PPP round-up

BALFOUR BEATTY CASHES IN ON TWO PPPs

UK developer Balfour Beatty has sold two PPP interests to funds managed by Dalmore Capital for a total of £97 million (€119 million; $162 million), representing a total gain on disposal of £51 million.

The sale involved a 50 percent stake in the University Hospital of North Durham PPP and a 100 percent stake in the Knowsley Building Schools for the Future (BSF) project.

Compared with Balfour Beatty directors’ valuation of the stakes, the sales delivered an additional £44 million – representing an uplift of 82 percent.

The sale of the Knowsley interest for £42 million is expected to complete shortly, while the £55 million Durham sale remains subject to the rights of a co-shareholder to exercise pre-emption rights at the proposed sale price. The latter sale is expected in mid-July.

The £90 million contract for the design, build, finance and operation (DBFO) of the 566-bed University Hospital of North Durham was enacted in March 1998. The project was for 30 years in total, with a three-year design and construction phase and a 27-year operational stage. It is currently in its 13th year of operations.

The £180 million Knowsley DBFO contract to build seven schools was entered into in December 2007 and then adjusted in 2011 to allow for the construction of a ‘special educational needs’ school. The 27-year project (which included two years of construction) is currently in its fifth operational year.

3i INFRA RETURNS TO CAMPUS

3i Infrastructure has committed £4.6 million (€5.7 million; $7.7 million) to a public-private partnership (PPP) project to build a new campus for Ayrshire College in Kilmanock, Scotland.

The project involves the design, build, finance, operation and maintenance of a new college campus in Kilmarnock, based on availability payments over a concession period of 25 years. The new campus is part of a wider regeneration strategy in the Kilmarnock area, with construction expected to be completed in May 2016.

“This new investment is in line with the Company’s strategy of building its portfolio of primary PPP projects over time, where it can access attractive risk-adjusted returns and enhance the overall portfolio,” 3i Infrastructure chairman Peter Sedgwick said in a statement.

The firm’s core economic infrastructure investments accounted for 81 percent of the portfolio as at 31 March 2014, whereas PPP investments and its interest in the 3i India Infrastructure Fund accounted for 12 percent and 7 percent of the portfolio respectively, according to Sedgwick.

This is the third new primary PPP investment 3i has completed since it bought Barclays’ European infrastructure investment operation, according to Ben Loomes and Phil White, managing partners and co-heads of 3i Infrastructure.

Under the deal, 3i Infrastructure becomes a shareholder in the project, while McLaughlin & Harvey is the construction contractor and SPIE Northern UK will provide facilities management services for the duration of the operational period.

BBGI STEPS UP STAKE IN NORWEGIAN ROAD

Bilfinger Berger Global Infrastructure (BBGI) has bought a further 41.2 percent equity interest in Norway’s E18 Roadway Project.

The acquisition, made outside of an auction process, will be funded from BBGI’s existing cash resources. The additional stake was acquired from Sundt, a Norwegian developer, for an undisclosed amount.
The London-listed firm fund manager will own 100 percent of the project upon completion of the transaction.

E18 is a PPP concession contract to operate and maintain a new section of highway between Grimstad and Kristiansand in Norway. The concession, which expires in 2034, is availability-based with no volume risk.

The 38-kilometre dual carriageway road, opened in August 2009, is seen as a key part of the transport corridor between southern Norway and the continent as well as an important connection between the cities of Oslo and Kristiansand.

The acquisition follows on a strong start of the year for BBGI, which has completed 15 transactions so far in 2014. Prior to the E18 deal these had a total value of £72.8 million (€89.6 million; $121.9 million).

NORTH AMERICA

P3 CANADA FUND BACKS SASKATOON BRIDGE PROJECT

The government of Canada will invest through its P3 Canada Fund up to $66 million in the Saskatoon North Commuter Parkway Project.

The Province of Saskatchewan will contribute another $50 million to the project, which is called the North Commuter Parkway and Traffic Bridge Replacement.

The project involves the replacement of the 107-year-old Traffic Bridge in the city’s downtown core, the development of a new bridge crossing in the city’s north end, as well as connecting roadways.

Once the Parkway and two bridges are opened, traffic congestion will be reduced and travel times will be shorter for vehicles and public transit, resulting in reduced greenhouse gas emissions and improved air quality.

The investment was announced at an event by Finance Minister Joe Oliver and Minister of Agriculture and Agri-Food, Gerry Ritz.

TxDOT NAMES PRIVATE PARTNER FOR ROADWAY PROJECT

The Texas Transportation Commission has chosen Southgate Mobility Partners as the developer for an $850 million roadway project in Dallas and Tarrant counties.

Southgate Mobility is expected to do improvements on up to 28 miles of roadway on SH 183, or Airport Freeway, which is traveled by nearly 170,000 vehicles every day.

“As we continue to face challenges with transportation funding, public/private partnerships such as this one will remain essential components for addressing our state’s mobility needs and spurring our economic prosperity,” said retired Lt. Gen. Joe Weber, USMC, TxDOT executive director.

The project will bolster the road network’s capacity by expanding 15 miles of SH 183 from SH 121 to I-35E, as well as 2.5 miles of Loop 12 from SH 183 to I-35E and up to 10.5 miles of SH 114 from SH 183 to SH 121/International Parkway, the statement said.

This project will be built in phases – the interim phase of construction, valued at $850 million, includes the rehabilitation and replacement of deteriorating roadways and the addition of one managed toll lane in each direction. Southgate Mobility will provide 25 years of operations and maintenance.

The interim construction phase is slated to begin at the end of 2014 with improvements completed by 2018.

The ultimate phase will include building an additional general purpose lane in each direction, up to three managed toll lanes in each direction and the completion of the Diamond Interchange at Loop 12/SH 183/Spur 482/SH 114. Funding for the ultimate project has not yet been identified.

COLORADO GOVERNOR BACKS GREATER P3 TRANSPARENCY

While Colorado Governor John Hickenlooper acknowledged the merits of the state senate’s Transportation Enterprise Transparency Act in terms of improving transparency and accountability in public-private partnership projects, he was opposed to the constraints the bill would impose on future P3 projects and so vetoed it.

At the same time, however, he issued an Executive Order instructing the High-Performance Transportation Enterprise (HPTE), a division of the Colorado Department of Transportation (CDOT), to adopt additional transparency measures when procuring future P3 projects.

These measures include: holding a minimum of three public town hall meetings for communities affected by a project before issuing a Request for Proposals; considering other alternatives when analysing any surface transportation project that involves toll lanes or managed lanes; and making the essential terms of a P3 agreement available to the public on the HPTE website.

The order also calls for the creation of a Centre of Excellence that would establish P3 best practices, including programmes for ensuring transparency and openness.

“Unfortunately, SB 14-197 is not just a transparency bill – it also inappropriately constrains the business terms of future P3 agreements,” Hickenlooper wrote in his veto letter.

The bill would require future P3s with certain features, such as contract terms longer than 35 years, to be pre-approved by the General Assembly.

The proposed legislation was drafted to address public concerns regarding the US 36 Express Lanes/Bus Rapid Transit project, the state’s first P3 project which CDOT and HPTE awarded to Plenary Roads Denver in April 2013 as a 50-year concession.

ASIA AND ROW

LIBYA PREPARES TO LAUNCH P3 PROGRAMME

One of Libya’s largest investment funds, the Libyan Local Investment and Development Fund (LLIDF), has hired Deloitte to serve as its adviser in delivering infrastructure projects through a public-private partnership (PPP;P3) programme.

“Following a review of the PPP strategy, the focus will shift to growing LLIDF’s institutional capacity and designing the PPP delivery organisation,” Deloitte and LLIDF said in a joint statement.

LLIDF, whose primary mission is to drive socio-economic development through investments in key infrastructure and industry sectors in Libya, is looking to do so through investment in, and promotion of, PPP opportunities.

“Deloitte is pleased to be working alongside LLIDF and we look forward to leveraging our global expertise to establish Libya as a centre of PPP excellence and partner of choice for private investors,” Ian Simpson, a partner of the consulting firm, said.

LLIDF and Deloitte will be carrying out a number of sector studies to explore opportunities in attracting global private investment. The studies, once completed, will be followed by the implementation of P3 pilot projects.

Deloitte was selected following a competitive process with independent international evaluation.

KPMG HIRES SEETO TO OVERSEE PPP OPERATION

Geoffrey Seeto has joined KPMG’s Asia advisory team, overseeing public-private partnership (PPP;P3) planning and feasibility, delivery of the transaction and maintenance of ongoing operations.

The Asian advisory team was created just last year in response to investment appetite spurred by growing projections of infrastructure needs in the region. Seeto will directly report to KPMG’s regional head of infrastructure markets, Roddy Adams.

“KPMG firms have an extensive and rapidly growing infrastructure advisory business in the region and Geoffrey’s appointment adds even more firepower as they continue to pursue growth,” said Julian Vella, KPMG Asia Pacific’s head of global infrastructure.

Vella specified that growth potential was particularly strong in the transport, energy, telecommunications, water and sanitation segments.

Seeto brings 20 years of experience in infrastructure and financial services and, more specifically, insight into ASEAN markets, acquired in his most recent role as managing director and head of investments at China Investment Cooperation Fund, where he oversaw most of the fund’s activities in the region. The hire also harnesses know-how on PPPs and Private Finance Initiative transactions.

MYANMAR TO JOIN P3-FOCUSED ASEAN FUND

The Myanmar government is expected to join the ASEAN Infrastructure Fund (AIF) this year, bringing all ten ASEAN members into the AIF.

The AIF was founded with an initial equity contribution of $485.2 million, of which $335.2 million came from ASEAN and $150 million from the Asian Development Bank (ADB). The aim was to provide more than $13 billion in equity and debt infrastructure financing, 22 percent of the estimated annual $60 billion of ASEAN infrastructural needs.

Myanmar’s contribution has not yet been set but the country will need $320 billion to meet its infrastructure needs from now until 2030, according to U Win Shein, Myanmar’s Union Minister of Finance and Revenue. He said the greatest needs are in power and connectivity infrastructure, but the government is expected to face challenges funding those projects on its own after years of isolation.

The AIF has chosen to focus on public-private partnerships (PPPs) despite controversy over their role in the region. Don Lam, co-founder and chief executive of Vietnam’s VinaCapital Group, argued at the latest World Economic Forum that the private sector does not get high enough returns and the government does not have the right laws in place to make PPPs viable.