News Analysis: Deals that forged new paths in 2010

Three award-winning PPPs in the US and Russia—countries not traditionally considered favourable to such partnerships— took unique approaches to achieve their closings.

Three award winning deals in 2010 cut new ground in markets where public-private partnerships and privatisation are still uncertain propositions.

In Russia, the Pulkovo Airport modernisation project won the twin titles of European and Global PPP Transaction of the Year. The project involves a major overhaul of the Pulkovo Airport, near St. Petersburg—the country’s fourth largest airport.

Yet, despite the size of the project – €1.2 billion – it reached financial close without support from the Russian government. International development institutions provided financing for the project. VTB Capital acted as financial advisor and equity sponsor in the winning consortium, which also included Frankfurt airport operator Fraport, and Greek investment group Copelouzos.

The consortium, called Northern Capital Gateway, will also give 11.5 percent of the airport’s annual revenue to St. Petersburg – a move toward the revenue-sharing model that is becoming more common infrastructure deals, not least in part thanks to its political attractiveness. Just a few months after the project reached financial close, Russian Prime Minister Vladimir Putin pointed to Pulkovo as a model for private investment in his country’s infrastructure.  

In the US, a market facing drastically different problems, the Highstar Capital succeeded by taking the long view in its partnership with the Maryland Port Administration. The Seagirt Marine Terminal project in Baltimore, Maryland, was awarded the title of North American Infrastructure Deal of the Year by Infrastructure Investor readers.

The project involves the construction of a new berth at the Seagirt Terminal at the Port of Baltimore. The broadening of the Panama Canal is likely to bring larger container ships into the terminal, and Port Administration wanted to be prepared. But the funds were not available. Highstar promised to use union labor and managed to get the support of the port’s chapter of the International Longshoremen’s Association.

And, like with Pulkovo, Highstar will share revenues with its public-sector partner on the deal. The port will receive an annual rent payment of $3.2 million, adjusted for inflation, plus a $15 fee for each cargo container moved at the terminal above a 500,000 threshold.

And the $2.7 billion LBJ Express project—the largest US road deal to close in 2010 —also took a unique, strategic approach to such a large-scale project. It was voted first in the category of North American PPP Transaction of the Year.

The project managed to bring together a European private equity fund manager, a US pension, a US infrastructure loan programme, a European developer and the Texas Department of Transportation to set the project in motion. Spanish developer Cintra and French fund manager Meridiam managed to secure $850 million in financing from the federal government’s TIFIA loan programme, which provides low-cost, long-term loans to US infrastructure projects. Dallas Police and Fire Pension System provided 6.6 percent equity as a direct investor, and the state’s transportation department agreed to contribute about $500 million in equity. 

Such a diverse, international grouping of investors, pensions developers and governments certainly made the LBJ Express a prime candidate for the award and a model to emulate in future road PPPs in the US.