Difference between revisions of "Bridge Projections"

Revision as of 19:51, 20 March 2010

Uncertainties

Repayment schedule

This is the biggest unknown - there appears to be no public information on the repayment of the $165 million in bonds comprising the Base Debt. Schedule 1 of the Concession Agreement says that commencing December 1, 2011 amortization payments will be made semi-annually with the final payment on June 1, 2046. But they don't indicate how the payment amounts are to be calculated.

I've tried a couple of guesstimating options. One is to reduce a fixed proportion of the principal each payment. However, this seems to build up deficits the first few years, which would require interest-bearing advances. It seems unlikely the financing would be set up this way. My other option is to cap the maximum payment each year so that no deficit is produced. This basically pays off the debt as fast as possible, and limits the return to the guaranteed 4.5% until the last few years of the project, which see large returns. Another option might be to reduce the payments to somewhat less than what the revenues would support each year, in effect taking out some of that later-year money in earlier years. This would seem more desirable from the DCBC point of view, but I don't know how much (if any) flexibility they have in determining the amount of principal they repay in a given year. It could be there is a semi-fixed repayment schedule that is skewed to build up to larger payments in later years to avoid the early shortfalls.

Partial Year

The Partial Concession Year after construction is completed causes a bit of uncertainty. Since it will likely begin late in the year, there will only be a small amount of toll revenue available that year, and the operating costs and GNWT contribution are pro-rated as well. But with an interest payment due December 1, this likely leaves a hole in the first year where the GNWT would have to advance Additional Funds. The Concession Agreement doesn't seem to allow for funds to be used for an interest payment after the construction is completed, but I'm not sure if there is something I'm missing would cover some of this shortfall.

Possible returns

(table)

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