Presentation by Jill Jamieson of Jones, Lang, LaSalle at Western Water Roundtable V - Dec. 2016

1. Leveraging Alternative Finance &
Delivery for Water Resource Projects
Jill Jamieson
Managing Director
Jones Lang LaSalle
Western Water Roundtable
December 13, 2016
Las Vegas, NV

2. Agenda
2
• Bridging the Infrastructure Gap
• Overview of Alternative Finance and
Delivery Structures
• Case studies
- Grand Prairie Irrigation Project
(Aquifer and Irrigation)
- Fargo-Moorhead (Flood Risk
Management)
• Discussion

3. 3
Global Infrastructure Market
Global Infrastructure Funding Deficit
• Global infrastructure investment needs by 2030
estimated at $57-$67 Trillion (OECD/WEF)
• US infrastructure needs estimated at over $7 Trillion
(by 2030), $3.4T needed by 2020 (to keep pace with
GDP).
• Over 50% of these investments cannot be funded by
public authorities (fiscal restraints, budget limitations,
debt ceilings, repayment capacity, etc.).
• Standard & Poor’s estimates that the majority of
public infrastructure spending will go to energy and
transportation, putting other sectors at greater risk.
• Within these constraints, governments and public
agencies being asked to do more with less.
Infrastructure deficiencies have a direct, material adverse effect on economic growth, competitiveness,
life-safety and standards of living.

4. 4
America’s Infrastructure Needs
Bridges C+ Dams D Drinking Water D
Energy D+ Hazardous Waste D Inland Waterways D-
Levees D- Ports C Parks C-
Rail C+ Roads D+ Schools D
Transit D+ Wastewater D Other ??
ASCE Report Card GPA: D+
• ASCE report card does not address all infrastructure needs (i.e., public buildings, university infrastructure,
prisons, technology, etc.), nor does it anticipate changing regulatory requirements.
• At D-, water resources register the lowest rating of all infrastructure groups
• Public authorities simply do not have the debt capacity and funding sources to address the nation’s
growing infrastructure needs
• Even with the promise of a Trillion dollar investment in infrastructure by incoming Administration, it is highly
unlikely that this funding will come through traditional channels.

5. 5
Public-Private Partnerships
5

6. 6
Public-Private Partnerships (P3)
P3s are typically long-term contractual arrangements between the public sector and a private sector entity for the
delivery of public works and/or services, with risks shared between both parties.
PRIMARY BENEFITS OF P3 APPROACH
 Accelerate delivery to advance public benefits;
 Provide greater cost and schedule certainty;
 Leverage private sector innovation;
 Ensure asset life-cycle management;
 Minimize cost impact on end-users;
 Optimize risk allocation; and
 Maximize public benefits by Incentivizing innovative asset
uses and monetization.
Extent of Ownership and Risk Transfer to the Private Sector
Low HighExtent of Private Sector Financing
Public-Private-Partnerships
Infrastructure Delivery Spectrum of Options
Traditional Delivery
Works & Service Contracts
(DBB, CMAR, PDB, DB)
Privatization
Performance Contracts
(ESPC, O&M, peer
partnering, etc,)
Divestiture
(Sale, Sale-leaseback, etc.)
Concessions
(DBFOM, BOT, etc.)
Lease-like Agreements
(LDO, DBOM, Lease-Backs )
• Federal, state and local governments have limited
financial resources to devote to capital and
operational expenditures
• In post-earmark Washington, intense competition
for scarce federal funding
• Protracted appropriations delay delivery, defer
benefits, and exponentially increase costs
• Public authorities seeking alternative finance and
delivery approaches for water resource projects
To address the growing funding shortfall, public authorities are turning to a wide variety of alternative finance and
delivery mechanisms for water resource projects, including P3.

7. 7
U.S. Federal, State, & Municipal P3
“While P3 cannot eliminate the need for government spending on infrastructure, we can help meet our
nation’s infrastructure needs by expanding the sources of investment and using those dollars, whether
public or private, as effectively as possible to advance the public’s interest.” – US Treasury
Federal
• DOT has leveraged P3 for many projects, including over $28 Billion in FHWA
projects alone
• DOE is utilizing P3 for energy infrastructure, including programs for renewable
energy, nuclear safety and hydrogen infrastructure
• DOD has track-record of utilizing P3 to address military housing, which under the
traditional model, would have cost taxpayers $25 billion over 20 years. Let $7B in
PPP contracts for renewable energy. Working on P4 for shared services.
• CBP is utilizing P3 to address increased demands for facilities and renovations,
including facilities agreements in Houston, Dallas, and Miami
• GSA has used P3 for years for government facilities
• USACE is now engaging in P3 for water resource projects (WRRDA 2014)
State / Local
• Majority of US states have adopted P3 enabling legislation in multiple sectors
• S&P predicts US P3 market to become market leader

8. 8
P3 Defined
Public Partner
• Specifies requirements/standards
•Owns assets / public service
Private Partner
• Build facilities
• Provide services
• Infrastructure
and services
• Payments to
Public Partner
Rights Users /
Public
Federal Sponsor
P3/P4
Contract
Non-federal Sponsors
Equity Investors
Creditors
Design / Build
O&M
Usage Fees

9. Project Screening
9

10. 10
P3/P4 Transaction Structuring
Transaction structuring should respond to a systematic process designed at ensuring that the sources of value
generation are identified and maximized for each individual project.
Other considerations:
• Bundling
• Ring-fencing
• Project Size and Complexity
• Benefits from innovation?
• Stakeholder support
• Ability to specify output standards

11. 11
P3 Compensation Models
P3 is not “free money” and investments and costs need to be repaid:
Challenge: To identify revenue sources that create “bankable” and financially viable projects
11

12. 12
Potential Compensation Structures
Capital
Investments
Operating Expenditures
Tariffs paid by Users to
the Concessionaire
Infrastructure
Delivery Date
User Charge based PPP
· Private Sector bears construction AND demand risk
· Revenue levels dependent on user payments
Private Sector
Investment
Revenue from User Payments
Capital
Investments
Operating Expenditures
Revenue from Availability Payments
Payments from Public
Authority to Concessionaire
Infrastructure
Delivery Date
Performance-based PPP
· Private Sector bears construction AND performance risk
· Public authorities make regular payments (calculated to cover investor
costs) which are adjusted according to infrastructure availability and
service levels.
· Deductions for availability and performance short falls.
Private Sector
Investment
Minimum Revenue Guarantee Availability Payment

13. Standard P3 Cash Flow Waterfall
• Affordability issues for water resource
projects is a critical consideration.
Many projects may require Viability
Gap Funding (VGF)
• Structuring of payment mechanism is
also a key consideration in P3
projects
• Monetization may off-set some costs,
but unlikely that ancillary revenues
will be sufficient to pay for entire
project
• Key to successful P3 is to commit
future revenues for project specific
purposes
13
Availability Payment
and/or capital
subsidies
User Charge(s)
Public Sponsor
Ancillary Revenues
(if any)
ButtonPrivate Partner
Availability & Performance
Deductions
O&M Expenditures
Debt Service
Reserves
Income Taxes
Profit
REVENUESEXPENDITURES
Debt Service
Coverage Ratio
Escrow Account

14. Funding & Financing Alternatives
14
Funding Sources Financing Tools
Compensation & Revenue Sources
· Usage fees [tolls, tariffs, etc.]
· Budget-based performance payments
(i.e., availability payments)
· Value capture revenues
· Tax proceeds and assessments
– Property Tax Assessments
– Special Developer Assessments
– Tax Increment Funding
– Hypothecated/Dedicated Taxes
· License fees
· Commercial / ancillary revenues
Public Subsidies & Support
· Upfront capital contributions
· Public grants
· Tax Credits
· In-kind contributions
Standard Credit Facilities
· Bonds
· Bank Debt
· Special Assessment Bonds
· Mezzanine Financing / Quasi-Equity
Concessionary and Alt. Finance
· Federal Credit Programs (WIFIA,
TIFIA, etc.)
· State Infrastructure Banks
· Tax-exempt Private Activity Bonds
· Other (i.e., EB-5 financing)
· State Infrastructure Banks
Equity
· Sponsor / Operator Equity
· Non-Sponsor Private Equity
· Public Equity
Standard P3/P4 Funding & Financing Sources

15. 15
Case Studies
15

16. GRAND PRAIRIE
IRRIGATION PROJECT

17. 17
Case Study : Grand Prairie Irrigation Project
• Initially authorized in 1950, the Grand Prairie Region
Demonstration Project aims to provide water security for drinking
water, industrial and agricultural use, as well as address depletion
and resiliency of the alluvial and Sparta aquifers which underlie a
seven state region.
• Key project features: major pumping station on the White River;
conveyance channels to deliver to water depleted areas; flood
management; and other environmental restoration and
conservation measures.
• Project benefits: provides sustainable water sources at a more
affordable and predictable price; slows depletion of aquifer; water
security for farming industry
• Key Public Sponsors:
 United States Army Corps of Engineers (USACE) is Federal
sponsor.
 The State of Arkansas, acting through its Arkansas Natural
Resources Commission (ANRC), is the non-Federal sponsor.
 White River Irrigation District (WRID) is a legal entity
created for the purpose of operating and maintaining the
Project upon completion.
Grand Prairie Area Demo Project
Federal Investment-to-date $137 million
Non-Federal Spend-to-date $75 million
Total investment-to-date $212 million
Project Cost Estimates
Infra and Distribution System $433.5 million
On-Farm Work $106 million
Sunk PED $11.5 million
Est. Total Project Cost $551 million
Estimated completion date (at current
funding levels)
34.5 years

18. 18
Grand Prairie Irrigation Project – P3 Screening
Competing priorities make a significant increase in federal
appropriations for this Project unlikely, so Project sponsors are
investigating alternative finance and delivery opportunities with
the aim of accelerating Project delivery and protecting existing
assets and investments to-date.
Project appears to meet P3 screening criteria, including the
following:
 Project Size & Complexity
 Criticality
 Vital to economic activity
 Urgency of implementation
 System integration
 Significant potential for revenue generation
 Environmental and Legal Clearances
 Potential for scheduling efficiencies
 Project would benefit from innovation and technology
 Potential for life-cycle cost savings through bundling
 Network completion
Federal Sponsor
USACE
Non-Federal Sponsor
State of Arkansas (ANRC)
Contracting Authority
White River Irrigation District
P3 Agreement
Private Partner
(Quasi-Governmental or Private
Special Purpose Entity)
Creditors /
Lenders
Financial Sponsors
(Equity)
Design-Build
(Construction)
Operations &
Maintenance
Insurance and
Reserves
Performance
Securities
Conduit Tax-Exempt
Bond Issuer
PPA
Debt Financing
Equity Financing
EPC Contract
Operating Contract
Grand Prairie Region Demonstration Project
Alternative Finance & Delivery Structure

19. Grand Prairie Tax-Exempt Structure
19

20. 20
Overview of P3 Development Process
• January – June 2016 – Project Review / Initial P3
Transaction Structuring
• High-level viability assessment undertaken
• P3 options analysis
• Initial transaction structuring and risk matrix
• June 6, 2016 – Request for Information (RFI)
Distribution Began
• Launch of RFI - Process heavily marketed in media
and industry groups
• Over 50 companies requested RFI and expressed
interest in project as P3
• June 28-30 2016 – Industry Forum and Site Tour
• Participation of 35 companies attended industry
forum
• Ongoing meeting requests show sustained interest
• July 25, 2016 – RFI Response Submissions
• 20 responses received from 22 companies
Project sponsors are currently working with State and
Federal authorities to create enabling framework for the
project, including state-level legislation, credit-backstops,
regulatory framework and Viability Gap Funding

21. 21
Key Takeaways from RFI Responses
1. Solid industry interest in GPIP as a P3, if structured appropriately
2. Industry unwilling to take demand risk
• Uncertainty related to water usage by farmers, availability of substitute
water sources, water pricing risk, etc. generates excessive demand risk
• P3 only viable under an availability/guaranteed off-take arrangement or
under a Minimum Revenue Guarantee (MRG)
• Need for viable project credit-backstop requires ANRC involvement
3. Need to better define governance structure:
• Role of diverse parties (USACE, WRID, ANRC) over term of agreement
• Counterpart risk
• Right of way acquisitions completed ahead of P3 project critical path
4. Other:
• Most other comments relate to basic transaction structuring issues that
are easily addressed, such as:
• Clarifying scope of work
• Brownfield transfer issues
• Definition of performance standards

22. 22
Grand Prairie Irrigation Project – Financial Modeling
Funding
Shortfall
Potential
Profit
Note: Values are NOT in Net Present Value. These figures are estimates/provides an order of magnitude. Figures meant for discussion
purposes only.

23. 23
Alternative Compensation Structure

24. USACE P3 Demonstration Project
FARGO-MOORHEAD DIVERSION PROJECT
US

25. Case Study: Fargo Moorhead Flood Risk Management)
• Authorized flood risk management project
• Strong local sponsor support:
 Local sponsor has leveraged local funding sources (local
sales taxes, state funding, and special assessment district)
 Local sponsor willing to explore new delivery options to
accelerate benefits and minimize appropriations and
delivery risk.
 Alternative finance and delivery options developed by
USACE, leveraging WRRDA 2014 (section 1014)
 Project is well-advanced, but awaiting OMB approval of
funding for new start.
25

26. Fargo – P3 Benefits
• Transaction aims to secure best Value-for-Money in the delivery of infrastructure
and services. Reduced total cost by some $400 million while increasing public
benefits by $1.9B
• Accelerates delivery by at least 8 years and reduces Federal funding by $400M
• Split Delivery model allows effective risk transfer to local sponsors, who in turn pass
those risks on to private partner.
USACE
(Federal)
Equity
Local Sponsors
(Diversion Authority)
Private
Partner
DBFOM
Agreement
Debt
Reserves
Design-Build
Insurance
O&M
Requirements
Land
Availability
Payments
Performance
Standards
Oversight
Bonds
Taxes
State Appropriations
PPA
Technical
Reviews &
Permitting
Reimbursement of
Advance Funding
Private
Sponsors
USACE
(Federal)
Local Sponsors
(Diversion Authority)
Provide Gap
Financing
PPA
Federal
Appropriations
DB
Agreement
Requirements
Issuing Permits
Payments
Performance
Standards
Oversight
Private
Partner
Design-Build
Provide Land
Administer Reviews
Delivery of
Infrastructure
Delivery of
Infrastructure
Crossover of O&M Provision
Diversion Channel
WRRDA 1014
Southern Embankment
WRRDA 5014
Assessments
Creditors
26

27. Fargo – P3 Benefits
27

28. 28
Conclusion
28

29. Conclusion & Discussion
29
• P3 appears to be the “new normal”. Alternative finance
and delivery models are playing an increasing important
role for most infrastructure projects, including water
resources.
• Significant capital is available for well-structured P3
projects; but capital is not the entire value proposition.
• Water resource projects have some unique characteristics
that distinguish them from other sectors (such as
transportation), which need to be understood as you seek
to structure transactions.
• Federal resources are available to assist in thinking
through alternative finance and delivery structures.

30. COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
Thank you
Jill Jamieson
Managing Director
Jones Lang LaSalle Americas
202.719.5588
Jill.Jamieson@am.jll.com