Regina bypass reaches financial close

Vinci Concessions is among consortium members ready to push ahead with Saskatchewan’s first transportation P3 project.

With the signing of paperwork by Saskatchewan's Ministry of Highways and Infrastructure and the consortium Regina Bypass Partners (formerly SaskLink Global Transportation Partners, or SGTP), financial close was reached on the central Canadian province's first transportation public-private partnership (PPP; P3).

Regina Bypass Partners consists of Vinci Concessions (37.5 percent), Parsons Enterprises (25 percent), Connor Clark & Lunn GVest Fund (25 percent), and Gracorp Capital (12.5 percent). The group will design, construct, finance, operate and maintain the bypass highway.

The design and construction work on the project was contracted out to another consortium named Regina Bypass Design Builders, a joint venture of Graham Infrastructure (37.5 percent), Parsons Canada (25 percent), Carmacks Enterprises (18.75 percent), and Vinci Infrastructure Canada Limited (18.75 percent).

In a release to announce the signing of the project agreement, Parsons Enterprises president Dean Harwood said: “Parsons is pleased to be part of the largest transportation infrastructure project in Saskatchewan's history, a project that will be completed using alternative project delivery methods.”

According to an official government release, the project consists of 58 kilometers of four-lane highway complete with 11 new interchanges as well as new flyovers and service roads. Forty kilometers of the highway will be new construction, with 18 kilometers of existing highway set to be renewed during the construction period. The bypass will become part of Trans-Canada Highway 1, an intercontinental highway that is essential for the movement of goods across the country, and is being touted as a major step forward in transportation safety and efficiency for the region.

The total investment volume of the project is roughly C$1.9 billion (€1.3 billion; $1.4 billion). Among those providing financing is the German KfW IPEX-Bank , which is providing borrowed funds of roughly C$85 million as a consortium partner in a commercial bank club in a loan that is set to be repaid upon completion of the new highway in four and a half years. The government of Saskatchewan promised to contribute roughly $200 million toward the project. The City of Regina and Rural Municipality of Sherwood will also share some of the costs.

Disbursements will be made to the consortium through availability payments.

Gordon Wyant, Minister Responsible of SaskBuilds, the provincial entity charged with planning and management of large-scale infrastructure projects said: “The P3 mode will help us deliver this project on-time and on-budget in a timeframe that would otherwise not have been achievable through a traditional construction approach.”

The project bond has a tenor of 30 years, according to a KfW release.

While the project has faced some scrutiny from local groups, some of whom are critical of the price tag, which was originally pegged at around $700 million to $800 million when the project was proposed last year, and others who are critical over the northern route, the project remains unhindered.

Wyant said in a statement responding to cost criticism that the original scope of the project was expanded to include two more interchanges and that the cost of three decades of maintenance was not included in the original estimate. In addition, while 430 points of conflict have been discovered with utilities, pipelines and other local infrastructure, Wyant noted that should cost overruns be incurred as a result of these issues, they will be borne by the private partner and not by taxpayers, a benefit of choosing to utilise a P3.

In fact, the Saskatchewan government estimates that the use of a P3 in the project will generate cost savings of roughly $380 million over the life of the project, a saving of roughly 16.8 percent. With contract negotiations complete, the province plans to release a full-bodied Value for Money (VfM) report “at the earliest opportunity,” according to an August 5 release.

Construction on the partial ring road is scheduled to kick off before the end of the summer, and the first phase is scheduled for completion in 2017 with the full project entering the O&M phase sometime in 2019. Based on preliminary estimates, the government of Saskatchewan estimates that the project will create 8,200 construction-related jobs, and 11,300 jobs over all in the province.