PPP round-up

NORTH AMERICA

FOUR TEAMS SHORTLISTED FOR INDIANA’S ILLIANA

The Indiana Department of Transportation (INDOT) and the Indiana Finance Authority (IFA) have selected four out of six teams to proceed to the next level of bidding for the state’s 12-mile portion of the Illiana Corridor project.

The six consortia responded to Indiana’s Request for Qualifications (RFQ) in January to design, build, finance, operate and maintain Indiana’s portion of the Illiana Corridor project, a proposed 47-mile highway that extends from Interstate 55 (I-55) in Illinois to the west to Interstate 65 (I-65) in Indiana to the east.

The two states are working together on the project but are separately procuring their own public-private partnership (PPP; P3) to deliver their respective parts of the project.

The four short-listed teams for the Indiana portion are:
– Illiana Corridor Transportation Group – with ACS Infrastructure Development and Fengate Capital Management;
– Illiana East Mobility Partners – led by Cintra;
– Isolux Infrastructure Netherlands BV – led by Isolux Infrastructure Netherlands; and
– WM Indiana-Illiana Partners – teaming Meridiam Infrastructure with Walsh Investors.

The entire project is estimated to cost $1.3 billion, with the smaller Indiana portion accounting for $270 million of the total.

PENNSYLVANIA LAUNCHES RFI FOR AMTRAK KEYSTONE LINE

The Pennsylvania Department of Transportation (PennDOT), through its Office of Public Private Partnerships (P3 Office), has issued a Request for Information (RFI) for the redevelopment of train stations and surrounding facilities along the Keystone Line, which links Harrisburg, Pennsylvania to New York City.

The Keystone Line is one part of the 349-mile Keystone Corridor, a railroad line linking Pittsburgh and Philadelphia in Pennsylvania. It is operated by Amtrak, a publicly-funded government service.

The project for which PennDOT is seeking market input involves 11 stations and their accompanying facilities – such as parking, lighting, and security – on the eastern section of the Keystone Corridor.

PennDOT, through its P3 Office, is considering procuring the project as a design-build-finance-operate-maintain (DBFOM) concession with an availability payment structure, according to the RFI.

“To address varying needs at each station, PennDOT is also considering ‘bundling’ contiguous stations into one or multiple procurement packages,” the state agency said. The deadline for responses is March 17.

While PennDOT stated that the RFI will not necessarily lead to any specific form of procurement, it did provide a preliminary schedule, according to which a Request for Qualifications (RFQ) might be issued in the second quarter of 2014, followed by a Request for Proposals (RFP) in the third quarter.

FLORIDA BILL SEEKS TO PROTECT INFO IN PROPOSALS

Ken Roberson, a Representative in the Florida House of Representatives, has introduced a bill that would exempt unsolicited public-private partnership (PPP; P3) proposals from public records requirements for a specified period of time in order to protect companies’ information, ideas or strategies.

Unsolicited proposals would be protected under the public records exemption as long as the public entity reviewing the proposals was either seeking additional proposals or soliciting bids for the specific project, under House Bill 1051 filed in the Florida state legislature.

However, an unsolicited proposal would not be exempt for more than 12 months after the public entity had rejected all proposals or had chosen a preferred bidder.

“The disclosure of information in an unsolicited proposal, such as financing mechanisms and terms, formulas, and designs could give competitors a business advantage by knowing the proposal’s financial strategy and innovative plans,” the bill states.

Failing to protect companies’ information may also curb the number of proposals put forward that could provide innovative and cost-effective solutions for necessary projects, the Florida legislature stated in the bill.

HB 1051 comes about six months after the state adopted its new P3 enabling legislation that significantly expanded the state’s ability to partner with private entities across a broad range of infrastructure sub-sectors.

EUROPE

ALLIANZ GI IN £175m SCOT ROADS DEAL

German asset manager Allianz Global Investors (Allianz GI) has acquired £174.8 million (€211.8 million; $291.4 million) of unwrapped project bonds issued by Scot Roads Partnership, the consortium behind a £415 million motorway upgrade project in Central Scotland.

The transaction, which will be made on behalf of Stanhope Pension Trust, is the first such investment ever made by a UK pension. It will be matched by a loan of an equal amount from the European Investment Bank (EIB), bringing the total borrowed by the project company to £359.6 million. Both debt structures will amortise over approximately 31 years.

Scot Roads Partnership is owned by asset managers Meridiam Infrastructure (30 percent) and Scottish Widows Investment Partnership (30 percent) alongside developers Amey Ventures (20 percent) and Cintra (20 percent).

It consists of the design, construction, operation and maintenance of the M8, M73 and M74 improvement projects. The A8/M8 is the motorway link between Scotland’s two main cities of Glasgow and Edinburgh.

Allianz GI claims that the transaction is the first to feature a listed project bond with a deferred settlement mechanism to alleviate negative carry – which protects investors should yield fall below funding costs – and the first use of an unwrapped construction project bond matched in equal measure by an EIB loan.

DALMORE HAS £260m FOR FIRST PIP FUND

The PPP Equity PIP fund, launched by the UK’s Pensions Infrastructure Platform (PIP) and managed by Dalmore Capital, has so far raised £260 million (€316 million; $434 million) from investors. It has a hard cap of £500 million.

Investors in the fund so far include British Airways Pensions, Pension Protection Fund, Railways Pension Scheme, Strathclyde Pension Fund and West Midlands Pension Fund.

PIP is a National Association of Pension Funds (NAPF) initiative, designed to offer UK pension funds low-cost access to long-term UK infrastructure investment. It has a target size of £2 billion and targets low fees of around 50 basis points, low risk and long-term cash returns of Retail Price Index (RPI) plus two to five percent.

A source at the NAPF revealed that Dalmore has “a number of pipeline investment opportunities” including a first investment which has been agreed and is expected to complete within the next month. The deal involves a portfolio of more than 10 public-private partnership (PPP) and Private Finance Initiative (PFI) equity investments alongside a “large UK construction and services company”.

A further portfolio of 16 mature PPP assets worth around £160 million is also reported to be part of the Dalmore Capital pipeline for the early part of this year.

$1trn IN GLOBAL CAPITAL TARGETING EUROPE

Global institutional investors have funds of $1 trillion available for investment in European infrastructure assets over the next 10 years, according to a survey by law firm Linklaters.

The survey said this would continue a trend that has already seen global investors from Canada, China/Hong Kong, the Gulf Cooperation Council, Japan and South Korea increase their European commitments by 465 percent between 2010 and 2013 compared with the previous four-year period.

If all the available capital were fully invested, Linklaters estimates it could boost UK gross domestic product (GDP) by 1.9 percent per year and European Union GDP by 1.4 percent per year between 2014 and 2023.

That’s the good news. The bad news is that the region risks missing out on this windfall due to a “weak pipeline of assets and regulatory uncertainty” which could “put the region’s economic recovery at risk”, the survey concluded.

“Governments have an excellent opportunity to secure private finance for national infrastructure projects by boosting the pipeline of projects available and to encourage investment by creating a hospitable regulatory environment,” said Ian Andrews, infrastructure sector co-leader at Linklaters.

ASIA AND ROW

BBGI ACQUIRES THIRD AUSSIE PROJECT

Bilfinger Berger Global Infrastructure (BBGI) has completed the purchase of a 50 percent stake in the Northern Territories Secure Facility (NTSF).

Located on a greenfield site near Darwin, Northern Australia, the asset is a new 1,000-bed correctional facility with a concession term running until June 2044. BBGI is to receive availability payments from the Northern Territory government, rated Aa1 by Moody’s, during the period.

The facility’s construction is being undertaken by a joint venture between Australian developers Baulderstone (now a subsidiary of Lend Lease) and Sitzler. Honeywell will assume responsibility for the facility management upon completion of the works, while the Northern Territory government will provide custodial services. The project is expected to be operational in the second half of this year.

NTSF was a pipeline asset in the recent £145 million (€174 million; $241 million) capital raise completed by BBGI last December. The acquisition was funded using the fund’s existing cash resources.

NTSF marks the third asset bought by BBGI in Australia, after Royal Women’s Hospital and Victoria Prisons. The fund, which manages 28 assets, has a market capitalisation of £511 million.

MONGOLIA TO SIGN FIRST PPP

Mongolia is in the final stages of negotiating its first PPP, and the $1.2 billion deal with an international consortium is expected to be signed before the end of this quarter.

The contract would be for the construction and operation of a 415-megawatt (MW) heating power plant in Ulaanbaatar, the country’s capital. Called CHP5, the plant will focus on generating heat for the nine coldest months of the year, and split its capacity between heat and energy for the remaining three months.

Mongolia first tendered the project in 2011, when it hired the Asian Development Bank as an adviser. After a bidding process involving many international investors, Mongolia shortlisted four consortia, and in May 2012 announced that a consortium led by French multinational electric utility company GDF SUEZ had emerged as the preferred bidder.

However, when Mongolia’s new government was elected later that year, many terms of the PPP were called into question.

After long consultation, the Mongolian government made its final offer in February 2013, and in August the original GDF consortium was confirmed as the preferred bidder. The private investors are currently negotiating terms of the $1.2 billion project, and a deal could be signed as early as this quarter.

SHORTLIST ANNOUNCED FOR SYDNEY LIGHT RAIL

Three consortia have been shortlisted for the A$1.6 billion (€1.05 billion; $1.4 billion) Sydney light rail PPP.

The consortia are: SydneyConnect (Serco, John Holland and Plenary Group); iLinQ (Keolis Downer, Balfour Beatty, McConnell Dowell, Bombardier and Macquarie Capital); and Connecting Sydney (Transdev, Alstom Transport Australia and Capella Capital).

“It is very encouraging that the strong participation in market sounding and industry briefings last year has translated into responses from high quality firms,” said Gladys Berejiklian, New South Wales’ Transport Minister.

The contract involves the design, construction, service relocations, operations and maintenance of a 12-kilometre network linking Circular Quay, the Central station, Sydney Cricket Ground and Randwick racecourse. It also covers the operation and maintenance of the Inner West Light Rail network.

The project is broken down into two contracts – one for the PPP and one for early works. A shortlist for the early works contract was announced previously and comprised: Laing O’Rourke Australia Construction; Leighton Contractors; and a joint venture between Downer EDI Works and Parsons Brinckerhoff Australia.