Lead arranged by Dexia and Fortis, financing for the 30-year North East Calgary ring road DBFO concession closed on 16 February. The deal draws from the Golden Ears bridge template of last year (the first Canadian infrastructure deal to use a cross-border monoline wrapped financing and also featuring Dexia in the lead arranger line-up) and – along with a number of other projects that have at least considered wrapped as well as unwrapped loans or bonds – is confirmation that monoline wraps are to become a fixture of Canadian public private partnership (PPP).

Following a request for qualifications in April 2006, three teams were shortlisted – Bilfinger Berger, Carillion and ABN Amro. Private sector cost comparison studies by Alberta estimated the cost of the project at between C$1 billion and C$1.1 billion ($937 million). Of the three proposals received, two were significantly below the estimate (the winning bid at C$650 million, and the runner-up at C$780 million), and the third in the expected range (at C$1.03 billion).

The government of Alberta awarded the concession in December 2006 to the Stoney Trail Group – a consortium led by Bilfinger Berger BOT Canada. The project is to build a high-capacity ring road around Calgary, including 21km of four and six-lane highway, six interchanges, and 22 bridge structures. The road will be an extension of the Stoney Trail from Deerfoot Trail to 17th Avenue SE. The Alberta government plans to open the roadway to traffic in 2009, and claims that the use of PPP will allow completion two years earlier than initially projected.

Total project cost is C$650 million – net present value including capital – with a funding requirement of C$460 million. The deal comes with no traffic risk. The Alberta government will advance C$300 million in installments as the work progresses and renumeration to the sponsors will be via availability and maintenance payments – in effect an average annual payment of C$21 million over the 30-year concession.

The road will not be tolled for two main reasons: firstly, Alberta law dictates that tolls cannot operate on a road when there is no feasible alternative untolled route. Furthermore, the traffic volume in Calgary would not provide enough revenue to fund the project, even over a long tenor.

Dexia and Fortis are equally funding a C$140 loan (though with the fees and other related costs, this figure is closer to C$146 million), wrapped by monoline FGIC. Bilfinger will provide 100% of the C$14 million in equity. The all-in cost is 5.4%, with a maturity of 30 years. There is no plan for syndication of the debt at this point.

The process for Calgary was slightly different to Golden Ears due to differences in the laws of Alberta and British Columbia, and the fact that the monolines operated under New York and UK law respectively. However, the outcome was the same, with the monoline wrap spawning substantially lower financial costs.

Another similarity to the Golden Ears deal is the interest rate swap. The borrowers have swapped the original floating rate on the debt with the two lead arrangers for a fixed rate payment. FGIC has also wrapped the swap payments.

North East Calgary
Status: Closed 16 February 2007
Size: C$650 million
Location: Calgary, Alberta, Canada
Debt: C$140 million senior secured loans, C$300 million government contribution
Equity: C$14 million
Description: DBFO contract for 21km of four and six-lane highway, six interchanges, and 22 bridge structures
Sponsors: Stoney Trail Group
Bank arrangers: Dexia, FortisBank
Monoline insurers: FGIC
Financial advisers to the sponsors: CIT
Legal counsel to lenders: Macmillan Binch Mendelsohn
Legal counsel to sponsor: Davis and Co.
Legal counsel to monoline: Tory's
Risk analysis: Marsh
Engineering and technical advisors: Delcom
Financial model auditor: Operis