CHICAGO - Indiana Thursday released a request for qualifications for private firms looking to bid on a $390 million interstate highway project, one of a series of public-private partnerships that Indiana officials say make the state a national leader in the sector.
The latest project will mark the Hoosier State’s second P3 structured with availability payments.
Officials said they opted to go with the design-build-finance-operate and maintain model with availability projects because it worked well with the state’s half of the $2.6 billion Ohio River Bridges project, launched earlier this year.
The Indiana Finance Authority plans to ask for private activity bond allocation to help finance the project.
“This is very similar to what was done with the Ohio River Bridges project,” said Will Wingfield, spokesman for the Indiana Department of Transportation. “Based on our experience, we learned that the private sector is very comfortable with the IFA as the primary owner of the process.”
The IFA in March issued $640 million of private activity bonds for the Ohio River Bridges project, marking the state’s first P3 structured with availability payments. The bonds are backed by payments from the state to the developer through the 39-year life of the deal. The payments are dubbed milestone payments in the early years and availability payments after the project is completed.
In its request for qualifications issued Thursday, the state said the availability payment P3 structure “provides a stable platform for risk sharing with the private sector.”
The IFA will also seek financing under the Transportation Infrastructure Finance and Innovation program for the I-69 project, according to the RFQ.
The project is part of a massive rebuilding of 142 miles of Interstate 69 connecting Evansville to Indianapolis. The work is being done in stages, with four already complete or in construction. The fifth stage, which would be financed with the new P3, is estimated to cost around $394 million, and feature four new interchanges and four new overpasses.
The private team would design, build, finance, own and operate the 21-mile stretch of the interstate for at least 35 years after the completion of the project, according to the request for qualifications. There will be no tolls.
The tentative structure calls for the IFA to enter into an agreement with the Indiana Department of Transportation that requires INDOT to make periodic availability payments. INDOT’s revenue comes from a biennial budget appropriation.
The IFA would make the availability payments to the developer. As with the Ohio River Bridges project, the payments could be reduced according to certain criteria, such as construction delays or problems after the section of the road is completed.
The structure also calls for INDOT to contribute annual milestone payments of up to $20 million a year for three years starting in 2014.
The state issued a request for interest in late 2012 and received 18 responses, Wingfield said. The responses on the RFQ are due in July, and the state hopes to chose a shortlist of bidders by the end of July. A final request for proposals will be issued in October, with proposals due in early 2014, and a final bidder selected by February. Commercial close is scheduled for March 2014 and financial close for May. The project will begin after that.
Indiana in 2006 established itself as a privatization pioneer when it leased the Indiana Toll Road for $3.8 billion. Proceeds from that deal, largely earmarked for transportation projects, are spent.
In addition to the Ohio River Bridges project and the I-69 project, the state is working with Illinois to build a 47-mile expressway running between the two states. On the local side, the city of East Chicago recently signed a P3 that will allow a private company to create the state’s only privately owned toll bridge.