PPP round-up

NORTH AMERICA

Pausing the shovel

A ‘shovel ready’ toll road project expected to be the first ever public-private partnership (PPP; P3) in North Carolina, could end up on the short end of the public funding stick.

Conceived in 2008 and developed as a P3, the proposed Mid-Currituck Bridge is a 7-mile road connecting mainland North Carolina to the Outer Banks, or OBX – a 200-mile-long barrier island and vacation destination.

But a reprioritising of transportation funding in the form of newly minted House Bill 817 (HB 817) is setting the stage for tolling to get short shrift across the ‘Tar Heel State,’ leaving Mid-Currituck out in the cold.

“The team is still evaluating the impact, if any, that HB 817 will have on the project,” a spokeswoman with the North Carolina Department of Transportation (NCDOT) said.

She went on to note that the Federal Highway Administration (FWHA) gave Mid-Currituck the go-ahead, adding that the Department is “in the process of negotiating a concession agreement” with Dragados USA. NCDOT signed a ‘pre-development agreement’ with Dragados in 2009.

HB 817 was rolled out in the spring to let North Carolina reorder the waiting line for its $1.5 billion transportation package. To secure funding under the bill, a transportation project has to score well on a 100-point scale determined by the Department.

Governor Pat McCrory signed off on HB 817 and the North Carolina General Assembly dropped its support for Mid-Currituck. But the ultimate plight of the would-be P3 is in the care of NCDOT.

Dragados has estimated Mid-Currituck would cost $660 million. Toll revenue had been forecast to reach $19 million in 2020 and $30 million by 2030.

In addition to the Mid-Currituck Bridge, HB 817 is also expected to impact the ‘Garden Parkway’ project – a 22-mile, $870 million toll road.

Palazzi leads Vinci charge

A toll road executive who piloted a historic P3 involving Puerto Rico Highway 22 (PR-22) has taken a post with Vinci Concessions, according to a press release.

Luis Palazzi signed on with Vinci as director of North and South America. He will be based in New York. Palazzi is the erstwhile chief operating officer (COO) of Metropistas, the private consortium behind PR-22.

Vinci executive vice president Fadi Selwan in a statement said Palazzi would be “in charge of business development” for the US and Latin America. Vinci spokesman Sidney Florey could not state if Palazzi was appointed to a newly created position within the company or name his direct report.

In addition to being COO, Palazzi from 2010 to 2012 had also served as president of Metropistas. He was also vice president of Metropistas co-owner Abertis USA from 2006 to 2011. He broke into infrastructure in 2000 with Spain's ACS Group.

Back with a bang

Procurement for a billion-dollar managed lanes project in Texas State Highway 183 (SH 183) has been revamped and revitalised.

A second Request for Qualifications (RFQ) for the design, build, finance, operate and maintain (DBFOM) concession attracted marquee-name interest, the Texas Department of Transportation (TxDOT) revealed, with Fluor Corporation, Macquarie Group, Meridiam Infrastructure and Plenary Group lining up to bid.

For TxDOT, which was a year ago permitted to put the so-called ‘SH 183 Managed Lanes Project’ out to tender as a toll road public-private partnership (PPP; P3), the positive response is a promising turnaround. A previously released RFQ drew just one bidder: Cintra.

The response prompted TxDOT to petition the Texas Legislature for permission to rewrite the RFQ.

A spokesman for the Department in Austin, Texas, pointed out the SH 183 Managed Lane Project was revised in February to incorporate a “bigger, broader scope” following the earlier RFQ.

The spokesman said he suspected the present size of the project, now 9.3 miles, rather than 6.7 miles, encouraged a better response.

Michigan tests the waters

The Michigan Department of Transportation (MDOT) issued a request for letters of interest from the private sector seeking its input on potential public-private partnership (PPP or P3) projects, including two rest areas, freeway lighting, bridge work, and timber management, the transport authority said in a statement.

“Like many states, Michigan faces tremendous challenges in rebuilding and maintaining infrastructure,” MDOT spokesperson Jeff Cranson said in an e-mail. “Based on the success of other countries and other states, we are exploring P3s,” he said.

While Michigan has partnered with the private sector in the past – MDOT allowed private capital to finance two projects in 2008 – P3 solicitations of this magnitude are a first, according to Cranson.

EUROPE

How do you like your stake?

The UK Treasury launched a consultation process until late August regarding the terms upon which it will take minority stakes in future Private Finance 2 (PF2) projects.

PF2 was unveiled towards the end of last year as the successor to the prolific but controversial Private Finance Initiative (PFI) procurement method.

In order to help detoxify PFI, the idea of a public equity stake arose as a way of dampening the ire surrounding private sector equity windfalls by ensuring that the taxpayer benefitted as well.

It was also felt that it would aid the transparency of projects if government were a participant in projects, tracking their progress and publishing results.

In a document entitled “A new approach to public private partnerships: consultation on the terms of public sector equity participation in PF2”, the Treasury says that it expects to take a minimum 15 percent stake in each project through “HMTCo”, a company wholly owned by the Treasury. Each shareholding of 15 percent will allow the nomination of a board director.

The proposal also suggests that HMTCo be entitled to nominate an observer to the board “to support better collaboration”. The observer would not have a vote and “can be excluded for the discussion of specific matters if so required by a majority vote of the directors, recognising that this may be appropriate for certain matters”.

The document also indicates that the Treasury may sometimes reduce its investment after financial close in order to “promote investment opportunities for new long term investors”.

As part of its push for greater transparency, the Treasury says it will publish an annual report on its PF2 investments, including the actual and forecast equity returns of individual projects and the portfolio as a whole.

JLIF adds 11 assets

John Laing Infrastructure Fund (JLIF), which raised £270 million (€306 million; $433 million) when it floated on the London Stock Exchange in October 2010, has completed its largest acquisition through the purchase of 11 operational and yielding assets from Investors in the Community for circa £123 million.

Investors in the Community is a portfolio of assets managed by Mill Asset Management Group (MAMG), a UK-based special purpose vehicle (SPV) manager of PPP projects.

The portfolio, which will continue to be managed by MAMG, comprises stakes in 11 social infrastructure projects in the UK: four schools, four lighting projects, two health projects and one housing project.

They are all fully operational and supported by government-backed, inflation-linked revenue streams, and the average remaining contract life is 20.4 years. Stake sizes range from 33 percent to 100 percent.

In a statement, JLIF said its total number of projects now stands at 49, with an approximate aggregate valuation of £697.8 million.

DIF drives into Dublin

Dutch fund manager DIF has purchased a 45 percent stake in an Irish road PPP from Spanish concessionaire Sacyr Vallehermoso.

The deal, which closed for an undisclosed amount, will see DIF’s third infrastructure fund buy into the M50 – a C-shaped ring road around Dublin. The project has been operational for two-and-a-half years and has 29 years outstanding on its concession.

The M50 PPP carries no traffic risk and is instead backed by availability payments – regular government contributions paid in exchange for making an asset available in good condition.

ASIA & ROW

EOI for Victoria’s ‘biggest ever’

The government of Victoria has called for Expressions of Interest (EoI) to participate in stage one of the East West road link, which would be the largest infrastructure project in the state’s history.

Stage one of the project, which is aiming to improve traffic congestion and travel times around Melbourne and boost Victoria’s productivity, is forecast to cost between A$6 billion (€4.2 billion; $5.5 billion) and A$8 billion.

Roads Minister Terry Mulder said proposals would be evaluated based on: design, construction capability and experience; operations, maintenance capability and experience; stakeholder engagement; financing capacity and capability; commercial structure; and innovation.

Construction of the project is expected to commence in late 2014 and complete between 2019 and 2020. Acting Treasurer Gordon Rich-Phillips said the state government had already received “strong interest from some of the world’s largest construction and finance companies” to deliver the project.

Rich-Phillips said the government intends to deliver the East West link project as an availability-based PPP, with the state initially retaining tolling and traffic risk.

Investors flock to Nigeria

More than 100 bidders have responded to an Expressions of Interest (EoI) process that was launched by the Nigerian government and which gives private investors the chance to buy shareholdings in ten thermal power plants in the country.

The process, which is part of a wider privatisation programme, “could generate several billions of US dollars” according to a press release which said that the EoI had concluded towards the end of July with 110 bids received.

The sales process is being overseen by the Niger Delta Power Holdings Company (NDPHC), a special purpose company set up by the government in 2005 to implement the National Integrated Power Project (NIPP). The NIPP aims to add new generation, transmission and distribution capacity and address Nigeria’s chronic electricity supply shortfall.

Anthony Muoneke, executive director (finance and administration) at the NDPHC, hailed a “tremendous vote of confidence by the international investment community for the Federal Government of Nigeria’s declared policy to increase private sector involvement in the electricity industry”.

Grandhi takes wheel at GMR

GMR Infrastructure has rotated its leadership, installing Kiran Grandhi as managing director and accepting the resignation of B.V.N. Rao, who will remain on the board of directors.

GMR Infrastructure, holding company of PPP developer GMR Group, has a policy of alternating senior management. Grandhi, 38, had been chairman in charge of highway infrastructure, GMR Infrastructure said.

Grandhi is also versed in airport privatisation, leading GRM Airports to a PPP for Turkey's Sabiha Gokcen International Airport and a deal for Ibrahim Nasir International Airport.

Headquartered in India, GMR is active in Turkey, South Africa, Indonesia and Singapore.