73209 PPI data update note 75 September 2012 Private investment in transport increases in 2011, focusing on the road and rail sectors Overview In 2011, 68 new transport projects reached financial or contractual closure in 15 lower- and upper-middle income countries: Argentina (1 project), Brazil (4), Chile (3),China (4), India (41), Kosovo(1), Mexico (3), Nigeria (1), Peru (3), Romania (1), the Russian Federation (1), South Africa (1), Sri Lanka (1), Togo (1), Turkey (2), and Zimbabwe (1).1 Total investment commitments (hereafter, investment) in transport projects reached US$31.9 billion, of which US$30 billion were investments in new projects and US$1.9 billion were investments in existing projects (Figure 2). Regional focus Figure 1: Transport projects with private Figure 2: Investment commitments in participation, by regions, 1990-2011 transport projects in developing 140 countries, by region, 1990-2011 40 Projects 2011 US$ * Adjusted by 120 billions US CPI. 35 100 30 25 80 20 60 15 40 10 20 5 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 EAP ECA LAC MENA SA AFR EAP ECA LAC MENA SA AFR Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. By number of projects (42) and by investment (US$17 billion), private activity in transport was concentrated in South Asia (SA), namely in India where 41 new projects closed in 2011. Total investment in transport projects in the region amounted to US$17 billion, a 4% increase from 2010 levels. One project, Colombo South Container Terminal, closed in Sri Lanka in December 2011, making this the third transport project with private participation in Sri Lanka since 1990. Following SA, was Latin America and the Caribbean (LAC), where 14 new transport projects (six road projects, four seaport projects, three airport projects and one railroad project) This note was written by Andreea Militaru, Consultant, Finance Economics and Urban Development Department, Sustainable Development Network, World Bank 1 Data on transport projects with private participation include primarily medium-size and large projects in low and middle income countries as reported by the media and other public sources. Small-scale projects are generally not included because of lack of public information. More information is available at http://ppi.worldbank.org/. 1 closed in 2011 with total investment of US$6.9 billion (in line with 2010 levels, but a 50% drop from 2009 levels). São Paulo Rodoanel Sul e Leste, a highway concession, closed in March 2011 in Brazil, and involved US$2.2 billion in investment commitments. Europe and Central Asia (ECA) ranked third with five new projects closing in 2011 (the same number as in 2010) and total investments of US$6.1 billion, the largest amount since 1990. The focus in ECA switched to railroad projects: two projects closed, one in Romania and one the Russian Federation involving investments of over US$4.2 billion. East Asia and Pacific (EAP) ranked fourth, with four new projects, two seaport terminals and two highway projects, all located in China. Total investment in transport projects in EAP amounted to over US$1 billion. In Africa (AFR) there were three new projects: two seaport projects in Nigeria and Togo and one cross border highway project, Beitbridge Border Post, in Zimbabwe and South Africa. Total investment in transport projects in Sub-Saharan Africa amounted to US$851.4 million. There were no new projects or any investment in Middle East and North Africa in 2011. Subsector focus The road sector accounted for 47 projects (69% of all new projects) and total investments of US$15.3 billion. They were followed by seaports (16%) which involved total investments of over US$4 billion. Airport projects accounted for five projects (7%) and US$1.7 billion. Lastly, the number of railroad projects increased from one in 2010, to five in 2011 involving investments of US$10.3 billion: two projects closed in ECA and three in SA. Figure 3: Transport projects with private Figure 4: Investment in transport projects participation, by subsector, 1990-2011 with private participation, by subsector, 40 1990-2011 140 Projects 2011 US$ * Adjusted by 35 billions US CPI. 120 30 100 25 80 20 60 15 40 10 20 5 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 Airports Railroads Roads Seaports Airports Railroads Roads Seaports Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Contract type focus By contract type, concessions were predominant both in terms of number of projects and investment levels. They accounted for 49 projects (72% of all new projects) and US$15.9 billion (50% of all the investment). They were followed by greenfield BOTs (25%), management contracts and divestitures (1.5% each). Although they accounted for only a quarter of the projects closed in 2011, greenfield projects involved the second largest amount of investment US$11.6 billion. This can be explained by that fact that greenfield projects generally require more capital expenditure than concessions. Finally, all divestiture investment in 2011 was due to Freight One, a railroad divestiture in the Russian Federation with investment commitments of US$4.2 billion. 2 Figure 5: Transport projects with private Figure 6: Investment in transport projects, participation, by PPI type, 1990-2011 by PPI type, 1990-2011 40 140 2011 US$ * Adjusted by Projects billions 35 US CPI. 120 30 100 25 80 20 60 15 40 10 20 5 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 Management and lease contract Management and lease contract Greenfield project Greenfield project Divestiture Divestiture Concession Concession Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Figure 7: Top 10 sponsor countries by Figure 8: Top 10 sponsor countries by number of transport projects in 2011 investments in transport projects in 2011 Denmark Peru Netherlands Turkey Peru U.A.E. Russia Hong Kong, SAR Project Investment Switzerland Denmark Brazil China Hong Kong, SAR Canada Turkey Brazil Netherlands 2011 US$ billions China India India Projects 0 5 10 15 20 0 20 40 60 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Sponsor focus Indian sponsors dominated the transport sector both by number of projects (41) and by investment (over US$16 billion). They only invested locally, in India. Indian sponsors were followed by Chinese sponsors who invested in seven projects, all local. Dutch sponsors who invested over US$5 billion globally of which US$4.2 billion was invested in only one project, Freight One, a rail project in Russia. Turkish sponsors ranked third based on the number of projects they invested (3 projects, 2 airport and 1 seaport project). Their total investment amounted to US$623.6 million. 3 Featured project L&T Hyderabad Metro Rail Private Ltd. (India) | Railroads | Greenfield (BOT) | 35 years| PPP Project Information On August 6, 2010, the Andhra Pradesh Government awarded a 35-year contract (extendable by an additional 25 years) to Larsen & Toubro Limited to build a 71.16km elevated metro line covering three high density traffic corridors of Hyderabad in the state of Andhra Pradesh. Under the contract, the consortium was responsible for the design, construction, financing, operation and maintenance of the metro line. The project would be integrated with the existing suburban railway network (MMTS) and bus stops. Hyderabad would be one of the first city in India to have integrated urban planning with intermodal connectivity. Bidding process The contract was awarded through international competitive bidding, conducted by the Andhra PradeshGovernment, The bidding criteria was the lowest subsidy requirement from the government, Financial bids for the project were opened on July 14, 2010 and three pre-qualified bidders participated in the tender:: Larsen & Toubro Ltd which requested a subsidy of INR 14580mn (12% of project cost); Transstroy India-OJSC Transstroy Russia-CR18G Consortium which requested a subsidy of INR 22000mn (18% of project cost); and Reliance Infrastructure consortium which requested a subsidy of INR 29910mn (25% of project cost).The project was awarded to the successful lowest bidder, Larsen & Toubro Ltd which quoted a US$ 324 million subsidy requirement. It established L&T Hyderabad Metro Rail Private Ltd, a Special Purpose Vehicle (SPV), to implement the project. Under the contract, the SPV was to recover the capital costs and operating costs including returns through user fees during the term of concession. A LoA was issued to them on August 6, 2010. L&T would provide the rolling stock and would be the EPC contractor. Financial structure The contract agreement was signed on September 4, 2010 and the project reached financial closure on April 5, 2011. The estimated capital cost of the project was US$3,639.5 million. Financing comprised: US$ 2551.1 million term loan, sponsor equity of US$764.4 million and a capital grant (or viability gap fund) of US$324 million from the government of India. The debt: equity ratio of the project was 77:23. Government financial support to the PPP State Bank of India (SBI) was the lead arranger of the term loan and the other members of the syndicate were Canara Bank, Indian Bank, Indian Overseas Bank Ltd, Jammu & Kashmir Bank Ltd, Punjab & Sind Bank, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and Syndicate Bank Ltd. The debt tenor was 15 years door-to door. This included a 60-month construction period, a 12-month grace period and a nine-year repayment period that required 36 quarterly installments and 30% of the debt amount as a bullet repayment upon maturity. The loan had an interest rate of 225bp over SBI base rate, or 10.5%, during the first two years. It had a refix provision every two years. Lenders received participation fees of 10bp. Lenders were comforted by a guarantee provided by the sponsor L&T, which includes cost overruns of up to 5% of the project cost. Also, the sponsor provided cash support to maintain the debt service cover ratio (DSCR) at 1x. Construction on the project began in April, 2011 and was expected to be completed by April, 2015. 4 Table 1: Transport projects with financial or contractual closure in 2011 Region AFR Country Project Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Name Status PPI commitment Type (US$ millions) 1 Channel Build, Bullnose dredging rehabilitate, Eko Support Port and operate, and Services Limited Nigeria Facilities Operational terminal Concession transfer 124.4 N/A N/A (100% / Nigeria) 2 Old Mutual (South Build, Africa), Nedbank South Beitbridge rehabilitate, Capital (South Africa, Border operate, and Africa), Sanlam Zimbabwe Post Construction Highway Concession transfer 97 KM .. (South Africa) 3 Mediterranean Lome Build, Shipping Company Container Greenfield operate, and Throughput (MSC) (100% / Togo Terminal Operational Terminal project transfer 495 (thousands) 1500 Switzerland) Region EAP Country Project Name Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Status PPI commitment Type (US$ millions) 1 Berths No.1 and No.2 of the Meishan Greenfield Build, operate, Throughput PSA Corp China Container Port Construction Terminal project and transfer 30 (thousands) 3 (Singapore) 2 Lianyungang New Century Liquid Greenfield Build, operate, Tadee Group China Chemical Port Construction Terminal project and transfer 91.69 .. .. (100% / China) 3 Jinzhong Longcheng Road King Expressway Infrastructure Registration Greenfield Build, operate, (45% / Hong China Capital Increase Construction Highway project and transfer 68.77 KM 71.6 Kong, China) 5 4 Increased Investment in New World Tangjin Express Rehabilitate, Development Co. (Tianjin North operate, and Ltd. (60% / Hong China Section) Operational Highway Concession transfer 745.22 KM 60.67 Kong, China) Region ECA Country Project Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Name Status PPI commitment Type (US$ millions) 1 Build, Pristina Runway rehabilitate, International and operate, and Number of Limak Holding Kosovo Airport Operational terminal Concession transfer 127 runways 1 (90% / Turkey) 2 Transferoviar Management Group S.A. Fixed and lease Lease (100% / Romania CFR lease Operational assets contract contract .. .. ... Romania) 3 UCL Rail (Universal Carogo Fixed Number of Logistincs assets working Holding B.V.) Russian and locomotives (75% / Federation Freight One Operational freight Divestiture Partial 4271 and cars 190000 Netherlands) 4 Build, Iskenderun rehabilitate, Port operate, and Limak Holding Turkey Concession Operational Terminal Concession transfer 425 .. .. (100% / Turkey) 5 Runway Build, and Greenfield operate, and Number of IC Holding (100% Turkey Zafer Airport Construction terminal project transfer 71.65 runways 1 / Turkey) 6 Region LAC Country Project Project Segment Type of Subtype of Investment Capacity Capacity Sponsors Name Status PPI PPI commitment Type (US$ millions) 1 Santa Fe- Rehabilitate, Rosario operate, and Arssa (100% / Argentina Highway Operational Highway Concession transfer 6 KM 157 Argentina) 2 AP Moller - Maersk Group (50% / Brasil Denmark), Terminal Terminal Greenfield Build, lease, Throughput Investments Limited Brazil Portuario Construction Terminal project and transfer 845 (thousands) 1100 (50% / Netherlands) 3 Build, São Paulo rehabilitate, Rodoanel Sul operate, and Grupo Bertin (100% Brazil e Leste Operational Highway Concession transfer 2221.5 KM 103.8 / Brazil) 4 Construtora Locatelli (50% / Brazil), Build, Argesil Armazens rehabilitate, Gerais e Silos MT 130 operate, and Itaquere (50% / Brazil Highway Operational Highway Concession transfer 73.5 KM 122 Brazil) 5 Odebrecht SA (26% / Brazil), Dubai Holding (26% / United Arab Greenfield Build, own, Throughput Emirates), Coimex Brazil Embraport Construction Terminal project and operate 800 (thousands) 1000 (16% / Brazil) 6 Build, El Loa de Runway rehabilitate, Calama and operate, and Number of Agunsa (100% / Chile Airport II Operational terminal Concession transfer 34 runways 1 Chile) 7 Guaymas Build, Dune Company of Fertilizer Greenfield operate, and Yuma, LLC (100% / Mexico Terminal Construction Terminal project transfer 4.4 N/A N/A United States) 8 ICA SA de CV (30% / Mexico), Impulsora Del Desarrollo Y El Empleo En América Build, Latina SA de CV Autovia Greenfield operate, and (IDEAL) (70% / Mexico Urbana Sur Construction Highway project transfer 524 KM 21 Mexico) 7 9 Build, Obrascón Huarte Autovia Bridge and Greenfield operate, and Lain (OHL) (100% / Mexico Urbana Norte Construction highway project transfer 801 KM 9 Spain) 10 Gestión e Ingenieria Build, IDC (Chile), Unique rehabilitate, (Flughafen Zurich Cerro Moreno operate, and Number of AG) (15% / Chile Airport II Construction Terminal Concession transfer 28 runways 1 Switzerland) 11 Iquique Build, Highway rehabilitate, Sacyr Vallehermoso Access operate, and SA (SyV) (100% / Chile Project Construction Highway Concession transfer 220 KM 78 Spain) 12 Build, Lima Electric Greenfield operate, and Graña y Montero SA Peru Train - Line I Construction Passenger project transfer 290 KM 11.7 (Peru) 13 Callao Terminal Build, Norte rehabilitate, AP Moller - Maersk (Phases I and operate, and Throughput Group (51% / Peru II) Operational Terminal Concession transfer 313 (thousands) 1600 Denmark) 14 Corporación América (CASA) Build, (50% / Argentina), Runway rehabilitate, Andino Investment Aeropuertos and operate, and Number of Holding (50% / Peru del Sur Operational terminal Concession transfer 257 runways 6 Peru) 8 Region SA Country Project Name Project Segment Type of Subtype of Investment Capacity Capacity Sponsors Status PPI PPI commitment Type (US$ millions) 1 Reliance ADA Group Freight Build, (74% / India), SNC Mumbai Metro and Greenfield operate, and Lavalin (26% / India - Phase II Construction passenger project transfer 2514.8 KM 32 Canada) 2 Essel Group (74% / Essel Build, India), China Railway Ahmedabad rehabilitate, Construction 18th Godhra Toll operate, and Bureau (Group) Co., India Roads Limited Operational Highway Concession transfer 280.7 KM 117.6 Ltd (26% / China) 3 Abhijeet Build, Hazaribagh rehabilitate, Toll Road operate, and Abhijeet Group (100% India Limited Operational Highway Concession transfer 139.3 KM 41.3 / India) 4 Transstroy Build, Bhopal Bypass rehabilitate, Tollway Private operate, and Transstroy India India Limited Construction Highway Concession transfer 106.7 KM 52 Limited (100% / India) 5 Valecha Engineering Limited (40% / India), Bhubaneswar Build, KazStroyService Expressways Greenfield operate, and Group (60% / India Private Limited Construction Highway project transfer 120.2 KM 67 Kazakhstan) 6 GVK Deoli Build, Kota rehabilitate, Expressway operate, and GVK Group (100% / India Private Limited Operational Highway Concession transfer 342.8 KM 83 India) 7 Navayuga Jahnavi Toll Build, Bridge Private Bridge and Greenfield operate, and Navayuga Group India Limited Construction highway project transfer 355.5 KM 51 (100% / India) 8 SREI Infrastructure Finance Ltd (India), PNC Infratech Ltd Ghaziabad Build, India), Galfar Aligarh rehabilitate, Engineering & Expressway operate, and Contracting SAOG India Private Limited Operational Highway Concession transfer 516.7 KM 126 (Galfar) (25% / Oman) 9 9 SP Jammu Build, Udhampur rehabilitate, Highway operate, and Shapoorji Pallonji India Private Limited Operational Highway Concession transfer 533.3 KM 65 Group (100% / India) 10 Build, rehabilitate, K M Toll Road operate, and Reliance ADA Group India Private Limited Operational Highway Concession transfer 260 KM 71 (100% / India) 11 Build, BSCPL Infrastructure North Bihar rehabilitate, Ltd (50% / India), C&C Highway operate, and Constructions Ltd India Limited Operational Highway Concession transfer 145.8 KM 86 (50% / India) 12 Navayuga Build, Quazigund rehabilitate, Expressway Highway operate, and Navayuga Group India Private Limited Operational and tunnel Concession transfer 558.6 KM 15.25 (100% / India) 13 Ashoka Sambalpur Build, Baragarh rehabilitate, Tollways operate, and Ashoka Buildcon Ltd India Private Limited Operational Highway Concession transfer 258.5 KM 88 (100% / India) 14 Build, Sion Panvel rehabilitate, IVRCL Infrastructures Tollways operate, and & Projects Ltd. (51% / India Private Limited Operational Highway Concession transfer 379 KM 23 India) 15 OJSC Corporation Transstroy Build, Transstroy, (26% / Dindigul Theni rehabilitate, Russian Federation), Kumli Tollways operate, and Transstroy India India Private Limited Operational Highway Concession transfer 73.6 KM 134 Limited (74% / India) 16 Transstroy Transstroy India Trichy Build, Limited (74% / India), Karaikudi rehabilitate, OJSC Corporation Tollways operate, and Transstroy, (26% / India Private Limited Operational Highway Concession transfer 68.7 KM 110.4 Russian Federation) 17 IRB Tumkur Build, Chitradurga rehabilitate, IRB Infrastructure Tollway Private operate, and Developers Ltd (100% India Limited Operational Highway Concession transfer 728.5 KM 114 / India) 18 Topworth Build, Topworth Group Tollways rehabilitate, (India), Metallurgical (Ujjain) Private operate, and Corporation of China India Limited Operational Highway Concession transfer 49.3 KM 95.2 (China) 10 19 Soma Isolux Varanasi Build, Isolux Corsan (50% / Aurangabad rehabilitate, Spain), Soma Tollway Private operate, and Enterprise Ltd (50% / India Limited Operational Highway Concession transfer 876.5 KM 192.4 India) 20 GVRMP GVR Group (India), Whagdhari Build, RMN Infrastructure Ribbanpally rehabilitate, Limited (25% / India), Tollway Private operate, and Prathyusha Group India Limited Operational Highway Concession transfer 90 KM 141.2 (India) 21 L&T Hyderabad Build, Metro Rail Greenfield operate, and Larsen & Toubro India Private Limited Construction Passenger project transfer 3639.5 KM 71.16 Limited (100% / India) 22 Noble Group Ltd (51% / Hong Kong, China), Blue Water Iron Build, Gammon India Ltd Ore Terminal Greenfield operate, and Throughput (31% / India), MMTC India Private Limited Construction Terminal project transfer 119.2 (thousands) 10000 Limited (18% / India) 23 Raebareilly Build, Allahabad rehabilitate, Highway operate, and Vijai Infrastructure India Private Limited Operational Highway Concession transfer 75.8 KM 106 Limited (100% / India) 24 GVK Bagodara Build, Vasad rehabilitate, Expressway operate, and GVK Group (100% / India Private Limited Operational Highway Concession transfer 253 KM 101.8 India) 25 Barasat Build, Krishnagar rehabilitate, Expressways operate, and Madhucon Projects India Limited Operational Highway Concession transfer 208.5 KM 84 Ltd (100% / India) 26 GVRMP GVR Group (India), Belgaum Build, RMN Infrastructure Khanapur rehabilitate, Limited (26% / India), Tollway Private operate, and Prathyusha Group India Limited Operational Highway Concession transfer 84 KM 81.9 (India) 27 Build, rehabilitate, Delhi Agra Toll operate, and Reliance ADA Group India Roads Limited Operational Highway Concession transfer 671.4 KM 179.5 (100% / India) 28 Build, Abhijeet Bihar rehabilitate, Roadways operate, and Abhijeet Group (100% India Limited Operational Highway Concession transfer 77.2 KM 92 / India) 11 29 Sanjose Supreme Supreme Build, Infrastructure India Ltd Tollways rehabilitate, (40% / India), Sanjose Development operate, and Constructora Spain India Private Limited Operational Highway Concession transfer 273.7 KM 47 S.A. (60% / Spain) 30 Khagaria Build, Purnea rehabilitate, Highway operate, and Punj Lloyd Limited India Project Limited Operational Highway Concession transfer 158.7 KM 140 (100% / India) 31 SEW Krishnagar Build, Baharampore rehabilitate, Highways operate, and SEW Infrastructure India Limited Operational Highway Concession transfer 172.7 KM 78 (100% / India) 32 Essel Ludhiana Build, Talwandi Toll rehabilitate, Roads Private operate, and Essel Group (100% / India Limited Operational Highway Concession transfer 156.5 KM 78 India) 33 Jiangsu Provincial Transportation Engineering Group Build, Company (JTEG) Tantia Raxaul rehabilitate, (26% / China), Tantia Tollway Private operate, and Construction Limited India Limited Operational Highway Concession transfer 123.2 KM 68.8 (74% / India) 34 Oriental Build, Nagpur Betul rehabilitate, Oriental Structural Highway operate, and Engineers Private Ltd. India Private Limited Operational Highway Concession transfer 747.9 KM 176.3 (100% / India) 35 Build, SREI Infrastructure Orissa Steel rehabilitate, Finance Ltd (India), Expressways operate, and MBL Infrastructures India Private Limited Operational Highway Concession transfer 164.4 KM 96 Limited ( India) 36 Supreme Infrastructure India Ltd (64% / India), China State Construction Engineering Supreme Build, Corporation (China), Panvel Indapur rehabilitate, Mahavir Road & Tollways operate, and Infrastructure Private India Private Limited Operational Highway Concession transfer 263.8 KM 84 Limited (India) 12 37 Build, BSCPL Infrastructure Patna rehabilitate, Ltd (50% / India), C&C Bakhtiarpur operate, and Constructions Ltd India Tollway Limited Operational Highway Concession transfer 217.3 KM 50.6 39(50% / India) 38 Build, Ranchi rehabilitate, Expressway operate, and Madhucon Projects India Limited Operational Highway Concession transfer 352.1 KM 163.5 Ltd (100% / India) 39 Build, Reengus Sikar rehabilitate, Expressway operate, and G R Infraprojects India Limited Operational Highway Concession transfer 48.5 Km 43.88 Limited (100% / India) 40 Soubhagya Build, Hata Darguwan rehabilitate, Soubhagya Projects operate, and Infrastructure Private India Private Limited Operational Highway Concession transfer 23.8 KM 64.42 Limited (100% / India) 41 Ramky Group (74% / India), Jiangsu Provincial Srinagar Build, Transportation Banihal rehabilitate, Engineering Group Expressway operate, and Company (JTEG) India Limited Operational Highway Concession transfer 340.4 KM 67.76 (26% / China) 42 China Harbour Enginnering Company Ltd (55% / China), Colombo South Build, Aitken Spence & Sri Container Greenfield operate, and Company Ltd. (30% / Lanka Terminal Construction Terminal project transfer 500 N/A N/A Sri Lanka) Note: .. denotes missing data; N/A means not applicable. Investment commitments include payments to the government and investment in physical assets. 13