PPP round-up

ASIA & ROW

‘Self-sustaining’ Philippines

The Southeast Asian country has started 2014 on a high note, with the announcement that the PPP Centre will no longer rely on government hand-outs to fund project research. The Aquino administration cut the Centre’s budget from PHP689 million (€11 million; $15 million) for 2013 to PHP86 million for 2014 – a drop of around eight times.

However, PPP Centre director Rina Alzate explained that PHP631 million of 2013’s budget was actually an augmentation for its Project Development and Monitoring Facility (PDMF) fund, which is used to fund PPP project research before putting it out for private sector bidding. The idea behind the PDMF fund is that the private sector winner will pay back the fund for its research services in setting up the project.

After three years of seed funding from the Philippine government and the Asian Development Bank, PDMF has built up $62 million of capital, and has already begun to receive back reimbursements from awarded projects.

“We now know this fund can be self-sustaining, so that we are not relying on annual allocations from the government or donations,” Alzate told Infrastructure Investor. “We hope that last year will be the last contribution from the government.”

This and the creation of a PHP30 billion contingency fund for PPP projects are hoped to generate more investor confidence in the island nation’s infrastructure.

Bangladesh achieves social landmark

Bangladesh has commenced one of its first social PPP projects: the BDT2.15 billion (€20 million; $28 million) Sheikh Fazilatunnessa Mujib Memorial KPJ Specialized Hospital & Nursing College, with the help of a Malaysian private hospital operator.

The hospital will have 250 beds upon completion, Al Amin Rahman, partner at domestic law firm Fox Mandal Associates, confirmed. State-owned conglomerate Bangabandhu Sheikh Mujibur Rahman Memorial Trust and the Social Welfare Ministry of Bangladesh will be in charge of construction, while KPJ Healthcare Berhad of Malaysia will be responsible for the administration of the hospital and the nursing programme, and will be entitled to the profits during that time. The timeframe on the project was not specified.

This is the first PPP project to commence since the Bangladeshi Cabinet approved draft regulations for the country’s new PPP framework in October. They are still being revised, however, and the hospital is operating under the old framework. Once completed, the new regulations are expected to establish a PPP office and provide clarity on the awarding of PPP projects.

“The enactment of the new PPP Law will be important for formulating and implementing a specific framework for the development of a sustainable PPP program,” he said.

Kazakhstan PPPs have new proponent

The government of Kazakhstan has appointed a new chairman of the board for its PPP Centre. Oynarov Azamat Ryskulovich has replaced Abiyessov Zhomart Amangeldievich as the latter moved to another appointment within the government.

Amangeldievich served as chairman of the board since 2011, and during his tenure the Centre made substantial progress, according to a government statement. He helped to pass amendments to PPP laws and legislation to open up and develop the sector more, and completed the institutional framework for PPP development.

He also oversaw some internal transitions for the PPP Centre and the establishment of regional PPP centres. The government credits his leadership in giving Kazakhstan a “strong image… as a leading state among CIS countries in [PPPs]”.

His replacement Ryskulovich has worked in various research and governmental positions, including the Economic Planning Agency, the Office of the Prime Minister of the Republic of Kazakhstan, and the Agency of the Republic of Kazakhstan on Regulation of Natural Monopolies and Protection of Competition. Most recently he was an advisor to Amangeldievich in the PPP Centre.

EUROPE

Sita UK wraps up 30-year waste deal

A conglomerate led by SITA UK, a subsidiary of French utility Suez Environment, has signed a 30-year public-private partnership with the Merseyside Waste Disposal Authority to convert household waste into energy.

The contract will involve financing, building and operating a new facility to manage more than 430,000 tonnes of waste annually. The chosen grouping, which also involves the UK subsidiary of Singapore’s Sembcorp Industries and Japanese trading company Itochu Corporation, was announced preferred bidder in April 2013.

The consortium plans to spend €295 million on new infrastructure to service the contract, which is worth just over €2 billion in total revenue over its duration.

The services will be contracted by the Merseyside and Halton Waste Partnership, which represents a population of approximately 1.5 million. Residual waste will be shipped to a new 49-megawatts (MW) energy-from-waste plant at the Wilton International industrial estate in Teesside, north-east England.

The contract is one of two large PPPs won last year by SITA. The firm, along with consortium partners, was also chosen as preferred bidder for a £900 million (€1.1 billion; $1.5 billion) 25-year energy-from-waste contract by West London Waste Authority last May.

Zagreb Airport upgrade lands financial close

A consortium formed of French operator Aéroports de Paris Management and developer Bouygues Bâtiment International, Turkish operator TAV Airports, Croatian developer Viadukt, the EU’s Marguerite Fund and the International Finance Corporation (IFC) have signed agreements with lenders and the Croatian Ministry of the Sea, Transport and Infrastructure that will kick-start the upgrade of Zagreb Airport.

The contract includes the financing, design and construction of a new, 65,000 square-metre terminal to replace the current one, for a forecasted cost of €243 million. The new facility will boost the airport’s passenger capacity from 2 million to 5 million annually.

The deal also involves a concession to operate the entire airport for almost 30 years, which includes the runways, the current passenger terminal (during the construction period), the new terminal once completed, the cargo terminal, car parks and future property developments. Maintenance of the overall infrastructure is expected to need around €88 million worth of investments over the period.

MZLZ was chosen as preferred bidder for Zagreb Airport’s upgrade in March last year. Financial lenders to the project comprise the European Investment Bank (EIB), IFC, Unicredit Bank Austria and Deutsche Bank. Construction works, due to last three years, will be carried out by Bouygues and Viadukt.

GIB, Foresight back the UK’s first wood gasification plant

A consortium led by the UK’s Green Investment Bank (GIB) and fund manager Foresight Group is to invest a total of £47.8 million (€56.6 million; $77.9 million) into the construction of a 10.3-megawatts electrical (MWe) recovered wood gasification plant in Tyseley, Birmingham.

The group of investors also includes the UK’s Balfour Beatty, waste specialist Eternity Capital Management, infrastructure debt-focused Gravis Capital Partners (GCP) and cleantech developer Carbornarius.

GIB is investing £12 million in the project through preferred loan stock, while GCP will provide £11 million of debt. GIB is also indirectly investing £6.2 million in equity through its cornerstone investment in Foresight’s fund, which will be completed by the £6.2 million and £12.4 million respectively coming from Eternity Capital and Balfour Beatty.

The project, dubbed Birmingham Bio Power, will convert recovered wood into electricity using gasification technology, via which thermal treatment of waste allows for the production of a gas used to raise steam that can then be passed through a turbine to generate power. It is the first of its kind in the UK.

The plant will be supplied with around 70,000 tonnes of recovered wood annually through its 20-year lifetime.

NORTH AMERICA

Indiana to the fore

A concession agreement to hand over operation of a ‘Chicagoland’ air field and a greenfield toll road public-private partnership (PPP; P3) have put the US Midwest front-and-centre for US deal flow in the coming year.

The financial minutiae of a lease of Gary/Chicago International Airport to a consortium led by ‘small hub’ operator AvPORTS and financial services firm Guggenheim Partners was fleshed out towards the end of 2013.

The $100 million agreement would also see AvPORTS and Guggenheim invest in the air field, located in Gary, a city in US Midwest state Indiana.

The deal remained the lone airfield P3 in the US other than the $2.5 billion deal for Luis Munoz Marin International Airport (LMM) in Puerto Rico. It would be the first ‘mainland’ US airport deal given that a PPP involving Chicago Midway International Airport fell through last year.

Indiana is also the site for what is predicted to be the most closely watched PPP deal for the US in 2014.

Procurement for ‘Illiana,’ a toll road project split between ‘Hoosier’ state Indiana and US Midwest neighbour Illinois, with each state using its own P3, was proceeding on schedule in January.

The 47-mile toll road would connect Interstate 65 (I-65) in Indiana to Interstate 55 (I-55) in Illinois and is valued at around $1.3 billion. The fact that each state is choosing alternative financing and procurement to deliver cross-state Illiana has elevated the ‘mega-project’ above the $2.6 billion Ohio River Bridges Project.

Purple line moves forward

The Maryland Department of Transportation (MDOT) and Maryland Transit Authority (MTA) have selected four private sector teams that will be allowed to submit proposals to design, build, finance, operate and maintain the Purple Line, a 16-mile light rail line that will cost $2.2 billion, MDOT and MTA said in a joint statement.

The four teams that will be invited to submit bids once MDOT/MTA issue a Request for Proposals (RFP) in the Spring are:

– Maryland Purple Partners – comprising Vinci Concessions, Walsh Investors, and InfraRed Capital Partners;
– Maryland Transit Connectors – teaming John Laing Investments with Kiewit Development and Edgemoor Infrastructure and Real Estate;
– Purple Line Transit Partners – combining Meridiam InfrastructurePurple Line, Fluor Enterprises and Star America Fund; and
– Purple Plus Alliance – with Macquarie Capital Group and Skanska Infrastructure Development.

CIBC boosts ranks

Canadian Imperial Bank of Commerce (CIBC) continued to add staff to its public-private partnership (PPP; P3) effort, bringing aboard David Tweedy and Jiri Maly.

The Toronto-headquartered financial services provider in September placed former McKinsey & Company professional Laurene Bielski Mahon in charge of its PPP arm, naming her managing director and head of global infrastructure.

Mahon announced last month in a firm-wide notice that both Tweedy and Maly had been hired last week.

Tweedy left the Port Authority of New York and New Jersey (PANYNJ) in December, becoming the latest executive to depart the public agency.

Mahon said Tweedy will hold the title of managing director of global infrastructure finance.

Maly, who like Mahon, worked for management consultant McKinsey, will also be a managing director for CIBC.

Mahon credits Maly with founding the infrastructure mega-project business at McKinsey. He joined the consultant in 2004.