Subject: FW: Gateway
From: "Joseph Boardman" <[email-masked]>
To: "Tom Carper" <[email-masked]>, "Hunter Biden" <[email-masked]>
Date: Mon, 19 Dec 2011 18:33:15 -0500

Tom and Hunter,
 
I think perhaps the strongest reason for Donna to come back on this board is contained in the concept that Tony responded to me on. Having a Board member that has an understanding of the Federal process is so very important for what we must do to move forward here. No matter what happens its going to be tough to get Federal Money to do it all and we will need to be creative ... Donna can play a very important role in this.
 
Thanks for your time, I know its not a high level problem to have fixed but for us it could make the difference over the next few years. 
 
Joe.

Subject: RE: Gateway
Date: Mon, 19 Dec 2011 16:37:13 -0500
From: [email-masked]
To: [email-masked]
CC: [email-masked]

Joe: 
 
Sorry for my delay in getting back to you.  Year-end is a little crazy in my business.
 
A full answer to your question is complicated.  We should take the time to work this through.  Also, I think the preliminary report by KPMG on financing alternatives will be helpful.
 
The "Transportation System" you define is financeable in several ways but each would require significant public support.  The point Tobias was making related to how to maximize the value of a identified stream of cash flow.  If we obtain credit enhancement (public guaranty) for cash flow it will lower the interest rate and therefore increase the amount of capital raised.  Applied to Gateway we would have to consider identifying a stream of cash flow from the project.  Assuming under the most ideal circumstances we were able to get government guarantees during the development and construction phases that would allow public absorption of all risk up to the point that the system is placed into service.  We would then need to identify a stream of cash flow that would be available to support a long term debt obligation.  The way the system is currently operated does not segregate revenue associated with a particular segment of the NEC but rather trips taken from one point in the NEC to another.  This is not to say we could not devise a structure that would allocate either incremental revenue or provide some kind of a surcharge - its just that we would have to find some component of the NEC cash flow to allocate to this financing.  Up until now I think people have looked at the project as Boston to Washington.  The incremental approach is far more manageable but would require creative thinking to isolate revenue to support each segment.  I think we could engineer options for consideration.  
 
If NY and NJ were each willing to provide credit enhancement through guarantees it could support a marketable financing.  They could share exposure and therefore no one party would have extraordinary risk.  Having said that the rating agencies would likely consider a contingent liability to each state up to the amount of their respective guaranty.  I think the bigger problem is segregating enough cash from the operation to support the transaction even with a guaranty and the lowest possible interest rates.  Clearly a grant from the Feds to serve as equity for the transaction would help the structure substantially and reduce the reliance on cash flow.  
 
Joe, there is a lot to work with on this project.  As long as no one gets wedded to unrealistic expectations, a reasonable plan could be developed that combines several means of support into one financing.

From: Joseph Boardman [mailto:[email-masked]] 
Sent: Friday, December 16, 2011 6:34 AM
To: Coscia, Anthony
Cc: DJ Stadtler
Subject: Gateway

Tony,

How would you look at the "Transportation System" of the Gateway series of projects from block 780 (the NJT Station area for Penn Station) to Portal Bridge and all "projects" in between through the lens of the concept that Tobias spoke about with a structure of debt that has a guarantee to reduce the capital cost? Can we look to a combination of Federal funds, and loans that are only guaranteed by NY and NJ to get this done? How would you see proceeding on this from a financing standpoint?

Joe