PPP round-up

ASIA & ROW

Thailand gets private support

The Southeast Asian nation has finally completed the implementing guidelines for its new PPP law and, so far, private sector reaction has been positive.

A report by law firm Tilleke & Gibbins points to the increased clarity that the new law brings, especially how it “provides greater specificity in definitions, procedures, and timeframes, and establishes a new committee — the PPP Committee — to take primary responsibility for PPPs in Thailand.”

The law also allows for greater research into how the private sector can make its returns, promotes transparency and introduces more open competition in project bidding. The law has also established a PPP Development Fund, which is to be used for hiring consultants and developing PPP strategies and projects consistent with the country’s needs. Tilleke & Gibbins projects that the new law allows for the PPP approval timeline to be shortened from two years to only seven to eight months.

Thailand’s government has wasted no time in attracting foreign interest with this new framework. Prime Minister Yingluck Shinawatra told foreign investors that the Kingdom hopes to open up its planned Bt2 trillion (€47 billion; $64 billion) of infrastructure projects to foreign investors, in the hope of making itself a regional hub and gateway to the entire Southeast Asia region. Several foreign investors have already expressed interest.

Regional financing mooted

A country that has long been stagnant on its PPP development recently hosted the Asia-Pacific Economic Cooperation (APEC) Finance Ministers’ meeting.

In those few days, the Indonesian government teamed up with representatives from Australia to propose the formation of a regional infrastructure financing market – to which all finance ministers agreed.

The proposal stipulated the establishment of a Public-Private Partnership centre in Jakarta to drive infrastructure investment in Indonesia, which it is hoped will help deliver the $8 trillion of infrastructure investment needed by 2020 to the entire region. It should also provide opportunity for Australian capital and infrastructure businesses to participate.

Other nations present also pledged to contribute. A statement suggests that further PPP Centers in Southeast Asia could follow. China hopes to take the proposals further when it hosts the next APEC conference in 2014.

New Zealand, Singapore and Korea joined Australia in signing a statement of intent to develop the Asia Region Funds Passport, which is meant to ensure that savings in Asia can be invested back in the region. And in Bali, 21 APEC Ministers endorsed a multi-year programme on infrastructure development and investment in the region on the back of trade liberalisation talks.

China spreads its wings

The “Dragon of the East” is growing not only into a possible destination for private investors in infrastructure, but also as an investor in itself.

With China’s urban population set to grow by more than 350 million by the end of the next decade, according to McKinsey & Co, the new Chinese administration is not shying away from private sector investment in urban infrastructure, as local governments begin to realise how much strain such projects would put on their balance sheets.

According to the Financial Times, Hong Kong’s metro rail company MTR is in discussions about operating two subway lines in Beijing, and already operates in several other major cities.

China has also been making a big push into the Southeast Asian region and even Central Asia. The country’s new president Xi Jinping visited Jakarta at the beginning of October, then signed off on billions of dollars worth of infrastructure projects, including a Chinese-Indonesian joint venture to build the new Jakarta metro system plus upgrade roads, rail and ports. Xi did the same thing on his visit to Malaysia soon after.

Advisory firm Dezan Shira & Associates managing partner Chris Devonshire-Ellis points out that China has been buying up quite a few PPP projects for infrastructure development recently. China expects the world’s real growth will be coming from Asia, and so is planning to put its money behind that region’s infrastructure – most likely in the form of PPPs, Devonshire-Ellis says.

EUROPE

Belgium notches first prison PPP

A consortium comprised of DG Infra and Eiffage completed the construction of a prison facility in Marche-en-Famenne, Belgium.

Awarded by the Ministry of Justice and the Building Agency in June 2011, the project is the first penitentiary public-private partnership (PPP) in the country. It is part of the government-led Penitentiary Master Plan 2008-2012, which aims to relieve overcrowding in Belgian prisons.

Construction work started at the end of October 2011 and lasted less than two years. It was completed on time and on budget, according to DG Infra and Eiffage. The consortium will now provide maintenance and support services to the facilities for a period of 25 years.

“Beyond the construction, we will stay in place with Fexim, for the maintenance, and our partner Sodexo for the facility services,” said Olivier de Guinaumont, director of operations and asset management at Eiffage, in a statement.

The news follows financial closes reached by similar deals recently, including a €124 million, Fiera Axium Infrastructure-led prison PPP in Quebec and a €300 million penitentiary facility in the Netherlands.

It comes as DG Infra deploys capital from its Infra Yield fund, which it launched in 2011 with a target of €200 million. The vehicle reached a second close on €163 million in July 2012.

UK Treasury confirms PF2 arrangements

The UK Treasury is to own a minority stake in future public-private partnerships, government representatives announced.

Speaking at an industry event, Chief Secretary to the Treasury Danny Alexander confirmed the government’s intention to become a shareholder in all the initiatives it supports, as well as own a seat on the board of project companies. That will give it a stronger say on how these are managed, a step it claims will enhance relationships between public and private sectors and increase transparency.

The declaration came alongside a new, legal document that sets out the terms of PF2, the refined version of the old Private Finance Initiative (PFI). It follows the conclusion of a consultation process involving business, industry groups and other interested parties, and is intended to be a template for all PF2 projects.

The new scheme will see the government invest alongside the private sector via HMTco, a company wholly owned by the Treasury, into joint ventures. It will have the right to appoint a director to each company, as well as require greater disclosure from other shareholders on project performance, profits and ownership.

The documents also include an update on fresh governmental policy changes on tax compliance and public procurement.

“As a shareholder, the public sector will have a stronger voice in the management of the PF2 project company and receive a share of the financial returns,” Alexander said. “This is a fundamental reassessment of the old PFI and it will provide better value for the taxpayer, better public services, and a better infrastructure.”

JLIF chalks up 50 deals

John Laing Infrastructure Fund (JLIF), a London-listed vehicle, has bought a 40 percent stake in the Barnsley Building Schools for the Future (BSF) project.

Acquired from UK developer John Laing, the scheme consists of the construction of nine new Advanced Learning centres, one new-build special school and one special school extension. It is a 25-year concession running until April 2036.

The deal marks JLIF’s 50th acquisition since inception. It brings the share represented by the education sector in the fund’s portfolio from 7 percent to 17 percent, putting it in third place behind health and transport.

The transaction closely follows JLIF’s latest fundraise, the largest since the fund’s launch in 2010. The firm announced it had collected £242.3 million (€286 million; $386 million) earlier this month, marginally exceeding its original target of £240 million.

NORTH AMERICA

Indiana explores parking options

US state Indiana is eager to find out if the private sector can offer a ‘creative’ answer to its garage and surface lot parking.

‘The Hoosier State’ is considering enlarging one parking garage, and is open to finding a possible partner to manage, operate and maintain two more.

In addition, Indiana is interested in redeveloping a state-owned parking lot.

A Request for Information (RFI) due Friday, November 15, is receptive to either separately accepting a proposal per project, or a package deal involving each mandate.

The Indiana Finance Authority (IFA), a state agency in charge of debt issuance and financing, published the RFI, available here: http://www.in.gov/ifa/files/IFA_-_RFI_Parking_Facilities.pdf.

The RFI said the Midwest state is seeking to expand the existing Washington Street parking garage in Indianapolis.

Indiana is also seeking a possible private partner to run the Senate Avenue parking garage and White River Park parking garage, both also in Indianapolis.

Finally, the state is looking to develop a parking lot for parking or non-parking use, according to the RFI.

Fengate, EllisDon green-lighted for Canada hospital

A preferred bidder has been chosen to design, build, finance and maintain a 270-bed hospital in Kingston, a city of 117,000 in Ontario, Canada, according to Infrastructure Ontario (IO).

The value of the contract with winning consortium ‘Integrated Team Solutions’ will be announced along with the commercial and financial close of the project in the autumn, IO said.

State-owned IO, a ‘Crown corporation’ responsible for public infrastructure in the province, disclosed that the estimated investment for the project amounts to C$350 million (€248 million; $336 million).

Integrated Team Solutions is led by developer EllisDon Corporation and C$1.5 billion investment company Fengate Capital Management.

Ontario-based EllisDon will build the hospital, which will be designed by Parkin Architects and managed by Johnson Controls. Scotia Capital is acting as financial advisor to the project.

The team responded to a Request for Qualifications (RFQ) in March 2012 and was shortlisted for a Request for Proposals (RFP) in December 2012.

The hospital is to be named Providence Care. Construction of Providence Care is expected to begin later this year.

Progress for Illiana 

The Illiana Corridor, the 47-mile regional highway that will cross two states once it is built, has made progress after receiving approval from the Metropolitan Planning Organisation (MPO) policy committee of the Chicago Metropolitan Agency for Planning (CMAP).

The approval comes just days after CMAP’s board blocked the project in a 10-to-4 vote, and Gerald Bennett, CMAP’s chairman, described it as “a highway to nowhere land”.

The policy committee’s vote clears the way for the proposed project to receive federal funding and for the Illinois Department of Transportation (IDOT) to obtain bids from the private sector.

“This regional highway will not only serve the largest and fastest growing areas in Illinois, it will have a long-term economic impact of more than $4 billion in the region,” said Illinois Governor Pat Quinn, a loyal supporter of the project.

The Illiana Corridor is expected to create more than 9,000 construction jobs and 28,000 long-term jobs, according to the statement issued by Quinn’s office.

The Indiana Department of Transportation (INDOT) and IDOT have been planning the project with the Federal Highway Administration since the spring of 2011. The planning process is expected to be completed by 2014.

The two states were to work jointly on the project, but in September announced that each would use separate public-private partnerships (P3s) to procure the highway.