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Colombian Road Concession Program 2013 - 2014 Projects and Financing Issues Luis Fernando Andrade Moreno President Agencia Nacional de Infraestructura.

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Presentation on theme: "Colombian Road Concession Program 2013 - 2014 Projects and Financing Issues Luis Fernando Andrade Moreno President Agencia Nacional de Infraestructura."— Presentation transcript:

1 Colombian Road Concession Program Projects and Financing Issues Luis Fernando Andrade Moreno President Agencia Nacional de Infraestructura June, 2013

2 Agenda 1.The target and ground preparation 2.The plan in motion: 4 th generation of roadway concessions 3.The project financing challenge 4.The timetable

3 Source: World Economic Forum. The Global Competitiveness Report The difficulty: Infrastructure deficiency

4 4 Source: Own calculations using DNP investment data Historical low investment in transportation infrastructure

5 The actions carried out by the current Government 5 Improved legal framework Building intitutional capacity Moving forward our infrastructure Creation of a PPP Law (Ley 1508 de 2012) Creation of the National Infrastructure Agency (ANI) Governance Capability Design of a comprehensive infrastructure investment program based on PPP scheme Robust structuring Improved and standardized contracts Effective project management with better controls and monitoring systems Speeding up execution Removing bottlenecks

6 Other Government actions Additional actions to set up a supportive regulatory and legal framework for private investment – Infrastructure Law project in Congress Improving regulation to mitigate risks associated to land acquisition, social and environmental management, and utility network displacements – Additional contractual provisions to facilitate resolution of Force Majeure events – Expedited conflict resolution mechanism in standard contract 6

7 Agenda 1.The target and ground preparation 2.The plan in motion: 4 th generation of roadway concessions 3.The project financing challenge 4.The timetable

8 8 -US$26 billion investment program -Around 40 toll road PPP projects -Construction in over 8,100 km of national roadways in the next 8 years. The 4G Program How will the Government deliver on its promise of closing the infrastructure gap? Estimated investment profile for the Program (US$ Billion of 2012)

9 VILLAVICENCIO CALI Buga PEREIRA Sogamoso Palo de Letras Caucasia MONTERÍA SINCELEJO Carmen de Bolívar VALLEDUPAR BARRANQUILLA CARTAGENA SANTA MARTA RIOHACHA Paraguachon San Roque Necoclí PASTO Zipaquirá Pamplona Simití Achí San Marcos San Pelayo CÚCUTA Girardot PTO CARRENO NEIVA Puerto Gaitán POPAYÁN B/MANGA Chachagüí Espinal ARMENIA Ibagué Pto. Salgar Cáqueza Calera La Paila Buenaventura Santander De Quilichao YOPAL Tame ARAUCA Sopó El Secreto MOCOA Cartago Planeta Rica La Yé Toluviejo Cruz del Viso Carreto Ponedera La Paz San Juan Buenavista Cuestecitas Barbosa Aguaclara MANIZALES Villeta MEDELLÍN BOGOTA Barrancabermeja Remedios Pto. Arimena El Tigre Pto. Berrío Santa Fé de Ant. Bolombolo La Manuela Camilo C TUNJA Aguachica Granada Sisga Existing projects 4G projects PTO CARRENO More than 11,000 Km 25 existing projects + 40 new projects National roadway network under Concession: Existing and Upcoming 9

10 Design Rehabilitation, construction and/or improvement Operation and maintenance Financing Scope Variable, 25 – 30 years Term Infrastructure units with functional independence Size: Capex + Opex over ~US$ 50 million per Unit Functional Units By Functional Unit based on availability Sources: Tolls and Government Contributions Discounts related to availability, quality and service, capped at ~10%. Evaluation by an experimented external auditor, Payment 10 4G Concession Contract: Basics

11 11 4G Concession Contract: Risk Allocation Concessionaires Risks Construction (except tunnels) Operation and maintenance Financing Change in construction and operation & maintenance input prices Land acquisition management (with control and supervision of ANI) Insurable Force Majeure events Traffic (liquidity risk) Macroeconomic risks Changes in law Shared Risks Construction (tunnels) Land acquisition (cost overruns) Environmental and social management (cost overruns in environmental compensations) Utility networks (cost overruns) ANIs Risks Force Majeure events Non insurable events (e.g. natural disasters) Land acquisition* Social consultation* Environmental licensing* Traffic (Aggregated Income) Utility networks (non identified networks) * Assuming concessionaires proper management

12 Agenda 1.The target and ground preparation 2.The plan in motion: 4 th generation of roadway concessions 3.The project financing challenge 4.The timetable

13 Debt Equity Investment & financing 13 Note: Preliminary and estimated values, subject to modifications, adjustments and corrections. Needs: Funding US$26 billons to be invested during the next 8 years and repaid with long term flows starting after construction phases 4G program financing needs

14 14 Debt required for 4G concession program is large relative to the Colombian financial market Local long term financing sources Note: Values in USD Billions, Updated at Dec G program financing constraints

15 15 4G program financing: The proposal Structured project financing 4G program financing will target broad participation: Banks, multilateral institutions, development banks, institutional investors and private equity funds Government is prioritizing the role of long term investors (institutional investors): Long term repayment flows and demand risk coverage Mixed project funding: Soft mini-perms loans and operating asset securitization

16 Financial Closing Debt commitments for 1/3 of total financing needed -Bank loans -Loans from other infrastructure investors Signing of Contract Bidding process Pre-construction ConstructionO & M Refinancing after construction phase - Asset Based Securities - Long term loans from institutional investors End of the contract Retribution flows according to availability* End of construction phase certification Refinancing during construction phase -Securities with credit risk enhancement -Loans from infrastructure investors/funds * Discounts are applied up to a threshold related to the infrastructure availability (availability, service level and quality standard) Mixed financing strategy

17 … Originators Securities Issuers … Investors $$$ UF 1 UF m % UF 1 % UF m Tranche j Inv. 1 Lead Bank/Fund Multilaterals / development Banks … Cession Tranche k Securitization structure Underwriting commitments Inv. n - 2 Contingent purchase Substitution / firm commitment 17 …

18 MODOS Securitization after construction is completed Third party guarantees for credit risk during construction phase Construction (Cost, licensing, and land availability) Predetermined discount caps affecting repayment flows Financing structure and sizing according to the perceived volatility from availability payments Strong insurance coverage requirements Recurrent non-availability of infrastructure as cause for early termination of the contract Operational (Non-availability, service levels and quality standards) Overcollateralization Third party liquidity guarantees / reserve account Securitization with tranches / subordination Liquidity (traffic) Adequate and timely causes for early termination Repayment of investments and expenses are covered by predetermined liquidation formulas Predetermined contractual terms and procedures for takeover rights by creditors Early termination Remaining Risks: Mitigation alternatives 18

19 Agenda 1.The target and ground preparation 2.The plan in motion: 4 th generation of roadway concessions 3.The project financing challenge 4.The timetable

20 20 Rounds # of projects 1Q 20122Q 20123Q 20134Q 20121Q 20132Q 20133Q 20134Q 20131Q st Round FONADE4 PrequalificationBidding process 1st Round PROSPERITY5 PrequalificationBidding process 2nd Round FONADE7 PrequalificationBidding process 3rd Round FONADE12 PrequalificationBidding process 2nd Round PROSPERITY 4 PrequalificationBidding process 1st Round ADAPTATION FUND 3 PrequalificationBidding process 2nd Round ADAPTATION FUND 5 PrequalificationBidding process 4G Program Timetable

21 Thank You Facebook 21

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