- Briefing Room
Detroit Tri-County Area
|Project Sponsor / Borrower||
Michigan Department of Transportation
Highway - Ancillary Systems
Prior to the Michigan Department of Transportation's innovative application of a DBFOM availability payment concession P3, only 70% of the freeway lights on major interstate corridors in the Detroit Metro Area (portions of I-75, I-94, I-96 I-375 and I-696) were functioning. Moreover, the vast majority of those lights were outdated high-pressure sodium or metal halide fixtures, which were costly to maintain.
In 2015, poor performance and ongoing incidents of copper theft prompted the Michigan Department of Transportation (MDOT) to enter into a first-of-its-kind P3 to improve the lighting systems along these freeways. The project bundled the replacement, upgrade and maintenance of approximately 15,000 lights on the five corridors for a period of 15 years. The project has improved freeway visibility, safety, and personal security, all while achieving energy savings by using efficient LED lights. The state's innovative procurement approach also expedited these improvements otherwise stalled by state and local funding challenges.
The 15-year P3 contract includes design, construction, finance, maintenance, and operations of the freeway lighting system. In addition, key maintenance performance requirements ensure that this arrangement will maximize the value of public funds committed to the project. The private partner received two milestone completion payments during the construction period and will receive quarterly service payments (availability payments) during the 13-year operations and maintenance period, backed in part by $79 million in federal funding. Together these payments will compensate the private partner for upfront design and construction costs and ongoing operations, maintenance and debt service expenditures. The service payments are a function of performance (e.g. correct roadway illumination), energy costs savings, and maintenance activities.
$172 million (15-year life cycle cost)
Capital Market Financing - $44 million
Equity - $5 million
|Project Delivery / Contract Method||
Design-build-finance-operate-maintain (DBFOM) Availability Payment Concession (15 years)
Freeway Lighting Partners, LLC
Design and Construction Contractor, O&M Manager - Aldridge Electric Company
O&M Performance and Asset Management - Engie Services Group
|Project Advisors / Consultants||
To the Sponsor (MDOT)
To the Borrower (Freeway Lighting Partners)
Allianz Life Insurance of North America (a Blackrock Capital entity)
|Duration / Status||
Commercial close achieved on August 24, 2015.
The 15-year contract has two phases: a 2-year design and construction phase and a 13-year operation and maintenance phase. Design and construction took place between August 2015 and August 2017. The contract expires in August 2030.
|Financial Status/Financial Performance||
Financial close achieved on August 24, 2015. MDOT milestone payments made during construction totaled $12 million ($6 million at 90% and at 100% completion). Quarterly service payments (availability payments) of approximately $2.1 million are being made during the 13-year O&M period, backed in part from $79 million in federal funds.
|Related Links / Articles|
Gregory M. Losch, PE