solid waste disposal. The Corporation also sought to engage smaller municipalities through other avenues, such as industry events, conferences and presentation opportunities. Client engagement meetings took place with several municipalities across Newfoundland as well as with provincial and municipal officials in St. John’s. P3 101 workshops were also held in Nova Scotia and, for the first time, in Whitehorse, where PPP Canada travelled to the municipality to meet with territorial and municipal officials. Through this cross-country approach, the Corporation has engaged with the Federation of Canadian Municipalities and municipal associations of both elected and non-elected officials through workshops, annual meetings and conference participation.

PROJECT IDENTIFICATION PPP Canada launched Round Six of the P3 Canada Fund on April 14, 2014 and closed the application period on June 13, 2014. A total of 16 applications were received. Of the 16 applications, 11 were new applications and 5 were resubmissions. The estimated capital cost for the 16 projects is almost $10 billion, which includes 4 projects valued over $1.5 billion each. A greater number of high quality applications were received in Round Six with none of the applications being deemed ineligible. Application highlights include:

• Continued development in Municipal Transit and Local Road & Core National Highway System Infrastructure sectors;

• The opportunity to bundle water treatment projects in Atlantic Canada; and, • Total capital value of projects submitted was valued at almost $10 billion.

The greatest number of applications once again came from municipalities with 75%, or 12, of the 16 projects submitted. Approximately 94% (15 projects) of the applications received were in

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the priority sectors. A chart illustrating the distribution of all applications received in total capital costs (capex) and their infrastructure categories is provided below.

Numbers are in thousands of dollars

The reduced number of applications in Round Six (26 were received in Round Five) can be attributed to a more targeted outreach by PPP Canada which continued to focus on select priority sectors and greater private sector involvement. As in previous years, the work done leading up to the launch, once again has resulted in a higher degree of quality applications. At its meeting in September 2014, the PPP Canada Board of Directors screened in seven of the 16 projects for further work in the business case development phase and were assessed to determine their eligibility to receive Project Development Funding (PDF) within the Round.

PROJECT DEVELOPMENT AND DUE DILIGENCE The 2014-15 planning period also saw additional milestones for PPP Canada projects:

• Iqaluit Airport Expansion Project entered construction • One project received Project Development Funding:

o Regina Bypass.

PROCUREMENT Five P3 Canada Fund projects launched the procurement process:

• Edmonton Valley Line LRT Expansion Project; • Regina Bypass Project; • Saint John Safe Clean Drinking Water Project; • Saskatoon North Commuter Parkway and Traffic Bridge Replacement Project; and, • Winnipeg BRT.

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Three projects reached substantial completion: • Evan Thomas Wastewater Treatment Plant; • Lac La Biche Wastewater Treatment Plant; and, • Kokish River Hydroelectric Project.

STRATEGY With the intake under Round Six focused on a smaller number of projects with significant capital costs, PPP Canada expects only one Round Six project to reach maturity and be presented to the Board of Directors for an investment decision in 2015-16. Given the size of the screened-in projects, work on P3 business cases for the remaining Round Six projects continues and these projects are expected to reapply in Round Seven in the spring of 2015. Having had the first five years of experience with the Fund, PPP Canada applied its experience to developing a high quality portfolio of projects for Round Six and for the next four years. During the first tranche of the Fund, PPP Canada saw an evolution in the number and quality of applications under each Round, resulting in smaller numbers of high quality P3 projects in Rounds Five and Six. Over the course of the next four years, it is expected that this trend continues due to the Corporation’s strategic outreach efforts leading up to the launch of Round. Corporate Plan 2014-15 recognized that it will be a challenge for the Corporation to maintain the momentum of the Fund and to manage higher expectations on the part of potential recipients as requested funding contributions are expected to increase. During Round Six, PPP Canada received four project applications with capital costs of at least $1.5 billion each, making it challenging to meet the funding expectations of applicants. Additionally, these larger projects are not expected to mature in the current fiscal year and may re-apply in subsequent rounds. PPP Canada will continue to work with these applicants/jurisdictions on the development of their projects to provide advice, expertise and P3 Best Practices. The Corporation will also need to consider how to balance large infrastructure projects by Canada’s more populous cities with applications for projects in the $50 million to $100 million range. Recognizing the need for this balance, PPP Canada is managing its current portfolio of projects with a long-term view of the commitment of the full $1.2 billion by the end of 2018-19 while respecting the merit-based approach to the Fund and broadening its reach to inexperienced jurisdictions. PPP Canada will also seek new and innovative P3 projects which directly promote job creation and economic growth. In practice, this means engaging new jurisdictions in P3 projects and broadening the sectors targeted by others. Consistent with the Government’s commitment in Economic Action Plan 2014, PPP Canada will continue to look at ways to share information, guidance and tools to support P3s and promote the bundling of projects. In that vein, PPP Canada continues to work with the Atlantic Policy Congress (APC), which comprises over 30 First Nations communities in Atlantic Canada on its water and wastewater project. PPP Canada has been working closely with APC and Aboriginal Affairs and Northern Development Canada in order to develop this project. Lessons

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learned throughout this project will be documented and will serve to inform future bundled projects. PPP Canada will develop an appropriate strategy in the lead up to the launch of Round Seven (expected in Spring 2015) that mirrors that of Round Six - a targeted approach that continued to focus on the DBFOM model and the previously-identified priority areas, and thereby ensuring long-term financing of the asset by the private sector – with outreach efforts consisting of targeted meetings with provinces, territories and municipalities to help determine what projects may be in the pipeline. The details of Round Seven will be outlined in the OLG Business Line Strategy. PPP Canada will continue to work with P3 Canada Fund recipients through the development of their Business Case, the procurement process and post-substantial completion management of the Financial Agreements. There are currently 12 P3 Canada Fund projects in procurement and seven projects in construction. As projects move through the procurement process, PPP Canada will continue to work closely with procuring jurisdictions through its advisory role to ensure that their projects successfully reach substantial completion. 2015-16 will see PPP Canada manage an increasing portfolio of P3 Canada Fund projects in the market. The Corporation expects the following six projects to enter their concession phase in 2015-16:

• Sudbury Biosolids Management Facility; • Lincoln Station – Coquitlam; • Barrie Transit Facility; • AMT – Lachine Train Maintenance Centre; • North Saskatchewan River Bridge; and, • Regina Wastewater Treatment Facility.

These six projects are in addition to the five projects currently in operations:

• Evan Thomas Wastewater Treatment Plant; • Downtown Eastside Housing Renewal Project (partially operational); • Chief Peguis Trail Extension; • Lac La Biche Wastewater Treatment; and, • Kokish River Hydroelectric Project.

PERFORMANCE MEASURES

• Launch Round Seven in spring 2015; • Commit $197 million to one to two projects in 2015-16; • Develop two projects for potential investment decisions in 2016-17; • Convert 25% of screened-in projects into investment decisions; and, • Commit to two projects through the Project Development Fund.

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PRIORITIES 2015-16

• Develop a Round Seven and Round Eight pipeline of innovative P3 projects in inexperienced jurisdictions;

• Provide PDF funding to one project; and, • Commit funding for one project.

2015-20 • Commit the full $1.2 billion renewed P3 Canada Fund after five years.

RESOURCE ALLOCATION PPP Canada will allocate $4,786,000 in operating funds ($4,715,000 in 2014-15) and $219,400,000 ($197,700,000 in 2014-15) in program funding to the P3 Canada Fund business line in 2015-16. A total of 23 FTEs are allocated to this business line (unchanged from 2014-15).

3.3.2 New Building Canada Fund P3 Screen

STATUS As outlined in Economic Action Plan 2013, all applications under the NBCF with total eligible costs over $100 million must be assessed to determine whether the P3 model would make sense. The P3 Screen, which officially launched in the 2014-15 planning period, is a two-step process beginning with a Suitability Assessment (SA); a series of 12 questions (which mirror those in the Federal P3 Screen) used to determine if the project demonstrates characteristics that would make it suitable for P3 delivery. Should the SA show that the project has P3 potential, a Procurement Options Analysis (POA), the in-depth analytical portion of a P3 business case, is required. The POA undertaken by project proponents includes a rigorous quantitative and financial analysis to determine whether a P3 approach provides better value for money than a traditional procurement approach. The outcome of a positive SA and POA for P3 delivery results in the federal contribution to the project being conditional on the project going forward as a P3. PPP Canada, as the Government of Canada’s centre of expertise on P3s, leads in the assessment of SAs and POAs under the NBCF P3 Screen and provides its advice and recommendations to Infrastructure Canada (INFC). INFC is responsible for, and is the primary contact point for discussion on the overall project review process for the NBCF and is the decision-making body. Economic Action Plan 2013 also allocated $10 million from the renewed P3 Canada Fund to cover up to 50% of the costs incurred by provinces, territories and municipalities for POA development (to a limit of $200,000 per project).

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For those projects deemed to be potentially viable as P3s by demonstrative a positive SA result, PPP Canada will engage these procuring authorities in the development of their POA. PPP Canada also prepared draft agreements for the first POA Development Fund, which is automatic for those moving to the POA phase. The Corporation published the NBCF Suitability Assessment Guide and the NBCF Procurement Options Analysis Guide in March 2014 to accompany the launch of the NBCF and the P3 Screen. These guides were developed to assist procuring authorities who have applied for federal funding under the NBCF to successfully complete the P3 screening process.

STRATEGY PPP Canada will continue to work collaboratively with INFC over the planning period to ensure the continued administration of the new P3 Screen. Governed by an MOU between the Corporation and INFC, PPP Canada will continue to demonstrate flexibility and will adapt processes, documentation and tools as needed to ensure P3 Best Practices and tools are available ensuring successful projects that produce Value for Money. PPP Canada will continue to work with Infrastructure Canada and others to maximize the use of P3s where it is the most cost effective approach.

PERFORMANCE MEASURES • Provide recommendations to INFC on the P3 Suitability Assessment within two weeks of

receipt of complete application; • Provide recommendations to INFC on POA within six weeks of receiving a

completed POA; and, • Provide POA funding to all NBCF projects.

PRIORITIES 2015-16

• Develop POA for projects demonstrating P3 viability; and, • Perform a review of internal governance to identify potential efficiencies.

2015-20 • Continue to provide timely advice and expertise to INFC on the potential for P3s under

the NBCF to further support the development of a robust and highly regarded Canadian P3 market.

• Continue to build the internal capacity of other jurisdictions through the development of NBCF projects.

RESOURCE ALLOCATION PPP Canada will allocate $1,090.000 in operating funds (unchanged from 2014-15) and notionally allocate a total of 5 FTEs to this business line (unchanged from 2014-15).

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4. CORPORATE EXCELLENCE PPP Canada strives to be one of the best managed federal organizations in the country and has, as such, built a solid track record of success during its first five years or operations. Since it became operational in 2009, PPP Canada has worked towards building a high-performing corporation, with extremely skilled and qualified staff, ensuring the implementation of sound processes, procedures and policies. This has included sound fiscal management, adherence to Government of Canada policies and guidelines, responsible management of the Corporation’s three business lines and effective performance management. PPP Canada’s efforts were recognised in 2014 as it received the Silver Award for the Best Government Agency at the P3 Bulletin Awards. PPP Canada will sustain its growth through flexible and resilient structures that have the capacity to evolve alongside the Corporation, meet the needs of the Government of Canada, and is reflective of the ongoing changes in the P3 market.

4.1 Risk Management Risk Management is an essential underpinning of good management and decision-making. Over the years, PPP Canada has developed and implemented systematic processes to effectively manage the impacts of potential risks and take full advantage of the opportunities that they can create. The integration of Risk Management into the Corporation’s business processes has led to better corporate planning, priority setting and has improved operational efficiency. It is fundamental to the achievement of PPP Canada’s mandate to effectively manage risks associated with delivering P3 programs and advisory services. As such, corporate practices have been built on Risk Management concepts and principles. PPP Canada is committed to the ongoing and continuous improvement of its Risk Management practices. In conjunction with its annual update of the Corporate Risk Profile (CRP), the organization refined its Risk Management Framework in September 2014. This Framework serves as a practical tool for staff at all levels to foster greater understanding of Enterprise Risk Management (ERM) from an organization-wide perspective and provides strategy on the continuous, proactive and systematic approach to managing and communicating risks. In support of the Corporation’s broader risk management practices, a Business Continuity Management (BCM) Policy was put in place to proactively ensure that the Corporation’s operations/activities can be delivered to its clients and stakeholders, with minimal disruption in the event of a significant incident (such as fire, flood, electrical outage, pandemic, systems failure or otherwise) that disrupts or threatens to disrupt any operational function. The objective of the BCM Policy is to ensure that business continuity planning is actively managed throughout the Corporation to protect the health and safety of employees and ensure the effective coordination and continuing operation of the more time sensitive, operational priorities as well as planning for the recovery of all other business functions and services in the event of a severe and prolonged disruption.

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4.2 Performance Measurement PPP Canada has established systematic performance reporting processes at the strategic and operational levels. At the strategic level, priorities are identified in the Corporate Plan and reported upon through the Annual Report, which is made available on the PPP Canada website. Targets established in the Corporate Plan provide direct and tangible input into operational planning among the Corporation’s four business units as well as individual Performance Agreements. The performance of each business unit is reviewed bi-annually through their individual planning process. PPP Canada continued to develop quarterly performance dashboards for the management team. The dashboards provides a snapshot of corporate wide performance against target outcomes set out in the Corporate Plan and highlights key risk areas for management oversight.

4.3 Business Processes PPP Canada regularly seeks out opportunities to drive efficiencies and identify cost savings beyond those already achieved in previous years. PPP Canada regularly reviews the design and effectiveness of corporate and business processes to find greater efficiencies and cost savings, beyond those already achieved in previous years and to ensure the adequacy of internal controls. Over the past five years, the Corporation has refined and improved: the pre-consultation process prior to the launch of a round under the P3 Canada Fund; tools for the application process; and the provision of timely feedback to applicants. These improved processes will extend to the Infrastructure Canada (INFC) P3 Screen and PPP Canada’s review of the Suitability Assessments and Procurement Options Analyses (POA). During the 2014-15 planning period, PPP Canada collaborated with key stakeholders to develop and implement the business processes for the P3 Screen under the New Building Canada Fund (NBCF). The collaboration resulted in the publication in early 2014 of the Guide to the New Building Canada Fund P3 Screen – Suitability Assessment and the New Building Canada Fund Procurement Options Analysis Guide. In support of its activities under the Federal Business Line, PPP Canada published the Federal Suite of Tools and also began developing template Request for Qualification (RFQ), Request for Proposals (RFP), Project Agreement (PA) and Project Specific Output Specifications (PSOS) documents for use by our federal clients. These templates will reflect best practices and lessons learned from the New Bridge over the St. Lawrence (NBSL) project. PPP Canada regularly undertakes efforts to cultivate a records management culture which has structure, discipline and integrity. Such efforts undertaken in 2014 included improving the documentation of project due diligence by developing internal templates and workflows. In 2014, the Corporation also identified areas of improvement for information management within P3Cdocs, such as retention, disposition, awareness, and monitoring and reporting.

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The Information Management Education and Awareness Plan also detailed a training strategy for staff on proper recordkeeping. The progress seen during the 2014-15 period will be carried through the 2015-16 planning period through the establishment of an Information Management Committee as well as a Configuration Control Board which will govern all potential changes to P3Cdocs and information management systems. An IT Policy Suite, which is comprised of seven policies, was approved by the management team in the second half of 2014. Such policies included in the Suite are: IT Systems Change Management Procedure; System Access and Acceptable Use; System Backup Restore – Procedure; Systems Naming Standard; Portable Data Storage Devices Use; Printer Policy; Social Network Policy; and, Information Security, which will see the development of a security classification system consistent with that of Government of Canada standards.

4.4 Stewardship PPP Canada is committed to the delivery of sound, transparent and risk-based stewardship of public resources. The Corporation has established an independent Audit Committee to oversee standards of integrity, systems of internal control and compliance with applicable legal and regulatory requirements. In January 2015, PPP Canada published on its website summaries of all completed internal audits. In September 2014, the Audit Committee adopted the Multi Year Audit and Evaluation Plan which sets out a three year programme of audit, oversight and evaluation activities for the 2014-15 to 2016-17 planning periods. This plan is consistent with Government of Canada Best Practices for internal audits and evaluations. The table below summarises the planned oversight engagements itemised by year.

Year Oversight Engagements

Scheduling

2014 2015

Q3

Q4

Q1

Q2

20

14

-15

Internal Oversight Engagements

Internal Audit: P3 Canada Fund – Due Diligence to Clear Conditions

Precedent √

Internal Review: Federal time tracking and invoicing process √

Follow–up Audit: Internal Audit of Screening Process and Project

Ranking

√

External Oversight Engagements

OAG Special Examination (planning and execution/examination)

The OAG has a legislative mandate under the Financial Administration Act to conduct a Special Examination on all Crown corporations at least every 10 years. The objective is to determine whether systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively.

√ √ √ √

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50

Year Oversight Engagements

Scheduling

2014 2015

Q3

Q4

Q1

Q2

External Audit: OAG/KPMG Audit of Financial Statements (Interim and

Annual) √ √

P3 Canada Fund Financial Agreement Compliance Audits

Lac La Biche Biological Nutrient Removal Wastewater Treatment Facility √

Evan Thomas Water and Wastewater Plant √

Year Oversight Engagement Activities

Scheduling

2015 2016

Q3

Q4

Q1

Q2

20

15

-16

Internal Oversight Engagements

Internal Audit: Information Management, Security and Privacy √

Internal Review: TBD √

Follow-up Audit: Results Identification and Performance Measurement √

External Oversight Engagements

OAG Special Examination (reporting) √ √

External Audit: OAG/KPMG Audit of Financial Statements (Interim and

Annual) √ √

P3 Canada Fund Financial Agreement Compliance Audit

Lachine Train Maintenance Centre √

Barrie Transit Facility √

Legislative Evaluations

P3 Canada Fund Summative Evaluation √ √ √

OAG SPECIAL EXAMINATION The Office of the Auditor General has a legislative mandate under the Financial Administration Act to conduct a Special Examination (SE) on all Crown Corporations at least every ten years. The objective of the SE is to determine whether systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively. “A Special Examination is a form of performance audit, but the scope is set by law to include the entire entity being audited. The Auditor General provides an opinion on the management of the Crown Corporation as a whole.”32 The draft report of the audit is expected to be shared with PPP Canada in April 2015, discussed by the Board of Directors in June, and the final report submitted in September.

32 Office of the Auditor General of Canada. http://www.oag-bvg.gc.ca/internet/English/au_fs_e_9364.html

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PPP Canada has made significant progress in implementing a strong management control framework, governance arrangements and well established systems and processes to support management and business priorities. The SE process will provide an opportunity to showcase PPP Canada as an efficient and effective organization of excellence. The Corporation will continue to work closely with the OAG SE team on providing access to all relevant substantiating documentation and scheduling interviews with key personnel including PPP Canada’s management team and Board members.

EMPLOYEE BENEFITS PACKAGE In 2014-15, PPP Canada initiated a market review of its employee benefits package to ensure that it is aligned with benefits provided to other public sector employees and to ensure competitive rates. The new employee benefits package, should adjustments be made, will take effect in May 2015. Any adjustments will be reported in the 2016-17 Corporate Plan. PPP Canada employees are covered under the Public Service Superannuation Act.

4.5 Organizational Development On an annual basis PPP Canada’s management team sets the business priorities and objectives for the Corporation.

INTERNAL GOVERNANCE Recognizing that is was vital for the Corporation to develop tools, materials and overall knowledge to affect the cultural change required of all levels of government, to promote the use of P3s across the country and to support our clients, the 2012-13 Corporate Plan identified PPP Canada’s third business line, the P3 Knowledge Development and Sharing (KDS) Business Line. In June 2014, the management team embarked on a more strategic approach to this work and created an internal governance committee to specifically support and manage this business line. This new Management level committee compliments the other existing committees: Management Committee; Federal Business Committee; and Other Levels of Government (OLG) Committee. The creation of this new committee meant changes to the existing committee mandates, in particular, where existing committees held responsibilities or oversight with respect to KDS initiatives in order to avoid duplication of efforts. This resulted in minimal change to the existing committees’ Terms of Reference and they will continue to operate under the initial mandate. The new PPP Canada internal governance structure has resulted in the following:

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52

HUMAN RESOURCE MANAGEMENT PPP Canada has fully integrated Human Resources planning and management in the Corporation’s business planning processes. As part of its annual planning process, the management team determines the level of resources required, the corporate training and development needs of employees, performance indicators and the risks associated with our workforce to meet priorities. As such, during the 2014-15 planning period, PPP Canada hired a Human Resources Manager and implemented a Human Resource Strategic Plan. This three year plan outlines concrete actions that PPP Canada will take to ensure that its human resources effectively support the priorities of the Corporation along our three business lines. PPP Canada’s managers recognise that employees are the Corporation’s most valuable assets. The strategies and approaches to Human Resources Management applied by the Corporation are guided by this reality. As a knowledge-based organization, our role is to acquire, influence and deploy information and expertise on P3s. This requires PPP Canada’s staff, both individually and collectively, to continuously enhance their capacity, competencies and skills to produce results and adapt to changing circumstances. We are guided by a commitment to organizational excellence through such pursuits as bench-marking, sharing best practices and the fostering of collaborative relationships amongst various stakeholders and the Corporation’s shareholder, the Government of Canada. The Corporation’s strategy is to use the effective application of existing knowledge and the creation of new knowledge. The goal is fourfold: to ensure that knowledge from one part of the organization is applied to activities in other parts; to ensure that knowledge is shared over time

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53

so that the organization benefits from past experience; to make it possible for employees from various parts of the organization to collaborate to create new knowledge; and to provide opportunities and incentives for experimentation and learning.

WORKFORCE PROFILE

As of 31 December 2014, PPP Canada had a staff compliment of 58 FTEs with five unfilled FTE positions. Compared to 2013-14, the Corporation has increased its staff compliment by 9 FTEs, from 52 FTEs to a total of 63 FTEs. This increase in staff was necessary in order to support the Federal and Other Levels of Government business lines. PPP Canada’s management team is comprised of five members of the Executive including the CEO and four vice-presidents. The team is also comprised of seven directors. All of PPP Canada’s employees are non-unionized. In order to ensure a depth of experience and expertise across the Corporation, PPP Canada has sought to ensure a broad range of highly skilled employees that together can complement the work of the Corporation. A breakdown of PPP Canada’s workforce is as follows:

• 88.5% of employees have a university degree • 42% of employees are female • 25% of employees identify French as their first language • 71% of employees are 40 years of age or under

COMPETENCY PROFILE The Corporation has invested significant time and effort in developing its own Competency Dictionary with behavioural and technical competencies to be applied to each position within the Corporation. The Technical competencies are very specific to the business of P3s, which is complex and risky. The corporate Competency Dictionary was fully implemented during the 2014-15 planning period. Information sessions were held in the summer of 2014 with all employees as well as with the management team to ensure that the Competency Dictionary is used accurately during the development of Learning Plans and during the employee performance review process. This tool is also used for recruitment purposes, objective setting, and for the development of performance improvement plans. All positions have a Job Profile that describes the behavioural and technical competencies required for that position. Employees use their Job Profile in order to establish performance objectives and learning plans in conjunction with the Competencies Dictionary.

RECRUITMENT AND RETENTION Given the mandate of the organization to act as a source of expertise and advice on P3s, the technical competencies and skills required are challenging and can be difficult to recruit. The Corporation’s strategy has always been to recruit individuals with post-secondary or

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54

graduate degrees in a related field and with experience and skills in business plan development, program management and procurement option analysis. Given that P3s are still relatively new in some Canadian jurisdictions and that finding employees with experience with the model can be a challenge, the Corporation had developed an internal training and development approach to encourage the development of P3 expertise for all employees. In addition to the PPP Canada website and jobs.gc.ca, the Corporation also reaches out to the broader P3 industry through such avenues as recruitment fairs and LinkedIn to reach potential applicants nationally and internationally, with the necessary skills required to advise and provide expertise on this unique procurement approach. Retaining this highly skilled workforce has the potential to become a challenge to the organization as staff will be increasingly sought after by those involved in the P3 industry. Management mitigates that risk by creating a motivating, supportive and trusting environment, and encourages employees to participate in the decision-making processes of the Corporation. Regular and open communication is encouraged. In addition to providing a safe and healthy workplace, the Corporation also believes in work and personal life balance. Supporting the development of a strong corporate culture are the Human Resource Strategy and the Values and Code of Conduct which embeds our Statement of Values and Ethics.

LEARNING AND DEVELOPMENT Learning and development is at the core of the Corporation’s culture. Its committees and governance structure facilitate collaboration and knowledge transfer between business units. Employees are encouraged to maximize learning opportunities and share their knowledge of projects between the various units. The Corporation continues to invest significant time and effort in individual training and development. The approach is to generate knowledge through multiple methods and by as many individuals as possible. In September 2014, PPP Canada developed and implemented a new employee orientation program which serves as an employee learning guide for the first six months of employment. The orientation program seeks to engage new employees prior to their start date and decrease the amount of time that it takes new employees to become operational and confident in their new roles. Learning and development continues to be a priority for employees throughout their career at PPP Canada. All are required to play a significant role in developing their annual learning and development plan which is based on fostering the technical and behavioural competencies that are key our success. Employees are encouraged to maximize learning through experiential learning, specialized courses, conferences and organization wide training in both hard and soft skills, such as: procurement courses, Microsoft Excel, effective communications, P3 financial modeling as well as language training. Individual learning and development plans have been established for all employees. These employees are expected to play a significant role in completing the learning goals identified in their plans. PPP Canada also encourages staff to develop and lead new learning opportunities through the Learning Committee, which is made up of employees from various levels across the organization.

EMPLOYEES PERFORMANCE MANAGEMENT

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55

The Corporation has put in place a robust employee performance management process. All employees sign Accountability Agreements that state their accountabilities and performance measures on an annual basis. These objectives are aligned with the Corporate Plan and their unit’s business plan. This ensures that every employee has an understanding of how their work is aligned with and contributes to the Corporation’s overall goals and objectives. Employees are provided feedback on a continuous basis and, more formally, through mid-year and end of year reviews. As per PPP Canada policy, all increases in salary and performance pay are based on the level of performance, as is variable pay for those employees who are eligible.

SUCCESSION PLANNING An Executive Succession Plan is approved by the Board of Directors on an annual basis. During the 2014-15 planning period, the Corporation implemented one aspect of the Executive Succession Plan when the Vice-President, Strategy & Organizational Development, retired in December 2014. A successor was identified and hired prior to the departure of the retiring vice-president in ensure a stable transition period. In addition, a new position, that of Human Resource Manager, was created and staffed during the 2014-15 planning period. This position was required as part of the Succession Plan in order to strengthen the human resource capabilities of the organization.

VALUES AND ETHICS CODE FOR THE PUBLIC SECTOR As per the application of the Treasury Board Secretariat’s Values and Ethics Code for the Public Sector which came into force in April 2012, PPP Canada will implement its own Code of Conduct in early 2015. All employees are required to review the Code on an annual basis. The Code of Conduct was developed in consultation with the Values & Ethics Advisory Group, made up of employees from all levels and from across the Corporation. It includes a mission and a vision statement for PPP Canada, as well as a statement of values and expected behaviours.

PERFORMANCE MEASURES • 100% of employees receive an information session on the Code of Conduct; • Implementation of the Security Management Plan; and, • Implementation of the Risk Management Framework.

PRIORITIES 2015-16

• Successful OAG Special Examination; and, • Successful transition of the new Vice-President, Strategy & Organizational

Development.

2015-20 • Complete Summative Evaluation;

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56

• Maintain the Corporation complements (recruitment and retention); and, • Maintain a policy of fiscal prudence.

RESOURCE ALLOCATION PPP Canada will allocate $2,262,000 ($2,250,000 in 2014-15) in operating funds and $400,000 in capital funds ($1,000,000 in 2014-15) and 7 FTEs to Corporate Excellence in 2015-16 (unchanged from 2014-15).

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57

5. OPERATING AND CAPITAL BUDGET

PPP Canada Inc.

Budget Statement of Operations

Year Ending March 31, 2016

(in thousands of dollars)

Actual Budget Estimate Budget

2013/14 2014/15 2014/15 2015/16

Operating revenues:

Parliamentary appropriations 12,300 11,800 11,800 11,800

Fees from federal P3 advice 2,054 2,500 2,620 2,750

Interest income 39 30 55 50

14,393 14,330 14,475 14,600

Operating expenses:

Salaries 4,787 6,182 5,360 6,405

Benefits 1,534 1,915 1,640 1,877

Professional services 1,047 1,850 1,820 600

P3 Canada Fund project due diligence 17 250 150 300

P3 knowledge and best practices 253 575 1,750 1,500

Federal P3 project consultants 524 400 400 450

Shared administrative services 780 780 780 780

Rent 757 1,017 970 1,040

Directors' fees & expenses 91 125 100 125

Travel 244 275 275 350

Amortization of tangible capital assets 574 630 588 522

Information and communication 191 180 190 180

Maintenance and equipment 156 180 180 180

Custodial Fees 158 220 200 220

Other Services 129 155 240 190

11,242 14,734 14,643 14,719

Operating surplus (deficit) 3,151 (404) (168) (119)

P3 Canada Fund:

Revenue 3,752 38,790 34,658 61,238

Transfer to Deferred P3 Canada Fund revenue (528)

Non-repayable disbursements to projects (3,752) (31,590) (27,458) (61,238)

P3 Canada Fund surplus (deficit) - 7,200 7,200 (528)

Annual surplus (deficit) 3,151 6,796 7,032 (647)

Accumulated surplus, beginning of period 3,210 6,361 6,361 13,393

Accumulated surplus, end of period 6,361 13,157 13,393 12,746

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58

PPP Canada Inc.

Budget Statement of Capital




2013/14 2014/15 2014/15 2015/16

Capital expenditures:

Equipment 91 100 45 200

Software 191 100 45 175

Furniture and fixtures 37 400 300 15

Leasehold improvements 3 400 210 10

322 1,000 600 400

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59

PPP Canada Inc.

Budget Statement of P3 Canada Fund Cash Flow




2013/14 2014/15 2014/15 2015/16

Appropriation 252,900 197,700 197,700 219,400

Fund interest earned 14,862 20,086 20,165 22,797

Repayment of P3 Canada Fund Loan - 528 - 528

Disbursements on Projects (3,457) (36,790) (31,033) (57,613)

Disbursements on Collaborative Projects (295) (2,000) (2,000) (2,000)

Disbursements on Collaborative Projects

(Building Canada Fund) - (1,625) (1,625) (1,625)

Opening fund balance 949,971 1,214,024 1,213,981 1,397,188

Closing fund balance 1,213,981 1,391,923 1,397,188 1,578,675

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PPP Canada Inc.

Budget Statement of Operating Cash Flow




2013/14 2014/15 2014/15 2015/16

Cash flow provided by (used in) operating activities:

Annual surplus (deficit) 3,151 6,796 7,032 (647)

Items not involving cash:

Amortization of tangible capital assets 574 630 588 522

Increase in employee future benefits 250 104 210 203

Loss on disposal of tangible capital assets 10 - -

(Increase) decrease in accounts receivable and prepaid expenses (1,480) - 764 -

Increase (decrease) in accounts payable and accrued liabilities 363 110 (234) -

2,868 7,640 8,360 78

Cash flow provided by (used in) investing activities:

Net purchases and redemptions of investments (261,133) (176,993) (183,806) (180,562)

Net change in P3 Canada Fund loan - (6,672) (7,200) 528

Interest received and allocated to Deferred P3 Canada Fund revenue 11,985 19,180 20,764 21,872

(249,148) (164,485) (170,242) (158,162)

Cash flow used in capital activities:

Acquisition of tangible capital assets (322) (1,000) (600) (400)

Cash flow provided by (used in) financing activities

Parliamentary appropriations for P3 Canada Fund 252,900 197,700 197,700 219,400

Net P3 Canada Fund disbursements (3,752) (40,415) (34,658) (60,710)

249,148 157,285 163,042 158,690

Increase (decrease) in cash and cash equivalents 2,546 (560) 560 206

Cash and cash equivalents, beginning of period 3,336 5,882 5,882 6,442

Cash and cash equivalents, end of period 5,882 5,322 6,442 6,648

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PPP Canada Inc.


Actual Estimate Budget Budget Budget Budget Budget

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Operating revenues:

Parliamentary appropriations 12,300 11,800 11,800 11,800 11,800 11,800 9,000

Fees from federal P3 advice 2,054 2,620 2,750 2,700 2,700 2,700 2,700

Interest income 39 55 50 40 30 30 20

14,393 14,475 14,600 14,540 14,530 14,530 11,720

Operating expenses:

Salaries 4,787 5,360 6,405 6,597 6,795 6,999 6,280

Benefits 1,534 1,640 1,877 2,111 2,174 2,240 2,010

Professional services 1,047 1,820 600 500 500 500 300

P3 Canada Fund project due diligence 17 150 300 290 260 170 100

P3 knowledge and best practices 253 1,750 1,500 1,400 1,200 1,100 100

Federal P3 project consultants 524 400 450 400 400 400 400

Shared administrative services 780 780 780 780 780 780 400

Rent 757 970 1,040 1,040 1,055 1,060 1,060

Directors' fees & expenses 91 100 125 150 150 150 150

Travel 244 275 350 350 350 350 250

Amortization of tangible capital assets 574 588 522 477 382 259 137

Information and communication 191 190 180 180 180 180 150

Maintenance and equipment 156 180 180 180 180 180 150

Custodial Fees 158 200 220 230 215 185 170

Other Services 129 240 190 190 190 190 150

11,242 14,643 14,719 14,875 14,811 14,743 11,807

Operating surplus (deficit) 3,151 (168) (119) (335) (281) (213) (87)

P3 Canada Fund:

Revenue 3,752 34,658 61,238 178,851 250,555 729,824 207,532

Transfer to Deferred P3 Canada Fund revenue - - (528) (1,126) (1,202) (1,284) (1,348)

Non-repayable disbursements to projects (3,752) (27,458) (61,238) (178,851) (250,555) (729,824) (207,532)

P3 Canada Fund surplus (deficit) - 7,200 (528) (1,126) (1,202) (1,284) (1,348)

Annual surplus (deficit) 3,151 7,032 (647) (1,461) (1,483) (1,497) (1,435)

Accumulated surplus, beginning of period 3,210 6,361 13,393 12,746 11,285 9,802 8,305

Accumulated surplus, end of period 6,361 13,393 12,746 11,285 9,802 8,305 6,870

For the Years Ending March 31, 2016 to 2020

Proforma Statement of Operations

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62

PPP Canada Inc.

Proforma Statement of Financial Position

As at March 31, 2016 to 2020



2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Financial assets:

Cash and cash equivalents 5,882 6,442 6,648 6,853 7,057 7,257 7,458

P3 Canada Fund accrued interest 7,716 7,117 8,041 8,645 8,909 6,648 5,712

P3 Canada Fund investments 1,206,265 1,390,071 1,570,633 1,688,437 1,740,025 1,298,456 1,115,554

P3 Canada Fund loan receivable - 7,200 6,672 5,546 4,344 3,060 1,712

Accounts receivable 2,217 1,500 1,500 1,500 1,500 1,500 1,500

Total financial assets 1,222,080 1,412,330 1,593,495 1,710,980 1,761,835 1,316,921 1,131,935

Liabilities:

Accounts payable and accrued liabilities 2,034 1,800 1,800 1,800 1,800 1,800 1,800

Employee future benefits 902 1,112 1,315 1,518 1,721 1,924 2,124

Deferred P3 Canada Fund revenue 1,213,981 1,397,188 1,578,675 1,697,081 1,748,934 1,305,104 1,121,265

Total liabilities 1,216,917 1,400,100 1,581,790 1,700,399 1,752,455 1,308,828 1,125,189

Net assets 5,163 12,230 11,705 10,581 9,380 8,093 6,746

Non-financial assets:

Tangible capital assets 1,122 1,134 1,012 675 393 183 96

Prepaid expenses 76 29 29 29 29 29 29

Total non-financial assets 1,198 1,163 1,041 704 422 212 125

Accumulated surplus 6,361 13,393 12,746 11,285 9,802 8,305 6,870

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63

PPP Canada Inc.




2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Annual Surplus (deficit) 3,151 7,032 (647) (1,461) (1,483) (1,497) (1,435)

Tangible capital assets:

Acquisition of tangible capital assets (322) (600) (400) (140) (100) (50) (50)

Loss on disposal of tangible capital assets 10 - - - - - -


262 (12) 122 337 282 209 87

Non-financial assets:

(Increase) decrease in prepaid expenses (44) 47 - - - - -

Increase (decrease) in net assets 3,369 7,067 (525) (1,124) (1,201) (1,287) (1,348)

Net assets, beginning of period 1,794 5,163 12,230 11,705 10,581 9,380 8,093

Net assets, end of period 5,163 12,230 11,705 10,581 9,380 8,093 6,746

Proforma Statement of Changes in Net Assets

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64

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,353

10

2,78

4

136,

289

161,

000

183,

345

20

1,30

7

21

5,07

2

22

3,95

2

22

8,46

8

22

8,46

8

Inte

rest

rate

ass

umpt

ion

1.29

%1.

25%

1.30

%1.

50%

1.50

%1.

75%

2.00

%2.

00%

2.00

%2.

00%

2.00

%2.

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2.00

%2.

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Assu

mpt

ions

:

Dis

brus

emen

ts o

n Pr

ojec

ts

Rou

nd 1

Pro

ject

s-

-

22,2

09

1,73

0

-

-

24

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-

-

-

-

-

-

-

-

-

Rou

nd 2

Pro

ject

s-

-

519

-

3,

457

31,0

33

32

,360

-

-

-

-

-

-

-

-

-

Rou

nd 3

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ject

s-

-

-

-

-

-

-

11

5,60

0

120,

800

17

8,20

0

-

-

-

-

-

-

Rou

nd 4

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ject

s-

-

-

-

-

-

-

58

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48,4

00

30

7,30

0

22,9

00

-

-

-

-

-

Rou

nd 5

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ject

s-

-

-

-

-

-

-

-

66,0

00

20

0,00

0

137,

300

-

-

-

-

-

Futu

re R

ound

s-

-

-

-

-

-

528

1,12

6

11,7

30

40

,724

45,7

32

23

8,30

7

224,

708

25

4,33

4

223,

813

22

6,93

8

-

-

22

,728

1,

730

3,45

7

31

,033

57,6

13

17

5,22

6

246,

930

72

6,22

4

205,

932

23

8,30

7

224,

708

25

4,33

4

223,

813

22

6,93

8

Estim

ated

dis

burs

emen

ts re

latin

g to

Rou

nds

1 to

5 re

lfect

pro

ject

spe

cific

est

imat

ed c

ash

flow

s ba

sed

on m

anag

emen

t's re

view

and

reco

mm

enda

tion

for e

xistin

g pr

ojec

ts.

Estim

ated

dis

burs

emen

ts re

latin

g to

futu

re R

ound

s re

flect

est

imat

es c

alcu

late

d ba

sed

on e

xper

ienc

e of

pro

ject

ed c

ashf

low

s fo

r Rou

nd 1

to 5

pro

ject

s.

Estim

ated

dis

burs

emen

ts o

n C

olla

bora

tive

Proj

ects

refle

ct m

anag

emen

t's b

est e

stim

ate

at th

is ti

me.

Inte

rest

rate

ass

umpt

ions

use

d re

flect

am

ount

s th

at a

re m

ore

cons

erva

tive

than

thos

e cu

rrent

ly pr

ojec

ted

by fi

nanc

ial i

nstit

utio

ns.

Inve

stm

ents

of c

ash

rese

rves

sha

ll fo

llow

the

guid

elin

es s

et o

ut in

the

Boar

d ap

prov

ed In

vest

men

t Pol

icy.

PPP CANADA


65

PPP Canada Inc.

Proforma Statement of Operating Cash Flow




2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Cash flow provided by (used in) operating activities:

Annual surplus (deficit) 3,151 7,032 (647) (1,461) (1,483) (1,497) (1,435)

Items not involving cash:


Increase in employee future benefits 250 210 203 203 203 203 200

Loss on disposal of tangible capital assets 10 - - - - - -

(Increase) decrease in accounts receivable and prepaid

expenses (1,480) 764 - - - - -

Increase (decrease) in accounts payable and accrued

liabilities 363 (234) - - - - -

2,868 8,360 78 (781) (898) (1,034) (1,098)

Cash flow provided by (used in) investing activities:

Net purchases and redemptions of investments (261,133) (183,806) (180,562) (117,803) (51,588) 441,569 182,902

Net change in P3 Canada Fund loan - (7,200) 528 1,126 1,202 1,284 1,348

Interest received and allocated to Deferred P3 Canada

Fund revenue 11,985 20,764 21,872 27,828 33,241 26,971 23,282

(249,148) (170,242) (158,162) (88,849) (17,145) 469,824 207,532

Cash flow used in capital activities:

Acquisition of tangible capital assets (322) (600) (400) (140) (100) (50) (50)

Cash flow provided by (used in) financing activities

Parliamentary appropriations for P3 Canada Fund 252,900 197,700 219,400 267,700 267,700 260,000 -

Net P3 Canada Fund disbursements (3,752) (34,658) (60,710) (177,725) (249,353) (728,540) (206,184)

249,148 163,042 158,690 89,975 18,347 (468,540) (206,184)

Increase (decrease) in cash and cash equivalents 2,546 560 206 205 204 200 200

Cash and cash equivalents, beginning of period 3,336 5,882 6,442 6,648 6,853 7,057 7,257

Cash and cash equivalents, end of period 5,882 6,442 6,648 6,853 7,057 7,257 7,458

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66

PPP Canada Inc.

Proforma Statement of Capital




2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Capital expenditures:

Equipment 91 45 200 60 30 15 15

Software 191 45 175 60 50 25 25

Furniture and fixtures 37 300 15 10 10 5 5

Leasehold improvements 3 210 10 10 10 5 5

322 600 400 140 100 50 50

Amortization Equipment 58 61 81 107 99 66 28

Amortization Software 170 213 174 115 94 70 39

Amortization Furniture and fixtures 183 165 138 134 105 75 42

Amortization Leasehold improvements 163 149 129 121 84 49 29

574 588 522 477 382 259 137

Equipment and software amortized straight line over 3 years

Furniture and fixtures and leasehold improvements amortized straight line over 5 years

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67

ANNEX 1- CORPORATE PROFILE

BACKGROUND AND HISTORY OF PPP CANADA Public infrastructure touches the lives of all Canadians and every year, billions of dollars are invested by all orders of government to provide Canadians the public infrastructure that contributes to their quality of life. PPP Canada is committed to promoting the delivery of public infrastructure in a manner that represents the best value for taxpayers through the effective use of P3s. P3s have a demonstrated track record of delivering value in Canada and internationally. P3s deliver value by ensuring on-budget, on-time delivery, transferring risk, optimising cost over the whole life-cycle and engaging the expertise of the private sector. P3s ensure that this value is delivered by harnessing the incentives and disciplines of the capital market. In 2008, PPP Canada was established by Order-in-Council, to build P3 procurement knowledge and capacity federally and leverage greater value for money from federal investments in provincial, territorial, municipal and First Nations infrastructure through the P3 Canada Fund. With the appointments of the Chair of the Board of Directors and the Chief Executive Officer, PPP Canada became operational in 2009. As a Crown Corporation with an independent Board of Directors, PPP Canada reports to Parliament through the Minister of Finance.

MANDATE PPP Canada’s mandate is to improve the delivery of public infrastructure by achieving better value, timeliness and accountability to taxpayers, through P3s.

CORPORATE OBJECTS On February 28, 2008, PPP Canada was incorporated pursuant to the Canada Business Corporations Act. On May 8, 2008, the Governor-in-Council declared PPP Canada as a Parent Crown corporation for the purposes of Part X, (except section 90) of the Financial Administration Act and reports to Parliament through the Minister of Finance. The objects for the Corporation were established by Order-in-Council as follows:

a. Assess public-private partnerships opportunities at the federal level in accordance with criteria established by the Treasury Board; b. Assess the suitability of public-private partnership projects seeking funding from federal infrastructure programs in accordance with criteria established by or pursuant to Treasury Board authorities; c. Advise on the execution of public-private partnership projects at the federal level; d. Manage the Public-Private Partnerships Funds (P3 Canada Fund) in accordance with the policies and authorities established by the Treasury Board;

PPP CANADA


68

e. Negotiate, sign and administer agreements to be funded through the P3 Canada Fund in accordance with the policies and authorities established by the Treasury Board; and, f. Act as a source of expertise and advice on public-private partnership matters.

The Order-in-Council also stipulates the foregoing objects shall in no way include the initiation, development or elaboration of policy related to decision-making concerning PPP project approval.

RESOURCE PROFILE During fiscal year 2015-16, PPP Canada forecasts $14,600,000 of operating and capital disbursements and will draw down and invest $219,400,000 under the P3 Canada Fund. The operating and capital disbursements will be funded by $11,800,000 from appropriations and $2,800,000 from federal fees and interest. Staying within existing operating funding levels, PPP Canada is expected to level out with approximately 63 FTEs which will be funded by the fee for services revenue earned from federal departments, agencies and Crown corporations. PPP Canada has built a high performing organization with qualified staff, strong human resources and governance practices, and effective planning management and control mechanisms. In 2015-16, the Corporation will continue to implement a strategy of prudence, bolster internal checks and balances and continue to leverage professional services contractors to support the organization with specific expertise. PPP Canada remains committed to building an effective organization which leverages the best value for the taxpayer in public infrastructure procurements. PPP Canada continues to develop a culture of fiscal prudence and implement the cost containment measures, including:

• Setting realistic operating priorities and focusing on growth in core business areas; • Compensation economic adjustments at 1% for 2014-15; and, • Rationalizing outsourcing costs by leveraging a Shared Services Agreement with the

Canadian Commercial Corporation, utilizing technology to reduce travel expenses, and extracting greater value from procured service arrangements.

PPP CANADA


69

ORGANIZATIONAL CHART

Minister of Finance

Board of Directors

CEO

Strategy & Organizational Development

Project Development Investments Finance, Risk and

Administration

PPP CANADA


70

summary corporate plan for the 2015-16 to 2019-20 planning period

Documents