Table of Contents
EXECUTIVE SUMMARY
By Rod Morrison, Editor, Project Finance International
Section 01 - DATA GLOBAL TRANSPORT PROJECTS
Airports Finance
Australia, Belgium, Chile, Costa Rica, Cyprus, Denmark, Ecuador, Hong Kong, India, Italy, Japan, Mexico, Netherlands Antilles, Peru
Poland, Turkey, UK
Airport finance – sector totals
Port Finance
Australia, Belgium, Brazil, Chile, Djibouti, Dominican Republic, Finland, Hong Kong, India, Italy, Mozambique, Oman, Panama, Poland, Russia, Singapore, South Korea, Spain, Sri Lanka, Taiwan, Turkey, UK, USA
Port finance – sector totals
Rail Finance
Australia, France, Israel, Italy
Netherlands, Spain, South Africa, South Korea, Sweden, Taiwan, UK, USA
Rail finance – sector totals
Road bonds
Australia, Austria, Canada, Chile, Croatia, Dominican Republic, France, Hungary, Ireland, Malaysia, Mexico, Peru, Portugal, South Korea, UK, USA
Road bond finance – sector totals
Road loans
Andorra, Australia, Argentina, Brazil, Canada, Chile, Croatia, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Ireland, Italy, Jamaica, Japan, Mexico, Netherlands, Norway, Philippines, Poland, Portugal, South Africa, South Korea, Spain, UK, USA
Road loans – sector totals
Bank totals – global
Section 02 - GLOBAL THEMES
CHAPTER 01 - Toll road alternative funding structures
By Monica Merli, Vice President – Senior Credit Officer, Moody’s, London
Introduction
Key credit metrics
Example of conventional debt structure
Example of index-linked debt structure
Example of accreting swap debt structure
Assessment of financing structures
Moody’s analytical approach
CHAPTER 02 - A banker’s view of current state of road financing
By Paul Leatherdale, Managing Director and member of the Executive Committee,
DEPFA Bank plc, Dublin
International developments
Greenfield development versus brownfield acquisition
De-risking techniques
Construction risk support
Insurance
Mitigating traffic risk
Future developments
CHAPTER 03 - Long-term traffic growth – the past and the future
By Charles Russell, Technical Director, Steer Davies Gleave, London
Introduction
Toll road project development
Traffic growth risk
Demand for brownfield sites
Analysis of traffic growth
Growth drivers
De-coupling economic from traffic growth
Long-term forecasts for brownfield facilities
CHAPTER 04 - Payment for roads – availability and shadow tolls
By Bruce Johnson and Richard Threlfall, KPMG
To toll or not to toll
Shadow tolls
Traffic volume risk transfer
Lane availability
Pure availability
Congestion management
Recent developments
Conclusion
CHAPTER 05 - Light rail – the issues
By Robert Lewin, Project and Infrastructure Finance, Capital Markets, Investec
Some unique characteristics
Multiple interfaces
Multi-discipline consortia
Systems integration/completion risk
Patronage and revenue risk
Some solutions
Mitigating the interfaces
Separation of activities
Completion/integration risk
Revenue risk sharing
Conclusions
CHAPTER 06 - Ports – investors find a new berth
By Sreekumar Chatra, Assistant Director, and Richard Abadie, Lead Partner, Global PPP and Infrastructure Finance, Pricewaterhouse-Coopers LLP, London
Introduction
Drivers of new capacity addition
Where is new capacity being added?
Drivers of M&A
Recent trends in financing
Future financing trends
Conclusion
CHAPTER 07 - Regional airports – runways paved with gold
By Richard Tollis, Partner, Infrastructure Advisory, Ernst & Young
Introduction
The attraction of airport investment
Value drivers
The benefits for regional airports
It is not only financial investors that stand to benefit
Price drivers for regional airports
Asset fundamentals
Efficient infrastructure finance
Sector prospects
CHAPTER 08 - Accretion technique starts to mature
By Rod Morrison, Editor, Project Finance International
Accretion swap structure
Early accretion swap deals
Chicago Skyway
Inexus
Indiana Toll Road
Birmingham Northern Relief Road
Chicago car parks
Recent deals and the future
Section 03 - THE AMERICAS
CHAPTER 09 - US road projects
By Alison Healey, Project Finance International
State by state breakdown
CHAPTER 10 - HOT lanes as private toll concessions
By Robert W. Poole, Jr, Director of Transportation Studies at the Reason Foundation,
Los Angeles
Introduction
Why HOT is starting to replace HOV
Two different models of HOT Lanes
Revenue objectives
Comparing performance of HOT lane models
A synthesis approach
Managed lane performance comparison
Private sector interest in HOT lanes
Conclusion
CHAPTER 11 - The public versus private toll road choice in the US
By Dennis J Enright, Principal, NW Financial Group, LLC, Jersey City
Introduction
Defining the problem
Funding options
Choice metrics
Role of the cost of capital and leverage
Choosing the best policy
Conclusion
CHAPTER 12 - US highway infrastructure – a diamond in the rough
By Cherian George, Managing Director, Fitch Ratings
Introduction
The needed policy debate
Funding issues
‘Public versus private’ or ‘public and private’
Operating efficiency –
a quantitative view
Operating efficiency – a qualitative view
Ratemaking flexibility
A way forward
CHAPTER 13 - PABS and TIFIA – financing tools for surface transportation projects
By Charles S. Henck, Partner, Ballard Spahr Andrews and Ingersoll, LLP, Washington DC
Introduction
Tax exempt financing – private activity bonds
Restrictions on the use of PABs
Exempt facility bonds
Project eligibility
Important restrictions
Economic considerations
Structuring flexibility
PAB volume cap applications
TIFIA – the patient lender
Features of TIFIA credit assistance
Flexible repayment structure
Selection process
TIFIA–PAB relationship
CHAPTER 14 - Legal structures for PPPs in the US
By Karen J. Hedlund, Partner, and William B. Fisher, Senior Attorney, Nossaman, Guthner, Knox & Elliott, LLP, Arlington
Varying approaches to PPPs
Legislative requirements
States with the most active PPP programmes
Florida, Georgia, Oregon, Texas, Virginia,
New and pending legislation
Alaska, Arizona, California, Colorado, Mississippi, Nevada, North Carolina, New Jersey, New York, Pennsylvania, Tennessee, Utah, Washington
Federal restrictions on PPP procurements
CHAPTER 15 - Mexican toll roads – back to the future
By Allan T. Marks, Partner, Milbank, Tweed, Hadley & McCloy, LLP, Los Angeles
Overview
Background
The competition – Mexico in the context of Canada and the US
Investment prospects in Canada
Investment prospects in the US
Recent Mexican market developments
Concession models
Recent transactions
Increasing the role of the private sector
Government of Mexico – current goals
State governments – current goals
Future prospects
Conclusion – politics matter
CHAPTER 16 - Consolidation and uncertainty – Chile and Brazil
By Alan Gersten, Latin America Reporter, Project Finance International
Chile
Planned projects
The role of PPPs
The Chilean model
Brazil
Investment incentives
Planned projects
Challenges to concessions
CHAPTER 17 - CASE STUDY: Bridge is as good as gold
By Massimo Polveraccio, Vice-President, Bilfinger Berger BOT, and Shariq Alvi, Director, PricewaterhouseCoopers
The project
The tender process
Financing structure
Monoline guarantees
Swaps
PPPs fostering innovation in the Canadian market
Section 04 - ASIA PACIFIC
CHAPTER 18 - Driving the roads
By Minerva Lau, Asia Editor, Project Finance International
Introduction
Indonesia
Road projects
MRT proposal
Monorail project
Rail link
PPP pipeline
The Philippines
Road projects
Railway loop
Priority rail projects
Financing options
Pakistan
Rail PPPs
Malaysia
Bullet train
Road and bridge projects
CHAPTER 19 - Financing road projects in India
By Cherian Thomas, Senior Director – Advisory Services, Infrastructure Development Finance Company Limited, India
Background
Enabling policy, regulatory and institutional frameworks
Financing the NHDP
Enabling private investment
PPPs in state highways
Managing traffic risks
Future outlook
Returns for equity investors
IDFC and road projects
Case study: Development of the first set of annuity payment-based projects
IDFC’s role
Broad framework
Selection of concessionaire
Private sector financial model
Public sector financial model
Bidding experience
What was achieved?
Key lessons
Case study: Financing of an annuity payment-based project
Risk analysis and mitigation
Refinancing
Key lessons
Case study: Financing of a direct toll-based project
Background
Bid details
Implementation arrangements
Financing arrangements
Security package
The views expressed in this chapter are the author’s own views and do not necessarily represent the views of IDFC Limited.
CHAPTER 20 - CASE STUDY: L&T Vadodara – the Bharuch national highway project
By Arun Sharma, Assistant Vice President, Project Advisory & Structured Finance, SBI Capital Markets, Delhi
Introduction
Project background
Project financing
Issues of concern
Deal structure
The outcome
CHAPTER 21 - Australian transport – bubble, bubble, tolls and trouble
By John Arbouw, Australian Correspondent, Project Finance International
Introduction
Sydney Cross City Tunnel
Project funding
Post-completion problems
Project reorganisation
Adelaide to Darwin railway
Project economics
Project funding
Project development
The Sydney and Brisbane airport rail links
Sydney airport rail link
Brisbane airport rail link
Conclusion
CHAPTER 22 - Transport finance in South Korea
By Seil Kong and Jongman Park, Project Finance Department, Investment Banking Division, Korea Development Bank, Seoul
Introduction
Roads
Railroads
Ports
Conclusion
Case study: Busan – Goeje fixed link
Financial restructuring
Investors
Lenders
CHAPTER 23 - CASE STUDY: Mumbai modernisers reach milestone
By Ashish K Singh, Assistant Vice-President, and Bhavna Chugh, Manager, UTI Bank
Introduction
Project sponsors
Project details
Debt funding
Deal profile
Conclusion
CHAPTER 24 - CASE STUDY: Uijeongbu links the banks in Korea
By Nicolas Vix, Head, and James Lok, Vice-President, Project and Structured Finance Asia, Calyon
Project background
Concession agreement
Engineering, procurement and construction
Operation and maintenance (O&M)
Financing structure
Conclusion
CHAPTER 25 - CASE STUDY: Brisbane bypass
By Shane Logan, Director, Project Finance, National Australia Bank
The project need
Project description
Key risks
Capital structure
Equity
Debt structure
More to come
CHAPTER 26 - CASE STUDY: Rolling Stock – Australia’s leading PPP
By John Arbouw, Australia Correspondent, Project Finance International
Reliance Rail – the winning consortium
Background
Project structure
Unique payment mechanism
Managing multiple stakeholders
Technical and procurement intricacy
Scale and contractual complexity
Financing structure
Bond market sell-down and deal reception
Setting new benchmarks
Section 05 - EUROPE, MIDDLE EAST AND AFRICA
CHAPTER 27 - EMEA – heading in the right direction
By Antony Collins, Senior Reporter Project Finance International
Introduction
UK, France, Italy, Russia, Spain, Western Europe
Rail
Light rail
Airports
Ports and waterways
Roads
CHAPTER 28 - Greek roads bear gifts
By Spyros Venetsianos and Yiannis Saratsis, EFG Telesis Finance SA
New motorway projects
State project strategy
Revenue-sharing mechanism
Bidding strategy
Contractual structure
Financial structure
Conclusion
Pilot projects
Potential tenders
District roads
CHAPTER 29 - German road sector – overview and outlook 2007
By Dr Christian Knütel, Partner, Lovells, Frankfurt
Introduction
A-Model
Pilot projects
F-Model
Potential tenders
District roads
CHAPTER 30 - Partnerships questions for French transport
Introduction
The persistence of recourse to the concessive system
Concession – optimisation of the transfer of risks to the private contracting party
Partnership Contract application
Curbs on the development of the Partnership Contract
Lenders’ rights
Constraints specific to the transport sector
CHAPTER 31 - Spain – Europe’s road capital
By Carlos López-Quiroga, Julio López-Quiroga and Ana Pocklington, Maritime, Transport and Logistic Department of Uría Menéndez, Madrid
Introduction
Recent projects
Road deals
Nationwide programme
Recent project funding
International model
CHAPTER 32 - CASE STUDY: MARS unwraps landmark tram PPP
By Antony Collins, Project Finance International
Project background
Risk allocation
Financing structure
Conclusion
CHAPTER 33 - CASE STUDY: Gautrain – the world’s second largest PPP
By Bobby Stewart, Partner, Finance, Infrastructure and Transport Groups, Freshfields Bruckhaus Deringer, London
The project
Project drivers
Contractual structure
Financing structure
Security structure
Comparison with other greenfield railway project structures
The future
List of tables and figures
T=Tables F=Figures
F1.1: Conventional debt structure
F1.2: Index-linked debt structure
F1.3: Accreting swap debt structure
F4.1: Road payment mechanism options
F4.2: Development of DBFO roads
F4.3: Typical shadow toll mechanism
F4.4: Typical availability/shadow toll mechanism
F4.5: Probability distribution for determining ‘real’ revenue risk
F4.6: Enhancement payment structure
F4.7: Typical congestion management payment mechanism
F6.4: Financing terms in select recent port acquisitions
F6.5: Financing terms in recent port concessions
F7.1: Airport EV/EBITDA multiples, 2001–07
F7.2: Annual UK domestic and international air passengers, 1995–2020E (m)
F7.3: UK airport growth in passenger numbers, 1996–2005 (%)
T10.1: Managed lane performance
T10.2: Current U.S. HOT (managed) lanes projects
T11.2: Indiana toll road transaction – toll increases at 4% (US$)
T11.3: Cost of capital – public vs. private entities (%)
T11.6: Impact of a public bid vs private bids (US$,%)
T11.7: Texas SH 121 – bid comparisons (US$bn, %)
F12.1: Bridges – O&M costs per transaction, 2000–05 (US$)
F12.2: Roads – O&M costs per transaction, 2000–05 (US$)
F12.3: Rate-making flexibility, 2003–05 (%)
F13.1: Taxable vs. tax-exempt rates, May 2002–May 2007 (%)
F13.2: AMT vs. tax-exempt rates, May 2002–May 2007 (%)
T13.1: TIFIA evaluation criteria (%)
T14.1: States with significant transportation PPP authority, 2007
T17.1: GEB transaction highlights
F17.1: GCG organisational and financing structure
F17.2: GCG CPI swap
T18.1: Indonesian toll road projects (as of Nov 2006)
T19.1: Road network in India (km, %)
T19.2: Summary of the NHDP (km, Rs bn)
T19.3: Financing plan for NHDP, 2006–16, 2017–31 (Rs bn)
T19.4: Variance in traffic (%)
F19.1: Project set-up
F19.2: Projected cash flows (for 95% debt financing), 2009–27 (Rs crore)
T20.1: NHDP phases
T20.2: Funding structure (Rs crore)
T20.3: Final debt structure (Rs crore)
F21.1: MIAL transaction structure
F21.2: Master plan highlights for CSIA
F21.3: Traffic statistics at CSIA
T22.1: Transport sector investment, 1998–2006 (Won bn)
T22.2: Roads – private investment (Won bn)
T22.3: SOC road at US$10,000 per GDP
T 22.4: Railroads – private investment (Won bn)
T22.5: Ports – private investment (Won bn)
T22.6: Current transport projects
F22.1: Project structure – post-amendment
T22.7: Financial structure (Won bn)
F22.2: Project location
T23.1: Uijeongbu LRT loan tranches
T26.1: Comparison between public sector and private sector project delivery
F26.1: Contractual overview
T26.2: Financial structure (A$)
T26.3: Bond overview (A$m)
F28.1: MCP motorway projects
T8.1: Project description (km, €m)
T28.2: Project development structure
T28.4: Risk allocation in the concession agreement
T28.5: Grounds for termination of the concession agreement
T28.6: Compensation entitlement
T29.1: Proposed A-Model projects (km)
F34.1: Gautrain contractual structure
F34.2: Gautrain financing structure