PPP round-up

NORTH AMERICA

STRONG SUPPORT FOR GOETHALS BRIDGE

A $1.5 billion public-private partnership (PPP; P3) to demolish the Goethals Bridge and erect a modern one in its place has reached financial close.

The Port Authority hired ‘NYNJ Link Partnership,’ a consortium teaming Macquarie Group and Kiewit Corporation, in April.

“Reaching financial close is another significant milepost,” said Patrick Foye, executive director for Port Authority, in a statement. He lauds the project as “the first true surface transportation public-private partnership in the [US] Northeast region”.

The P3 is receiving a $474 million Transportation Infrastructure Finance and Innovation Act of 1998, or TIFIA, loan. The Port Authority also undertook a $457 million bond offering to finance the project.

Macquarie and Kiewit will contribute $113 million in equity. The design, build, operate, finance and maintain (DBOFM) concession has a 40-year availability payment lease.

Macquarie Infrastructure and Real Assets (MIRA) is responsible for 90 percent of the equity contribution, with Kiewit Development accounting for the remaining 10 percent.

The 85-year-old Goethals Bridge is a 7,100-foot steel truss cantilever bridge running from Staten Island, New York, to Elizabeth, New Jersey.

The replacement bridge is a planned six-lane, cable-stayed structure expected to open to traffic in 2016.

GREEN LIGHT FOR MIDTOWN TUNNEL

The State Supreme Court of Virginia has handed down a ruling that allows the Elizabeth River Tunnels project to move ahead as a tolled facility, overturning the Portsmouth Circuit Court’s decision that tolling an existing facility for the construction of a new one is unconstitutional.

The $2.1 billion project, which connects Portsmouth to Norfolk, includes building a second Midtown Tunnel, rehabilitating the existing Midtown and Downtown tunnels, and extending the Martin Luther King Boulevard.

In May, the lower court had ruled that charging tolls on an existing facility for the construction of a new one was the equivalent of raising taxes, something the Virginia Department of Transportation (VDOT) is unauthorised to do. Had the decision been upheld, other P3 projects in Virginia that are either underway or in development could have also been affected.

“By attracting private sector capital and innovation and ensuring projects are completed in a timely, efficient, and cost-effective manner, our ability to partner with the private sector makes otherwise impossible projects doable,” Virginia Governor Bob McDonnell said.

Virginia’s private sector partner on this project is Elizabeth River Crossings. The project will be financed through tolls, scheduled to begin in February 2014.

CHICAGOLAND SELECTS WINNER

The winning bidder of a P3 to operate and upgrade a Chicago metropolitan area airfield has been decided.

A six-person committee in charge of procuring a concession handing control of Gary/Chicago International Airport over to a private partner has named a consortium teaming ‘small hub’ operator AvPORTS and Guggenheim Partners as preferred bidder.

The ad hoc committee is expecting to make a final recommendation on the P3 to the Gary/Chicago International Airport Authority soon.

AvPORTS is a subsidiary of Aviation Facilities Company (AFCO) while Guggenheim is a financial services shop based in New York. Investment manager Loop Capital and law firm DLA Piper are also part of the AvPORTS-Guggenheim team.

The airfield is located in Gary, a city located in the US Midwest state of Indiana a short distance from Chicago, the largest city in neighbouring Illinois.

Should the deal for Gary/Chicago close, the airport will be just the second in the US to successfully opt for privatisation.

Puerto Rico in February reached financial close on a lease of its Luis Munoz Marin International Airport (LMM) to infrastructure fund manager Highstar Capital and Grupo Aeroportuario del Sureste (ASUR) for $2.5 billion.

EUROPE

3i IN DUTCH MUSEUM DEAL

London-listed 3i Infrastructure has committed €6.3 million for an 80 percent interest in the National Military Museum (NMM) public-private partnership (PPP) project in the Netherlands.

3i says €3.25 million of the total commitment has already been invested, with the remainder set to be invested when construction is completed.

NMM was procured by the Dutch Ministry of Defence and comprises the design, build, finance and maintenance of a museum facility at the former Soesterberg airbase 60 kilometers south-east of Amsterdam.

The project is currently being built, with completion of construction expected in September next year. The facility will exhibit military hardware and stage various events including workshops and symposia on military research.

Heijmans, the construction firm involved in the project, will retain a 20 percent stake.

The NMM holding has been acquired from parent 3i Group following its acquisition of Barclays Infrastructure Funds Management (BIFM), which completed recently. BIFM became part of 3i’s infrastructure business and is now known as 3i BIFM.

3i Infrastructure listed in London in March 2007, raising £703 million in an initial public offering and a further £115 million in a placing and open offer in July 2008.

IRELAND KICKS OFF GRANGEGORMAN TENDER

Ireland has launched procurement for Dublin’s Institute of Technology campus at Grangegorman.

The tendering process is managed by the National Development Finance Agency (NDFA). The deadline for submission of pre-qualification submissions is 16 December 2013.

Due to begin in 2015, the construction phase is expected to finish by 2017. The campus will comprise a total floor area of around 50,000m2 and be able to accommodate 10,000 students upon completion.

The new facility is part of the €650 million of PPP projects to be delivered by the NDFA, as part of the €2.25 billion Infrastructure Stimulus Programme announced by the Irish government in July 2012. Phase one of the package, the proposed PPP pipeline, amounts to €1.4 billion.

Among these, the NDFA will be responsible for procuring three education PPPs, up to two health PPPs and three justice PPPs. The National Roads Authority (NRA) will be in charge of tendering for the various road PPPs, which will account for €750 million.

The National Development Agency is the statutory financial advisor to state authorities for all public investment projects worth more than €20 million. It also assumes full responsibility for the procurement and delivery of PPPs in sectors other than transport and local authorities.

SLOVAKIA’S FIRST PPP ON THE RIGHT TRACK

The Granvia consortium, the concessionaire for the project to design, build, operate and manage four sections of Slovakia’s R1 Expressway, intends to issue €1.2 billion worth of bonds to refinance existing debt.

Co-owned by French developer Vinci and fund manager Meridiam Infrastructure, Granvia entered into a concession for the project in 2009, in what was the first public-private partnership (PPP) agreement to be signed in the country. The road became operational in September 2012, and the concession now runs until July 2041.

The proceeds of the bond issue will be used to refinance a senior secured loan that was closed in August 2009 as well as pay for the swap breakage costs associated with pre-payment of existing debt. The bonds are due to mature in 2039.

The project was granted a BBB+ rating by Standard & Poor’s, two notches above the minimum rating needed to qualify for investment grade.

In a report, the agency underlined the stability of the project’s availability based revenue streams, as well as the absence of material construction risk and strong breakeven thresholds for other key project risks.

ASIA & ROW

PERU UNVEILS PPP PIPELINE

Peru’s Private Investment Promotion Agency, ProInversión, will launch 37 projects as PPPs in 2014 and 2015, including nine road and rail projects and eight energy projects, the agency’s executive director Javier Illescas Mucha told the Congressional banking and finance committee.

Projects which are scheduled to be awarded in the first quarter of 2014 include the airport concession Chinchero-Cusco (AICC), valued at $556 million, as well as the South Peruvian Gas pipeline and improving security of the country’s energy infrastructure, estimated to cost $3 billion.

Other energy projects include the Friaspata-Mollepata transmission line and Orcotuna substation and the liquefied petroleum gas supply system between Lima and Callao.

In transportation, contracts for the monorail in Arequipa and for the Huancayo–Huancavelica railroad are also expected to be awarded between 2014 and 2015, the agency said.

The remaining projects are in the tourism, healthcare, and rehabilitation sectors.

PHILIPPINES CRAFTS PARTNERSHIP FOR URBAN INFRA

In an effort to boost the infrastructure investment and management capacity of Philippine cities, the country’s Public-Private Partnership (PPP) Centre has entered into a Memorandum of Understanding (MOU) with the Cities Development Initiative in Asia (CDIA), a development initiative backed by the Asian Development Bank.

Both parties are hoping to streamline the process of launching urban infrastructure projects and getting them implemented. They are also particularly interested in encouraging the private sector to play a more active role in infrastructure development on a smaller scale in the Philippines.

The partnership is particularly keen to provide advisory services and training to local city governments regarding PPP project preparation and development, as well as financing options. In the actual implementation of infrastructure projects, the new partnership also plans to draft project proposals that are simpler, conduct feasibility studies and launch programmes that address financing constraints in urban infrastructure, while being sure the projects are environmentally friendly and address urban poverty.

Established in 2010 by the Aquino administration, the PPP Centre serves as an advisory and monitoring body for the Philippines’ many PPP projects. CDIA is a regional initiative established in 2007 by the Asian Development Bank and the government of Germany, focused on helping medium-sized Asian cities bridge the gap between development plans and implementation of infrastructure investments.

INFRATIL BETS ON AUSSIE PPPs

Infratil, a New Zealand-based infrastructure investment company managed by H.R.L. Morrison & Co, has committed to investing A$100 million (€70 million; $96 million) in Australian PPPs via the Australia Social Infrastructure Partners (ASIP) platform.

The ASIP platform, established last year, is a joint venture between Morrison & Co. and Leighton Contractors consisting of two investment vehicles. The funds are targeting between A$300 million and A$500 million altogether.

Morrison held a A$100 million first close on the platform last year, and is “currently in discussion with a select group of institutional investors regarding a second financial close of the ASIP vehicle,” according to the firm’s website. This A$100 million, however, will not be part of that second close, according to a Morrison spokesman.

The alliance established by the ASIP platform gives Morrison and its institutional investors the opportunity to participate as equity investors in Leighton’s future PPP projects. The partnership is seeking to tap the A$30 billion pipeline of availability based PPP projects in the Australian market.

The commitment will be formalised before the end of the year, and Infratil expects to deploy the A$100 million over the next two to three years.

ASIP currently holds 9.95 percent and 49.9 percent respectively of the equity in the A$1.85 billion New Royal Adelaide Hospital and A$232 million South East Queensland Schools PPP projects.