Colombia evaluates 4G road program

23 November 2018 - 12:00 am UTC

Colombia´s National Infrastructure Agency (ANI) is planning to launch a new auction for the Malla Vial del Valle del Cauca Zona Pacífica road project, said Transportation Minister Ángela María Orozco at a press conference at the XV National Infrastructure Congress in Cartagena on 22 November.

ANI is working on the structure the project, but has yet to announce the timeline for the new tender.

The new project will include the previous Buga-Buenaventura highway project, which was terminated after reaching an agreement with the concessionaire. The SPV Vía Pacífico, owned by Carlos Alberto Solarte’s family companies CASS Constructores and CSS Constructores, and builder Conconcreto.

With the termination of the unsolicited proposal Buga-Buenaventura road project, the 4G program comprises 29 highway projects, out of 30 originally slated.

ANI’s president Louis Kleyn, also at the press conference in the congress, said that an analysis conducted by the Ministry of Transportation found that only six highways are complying with contractual milestones out of a total of 29 projects in the 4G road program.

According to Kleyn, the Girardot-Honda-Puerto Salgar toll road and the Cartagena – Barranquilla highway are 90% completed, while Conexión Pacífico 2 and Conexión Pacífico 3 have advanced 57% and 49%, respectively.

Without having reached a 40% threshold of completion, the Girardot-Ibagué-Cajamarca road project has advanced a 39% and the Chirajara-Fundadores project has achieved 36%.

ANI expects that two roads will be completed in 2019, and another two in 2020. A total of 21 road projects should have advanced to fulfill contractual deadlines by 2020, Kleyn said.

Regarding the ability of project sponsors to reach financial close, 14 SPVs have signed long-term financing agreements, and another four obtained short-term debt through bridge facilities, for a combined value of COP 21.2trn (USD 6.62bn), said Clemente del Valle, president at local development bank FDN, in its presentation for the panel called Financial Challenges to Infrastructure in the Congress.

Del Valle expects that in 2019 eight more projects could reach financial closure for a combined COP 11trn, while in 2020 six projects could reach financial agreements for the equivalent of COP 10trn.

However, Del Valle pointed out that many projects are facing difficulties to access financing due to reputational concerns, not the structure of the projects. He suggested that ANI should be given the ability to negotiate with more flexibility the modification of contracts, if required, adding that some sponsors are willing to exit the concessionaires, which should clear the way for the lenders to grant the financing, but contractual negotiations with ANI are stalling the process.

“Some ways to handle processes at ANI are not allowing to unlock processes,” said Kleyn. He did not identify which processes.

In the panel called Infrastructure: allied to economic recovery, economist Marcela Meléndez, member of the Public Investment and Spending Commission, pointed out that several 4G road projects in Colombia are struggling to reach financial close as lenders become more cautious due to reputational concerns, engineering events and permitting difficulties.

Colombia´s Treasury Department created the Public Investment and Spending Commission in 2017 with a group of ad honorem independent members to offer advice and recommendations about allocations for public spending.

According to Meléndez, speeding up the pace of private investment would require authorities bringing more certainty to the management of concession contracts and their relationship with the sponsors. Top recommendations of the 2018 Commission’s Report for the 2018-2022 period are a reform of the organizational structure of the National Infrastructure Agency (ANI) to streamline decision making process, and a creation of an independent board of directors with the ability to elect the president.

A redistribution of risks among the public and private sector was also pointed out, recommending that public entities to take the lead in permitting processes. Meléndez suggested a revision and change current regulations to prevent cancellations of contracts in the face of wrongdoings, but rather implementing solutions that would punish individuals responsible allowing the advancement of the contracts.

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