Highlighting the hot-spots

Capital Development Certificates (CDKs), a form of security created by the government, have worked wonders for Mexico’s infrastructure market, allowing the country’s pensions to become major financiers of the asset class. New funds from Macquarie, AMB Properties, Artha Capital and Mexico Retail Properties all attest to the success of CDKs.

Puerto Rico
Last year Puerto Rico created its Public-Private Partnership Authority with sole power to authorise and oversee PPP projects. Accompanying legislation set the ground rules for PPPs, limiting them to 50-year leases and setting a special tax rate. Investors have taken confidence from the moves and Puerto Rico is now lining up a number of big-ticket deals. 

In March, a court sentence gave state competition authorities the power to regulate water company charges. The change resulted from a long-running dispute with a local utility accused of overcharging customers. The decision has strengthened a campaign to renationalise one of Berlin’s utilities, owned by Veolia and RWE.

A debt guarantee mechanism designed to stop PPP projects from stalling in the wake of the financial crisis was a big part of President Sarkozy’s economic stimulus plan in early 2009. The guarantee, which covers up to 80 percent of the debt used to fund PPPs, has had a muted effect so far as many qualifying projects have yet to reach financial close. This has prompted the government to consider extending the planned deadline for the guarantee beyond December 31 2010.     

In late June, the Egyptian parliament passed a law allowing private sector participation in infrastructure and public utilities projects, in the process putting PPPs at the centre of its infrastructure ambitions. That it managed to close its first PPP even before the framework law was finalised bodes well for the government’s plans.

In September, the Nigerian National Pension Commission issued proposals calling for the country’s pension plans to be allowed to invest for the first time in infrastructure bonds (up to 40 percent of the total portfolio) and infrastructure funds (up to 20 percent). The move was designed to channel funds into the upgrading of the country’s power plants, roads and bridges.  

A flexible approach to regulation has seen the Indian government take on land acquisition risk, issue  tax-free infrastructure bonds, provide one-time grants to top-up expected concession returns, allow local companies to more easily raise foreign funds and prepare to launch two government-backed debt funds worth more than $20 billion.

Under a new initiative, the Aquino government has prioritised 10 projects that it wants initiated next year by way of public-private partnerships. Seven of these projects are worth nearly $3 billion. They include the expansion of Manila’s Light Rail Transit line 1 and a new airport to be built on Panglao Island.