On July 23, 2014, the Indiana Finance Authority closed financing on its second availability payment P3 project, the I-69 Section 5 highway project, a 21-mile reconstruction project located outside of Bloomington Indiana, the home of Indiana University. The project is a component of the I-69 Corridor Project which will strengthen connectivity between the northern and southern portions of the state. After signing the public-private agreement in April of this year, Isolux Infrastructure, a major Spanish infrastructure company, brought in Infra-PSP Canada, an affiliate of the Public Pension Investment Board, a Canadian crown corporation, to take 49% of the equity in the project development company, the first time an international public pension player has made a direct investment in a US P3 project during the construction phase of the project. The total equity commitment is approximately $40.4 million.
Total project capital costs are expected to be approximately $370 million; in addition to the private equity commitment, funding is coming from a $243,845,000 tax-exempt private activity bonds issued by IFA with Citi and Jeffries as the bond underwriters. IFA has committed $80 million in milestone payment payments towards project costs. After application of the interest-rate risk sharing provision of the agreement, and with the rally in the muni bond market since Isolux submitted its winning bid in January 2014, the final base maximum annual payment decreased by $1.5 million per year.
The PABs are comprised of a single short-term serial bond maturing March 1, 2017 and several term bonds with maturities ranging from September 1, 2027-September 2046. Yields on the term bonds range from 3.98% to 5%.
The source of repayment of the PABs is anticipated to be availability payments made by IFA under the public-private agreement as consideration for the private developer designing, constructing, financing, operating and maintaining the project. The availability payments, which commence on substantial completion of the project, are subject to quarterly deductions if the private developer fails to meet certain performance requirements relating to the availability of the project and compliance with the technical requirements.
The project is scheduled for completion on October 31, 2016, which, coincidentally is the same date the East End Bridge project, IFA’s first availability payment P3 project, is scheduled to be completed.