Colombian Road Concession Program 2013 - 2014

Projects and Financing Issues

Luis Fernando Andrade MorenoPresident

Agencia Nacional de Infraestructura

June, 2013

Agenda

1. The target and ground preparation2. The plan in motion: 4th generation of roadway

concessions3. The project financing challenge4. The timetable

Venezuela

Colombia

Brasil

Argentina

Perú

Uruguay

Ecuador

México

Chile

España

0 20 40 60 80 100 120 140

128

126

123

106

100

81

53

50

23

13

Poor Quality of Roadway Infrastructure

Source: World Economic Forum. The Global Competitiveness Report 2012-2013.

3

The difficulty: Infrastructure deficiency

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%Inversión Comunicaciones / PIB Inversión Energía / PIBInversión Transporte / PIB

Telecom Investment / GDPTransportation Investment / GDP

Energy Investment / GDP

4

The difficulty: Infrastructure deficiency

Source: Own calculations using DNP investment data

Historical low investment in transportation infrastructure

The actions carried out by the current Government

5

Improved legal framework

Building intitutional capacity

Moving forward our infrastructure

▪ Creation of a PPP Law (Ley 1508 de 2012)

▪ Creation of the National Infrastructure Agency (ANI)

▪ Governance▪ Capability

▪ Design of a comprehensive infrastructure investment program based on PPP scheme

▪ Robust structuring ▪ Improved and standardized contracts

▪ Effective project management with better controls and monitoring systems

▪ Speeding up execution ▪ Removing bottlenecks

Other Government actions

• Additional actions to set up a supportive regulatory and legal framework for private investment

– Infrastructure Law project in Congress• Improving regulation to mitigate risks associated to land acquisition, social and

environmental management, and utility network displacements

– Additional contractual provisions to facilitate resolution of Force Majeure events

– Expedited conflict resolution mechanism in standard contract

6

Agenda

1. The target and ground preparation2. The plan in motion: 4th generation of roadway

concessions3. The project financing challenge4. The timetable

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- US$26 billion investment program - Around 40 toll road PPP projects- Construction in over 8,100 km of national roadways in the next 8

years.

The 4G Program

How will the Government deliver on its promise of closing the infrastructure gap?

Estimated investment profile for the Program(US$ Billion of 2012)

2014 2015 2016 2017 2018 2019 2020 2021$0

$1

$2

$3

$4

$5

$6

$7

VILLAVICENCIO

CALI

Buga

PEREIRA

Sogamoso

Palo de Letras Caucasia

MONTERÍA

SINCELEJO

Carmen de Bolívar

VALLEDUPAR

BARRANQUILLA

CARTAGENA

SANTA MARTA

RIOHACHA

Paraguachon

San Roque

Necoclí

PASTO

Zipaquirá

Pamplona

Simití

Achí

San Marcos

San Pelayo

CÚCUTA

Girardot

PTO CARRENO

NEIVA

Puerto Gaitán

POPAYÁN

B/MANGA

Chachagüí

Espinal

ARMENIA

Ibagué

Pto. Salgar

Cáqueza

Calera

La Paila

Buenaventura

Santander De Quilichao

YOPAL

Tame

ARAUCA

Sopó El Secreto

MOCOA

Cartago

Planeta Rica

La Yé

Toluviejo

Cruz del Viso Carreto

Ponedera

La Paz

San JuanBuenavista

Cuestecitas

Barbosa

Aguaclara

MANIZALES Villeta

MEDELLÍN

BOGOTA

Barrancabermeja

Remedios

Pto. Arimena

El Tigre

Pto. BerríoSanta Fé de Ant.

Bolombolo

La Manuela

Camilo C

TUNJA

Aguachica

Granada

Sisga

Existing projects

4G projects

PTO CARRENO

More than 11,000 Km

25 existing projects + 40 new projects

National roadway network under Concession: Existing and Upcoming

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• Design• Rehabilitation, construction and/or improvement• Operation and maintenance• Financing

Scope

• Variable, 25 – 30 years Term

• Infrastructure units with functional independence• Size: Capex + Opex over ~US$ 50 million per UnitFunctional Units

• By Functional Unit based on availability• Sources: Tolls and Government Contributions• Discounts related to availability, quality and service, capped at ~10%.• Evaluation by an experimented external auditor,

Payment

10

4G Concession Contract: Basics

11

4G Concession Contract: Risk Allocation

Concessionaire’s Risks

• Construction (except tunnels)• Operation and maintenance• Financing• Change in construction and operation &

maintenance input prices • Land acquisition management (with

control and supervision of ANI)• Insurable Force Majeure events• Traffic (liquidity risk)• Macroeconomic risks• Changes in law

Shared Risks• Construction (tunnels)• Land acquisition (cost overruns)• Environmental and social management

(cost overruns in environmental compensations)

• Utility networks (cost overruns)

ANI’s Risks• Force Majeure events

• Non insurable events (e.g. natural disasters)

• Land acquisition*• Social consultation*• Environmental licensing*

• Traffic (Aggregated Income)• Utility networks (non identified networks)

* Assuming concessionaire’s proper management

Agenda

1. The target and ground preparation2. The plan in motion: 4th generation of roadway

concessions3. The project financing challenge4. The timetable

Tolls60%

40%

Projects’ income (average expected distribution)

Public Contribu-tions

Investment (USD Billons)

Financial closing

26

20%

80%Debt

Equity

Investment & financing

13

Note: Preliminary and estimated values, subject to modifications, adjustments and corrections.

Needs: Funding US$26 billons to be invested during the next 8 years and repaid with long term flows starting after construction phases

4G program financing needs

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Debt required for 4G concession program is large relative to the Colombian financial market

Local long term financing sources

Note: Values in USD Billions, Updated at Dec-2012

4G program financing constraints

Financing needs Commercial loans Pension Funds Insurce companies Banks' portfolio

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84

76

15

40

25% 27% 139% 52%

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4G program financing: The proposal

Structured project financing

4G program financing will target broad participation:

Banks, multilateral institutions, development banks, institutional investors and private equity funds

Government is prioritizing the role of long term investors (institutional investors): Long term repayment flows and demand risk coverage

Mixed project funding:Soft mini-perms loans and operating asset securitization

Financial ClosingDebt commitments for 1/3 of total financing needed

- Bank loans- Loans from other

infrastructure investors

Signing of

Contract

Bidding process Pre-construction Construction O & M

Refinancing after construction phase- Asset Based Securities- Long term loans from institutional investors

End of the contractRetribution flows

according to availability*

End of construction

phase certification

Refinancing during construction phase-Securities with credit risk enhancement

-Loans from infrastructure investors/funds

* Discounts are applied up to a threshold related to the infrastructure availability (availability, service level and quality standard)

Mixed financing strategy

…

Originators SecuritiesIssuers

…

Investors

$$$$$$

UF 1

UF m

% UF 1

% UF m

Tranche j

Inv. 1

Lead Bank/Fund

Multilaterals / development Banks

…

Cession

Tranche k

Securitization structure

Underwriting commitments

Inv. n - 2

Contingent purchase

Substitution / firm commitment

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…

MODOS

• Securitization after construction is completed• Third party guarantees for credit risk during construction phase

Construction(Cost, licensing, and land availability)

• Predetermined discount caps affecting repayment flows• Financing structure and sizing according to the perceived volatility from

availability payments• Strong insurance coverage requirements• Recurrent non-availability of infrastructure as cause for early

termination of the contract

Operational (Non-availability, service levels and quality

standards)

• Overcollateralization• Third party liquidity guarantees / reserve account• Securitization with tranches / subordination

Liquidity (traffic)

• Adequate and timely causes for early termination• Repayment of investments and expenses are covered by predetermined

liquidation formulas• Predetermined contractual terms and procedures for takeover rights by

creditors

Early termination

Remaining Risks: Mitigation alternatives

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Agenda

1. The target and ground preparation2. The plan in motion: 4th generation of roadway

concessions3. The project financing challenge4. The timetable

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Rounds # of projects 1Q 2012 2Q 2012 3Q 2013 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014

1st Round FONADE 4 Prequalification Bidding process

1st Round PROSPERITY 5 Prequalification Bidding process

2nd Round FONADE 7 Prequalification Bidding process

3rd Round FONADE 12 Prequalification Bidding process

2nd Round PROSPERITY 4 Prequalification Bidding process

1st Round ADAPTATION FUND 3 Prequalification Bidding process

2nd Round ADAPTATION FUND 5 Prequalification Bidding process

4G Program Timetable

Thank You

www.ani.gov.co

Twitter @ANI_Colombia

Facebook http://www.facebook.com/agencianacionaldeinfraestructura

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