PPP round-up

EUROPE

INPP TO COMMIT £78M TO PF2 SCHEME

International Public Partnerships Limited (INPP), the London-listed infrastructure investment firm, said it expects to provide £78 million (€99 million; $124 million) in funding to Priority Schools Building Programme (PSBP) projects being rolled out over the next 12 months.

The UK’s Education Funding Agency and the Amber consortium – of which INPP is a part – recently reached commercial close on a deal which will see 46 UK schools delivered in five batches with a total value of £700 million. INPP said in a statement this was an “important step” towards achieving financial close on the underlying projects.

As well as INPP, the Amber consortium also includes Aviva Investors and the European Investment Bank, which is providing senior debt.

The PSBP is a centrally managed government programme set up to address the needs of schools in most need of urgent repair. Overall, the programme comprises 261 schools that will be rebuilt or improved by 2017 and is effectively a scaled-down version of the previous Labour administration’s £50 billion Building Schools for the Future (BSF) scheme.

The part of the PSBP programme being delivered by the private sector is being done through the PF2 framework, the successor to the Private Finance Initiative (PFI). PF2 was introduced by the coalition government in an attempt to reduce costs and introduce greater transparency compared with PFI.

TETRAGON TO ACQUIRE EQUITIX FOR £160M

Tetragon Financial Group (TFG), an alternative asset manager, has entered into a definitive agreement with Cabot Square Capital to acquire Equitix Holdings, an investment company that delivers and manages PPP projects.

Tetragon will pay £159.5 million for an 85 percent stake in Equitix, while 15 percent of current ownership will remain with members of Equitix’ management group, according to a statement.

The fund manager’s team, which counts more than 50 members, is expected to stay with the firm post-acquisition.

Equitix is an integrated business with two complementary platforms – bidding and project development as well as fund and asset management.

Established in 2007 by Geoff Jackson, Nick Parker and Hugh Crossley, the firm now manages more than £1 billion of investor capital across three 25-year core infrastructure funds – focused on mid-size infrastructure projects – and two energy efficiency funds. The firm has raised more than £3 billion in equity and debt and closed more than 20 infrastructure projects in the UK.

Equitix closed its third infrastructure fund in October 2013 on its hard cap of £500 million, a target it reached within six months of beginning fundraising.

Based in London and listed on Euronext Amsterdam, Tetragon maintains two key business segments – an investment portfolio and an asset management platform. Both segments cover a range of assets including bank loans, real estate, equities, credit and convertible bonds.

POLITICAL UNCERTAINTY HAMPERING UK INFRA

Two-thirds of 443 senior business leaders canvassed for a new survey (67 percent) believe that energy infrastructure in the UK will worsen over the next five years. When it comes to transport, the figure is also more than half at 57 percent.

Respondents to the CBI/URS Infrastructure Survey also expressed the opinion that the UK’s infrastructure is lagging behind that in Australasia, North America and the European Union and has improved little since the first such survey in 2011.

Moreover, when asked to identify the culprit for this state of affairs, fingers point overwhelmingly in the direction of politicians. Some 96 percent said political uncertainty was discouraging investment and 93 percent cited political rhetoric as something that was damaging confidence in markets.

This is despite more than two-thirds of respondents expressing the view that government policies such as the UK Guarantee Scheme (welcomed by 87 percent) and pro-growth planning reforms (64 percent) are positive developments that will have increased the attractiveness of the UK as a place to invest in infrastructure over the course of this Parliament.

The survey found strong support (89 percent) for an independent infrastructure commission of the type recommended by a recent review by Sir John Armitt as a way of helping to determine what infrastructure the UK needs and when it needs it.

NORTH AMERICA

MERIDIAM NORTH AMERICA NAMES NEW COO

Meridiam Infrastructure has named Thilo Tecklenburg its chief operating officer for North America, effective January 2015, as the global infrastructure asset manager further expands its investment footprint in the region.

Tecklenburg replaces Olivier Garnier, who was recently appointed global risk officer.

Meridiam considers the North American infrastructure market to be “in the starting blocks” for “extraordinary growth” in 2015, and Tecklenburg’s experience in public-private partnership (PPP; P3) business development will be a valuable addition to the team, said Jane Garvey, Meridiam North America chairman, in a statement.

Before joining Meridiam in October 2013, Tecklenburg was head of Bilfinger Project Investments’ development team in North America, where he was responsible for business development and the pursuit of P3 projects within the North American marketplace.

He has extensive experience with availability-type P3 projects and has led consortia for projects in several Canadian provinces and US states, totaling a committed finance volume of over $5 billion.

Tecklenburg played an active role in securing Bilfinger’s first P3 project in the US, the East End Crossing Project in Indiana, and was also instrumental in the company’s efforts to enter new sectors, according to the statement.

TIFIA CRITICAL FOR US INFRA FUNDING

The Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) plays a critical role for US infrastructure funding and has increasingly been relied upon for P3s and non-P3s, according to a new Fitch Ratings report.

The current TIFIA portfolio encompasses 47 projects totalling $19.3 billion in credit support. Annual funding grew to $1 billion in 2014 from the programme's initial $80 million per year at inception, it said.

Up to 49 percent of total development costs are now eligible for TIFIA funding versus the prior 33 percent.

Calling it a subordinate lender with teeth, Fitch said TIFIA, apart from lower interest rates, provides potential flexibility in debt amortisation and takes on the risk of a typical project finance lender.

The repayment of the TIFIA loan is subordinate to repayment of senior lenders in the waterfall if the transaction is performing as it should. However, in a bankruptcy-related event, the US Department of Transportation (USDOT) requires that its claim on a project’s pledged revenues or other security spring to parity with other creditors.

By utilising TIFIA, projects that would otherwise be non-investment grade have the potential to reach investment grade through more favourable transaction terms, said Jeffrey Lack, associate director at the ratings agency, in the report.

PLENARY, WALSH AWARDED PENNSYLVANIA BRIDGES PROJECT

A consortium teaming Plenary Group with The Walsh Group has been awarded an $899 million project that involves the replacement of 558 bridges across the state, the Pennsylvania Department of Transportation’s (PennDOT) Office of Policy and Public Private Partnerships said in a statement.

Plenary Walsh Keystone Partners (Plenary Walsh), which also includes Granite Construction and HDR Engineering, was one of four teams to be shortlisted in March for the Rapid Bridge Replacement Project. The consortium also includes 11 Pennsylvania-based sub-contractors.

Under the terms of the contract, Plenary Walsh will be responsible for the design, building, financing and maintenance of the bridges. PennDOT, which will retain ownership of the bridges, will make performance-based payments and be responsible for routine maintenance, such as snow plowing and debris removal.

The preferred group was selected based on scoring that considered cost, financial capability to carry out the project, background and experience in managing comparable projects and understanding of the project, PennDOT’s P3 office said.

The other shortlisted groups were: Keystone Bridge Partners – comprising InfraRed Capital Partners and Kiewit; Commonwealth Bridge Partners – led by John Laing Investments and Fluor; and Pennsylvania Crossings – teaming Meridiam Infrastructure with AECOM.

Construction will begin in the summer of 2015 and will be completed within 36 months. Plenary Walsh will then be responsible for maintaining each bridge for 25 years.

ASIA AND ROW

THREE PROJECTS TO BE TENDERED IN JAKARTA

The tendering of three transportation projects was launched on 4 November in the Indonesian capital, only two weeks after pro-infrastructure Indonesian President, Joko Widodo, was officially inaugurated.

Widodo sparked an infrastructure debate during his campaign, with promises of ten new airports and 2,000 kilometres (km) of road infrastructure.

The President has chosen to put out to tender three fast-transit transportation systems to unlock key areas of growth in the country, with the Soekarno-Hatta International Airport Railway, the development of the South Sumatra monorail and Bandung monorail in West Java, all to be run as PPPs.

The airport railway will link Banten, the westernmost province of the island of Java to the Jakarta province all the way to the airport 20km north of the capital. Pre-qualification and bidding/evaluation are expected to happen respectively by H1 2015 and H2 2015, with the contract to be awarded in H2 2016.

The South Sumatra Monorail, which will follow the same timeline as the airport railway, aims to develop the province’s transportation network through an integrated system to reinforce the existing air and land transportation system in the area. It has an estimated cost of $550 million.

The Bandung Monorail project, worth $2.9 billion, is aimed at easing congestion in four growing districts of Bandung, the country’s third-largest city and capital of its Java West province.

Market sources indicate that Korean and Japanese firms have already shown interest in the projects.

NEW PROJECT TOOL TARGETS $57TN INFRASTRUCTURE GAP

A group of global development banks and private sector players in November launched the International Infrastructure Support System (IISS), an online, Cloud-based project development tool aiming to strengthen project procurement.

The initiative is seen by its sponsors as a promising step towards addressing a global infrastructure gap that recent research has placed at about $57 trillion, a large part of which, they say, owes to the lack of well-prepared projects to fulfil the world’s growing needs. It will be implemented by the Sustainable Infrastructure Foundation (SIF), a Geneva-based non-profit organisation.

During an interview with Infrastructure Investor, Julia Prescot, chief strategy officer at fund manager Meridiam and president of SIF, explained that the system is akin to a template that governments – with the help of prospective private partners – will have to fill to ensure all appropriate steps are taken to ensure the viability of early-stage projects. These won’t always be PPPs, she said, as one objective of IISS is precisely to help determine the most appropriate financing structure for a given project.

The launch is supported by a large number of multilateral organisations, comprising the Asian Development Bank (ADB), the African Development Bank, the Brazilian Development Bank, the Development Bank of Southern Africa, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the World Bank, the World Economic Forum (WEF), the Global Green Growth Institute and the Organisation for Economic Co-operation and Development.

PHILIPPINES APPROVES PROJECTS WORTH $6.8BN

The Philippines National Economic Development Authority Board, led by President Benigno Aquino, has approved 12 infrastructure projects worth more than 300 billion pesos (€5.3 billion; $6.8 billion), of which six, collectively worth $3.67 billion, are to be undertaken as PPPs.

“The transportation and port projects will improve the mobility of people and the efficiency of the flow of goods and services. Also, some of these projects will instil or enhance resiliency of many areas against climate-related risks and disasters,” according to Economic Planning Secretary Arsenio Balisacan.

Aquino has made a number of moves to deliver on his promise to significantly boost his country’s infrastructure pipeline by the end of his term in office. The latest infrastructure projects add to the pipeline of 50 or more deals which he has been presenting to potential investors around the world since September.

The PPP Center-led North-American investments road-show, which kicked off in Toronto on October 14 and passed by New York, ended in Washington DC with a forum organised by CGLA at the Philippine Embassy in which the PPP Center’s executive director Cosette Canilao presented transportation projects, including airports, transport terminals, and rail lines, and highlighted the Regional Prisons Facilities Project as well as the Batangas-Manila Natural Gas Pipeline to 40 potential investors.