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Vancouver Fraser Port Authority

Roberts Bank Terminal 2 Project Market Sounding Phase 1A

December 2019

2 Vancouver Fraser Port Authority | RBT2 | Market Sounding Phase 1A | December 2019

Project information

The volume of shipping containers handled along Canada’s west coast has grown substantially in the past decades. To manage this growth, there have been significant improvements to container terminals in Vancouver and Prince Rupert to increase their efficiency and capacity, as well as investments in road and rail to improve the flow of trade. However, even with the additional capacity provided by these improvements, forecasts from independent experts show that it will not be enough to manage Canada’s future trade demand.

The Roberts Bank Terminal 2 Project is a proposed container terminal in the Port of Vancouver that is needed to ensure Canada is able to meet its trade objectives through to the late 2030s. The project is being led by the Vancouver Fraser Port Authority, which is committed to ensuring the success of the procurement and the project.

The proposed terminal location was selected based on years of planning and over six years of environmental research and engineering study.

The goal of this market sounding exercise is for the port authority to gather information and feedback that will shape infrastructure procurement for the project, including the delivery model, the schedule, and the contract packaging.

View the proposed construction approach: here

About the Vancouver Fraser Port Authority and the Port of Vancouver The Vancouver Fraser Port Authority is the federal agency responsible for the stewardship of the Port of Vancouver, Canada’s largest port.

Like all Canada Port Authorities, we are accountable to the federal minister of transport. Our mandate is to enable Canada’s trade through the Port of Vancouver, while protecting the environment and considering local communities.

The port authority is structured as a non-share corporation, is financially self-sufficient and does not rely on tax dollars for operations. Our revenues come from port terminals and tenants who lease port lands, and from port users who pay various fees such as harbour dues. Profits are reinvested in port infrastructure.

The port authority has control over the use of port land and water, which includes more than 16,000 hectares of water, over 1,500 hectares of land, and approximately 350 kilometres of shoreline. Located on the southwest coast of British Columbia in Canada, the Port of Vancouver extends from Roberts Bank and the Fraser River up to and including Burrard Inlet, bordering 16 municipalities and intersecting the asserted and established traditional territories and treaty lands of several Coast Salish First Nations. The port is complex and includes many organizations beyond the port authority. Among other roles, we are responsible for overseeing port development as Canada’s trade grows, which we do by building infrastructure and by reviewing and permitting development projects in the port, such as terminal expansions.

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Context Overall, container volumes have grown at a significantly greater pace than overall economic growth within Canada and greater than even international trade growth itself. Since 2012, average container volumes moving through Vancouver have risen to approximately 3.4 million 20-foot equivalent units, or TEUs, (about 4% annually).

As part of our work to ensure there is enough capacity for growing trade on Canada’s west coast, the port authority commissioned a series of independent expert third-party container traffic forecasts. These forecasts predict sustained growth in container traffic through the west coast of Canada to 2040 and beyond. Based on these forecasts, the entire proposed capacity of the Roberts Bank Terminal 2 Project is needed to ensure Canada is able to meet trade plans and objectives through to the mid-to-late 2030s.

The image below outlines these forecasts and identifies planned improvements underway within the jurisdiction of the port authority and at the Port of Prince Rupert. These improvements are at various stages of the planning and permitting processes and will alleviate capacity constraints on the West Coast until the Roberts Bank Terminal 2 Project can be delivered.

Should any of the planned improvements experience delays or not proceed to construction, the West Coast will not have enough capacity to handle container trade and will face capacity shortfalls earlier than anticipated.

Without the ability to move goods efficiently and reliably, shippers will search for the next best alternative. This will have consequences to Canada’s economic progress.

The port authority is committed to developing the Roberts Bank Terminal 2 Project in a way that meets and fulfills the following objectives:

1. Prepare for shipping container trade growth on behalf of Canada and Canadians

2. Ensure that port growth does not come at the expense of the environment, local communities or Indigenous groups

3. Provide economic benefits, including job creation, to the region, British Columbia and Canada


In addition to ensuring that Canada continues to be an appealing port for goods to and from Asia, the project will be a significant economic generator for the region. Like most large, recently constructed container terminals, the Roberts Bank Terminal 2 Project is anticipated to be semi-automated and is estimated to create about 1,500 jobs on the terminal as well as 11,000 trucking, warehousing and other jobs off the terminal. The construction of the terminal over five and a half years would provide 12,700 person-years of employment.

The port authority recognizes the importance of meaningful engagement and consultation. We have undertaken an engagement and consultation program with 46 Indigenous groups that will continue throughout the federal review and permitting of the project and, should the project proceed, into construction and operation. In addition to this work, the port authority has engaged extensively with the public and stakeholders over four rounds of public engagement and the creation of or participation in working groups with local government and technical experts.

In addition to this extensive consultation, the Roberts Bank Terminal 2 Project is undergoing a federal environmental assessment by an independent review panel under the Canadian Environmental Assessment Act, 2012. A decision on the assessment by the Government of Canada is required before the port authority proceeds with procurement.

The final project design will be informed by these consultations and subject to any conditions set out by regulators, including the terminal location, orientation, construction timing and methods, mitigation methods, and ongoing monitoring practices.

Main project characteristics The new container terminal proposed by the Roberts Bank Terminal 2 Project would have three berths and be constructed at Roberts Bank in Delta, B.C. Once built, the project will provide container capacity required to meet forecasted demand.

There are three main components to the proposed Roberts Bank Terminal 2 Project: 1. A new 108 hectare, 2.4 million 20-

foot equivalent units (TEUs), marine container terminal

2. A widened causeway to accommodate additional road and rail infrastructure

3. An expanded tug basin to accommodate a second tug operations contractor

DELTA

Project component Project rail additions/modifications Project road additions/modifications


Key nomenclature and definitions The following definitions are used to describe the procurement models discussed in this document.

Build-operate-transfer (BOT) The full concession model, or BOT, is the procurement method with the highest degree of private sector involvement. The full concession model is similar to a design-build-finance-operate-maintain (DBFOM) approach, with the additional transfer of most revenue risk to the private sector consortium.

In a full concession agreement, the private sector consortium constructs an asset and is responsible for collecting tolls or fees directly from asset users for a pre-defined period of time. The concession grants the consortium a right to collect user fees, but the consortium never takes physical ownership of the asset. The revenues collected from tolls or fees are intended to compensate the private sector for capital, operating, maintenance, life cycle and financing costs expended and provide a reasonable rate of return.

Design-build (DB)/design-build-construction finance (DBf) The major differentiator between a DB and DBf model is which party retains construction financing responsibility. In a DB model, the owner retains financing responsibility, whereas, in a DBf model, the financing responsibility is passed to the contractor. The details of the financial responsibility can vary by contract and are dependent on commercial terms.

Similar to a DB model, a DBf approach awards the design and construction under a single contract. Consortiums, joint ventures or subcontract agreements may be established between two or more companies to pool the resources and expertise necessary to deliver a DBf project.

Delivery models considered The port authority has reviewed a range of procurement and commercial arrangement options available for the project.

As a next step in planning, we will continue to review and consider the merits of four possible procurement options:

Scenario 1 involves a single procurement of all components as a build-operate-transfer (referred to as a “BOT from sea floor up”).

A. Alternate Scenario 1A would procure all components as a BOT, with the reserved right to step-in to the design-build (DB)/design-build-construction finance (DBf) of the earthworks and caissons (“landmass”).

Scenario 2 involves two procurements; a DB/DBf for the landmass, and a BOT for all other components including terminal operations and revenue risk (referred to as a “BOT Terminal”). These two contracts (DB/DBf, and BOT) would be managed separately.

A. Alternate Scenario 2A would novate the DB/DBf contract for the landmass into the BOT contract.

The following table outlines the scenarios currently under consideration.

Earthworks and caissons Terminal construction & operations

Scenario 1 (BOT from sea floor up) BOT

Scenario 1A (BOT with step-in rights) BOT

Scenario 2 (separate procurements) DB/DB(f) BOT

Scenario 2A (novated DB/DB(f)) DB/DB(f) BOT


Preliminary procurement schedule options Each scenario presents its own challenges and opportunities for scheduling. This section lays out the approximate timing of key phases in the procurement and construction of the Roberts Bank Terminal 2 Project for each scenario. These are best estimates at time of writing and are not to be representative of a final schedule or the requirement of the procurement.

Estimated schedule: Scenario 1 (BOT from sea floor up) The following table outlines the anticipated procurement and construction schedule for a full BOT procurement of the project.

Project milestone Estimated timing

RFQ start Q3–Q4 2020

Selection of proponents Q4 2020–Q1 2021

RFP start Q4 2020–Q1 2021

Selection of preferred proponent Q2–Q3 2021

Financial close Q3–Q4 2021

Mobilization start Q4 2021–Q1 2022

Construction start Q3 2022

Operations start Q4 2028

Estimated schedule: Scenario 2 (separate procurements) The following table outlines the anticipated procurement and construction schedule for separate procurements.


Earthworks and caissons procurement

RFQ (earthworks/caissons) start Q3–Q4 2020


RFP (earthworks/caissons) start Q4 2020–Q1 2021

Selection of preferred proponent Q2–Q3 2021

Terminal construction and operations procurement

RFQ (terminal) start Q4 2020–Q1 2021

Selection of proponents Q1–Q2 2021

RFP (terminal) start Q2–Q3 2021

Selection of preferred proponent Q4 2021–Q1 2022


Mobilization start Q1–Q2 2022




Estimated schedule: Scenario 2A (BOT with novated landmass contract) The following table outlines the anticipated procurement and construction schedule for a DB(f) procurement novated into a BOT.


RFQ (earthworks/caissons) start Q3–Q4 2020


RFP (earthworks/caissons) start Q4 2020–Q1 2021

Selection of preferred proponent Q2 2021

RFQ (terminal) start Q4 2020–Q1 2021

Selection of proponents Q1–Q2 2021

RFP (terminal) start Q2–Q3 2021

Selection of preferred proponent Q4 2021–Q1 2022


Mobilization start Q1–Q2 2022




Preliminary cost estimate The following section provides cost estimates in nominal dollars for the various components of the terminal. The costs outlined include direct costs, contractor overhead, and contingency. These are for reference only and are not official estimates. The port authority is still determining the final scope of the project, therefore these estimates will likely change.

Earthworks and caissons cost guideline The expected costs for the construction of the earthworks and caissons are summarized in the following table.

Component Estimated cost Construction areas

Construction Earthworks $1.0B Land reclamation

Dredge basin

Causeway expansion

Tug basin

Wharf structure $0.9B Wharf structure

Terminal construction and equipment cost guideline The expected costs for the terminal construction and operations are summarized in the following table.

Component Estimated cost Construction areas

Construction Terminal infrastructure

$1.1B Buildings

Electrical

Civil utilities

Crane rail

Roadworks/Pavement

Operating equipment

$0.5B ASC, RMG and STS cranes

Mobile equipment

Other

Infrastructure and equipment maintenance

Infrastructure maintenance


1. Market sounding questions – Phase 1A

1.1. Questions tracker The questions below have been prepared for Phase 1A of market sounding (Q4 2019), which will be conducted via phone interviews. Where participants could fit into more than one category, they will be asked applicable questions from both categories.

1.1.1. Questions for contractors 1. Given the information provided, do you

have any questions about the project?

2. The port authority is considering a Build Operate Transfer (BOT) model including everything from the “sea floor up” (i.e., land mass construction, wharf structure, widened causeway, all fixed and mobile terminal assets) for the project (estimated CAPEX spend of $3.5B CAD) that allocates the majority of revenue risk to the concessionaire. This is the port authority’s Scenario 1. What is your firm’s interest and willingness to participate in a project that uses this approach?

3. The port authority is considering various configurations, which would allow construction of the landmass (108 ha and $2.0B) to proceed if a full concession agreement cannot be reached for any reason. How would your interest in the project be affected if alternative procurement configurations for the landmass were used?

Alternate Scenario 1A would procure all components as a BOT, with the reserved right to step-in to the Design Build (DB)/Design Build construction finance (DBf) of the earthworks and caissons (“landmass”).

Scenario 2 involves two procurements; a DB/DBf for the landmass, and a BOT for all other components including terminal operations and revenue risk (“BOT from Top of Sand Up”). These two contracts (DB/DBf, and BOT) would be managed separately.

Alternate Scenario 2A would novate the DB/DBf contract for the landmass into the BOT contract.

4. Based on your knowledge of the market and the planned timing of the project, what challenges do you foresee with the procurement, and what recommendations do you have for the port authority?

5. The port authority has been working to complete the federal environmental assessment for the project and is anticipating a final decision from Government of Canada to occur between June and December 2020. The port authority will not enter into a contract without having this approval in place. What is your firm’s willingness and interest in participating in the following stages of the procurement process prior to a final Government of Canada decision?

a. RFQ?

b. RFP?

6. The port authority is currently in the process of developing its application for a Fisheries Act authorization and Vancouver Fraser Port Authority Project and Environmental Review permit, and would likely require the preferred proponent’s participation in order to finalize those permits.

a. What would you require from the port authority in order to participate prior to contract signing?

b. Would you sign a contract prior to obtaining these permits? If so, what protections would require?

c. Can you share any thoughts that could assist the port authority through the permitting and procurement process?

7. To provide time for the proponent to obtain minor permits, secure equipment and firm up material supply before start of construction, it is possible that an LNTP period of up to 12 months would be required.

Objective of Phase 1A Market Sounding: Guide the delivery model decision


a. Would this affect your desire to participate in financing?

b. What protections would you want for your pricing if there was an extended LNTP period?

c. What is the longest period of time you’ve been asked to hold your pricing for an LNTP period prior to signing a contract?

8. From your involvement on other major port and infrastructure projects, what caused you to decide to bid/not bid? What could the port authority do to encourage you to submit a bid on the project e.g. submittal requirements, time to bid etc.

9. From your perspective, what do you see as the main risks of this procurement? What could the port authority do to de-risk the project from your perspective?


11. The port authority is aiming to have an interactive procurement process to ensure we optimize the project. How much time do you think the port authority would need to ensure an optimal procurement process?

12. If your organization was willing to participate, how much time would you require to become a consortium member if this decision was a BOT? How much time would you require for a DB/DBf consortium?

13. Can you share any other information that may be useful to the port authority as it develops its thoughts on the project (e.g. lessons from past novation contracts)?

14. Regarding future communication and engagement, are you aware of the port authority’s Roberts Bank Terminal 2 Project website?

15. If you have further feedback to share at a later date, we will receive it in written form via [email protected]

16. The port authority is considering a second round of market sounding to further develop its thinking on certain commercial issues. Are you available for follow-up on this market sounding and/or willing to

participate in a further market sounding exercise if initiated?

1.1.2 Questions for operators 1. Given the information provided, do you have any

questions about the project?

2. The port authority is considering a Build Operate Transfer (BOT) model including everything from the “sea floor up” (i.e., land mass construction, wharf structure, widened causeway, all fixed and mobile terminal assets) for the project (estimated CAPEX spend of $3.5B CAD) that allocates the majority of revenue risk to the concessionaire. This is the port Authority’s Scenario 1. What is your firm’s interest and willingness to participate in a project that uses this approach?

3. The port authority is committed to having the project operational by 2029. The port authority is considering various configurations, which would allow construction of the landmass (108 ha and $2.0B) to proceed if a full concession agreement cannot be reached for any reason. How would your interest in the project be affected if alternative procurement configurations for the landmass were used?


Scenario 2 involves two procurements; a DB/DBf for the landmass, and a BOT for all other components including terminal operations and revenue risk (“BOT from Top of Sand Up”). These two contracts (DB/DBf, and BOT) would be managed separately.

Alternate Scenario 2A would novate the DB/DBf contract for the landmass into the BOT contract.

4. Would you take equity risk as a BOT consortium member or would you consider just taking on an operations role?

5. If your organization was willing to participate in this project as a member of a consortium, how much time would you require to become a consortium member for a BOT?

6. Have you been part of a BOT project of this nature before?

a. If you haven’t, would you consider it?

b. What would it take to encourage you to be part of a consortium?

7. Based on your knowledge of the market and the planned timing of the project, what challenges do

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you foresee with the procurement, and what recommendations do you have for the port authority?


a. RFQ?

b. RFP?

9. From your involvement on other major port and infrastructure projects, what caused you to decide to bid or not to bid (e.g. submittal requirements, time to bid etc.)? What could the port authority do to encourage you to submit a bid on the project?

10. The port authority is aiming to have an interactive procurement process to ensure we optimize the project. How much time do you think the port authority will need to optimize the procurement process?

11. The project currently anticipates that it could be up to 7.5 years from the announcement of Preferred Proponent to the initial operations start date. What could the port authority do to de-risk the project from this perspective?

12. Can you describe how you would forecast revenue?

13. The port authority is looking for this project to be a world-class terminal. What considerations should the port authority take under advisement in pursuit of this objective?

14. Can you share any other thoughts or information that may be useful to the port authority as it develops its thoughts on the project?


16. If you have further feedback to share at a later date, we will receive it in written form

via [email protected]

17. The port authority is considering a second round of market sounding to further develop its thinking on certain commercial issues. Are you available for follow-up on this market sounding and/or willing to participate in a further market sounding exercise if initiated?

1.1.3 Questions for concessionaire lead (equity) 1. Given the information provided, do you have any

questions about the project?

2. Have you acted in this concessionaire role for a port project before? If so, what was the approximate size of your equity investment? Have you done one that required capital spending of $2.0B CAD, or 60% of the total CAPEX spend, for just land mass and wharf structure?


4. The port authority is considering various configurations, which would allow construction of the landmass (108 ha and $2.0B) to proceed if a full concession agreement cannot be reached for any reason. How would your interest in the project be affected if alternative procurement configurations, for the landmass were used? Alternate Scenario 1A would procure all components as a BOT, with the reserved right to step-in to the Design Build (DB)/Design Build construction finance (DBf) of the earthworks and caissons (“landmass”). Scenario 2 involves two procurements; a DB/DBf for the landmass, and a BOT for all other components including terminal operations and revenue risk (“BOT from Top of Sand Up”). These two contracts (DB/DBf, and BOT) would be managed separately. Alternate Scenario 2A would novate the DB/DBf contract for the landmass into the BOT contract.

5. If your organization were willing to participate in

this project, how much time would you require to form a consortium for a BOT?



6. How much time would it take once you have received confirmation of capital costs to finalize a financial submittal?


8. If the port authority offered proponents preferential financing, at below market interest rates, for up to a third of the required financing for multiple years, how would this change your interest in the project, and any key challenges you have identified?

9. The port authority is considering structuring the project so that bidders would commit finance (both debt and equity) approximately 7.5 years before operations commences.

a. What are the implications of this approach in terms of how you would approach risk adjustment to financing?

b. What hurdle rate or return on equity do you think you would require?

c. What can the port authority do to make the project as attractive as possible?

d. Can you describe how you would forecast revenue? What sort of conservativism would you apply to revenue based on this project’s schedule?


a. RFQ?

b. RFP?

11. The port authority is currently in the process of developing its application for a Fisheries Act authorization and a Vancouver Fraser Port Authority Project and Environmental Review permit, and would likely require the preferred

proponent’s participation in order to finalize those applications.

a. What would you require from the port authority in order to participate prior to contract signing?

b. Would you sign a contract prior to obtaining these permits? If so, what protections would require?

c. Can you share any thoughts that could assist the port authority through the permitting and procurement process?

12. From your involvement on other major port and infrastructure projects, what caused you to decide to bid/not bid? What could the port authority do to encourage you to submit a bid on the project (e.g., submittal requirements, time to bid etc.)

13. From your perspective, are there enough contractor consortiums in the market who could build the land mass and maintain a competition from a concessionaire’s perspective? From your perspective, are there a lot of concessionaires who will fulfill a 42-year project of this type in Western Canada?

14. To provide time for the proponent to obtain minor permits, secure equipment and firm up material supply prior to start of construction, it is possible that a Limited notice to proceed (LNTP) period of up to 12 months would be required.

a. What protections would you want for your pricing if there was an extended LNTP period?

b. What is the longest period of time you’ve been asked to hold your pricing for an LNTP period prior to signing a contract?

c. Would this affect your desire to bid?

15. What debt to equity ratio do you foresee for the BOT? Would it change depending on the potential scenarios (1A, 2, 2A) the port authority is considering?

16. What is your view of the Western Canadian market currently? And what is your likelihood to bid?

17. How could the port authority make this project as attractive as possible? What could the port authority do to further encourage you to bid?

18. If your organization was willing to lead a bid, how much time would you require to develop a consortium for a BOT?





22. The port authority is considering a second round of market sounding to further develop its thinking on certain commercial issues. Are you available for follow-up on these market soundings and/or willing to participate in further market sounding exercises if initiated?

1.1.3 Questions for financiers (debt) 1. Given the information provided, do you

have any questions about the project?


3. The port authority is committed to having the project operational by 2029. The port authority is considering various configurations, which would allow construction of the landmass (108 ha and $2.0B) to proceed if a full concession agreement cannot be reached for any reason. How would your interest in the project be affected if alternative procurement configurations for the landmass were used?


Scenario 2 involves two procurements; a DB / DBf for the landmass, and a BOT for all other components including terminal

operations and revenue risk (“BOT from Top of Sand Up”). These two contracts (DB/DBf, and BOT) would be managed separately.

Alternate Scenario 2A would novate the DB / DBf contract for the landmass into the BOT contract.

4. How do you view the creditworthiness of the port authority to backstop a project of this size?

5. If your organization was willing to participate in this project, how much time would you require to become a consortium member for a BOT?

6. What debt to equity ratio do you foresee for the BOT? Would it change depending on the potential scenarios (1A, 2, 2A) the port authority is considering?

7. How do you think debt for a project like this would be financed? (e.g. long term bonds, bank finance, construction bonds taken out by long term bond post construction)

8. How do you view this project in terms of credit ratings? (e.g. BBB)


10. From your involvement on other major port and infrastructure projects, what caused you to decide to finance or not finance? What could the port authority do to encourage you to participate in financing this project?

11. If the port authority offered preferential financing, at below market interest rates, for up to a third of the required financing for multiple years, would this change your interest in the project, and the key challenges you have identified?

12. The port authority is considering structuring the project so that bidders would commit finance (both debt and equity) approximately 7.5 years before operations commence.

a. What are the implications of this approach in terms of how you would approach risk adjustment to financing?

b. What can the port authority do to make the project as attractive as possible?

c. Can you describe how you would forecast revenue? What sort of conservativism would you apply to revenue based on this project’s schedule?



13. To provide time for the proponent to obtain minor permits, secure equipment and firm up material supply before start of construction, it is possible that an LNTP period of up to 12 months would be required.

a. Would this affect your desire to participate in financing?

b. What protections would you want for your pricing if there was an extended LNTP period?

c. What is the longest period of time you’ve been asked to hold your pricing for an LNTP period prior to signing a contract?




17. The port authority is considering a second round of market sounding to further develop its thinking on certain commercial issues. Are you available for follow-up on this market sounding and/or willing to participate in a further market sounding exercise if initiated?


Learn more: robertsbankterminal2.com/business-opportunities [email protected]

http://www.robertsbankterminal2.com/business-opportunities/procurement


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