This presentation was made by Nathan Flynn, Director of Infrastructure Investment Banking Department at William Blair & Company at the ironically named conference, "Beyond Parking Meters: The Future of Public-Private Partnerships in Illinois." Can you explain it? If so, email tom@tresser.com

1. March 14, 2012
The Civic Federation and
The Federal Reserve Bank of Chicago
Beyond Parking Meters: the Future of
Public-Private Partnerships in Illinois

2. Asset Valuation Done Right

3. Availability Payment Structures - Overview
 An Availability Payment combines the design, construction, financing,
operation and maintenance of an asset into a single agreement and
payment stream funded by a payment from a governmental entity
 Often utilized for “social infrastructure” or assets that generate no revenue
 Can be utilized for assets that produce revenue when the governmental
entity does not want to give up revenue control of the asset
40
Operating Cost Profile
30 Capital Costs
$ 20
Operating Costs
10
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Years
1

4. Availability Payment Structures - Valuation Analysis
 Value for Money = Traditional
Cost – P3 Cost
Net Present Value Cost
 Potential cost impacts of P3
Procurement
Transferred Value for Money
Risks
 Financing
Retained Retained
 Life Cycle Costs
Risks Risks
 Operating Efficiencies Capital Capital
 Transferred Risks
Expenses Expenses
 Operating & Capital
Expenditures
 State of Good Repair
Operating Operating
 Retained Risks
Expenses Expenses
 Policy
 Regulatory
Traditional Financing P3 Procurement
2

5. Revenue Monetization Structures - Overview
 A Revenue Monetization combines the design, construction, financing,
operation and maintenance of an asset into a single agreement with a
payment stream funded from asset revenues
 Revenue-Sharing
 Augmented availability payments
 Generally speaking, the governmental entity agrees to a specific set of
revenue terms
60
Net Operating Profile
Gross Operating
50
Net Operating Income Income
40
$ 30 Capital Costs
20
Operating Costs
10
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Years
3

6. Revenue Monetization Structures – Valuation Analysis
 Asset valuation, in its most simple form, is the net preset value of asset cash
flows
 Operating Expenses
 Capital Expenses
 Revenue
 Value for Money analysis of a revenue monetization is similar to an Availibity
Structure analysis with the addition of both asset revenue and transferred
revenue risks
 The reserve price of an asset monetization should reflect the risk-adjusted
value of the asset
 William Blair utilizes a multi-variable analysis to produce a range of valuation
outcomes
 By virtue of a competitive procurement process, the winning bidder will
often be the one with the most optimistic/aggressive valuation
assumptions
4