Puerto Rico unveils $6.2bn blueprint for PPPs

At an industry forum held last week, Puerto Rico Governor Luis Fortuño told attendees he was an ‘unwavering’ believer in PPPs, and presented attendees with 16 top-priority projects he hopes to implement soon. A search for financial, legal and other advisors is under way.

The US territory of Puerto Rico has launched an ambitious plan to invest $6.2 billion in the Caribbean island’s infrastructure over the next eight years through the use of public-private partnerships (PPPs). Advisors, investors and developers are being sought to help implement the plan.

More than $4 billion of the plan is expected to go toward 10 high-priority infrastructure projects with target start dates between 2010 and 2011. These include concessions and extensions of key roads, such as PR 22 and PR 66, as well as the construction of new water treatment plants, energy generation plants and a capital improvement plan for the island’s schools.

Puerto Rico Governor
Fortuño greeting Jordi
Graells of Abertis

“Most of the projects are strategic, have far reach for Puerto Rico, great importance and we believe PPPs will accelerate that,” David Alvarez, the executive director of the Puerto Rico Public-Private Partnerships Authority, told InfrastructureInvestor.

The projects were all submitted to the authority by various Puerto Rico government agencies. To date, 108 projects have been received by the Authority.

“We see this as a pipeline of projects,” Alvarez said, adding that he hopes to contract out at least two to three projects a year starting next year. To help meet this goal, the top 16 projects, including the 10 mentioned above, were showcased last week at an industry forum in the capital of San Juan. Between 600 and 700 PPP industry participants are said to have attended the event.

Puerto Rican economy: lost a decade of growth.
Source: Presentation by Governor Luis Fortuño




















Luis Palazzi, vice president at Abertis USA, the US subsidiary of Spanish concessionaire Abertis Infraestructuras, said he was impressed by what he saw at the event.

“My impression is that [Puerto Rico] is a good place to be now. There they have a clear need for PPPs and they realize that, which is the main difference compared with here in the US,” he said.

Luis Palazzi

“The good thing is they’re willing to listen and they’re working hard to make it attractive to the private sector.” For example, he suggested that a pre-development agreement be included with the $1 billion PR-22 project to help make it a more attractive investment proposition for a potential concession, and he felt these and other comments were taken seriously by the Authority.

Abertis, which owns the only road concession on the island, is primarily interested in road and airport projects in Puerto Rico, Palazzi said.

It's the early days, but they've done a stunningly good job of starting this programme

DJ Gribbin


The key question going forward, he added, is whether the Authority can execute on its vision. He expressed optimism that it can, given that they have “the right team” in place.

Last month, the government announced that it had selected Macquarie Capital, the investment banking arm of Australia’s Macquarie Group, to advise the Authority on implementing its PPP programme. Other advisors are also being sought. Earlier this month, the Authority issued a request for qualifications for legal, engineering and environmental, financial and other advisory services. Responses are due to Alvarez by 6 November. 

DJ Gribbin

“It’s the early days, but they’ve done a stunningly good job of starting this programme and getting it focused,” DJ Gribbin, the managing director at Macquarie, who is leading the advisory team, told InfrastructureInvestor. “I have never seen any government move a PPP programme as fast as Puerto Rico.”

The programme was launched earlier this year after Puerto Rico Governor Luis Fortuño signed into law Act 29, a PPP-enabling bill that also created the PPP Authority, which is being staffed by the Government Development Bank for Puerto Rico.

I am a firm, unwavering believer in public-private partnerships

Luis Fortuño

 


Gribbin said one of the tailwinds helping Puerto Rico is the fact that “they don’t have to wrestle with proponents of the traditional procurement system”. Under the traditional system, still the norm in most of the US, governments take on most of the risk of developing and maintaining projects themselves and finance them using municipal debt.

Luis Fortuño

For Puerto Rico, the traditional procurement is not a viable option. This year, the government is facing a $3.2 billion deficit and its S&P credit rating is at its lowest level ever: BBB-.  Worse still, growth for the economy has slowed down 7.8 percent between fiscal years 2007 and 2009. And as the island prepares to enter the next decade, Fortuño looks back at the 2000s as “the lost decade” due to the negative compounded annual growth rate of .2 percent achieved during those ten years.

“I’m a firm, unwavering believer in public-private partnerships,” Fortuño told delegates gathered at the industry forum last week, according to prepared remarks that have been posted on the Authority’s website. “I am confident that as we continue to take steps towards establishing partnerships that combine the best from the public and private sectors, we will be able to transform our infrastructure, enhance our global competitiveness and create job opportunities for all Puerto Ricans,” he added.