Puerto Rico has chosen Macquarie Capital, Sydney-based Macquarie Group’s investment banking division, to assist its Public-Private Partnerships (PPPs) Authority in the development of a PPP programme for the Caribbean island.
The assignment is a first in the US for the firm, which has previously advised governments, such as British Columbia in Canada, on their PPP programmes but has to date not advised any US states or territories.
The Authority said in a statement the objective of the engagement with Macquarie will be to advance the development of a “robust PPP program” in Puerto Rico. Specifically, Macquarie will assist the Authority in formulating programme guidelines, procedures and methodologies for feasibility studies and public sector comparator methods.
A public sector comparator is an analysis to determine how private-sector delivery of a project compares with the public sector’s delivery in terms of time, cost and efficiency.
The announcement comes little more than three months after Puerto Rico formally adopted general enabling legislation for PPPs. The act, SB 469, authorises all departments, agencies and branches of the Puerto Rican government to enter into PPP agreements and creates the Authority as an affiliate of the Government Development Bank for Puerto Rico to assist them in pursuing such agreements.
Puerto Rico has established one of the best legal structures in the United states to encourage the development of public-private partnerships
“This law gives a very structured framework on how to work on PPPs and gives the investors the assurance that they can rely on a specific set of rules and organization,” said Ana Gregoria, a spokesperson for the Authority.
Under the law, Puerto Rican government agencies can submit projects to the Authority, which will refer them to a special committee for consideration as PPPs. If the projects are approved, a procurement process will be launched. As of 14 August, 32 projects ranging from bus rapid transit to highway developments and the operation of a restaurant and a municipal hotel had been submitted to the Authority. The list will be updated soon, Gregoria said, as it currently totals more than 100 projects.
Macquarie also hailed the PPP law as a positive development in the island’s regulatory climate.
“Puerto Rico has established one of the best legal structures in the United States to encourage the development of public-private partnerships. Their program has great potential to significantly improve the quality of infrastructure and promote economic development,” Macquarie managing director DJ Gribbin said in a statement.
The law was enacted as the US territory struggles with the deepest recession in its history. Growth for the Puerto Rican economy slowed down 7.8 percent during fiscal years 2007 and 2009, according to SB 469, and the government estimates the cumulative drop through 2010 will reach 9.8 percent. This year, the government is facing a $3.2 billion deficit and its S&P credit rating is at its lowest level ever: BBB-.
The Authority said it is aiming to “develop a program that uses best practices from around the world in procurement”. It praised Macquarie as an advisor with “unparalleled PPP capabilities”.
Macquarie’s Gribbin will spearhead the effort in Puerto Rico along with several other key executives from Macquarie’s North American infrastructure advisory team headed by New York-based Nick Butcher.
Macquarie Capital’s infrastructure advisory practice has over 500 specialists worldwide, Macquarie said in the statement.
In October, the Athority will host a conference for the PPP industry to introduce investors to the potential infrastructure investment opportunities on the island, Gregoria said.