Alaska re-launches $715m bridge PPP

Alaska has re-launched the tender for its first public-private partnership (PPP), a $715 million project to construct a 2.7-mile toll bridge connecting Anchorage with nearby Port MacKenzie, as well as 19 miles of roads surrounding the bridge.

This is the second tender Alaska has initiated for this project, known as the Knik Arm Crossing. An earlier version of the project was launched as a PPP in 2006 and attracted bids from consortia led by Macquarie and French developer Bouygues.

Knik Arm Crossing: second try as a PPP

But the tender process stalled because of concerns over the project's impact on a nearby inlet home to a species of endangered whales, according to Kevin Hemenway, chief financial officer for the Knik Arm Bridge and Toll Authority (KABATA). KABATA was created in 2003 with the express purpose of delivering the project, which has since adjusted its design to allay those environmental concerns.

Hemenway said market conditions also changed in the interim, and KABATA decided to pursue the PPP with availability payments, or payments given to the private partner in exchange for making the road available in good condition, rather than toll revenues.

Hemenway said Macquarie and Bouguyes remain “very interested” in the project. He said that other private sector groups have also expressed interest, but declined to specify which groups. KABATA intends to issue a request for qualifications for the project by June, according to a tentative schedule.

To finance the project, KABATA is requesting assistance from the federal government’s TIFIA loan programme.  TIFIA, which stands for the Transportation Infrastructure Finance and Innovation Act, was introduced in 1998 to provide low-cost, long-term loans to US infrastructure projects.

In its TIFIA application, the toll authority proposed a capital structure including a $306 million TIFIA loan, $78 million in equity from a private partner, and $396 million in tax-exempt bonds, including private activity bonds, or municipal securities whose proceeds can be used to finance privately backed projects. Other funding sources include federal highway funds, state matching funds and a state commerce grant, according to the application.

The availability payment structure would result in a shorter lease, according to Hemenway.  The proposed project now has a 35 year concession term, according to the TIFIA application. Hemenway said the original tender contemplated a lease length of 55 to 60 years.

If completed, the Knik Arm Crossing would be the fifth major availability payment deal in the US. Previous deals include the $1.68 billion I-595 corridor improvement project and the $903 million Port of Miami Tunnel in Florida, as well as the Eagle transit rail project in Denver. And California has selected a consortium comprised of French fund manager Meridiam and German infrastructure group Hochtief to rebuild the southern access route to San Francisco's Golden Gate Bridge, though final negotiations for the project, known as Presidio Parkway, are still underway.

Citigroup Global markets is KABATA's financial advisor on the project, while law firm Nossaman is serving as its PPP counsel, according to the TIFIA application.