Skanska has announced the financial close of the Downtown Tunnel/Midtown Tunnel/MLK Freeway project in Norfolk and Portsmouth, Va. The project was awarded to a joint Skanska/Macquarie consortium in 2011 by the Virginia Department of Transportation under the Commonwealth’s Public-Private Transportation Act.
With a total project value of $2.08 billion, the project is one of the largest greenfield/brownfield transportation public-private partnerships (PPPs) in U.S. history and the largest undertaken by Virginia.
Skanska and its partners will finance, build, operate and maintain the project during a 58-year concession agreement, assuming full market risk on traffic and tolls. The project includes a $1.47 billion design-build contract, of which Skanska has a 45% share. For Skanska the project represents a $661 million construction contract and up to a $136 million equity investment.
“This is a great day for Skanska in the United States. This is a phenomenal project that puts our company on the map when it comes to PPPs, and it opens doors for similar projects nationwide,” said Mike McNally, president and CEO of Skanska USA Inc. “We’re thrilled to see this day arrive, after so many years spent bringing this project to reality.”
The project was led by Skanska’s Infrastructure Development unit, headed by Executive Vice President Karl Reichelt.
“This project represents our first success in the U.S. PPP market. The financial close is a milestone achievement for Skanska,” Reichelt said. “We could not have reached this day without the tremendous dedication of the team who worked on the project and the strong partnerships built among VDOT, FHWA, the community and our construction joint venture.”
The project is funded through $675 million in Private Activity Bonds, $463 million in a Federal Highway Administration TIFIA loan; $363 million in project revenues during construction; $309 million in contribution from VDOT to reduce tolls; and $272 million in equity commitments from Skanska & Macquarie.
Construction and renovation activities commence immediately, with project completion in 2018.
In addition to the construction of a new two-lane tunnel under the Elizabeth River adjacent to the existing Midtown Tunnel, the project will include extending the MLK Freeway; minor modifications to the interchange at Brambleton Avenue/Hampton Boulevard in Norfolk; and maintenance and safety improvements to the existing Midtown and Downtown tunnels.
