Latin America: Argentina launches closely-watched tenders for six highways

29 January 2018 - 12:00 am UTC

Argentina on Tuesday (29 January) published the definitive tender documents for six highway corridor PPPs amid interest from international banks, sponsors and investors.

The projects will have an estimated total capex of USD 6.04bn, although numbers might change, Inframation understands. The projects range from USD 1.3bn (Corridor E) to USD 631m (Corridor C).

The government set a 3 April bid deadline, with a target concession start date in May, when current contracts for the roads end.

Winners of the tender process will have one year to reach financial close.

The government incorporated suggestions gathered in pre-tender documents, released on 28 December, from meetings with developers and other interested parties.

Officials “optimized the guarantees and resources that sponsors must provide in order to bid,” José Luis Morea, head of Argentina’s PPP office, told Inframation. Morea said the changes could result in lower bids. “The risks will be better mitigated at a lower cost,” Morea added.

Developers must provide a guarantee of USD 15m per project. Sponsors must provide 25% of the equity when the contract is signed, 25% six months later, 25% a year after contract signing, and the remaining 25% at the end of construction. A source familiar with the negotiations between sponsors and banks said developers supported these changes.

Morea said the government had drawn strong interest from local and international developers.

“Just looking at the tender document downloads, we are [seeing] hundreds from different parts of the world,” he said. “This confirms the interest we have already been seeing in the projects.”

Morea said the government has watched consortia form in recent months, while some international and local developers are looking to bid on their own.

The economic and financial structure of the projects is “very balanced” between risks and benefits for the state and private companies, he said.

“Our idea is that the developers that come to participate in this projects will also do so in the other [PPP] projects, including rail, sanitation and transmission lines that are going to be tendered,” Morea said. 

Daniel Dreizzen, an advisor at national road agency Vialidad Nacional, told Inframation that at least 10-12 international consortia are preparing bids for the first phase of program.

Nearly all of these include a local company, he said. He declined to provide further details about potential bidders.

Companies interested in the process include Abertis (Spain), Acciona (Spain), Grupo ACS (Spain), Astaldi (Italy), China Road and Bridge Corporation (CRBC), Dragados (Spain), Eiffage (France), Ferrovial/Cintra (Spain), Fluor (USA), Graña y Montero (Peru), Grodco (Colombia), Hyundai (South Korea), JSTI (China), OHL (Spain), Rizzani De Eccher (Italy), Sacyr (Spain), Salini Impregilo (Italy), Systra (France), Techint (Argentina), Vinci (France), and Yutong (China).

The government will base economic bids on the lowest present value. Each consortium will be able to prioritize one or two projects, and may offer discounts if awarded two concessions – the maximum allowed.

Each project must have a separate SPV, even if the same consortium wins two projects.

The projects will receive revenue from two sources: availability payments for operations in Argentinian pesos; and payments for reaching construction milestones through work certificates that can be securitized through a bond issuance in international markets.

An executive in the Latin American infrastructure space said international players are keeping a close watch on Argentina and that the road PPPs could attract commercial bank participation for the first time in many years.

“The consensus is that this will probably be the year where we see start to see project finance in Argentina — at least with deals starting, not necessarily closing,” the executive said. “Most of these deals will require some participation from development banks just to get commercial banks comfortable. You may see a combination of bank bond hybrids.”

Argentine officials studied road financing programs in other geographies before launching this program, the executive said. This one may resemble Colombia’s recent 4G financings, some of which used a combination of loans and 144A private placement bond offerings, the executive said.

The projects are:

Circuito A (706km of Route 3 and Route 226)    
Circuito B (545.65km of Route 5)
Circuito C (778.39km of Route 7)
Circuito E (389.41km of Routes 9, 193, 34, A012, A08 and 11)
Circuito F (634.99km of Routes 33 and 9)
Circuito Corredor Sur (Routes 205 and 3, as well as the Newbery, Riccheri and Ezeiza Cañuelas highways)