planes de infraestructura: experiencias · click to edit master title style mecanismos de...

Planes deInfraestructura:Experiencias

www.altracapital.com© copyright Altra Capital Limited 2016

Foro Sobre Desarrollo y Promoción de laInfraestructura de la Alianza Del Pacífico09 November 2016

John Davie

Chairman Altra CapitalVisiting Professor London Guildhall Faculty of Business and LawAuthorThe PPP Book, Public Private Partnerships Unbundled

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Mecanismos deFinanciamientode Proyectos deInfraestructura


Where is the finance?

• Today the problem is that of matching the supply of finance from theprivate sector with investable projects

• The main forms of financing infrastructure remain:• government funding

• traditional procurement• design-build-operate

• corporate or on-balance sheet finance• corporate financing – which would involve getting finance for the

project based on the balance sheet of the private operator• the mechanism used in lower value projects

• project finance• “limited recourse” or “non-recourse” financing

• The potential supply of long-term financing is ample and the following all have very large andgrowing long-term liabilities

• pension funds,• insurance companies• other long-term institutional investors


Commercial viability

• Will the project work and make money?

• is there a sound market for the project or service?

• how will current and future competition affect theviability of the project?

• how are the running costs expected to escalate?

• how reliable is the supporting infrastructure (e.g. theroads leading to the bridge which the project willconstruct)?

• is a guarantee available from the public entity?

• how reliable are the input supplies, and arealternatives available?

• does the project company have the resources andskills to successfully implement and manage theproject?


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Planes deInfraestructura:Experiencias


Some examples

• Thames Tideway – innovative government guarantee

• N33 Road Widening PPP – an index-linked long term debt facility

• Alderhey Children’s hospital – debt auction


Thames TidewayCase study


Thames Tideway

building London’s sewers was the biggest civil engineering project inthe world at the time


Commentson structure

Instead of funding the scheme on its ownbalance sheet, Thames Water is setting upa company that will own the tunnel andreceive a licence from Ofwat, the waterregulator. This company, which is to beowned by a group of pension or sovereignfunds, will be responsible for overseeingprocurement and raising bank debt.

Issues 1. Thames Water has a balance sheet ofaround £10billion and this project willcost around £4.5 billion

2. Investors will receive earnings while it isbeing constructed from day one. This willbe paid for by an 11 per cent increase incustomer bills – up to £80 a year – overthe rest of the decade.

Thames TidewayCase study


HMT guarantees theCompany’s payment obligations

under the UnderlyingDocumentation in the UK

Guarantee

Beneficiary

HMTCompany

The Company agrees toreimburse any payment under

the UK Guarantee in theGuarantee & Reimbursement

Agreement

HMT and the Company documentany bilateral rights in furthersupporting documentation

Provision of funds throughbonds and/or loansdocumented in the

UnderlyingDocumentation

UK Guarantees Scheme


UK Guarantees Scheme

• In providing guarantees, the Treasury does not consider the overall value for money of the projects,but uses a narrow test that the guarantee fee must represent a market price for the risk

• The Treasury takes a narrow view that guarantees are value for money if the fee covers the risk

• The Scheme transfers project risk to government and ultimately the taxpayer, in return for a fee

• Under the Scheme, the Treasury guarantees that lenders to infrastructure projects will be repaid infull and on time, irrespective of project performance

• The National Audit Office is calling on the Treasury to be rigorous and objective in assessingwhether government guarantees for new UK infrastructure projects are genuinely needed and theprojects are likely to bring significant public value

• The Treasury intentionally designed the Scheme to be flexible and there is no upper limit on risk

• The Treasury assumes guaranteed debt will typically be priced at 0.5% above gilts, although it hasachieved better results when the debt has been competitively auctioned

10/11/2016


N33 Road Widening PPP

Case study


Pre-bid assessments

• project tested inclusion of an index-linked long term debt facility by aninstitutional investor - otherwise straightforward PPP road transaction

• project is the first instance where a pension fund has a role in thesenior debt of an infrastructure project in the Netherlands

• Three banks provide 100 per cent of debt during the construction phasefollowed by a post-construction phase refinancing facility

• The banks provide capital of €120 million• 100 per cent of debt during construction phase followed by a

post-construction phase refinancing facility• tenor for this phase of debt approximately three years

• Dutch pension fund APG• providing debt at a fixed rate but entering project at a later stage• will receive an inflation-proof fee for the loan capital it is providing

during post construction phase• will hold 70 percent of the refinancing debt• remaining 30 percent will be held by the three commercial banks

N33 Road Widening PPP, Holland


• One of first PFI projects to use a DebtFunding Competition

• Asset manager [M&G is Prudential’s UKand European fund management business]acting on behalf of institutional investors

• Proportion of the scheme funded by cashsurpluses generated by Alder HeyFoundation Trust and from the hospital'scharity Tenor for the refinancing phase debtis 20 years

Alder Hey Children’s Hospital PFI


Some of what we discussedtoday is set out in more

detail in the

The PPP BookPublic-Private Partnerships unbundled

Inspire Publishing

www.pppbook.co.uk


Thank You

www.altracapital.com

[email protected]

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