Sea-to-Sky Highway

The US$498 million Sea to Sky highway improvement project stands out as a milestone for the Canadian province of British Columbia as one of its first motorway upgrade PPP projects, writes Edward Berry.

It is the second of four road improvement projects involving by Partnerships BC – the body responsible for building and maintaining public infrastructure in the province. It follows the Sierra Desan Yoyo road which closed in 2004 and is soon to be followed by the Kicking Horse Canyon project that should reach preferred bidder stage this summer

The BC government has long foreseen the need to upgrade the road as it will provide a key access route for the 2010 Winter Olympics, linking West Vancouver to the ski resort at Whistler.

Added to the poor state of repair, and a massive increase in traffic planned for less than five years’ time, the road also has a poor safety history. This 100km section of Highway 99 – between Horseshoe Bay and Whistler – witnesses an average of 300 accidents per annum, considerably higher than similar roads in the region.

In addition, when severe weather arrives, the road is often off limits. It is often closed due rock slides and combined with an increasing volume of traffic, a lack of passing lanes and winding mountain conditions it has given this stretch of road the unenviable reputation as one of the most treacherous stretches of roadway in the province.   


In March 2005, having narrowed the list down to just three contenders – which included more than 30 Canadian and international companies – Partnerships BC, awarded the DBFO, 25-year concession to the Maquarie-led consortium.

The two runners up were the Bilfinger Berger-led Black Tusk Highway Group – which also included project management giant AMEC – and the Sound Highway Development Consortium headed up by the Candadian Highways Infrastructure Corporation.

The winning S2S team includes:

Macquarie Essential Assets Partnership (MEAP) – Canada’s first unlisted fund that focuses on essential infrastructure assets that was established by Macquarie Bank in 2003 and is the project’s sponsor and manager Peter Kiewit Sons – this North American firm is the project’s EPC contractor, with more than 60 years’ experience of projects in the province Miller Paving and Capilano Highway Services will operate the highway once it is operational. They have more than 15 years of hands-on maintenance and operations experience on the Sea-to-Sky Highway JJM is one of BC’s largest road builders and has constructed major portions of the Island Highway Hatch Mott MacDonald (HMM) will lead the highway’s design for Peter Kiewit Sons ND Lea, McElhanney Engineering Services and Urban Systems are sub-consulting firms who have all worked on preliminary design of the proposal

Not only will the highway project extensively improve the reliability and capacity of the corridor in time for the huge influx of visitors and competitors in 2010, the redevelopment is also intended to accommodate the province’s population growth and economic development until 2025.

Average daily traffic volumes between Horseshoe Bay and Squamish, on the route to Whistler, are forecast to increase from the current 13,700 to 22,000 by 2025 while the vehicles using the stretch of road between Squamish and Whistler is slated to rise by 56 per cent – from 7,700 to 12,000.

Official development plans for communities along the corridor suggest that population growth will double over the next 25 years.

The Project

In order to minimise the risk to the project’s schedule and the disruption to traffic flow, construction work on two sections of the corridor are already being delivered – Sunset Beach to Lions Bay is underway and the Culliton to Cheakamus stretch was completed in 2004.

These two sections were procured in the traditional design construct style by the provincial government.

Under the contract, the remainder of the highway is divided into five main stretches which currently have just two lanes. The following sections of road expanding the arterial road in the following areas by 2009:

Horseshoe Bay through Lions Bay (four lanes) Lions Bay to Murin Park (mix of two lanes featuring three and four lane sections. The two lane sections will temporarily upgraded to three-lane for the 2010 Olympics) Murin Park to Squamish (four lanes) Squamish to Whistler (three lanes)

Improvements will also include highway straightening, improved sightlines, passing lanes and other design innovations and measures to reduce hazards, shorten travel times and increase capacity of the Sea-to-Sky Highway.

To combat the dangerous nature of the road, the contract also calls for a split grade alignment so that up-slope excavation can be minimised on the sheer cliffs.

According to the BC transport ministry, the new design will encourage slower speeds with a curvilinear roadway so that drivers will be less likely to accelerate in straight sections and then abruptly slow down at curves.

The project will improve earthquake resistance and lighting strikes to bridges as well as improving rock fall and debris catchment in danger areas.

Due to economic activity generated along the corridor the project is expected to create 6,000 new jobs throughout the province and bolster the country’s GDP by US$249m over the period of 2010 to 2025.


With the complex nature of the project and the Olympic deadline looming ever closer, it was imperative that the procurement process proceed in an efficient and prompt manner.

Within a few months of announcing preferred bidder, BC’s transport ministry and the S2S Transportation Group reached financial close on the US$498m Sea to Sky Highway Improvement Project on 6 June.

To prove how serious the province was on pushing through this project at speed, while maintaining a high level of competition between the bidders, honoraria were offered to unsuccessful bidders throughout the procurement process.

The swift financial close was aided by a portion of the honorarium being dedicated to the legal fees of the project funders, freeing up the work to be done before a preferred bidder was selected.

Of a total capital cost of US$498m, the cost of the DBFO component of the project is roughly US$332m. From the sale of BC’s rail operations, the transport ministry is investing US$166m in the project - which is covering the first phase of the project, the traditionally procured construction work.

As the mandated lead arrangers, Société Générale and the Royal Bank of Scotland put together a senior debt loan facility of US$412m, while MEAP provided US$86m of equity – which was divided into a mix of subordinated debt and equity. The debt equity ratio is 85:15.

Syndication for the senior debt facility is currently underway and is expected to be completed by August.

Due to the province’s competing infrastructure demands and the fact that it was committed to funding the project in its entirety, the province needed to maintain a reasonable budget for the project.

Therefore, as financial advisors to the Province of BC, Ernst & Young (E&Y) advised the government to find a funding structure that limited its exposure to potential costs over the concession period.

It helped the government develop a structure that divided the project into eight periodic payment mechanisms to the concessionaire. A total performance payment for any given year will be calculated through three main components:

availability payment vehicle usage payment performance incentive payment

This mechanism gives the consortia incentives to meet specific performance standards while sharing traffic volume risks.

To ensure that the province will not be faced with costs over a pre-determined budget value, it set down an annual affordability ceiling which the consortium could not exceed in the calculation of its total performance payment.

In order that the highway be returned to the province in an acceptable condition an end of term payment was also negotiated.

Linklaters, Blake Cassels and Graydon were the legal advisors to MEAP, while Macquarie North America acted as its financial advisors.

Lovells and Borden Ladner Gervais provided legal advice to the banks while the attorney General of British Columbia and Fraser Milner Casgrain were legal advisors to the government.


The importance of the Sea to Sky project and the vital role that it will play in making it possible for the province to host the 2010 Winter Olympics was highlighted by the host of domestic and international groups that made up the final three consortia vying for the contract.

And the task of upgrading some of Canada’s most treacherous roads was no mean feat as the project will see the winning consortium, S2S, construct roads on some of the country's most challenging landscape.

The efficiency and speed that the second large-scale road PPP project in BC was procured and closed is further proof that the province’s P3 market is well and truly up-and-running.

The success of this project thus far will give great confidence to developers, investors and advisors looking to tap into the handful of other PPP’s in the area, though a lot of the feel-good factor will undoubtedly come from the honoraria that have been dished out to losing bidders. 

There are also real signs of positive action in other areas of the Canadian P3 market. Earlier this month an eight-member PPP agency for projects in Quebec was established and a new capital agency for the Canadian province of Ontario was established recently to help deliver US$2.4bn worth of PPP projects in the area.

This project might also prove an interesting model for the UK to follow as it has proved fast to close and - given the recent award of the 2012 Olympic Games to London - could act as a template for the UK where there's a lot of work to be done in a short timescale.

The project at a glance

Project name

Sea-to-Sky Highway Improvement Project


British Columbia, Canada


To design, build, finance and operate the Can$586m Sea-to-Sky Highway between West Vancouver and Whistler.


Macquarie Essential Assets Partnership


Miller Capilano Maintenance Corporation

EPC Contractor

Peter Kiewit Sons Co.

Total project value

Can$586m (US$498m)

Total equity

Can$88m (US$86m)

Equity breakdown

Mix of subordinated debt and equity

Total senior debt

Can$497.6m (US$332m)

Debt senior debt breakdown

1 senior term loan facility

Senior debt pricing

Unavailable at this time

Total mezzanine


Mezzanine pricing


Debt:equity ratio


Mandated lead arranger/s

Socété Générale The Royal Bank of Scotland

Participant banks

Socété Générale and The Royal Bank of Scotland - Syndication to a group of banks and institutions anticipated early August 2005

Bond arranger (if applicable)


Bond pricing (if applicable)


Monoline provider (if applicable)


Legal advisor to sponsor

Blake Cassels & Graydon Linklaters

Financial advisor to sponsor

Macquarie North America

Legal advisor to banks

LovellsBorden Ladner Gervais

Financial advisor to banks

Macquarie North America

Legal advisor to government

Attorney General of British Columbia  Fraser Milner Casgrain

Financial advisor to government

Ernst & Young

Date of Financial Close

6 June 2005