D.C.’s first P3 project showcases opportunities to innovate

Bonds

The District of Columbia’s first public private-public partnership was filled with challenges, but demonstrated how outside-the-box thinking can help issuers overcome obstacles to achieve their infrastructure goals.

A panel discussion detailing the financing behind the ambitious plan occurred at the Bond Buyer Infrastructure Conference in Washington D.C. Monday. The D.C. Smart Street Lighting Project calls for replacing more than 75,000 street and alley lights to energy-efficient LED technology with remote monitoring and control capabilities.

“We looked at it as a pathfinding project to asset delivery as opposed to simply replacing lightbulbs,” said Sia Kusha, group head, project development, Plenary Americas. “It was a risk-adjusted performance contract to bring a significant cost savings for the life of the contract by providing a very efficient cost-effective financing mechanism that included equity and significant debt.” 

The deal closed in May 2022 with $160 million in PABs running through D.C. Revenue Bond Program, with a 15-year term tied to a performance-based project that includes milestone payments during construction along with milestone maturities. 

From right, Darrin Glymph, partner, Orrick, Julie Burger, managing director, Wells Fargo, Securities, Sia Kusha, group head, project development, Plenary Americas, Jeremy Ebie, CEO, Phoenix Infrastructure Group, William Liggins, director D.C. Revenue Bond Program.

Julie Burger a managing director at Wells Fargo Securities noted that the issuance achieved an A3 rating from Moody’s Investors Service and was marketed as a green bond which garnered a positive response from investors.

“It was two weeks of going to cities and doing luncheons,” said Burger. “We had thirty-seven investors who looked at the roadshow, a dozen one-on ones, and ultimately it was oversubscribed.”   

The hybrid arrangement of the financing includes availability payments from D.C. along with required disclosures which required flexibility among the stakeholders.

“Every now and then a particular document would pop up,” said William Liggins, director of the D.C. Revenue Bond Program. “We said, ‘who’s going to sign this document? Who has the authority to sign this document?'”   

As issuers continue to discover new ways to unlock infrastructure funding, out-of-the box thinking may win the day.

“This deal shows there are some innovative options and people can be creative to help finance the infrastructure needs throughout the country,” said Darrin Glymph, a partner in Orrick’s Washington office.

“In the first $15 billion of funding, we had thirty-seven projects including toll roads, bridges, tunnels, and highways but there were no streetlights. We looked at this deal and said, “we can do this but it’s going to be different.”   

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