Wales launches tender for US$650 million road project under new PPP model

Wales launches tender for US$650 million road project under new PPP model

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The Welsh government has launched the tender for the A465 Heads of the Valleys dualling project. As well as the substantial investment required - GBP500 million (US$656.5 million) - this is noteworthy as the government is using a new PPP model to structure the project, the Mutual Investment Model (MIM)

The tender seeks to award a contract for the design, construction, finance, operation and maintenance of Sections 5 and 6 of the A465 Trunk Road between Dowlais and Hirwaun, located in south Wales. 17.7km of existing three-lane single carriageway are to be upgraded to dual two-lane carriageway. 

The selected private partner will also construct 2.2km of new road off the A465 (1.4km from Hirwaun to Trewaun and 0.8km from Taff Fechan to Gurnos Farm), six full movement grade-separated junctions along the route, 35 widened or constructed bridges, 41 culverts and 40 retaining walls.

The new MIM model allows for the Welsh government to invest in the project alongside private sector equity providers, with the right to take up to 20% of the total equity. This will allow a share of the profits to go to the public sector. 

Shareholders in MIM projects must agree to the creation of a statutory corporation, referred to as 'WGCo', which functions as an observer to the project company board. In the event that a corporate vehicle is not used, the Welsh Ministers, or another such body as it may determine, may assume the role of WGCo. This aims to increase the transparency of the project company.

The model also includes an optional funding competition following the appointment of the preferred bidder for a specified proportion of equity in the project company. This is intended to reduce the potential for windfall gains on secondary market sales, through attracting equity  investments from long-term investors. Although, the Welsh Ministers have elected not to hold such a competition following the procurement of the Heads of the Valleys project.

The length of the MIM contract for this project is 397 months, just over 33 years.

The government intends to select three respondents to the Pre-Qualification Questionnaire (PQQ) to participate in competitive dialogue. The deadline to respond is 19 September 2018, with the shortlisted candidates to be notified by 19 November 2018. For more information, see the Business Opportunity.

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