Three examples12 of P3 road projects in Canada demonstrate the important role that tolls (user or shadow) 13 play in the development of new highway infrastructure. Highway 104 (Cobequid Pass) in Nova Scotia was the first to include non-recourse financing and achieved an important risk balance between the government, the contractor/operator and the lenders. Cost savings are estimated at $10 million (8%) on the capital cost of the project, and the road has provided a safe and high quality alternative to the Trans Canada. It also proved the advantages of a special purpose vehicle (Western Alignment Corporation) to manage the interests of the partners.
The Fredericton-Moncton Highway was built under a 50-year design-build-finance-operate concession agreement. Initial capital cost savings were estimated at $170 million and operating savings are $13.7 million over 20 years. The road was built 10 to 15 years earlier than through traditional procurement, and although the tolls were removed in 2000, the government continues to make traffic volume payments (shadow tolls) to repay the toll-based debt.
The Confederation Bridge stands as one if this country's most prolific and successful P3 projects to date. Although its scale is considerably larger than any bridge required in Ontario, there are many lessons to be learned from the way it was built, financed and operated. The 35-year design-build-finance-operate (DBFO) contract includes a $41.9 million (1992 dollars) fixed annual payment to the private partner, which represents estimated annual cost savings of $9.2 million. The 13-km bridge was built in three and a half years and the 100-year service life means the government will save an amount equal to the level of the subsidy every year for 65 years, once it has been transferred back from Strait Crossing Development Inc. (SCDI). The construction, financing, revenue, operation and maintenance risk are all borne by SCDI, representing a significant value to the Government of Canada.
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12 For more information, see The Canadian Council for Public-Private Partnerships publication "Successful Transportation Public-Private Partnerships in Canada and the USA", November 2002.
13 See "Optimizing Investment" above.