1. Project Finance in Latin America
Public-Private Partnerships for Infrastructure
Development in Middle Income Countries: the
experiences of Chile and Peru
Patricio Mansilla
Chemonics International Inc.
Wharton Finance Conference
November 5, 2010
1
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
10. EXPLICIT
GUARANTEE
Long Term Minimum DESIGNS
Revenue Guarantee PROPER
Revenues RISK
ALLOCATION
ACTUAL
REVENUES
DISTINCTIVE
ELEMENTS
T Time 10
11. EXPLICIT
Long Term Minimum GUARANTEE
Revenue Guarantee DESIGNS
PROPER
Revenues RISK
ALLOCATION
ACTUAL
REVENUES
GOV. PAYMENT DISTINCTIVE
TO ELEMENTS
CONCESSION
11
P Time
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. 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 users
go 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
24. Peru: Project Cycle and
Institutional Structure
Investment
Planning Bidding Regulation
and Operation
TRANSPORT
MINISTRY AND •ENAPU
NATIONAL PORT PROINVERSION •PRIVATE COMPANIES OSITRAN
AUTHORITY •CONCESSIONAIRIE
24
26. Peruvian Economic Corridors
Economic Corridors facilitate new
business in Perú.
Paita Yurimaguas
*IIRSA Norte
Pucallpa *IIRSA Central
*IIRSA Sur
Lima
*IIRSA Andino
26
28. 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
29. 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 Guarantee
Bridge Loan
US$60 million ($15m/year)
Domestic Inter-American
Development
CAF Capital
Coupon Bank
Markets Payments (i + p)
29
31. Project Description IIRSA North Road
• A 25-year Concession Contract Estimated maximum
US$
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
32. 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
34. 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
35. Callao Port
a) 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 change
c) Negative externalities
d) $800 million in investments required 35
in Peruvian ports
36. Selection Process
• Criteria 1: The lowest tariff index consisting of the following
rates:
– Standard Ship Services: US$ 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
