Henry Ford Health’s energy hub is pioneering in every way. Is it the new way forward for P3?
Just as its namesake revolutionized the auto industry in Detroit, Henry Ford Health (HFH) is now charting a transformative course in healthcare infrastructure.
The healthcare provider’s $235m new Central Energy Hub (CEH) - part of its $2.2bn redevelopment project - is blending sustainability and financial innovation to redefine how healthcare systems can support both operational efficiency and environmental responsibility.
While P3 energy projects are not new, what sets this project apart is the decision to introduce a 501(c)(3) nonprofit organization into the P3 model: a rarely-seen addition that unlocked lower-cost financing.
Incorporating the nonprofit into this kind of P3 “introduces a unique layer of complexity, but it’s also what made tax-exempt financing possible”, explains Chas Cardall, a partner with Orrick, and special tax counsel on the project. “It’s not common in P3 energy projects, but it provided significant cost savings while allowing HFH to stay focused on its core healthcare mission.”
Under the complex deal, a Provident Resources Group-owned entity facilitated the issuance of tax-exempt green bonds and entered into the project agreement with Henry Ford Health System. Kiewit Development Company, serving as both the equity investor and project developer, entered into a project implementation agreement with the Provident entity.
At a recent panel session, Provident’s general counsel, Jamie Boyd echoed the praise, adding that the nonprofit structure relieved HFH of many regulatory headaches, enabling the system to stay focused on its core mission: delivering top-notch healthcare. For bondholders, this setup was also attractive - being backed by a nonprofit focused on improving healthcare infrastructure made it an appealing investment.
The nonprofit model wasn’t the only innovative financing tool used for the project. Due to its environmental attributes, tax-exempt green bonds also played a key role, with the returns being tied to rigorous standards being achieved.
As Cardall points out, these additional components mark a significant increase in complexity on top of the ordinarily complex P3s.
What’s more, this was the debut in the district heating space for Kiewit, a key equity investor in the project.
Despite these new territories, the project reached financial close in just a year, which is almost unheard of for a project of this magnitude.
“It’s a testament to how well the team worked together to achieve a shared vision,” says Tyler Maxey, a director at Kiewit.
Chris Elmore, managing director at Goldman Sachs, agrees. “This timeline was evidence of the team’s ability to balance private equity, bondholders, and public sector interests while aligning with HFH’s strategic goals.”
But the CEH isn’t only significant because of its innovative financing; it’s a technological marvel designed to meet the future energy needs of HFH’s expanding facilities.
Featuring waste heat recovery systems, digital energy management, and dual-fuel boilers, the 30,000sq ft, four-story facility is built to be fully electric and emissions-free from day one. Even more impressive, it’s designed to scale as the campus grows, ensuring that HFH’s energy infrastructure is just as future-proof as its healthcare offerings.
Thoughtful planning didn’t stop with technology. Jerry Darby, HFH’s vice president of campus planning, development, and design, explained that the CEH is also designed to integrate seamlessly with the surrounding neighborhood. All mechanical equipment will be screened to meet noise regulations, ensuring the facility remains a good neighbor while delivering essential services to the campus.
With construction set to begin in late 2024 and completion expected by spring 2027, Henry Ford Health’s Central Energy Hub is not just an energy solution - it’s writing a new prescription for how healthcare institutions can integrate financial innovation with environmental responsibility, setting a new benchmark for sustainability and infrastructure leadership in Detroit and beyond.
“This project really speaks to the larger ambitions of Detroit and the innovative direction Henry Ford Health is heading toward in energy and sustainability,” concludes Maxey.
