Patricio Mansilla - Project Finance in LA

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Patricio Mansilla - Project Finance in LA

  1. 1. Project Finance in Latin AmericaPublic-Private Partnerships for InfrastructureDevelopment in Middle Income Countries: the experiences of Chile and Peru Patricio Mansilla Chemonics International Inc. Wharton Finance Conference November 5, 2010 1
  2. 2. Agenda 1. Chilean Institutional Framework for PPPs in infrastructure 2. Key elements to facilitate PPP financing in Chile 3. Peruvian Institutional Framework for PPPs in infrastructure 4. Key elements to facilitate PPP financing in Peru 2
  3. 3. 1. Chilean Institutional Framework for PPPs in Infrastructure 3
  4. 4. Chile: Project cycle and institutional structure 4
  5. 5. Chilean PPP Results: Investment Type of Project Investment (US$ Million)Interurban Roads 3,800Urban Roads 2,500Airports 350Dams 140Public Buildings 110Jails 200Railways 466Ports 260Total 8,000
  6. 6. Chilean PPP Results: Revenues Ministry Revenues (US$ Million)Ministry of Public Works 428Ministry of Transport (Ports) 294Total 722
  7. 7. Cost of PPP Project Development 25 1.8% of Total Investment 2.5 % Including Land Acquisition 20 19.2 15 15 13.8Million $ 14.6 10.1 10 8.2 7.7 9.3 9.3 8.2 8.1 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
  8. 8. Chilean PPP Results: Summary Summary (US$ Million)Investment 8,000Revenues 722Cost of Project Development 250
  9. 9. 2. Key Elements to Facilitate PPP Financing in Chile 9
  10. 10. EXPLICIT GUARANTEELong Term Minimum DESIGNSRevenue Guarantee PROPERRevenues RISK ALLOCATION ACTUAL REVENUES DISTINCTIVE ELEMENTS T Time 10
  11. 11. EXPLICITLong Term Minimum GUARANTEERevenue Guarantee DESIGNS PROPERRevenues RISK ALLOCATION ACTUAL REVENUES GOV. PAYMENT DISTINCTIVE TO ELEMENTS CONCESSION 11 P Time
  12. 12. Revenue Sharing MechanismRevenues Actual Revenues IMG 50% Gov. 50% Conces 12 P Time (years)
  13. 13. Santiago- Valparaíso Highway (Toll Road US$3 for 100 km) Sociedad Concesionaria Rutas del Pacífico S.A. 13
  14. 14. We put your savings in this road to grow your pension fund Sociedad Concesionaria Rutas del Pacífico S.A. 14
  15. 15. PPP Projects Operating in Chile 15
  16. 16. PPP Projects Operating in Chile 16
  17. 17. Chili URBAN ROADS SANTIAGO AMÉRICO VESPUCIO NORTE US$ 250 mill. COSTANERA NORTE KENNEDY GENERAL US$290 VELÁSQUEZ Mill. NORTE-SUR AMÉRICO VESPUCIO FIRST SUR URBAN US$270 US$440 Mill. CONCESSION 17 Mill. PROGRAM
  18. 18. Urban Road Concession: East-West Urban System Results •Investments: US$385 million •Length: 42 kilometers •Reduced gas emissions •Reduced contamination •Reduced congestion •Reduced travel time from Las Condes to the Santiago Airport•Implementation of the “free flow” electronic toll road system which lets usersgo through the road without stopping to pay tolls.•The number of accidents in the road is very low—average of only 8 per month. 18
  19. 19. Costanera Norte
  20. 20. PPP Projects for 2010-2014 Year Investment Million $ 2010 500 2011 1.900 2012 1.400 2013 2.300 2014 1.900 Total 8.000 22
  21. 21. 3. Peruvian Institutional Framework for PPPs in Infrastructure 23
  22. 22. Peru: Project Cycle and Institutional Structure InvestmentPlanning Bidding Regulation and Operation TRANSPORT MINISTRY AND •ENAPUNATIONAL PORT PROINVERSION •PRIVATE COMPANIES OSITRAN AUTHORITY •CONCESSIONAIRIE 24
  23. 23. USAID Successful PPP Program in Peru 25
  24. 24. Peruvian Economic Corridors Economic Corridors facilitate new business in Perú.Paita Yurimaguas *IIRSA Norte Pucallpa *IIRSA Central *IIRSA Sur Lima *IIRSA Andino 26
  25. 25. 4. Key Elements to Facilitate PPP Financing in Peru 27
  26. 26. Shadow Rating and Credit Enhancement• Additional credit enhancement (i.e. partial risk guarantee) is needed to improve the credit/risk profile of the debt issue and attract long term institutional investors• AFPs in Peru purchase only investment grade bonds. Minimum AA- (pe) 28
  27. 27. Amazon North Transaction Structure OSITRAN Regulation MTC MEF and Supervision 25 year Annual O&M Concession Payments Tolls Contract PAMO ($15 mill) 15 annual payments Concessionaire Amazon North PAO Special Purpose ($29 mill.) Road Concession Company (SPC) Trust PAMO / PAO Road Improvements, Partial ($60 mill.) Rehabilitation ($220 Bond Credit m), and O&M Issue GuaranteeBridge LoanUS$60 million ($15m/year) Domestic Inter-American Development CAF Capital Coupon Bank Markets Payments (i + p) 29
  28. 28. IIRSA North RoadFirst PPP bond financing and Partial Credit Risk Guarantee (IADB) 30
  29. 29. Project Description IIRSA North Road • A 25-year Concession Contract Estimated maximum US$ to improve, rehabilitate, operate annual GOP Millions and maintain 960 Km. of road contributions infrastructure between Paita Annual Payment for and Yurimaguas Construction (PAO) for US$ 29 • Initial investments: 10 years (end of year 2 – Phase I (years 1-2): US$ 95.0 through year 12) million Annual Payment for – Phase II (years 2-4): US$ Operation and 120.0 million US$ 15 Maintenance (PAMO) – TOTAL: for 20 years US$ 215 million Selection criteria: the lowest • Average annual O&M: US$ present value of the sum of the 15.0 million PAO and PAMO payments 31
  30. 30. Facilitating Project Finance and Construction risk• In lieu of strong toll revenues, the GOP compensates the concessionaire for construction progress with annual payments PAO prorated to the advance of works• The GOP issues Construction Progress Certificates (CRPAOs) through the Ministry of Transport (MTC)• Each certificate evidences an unconditional and irrevocable obligation of the GOP to make a fixed payment in U.S. dollars• The concession agreement provides that CRPAOs are freely transferable and that once generated they are not subject to any condition or performance obligation relating the concession agreement• The concessionaire raised $214 million through the securitization of CRPAOs in the international capital markets 32
  31. 31. Amazon North Financing IDB PR GuaranteeSource: FITCH Ratings 33
  32. 32. Facilitating Project Finance and Mitigating Construction risk• Bond holders do not take construction risk• If construction fails to advance on schedule or is abandoned completely for whatever reason, CRPAOs would never be available for purchase, and the securitization would never be fully collateralized by CRPAOs• This possibility does not create additional risk for note- holders, because in lieu of CRPAOs as collateral, the notes will be backed by the CLN and a letter of credit, which together are expected to be sufficient to cover outstanding obligations at all times 34
  33. 33. Callao Porta) Increase in Demand (Port moves more than 1 million TEU per year and serves 80% of Peruvian foreign trade)b) Overruns, low productivity and technological changec) Negative externalitiesd) $800 million in investments required 35 in Peruvian ports
  34. 34. Selection Process• Criteria 1: The lowest tariff index consisting of the following rates: – Standard Ship Services: US$ 0.70 per meter of the Ship Length/hour – Standard Cargo Services. 20’ container: US$90; 40’ container: US$135• Criteria 2: Additional Complementary Investments (ACI) in Callao Port common areas• Winning Bidder: P&O Dover / Dubai Ports International and Uniport S.A.• In addition, the concessionarie will pay 3% of the annual gross revenues to the National Port Authority and 1% to the Transport Investments Regulator (OSITRAN). 36
  35. 35. Container Terminal- Callao Port 37
  36. 36. Many Thanks! 38

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