Companies vie to build and operate Purple Line
Six private consortia have expressed interest in building and operating the $2.2 billion Purple Line in partnership with the Maryland Transit Administration. They bring experience from similar deals around the world, including a successful project in Denver.
The Maryland Transit Administration (MTA) has received responses from six private consortia who want to bid on the planned light-rail line between Bethesda and New Carrollton in a public-private partnership (P3), which the state approved in August.
"The six responses, from local, national, and worldwide firms, clearly demonstrate leaders in the P3 industry have strong interest in delivering this long-awaited project," said Maryland transportation secretary James Smith in a statement. The consortia include a who's-who of investors and operators active in the P3 space, including the investors in the only comparable transit concession in the United States, the Eagle P3 in Denver.
The interested teams are: M-PG Connect (Plenary Group and Bechtel Development), Maryland Purple Line Partners (Vinci Concession, Walsh Investors, InfraRed Capital Partners, Alstom, and Keolis), Maryland Transit Connectors (John Laing Investments, Kiewit Development, and Edgemoor Infrastructure & Real Estate), Purple Line Development Partners (CSCEC and United Labor Life Insurance), Purple Line Transit Partners (Meridiam Infrastructure, Fluor, and Star America Fund) and Purple Plus Alliance (Macquarie Capital and Skanska Infrastructure Development).
Macquarie and Fluor's Denver Transit Partners was the winning bidder of the Eagle P3, the only design-build-finance-operate-maintain (DBFOM) transit concession that has successfully closed in the US. John Laing and Uberior bought Macquarie's stake in the project when its financing closed in August 2010.
Under a DBFOM concession, a private consortium takes responsibility for the design, construction, financing, operations, and maintenance of a project within the parameters of the contract with the grantor, which in this case is the state of Maryland. The deal structure also places the majority of the design, construction, and operational risks on the private sector.
The Eagle P3 is a good comparison for Maryland's Purple Line. In addition to being the country's only DBFOM transit concession, it also uses availability payments, which are guaranteed payments to the concessionaire from the grantor.
It also involves an isolated rail system that is separate from Denver's existing light rail. This separation is important in terms of measuring the operational performance since there aren't any other services to affect it. This allows the grantor to accurately reimburse the private concessionaire in the future.
The Purple Line light rail will stretch 16 miles from Bethesda to New Carrollton through Montgomery and Prince George's counties. Operationally separate from the MTA's other transit lines, the concession also includes a maintenance facility and rolling stock.
The Eagle P3 includes three commuter rail lines that will run more than 35 miles from Denver Union Station to Denver International Airport, the suburb of Westminster and the suburb of Wheat Ridge when they open in 2016. It also includes a commuter rail maintenance facility and Hyundai Rotem rolling stock.
Fluor, John Laing, and Macquarie will undoubtedly be able to bring best practices to Maryland from their experience in Denver, some of which could help reduce costs and possibly speed up the construction schedule.
Other interested firms also have transit concession experience outside the US. Keolis and Plenary are investors in the eight-mile Gold Coast light rail concession in Australia, and Vinci is an investor in multiple light rail concessions in Europe.
Meridiam and Skanska bring experience from other DBFOM concessions in the US to the table. Meridian built a courthouse in Long Beach, California, while Skanska worked on the Midtown and Downtown Tunnels in Virginia's Hampton Roads area.
The next steps for Maryland include evaluating the responses that the six consortia submitted for the Purple Line P3 and selecting a shortlist of qualified teams who will move on to the actual bidding phase. Robert Smith, administrator of the MTA, says that they plan to shortlist up to four consortia.
The MTA plans to announce the shortlist in January 2014 with proposals due in the early summer, the agency says. It expects to pick a preferred bidder by either the end of 2014 or early 2015.
Construction on the Purple Line could begin as early as the second quarter of 2015, subject to approval of the concession contract by the Maryland Board of Public Works and funds from the federal government to help finance the project.
Maryland is seeking up to $1.05 billion in a New Starts grant from the US Federal Transit Administration and has submitted a letter of interest for a TIFIA loan from the US Department of Transportation. The state plans to contribute at least $711 million and expects between $400 million and $900 million in funds from the private sector.
While there aren't many transit projects built through P3s in the United States, if successful, the Purple Line could set an example for the rest of the country.
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