Project Development and Finance

Argentine Public-Private Partnership Program

Main bankability aspects of the Argentine Highways and Safe Roads Public-Private Participation (PPP) Program.

In order to partially revert the infrastructure deficit accumulated during the last 15 years, the Argentine Government has launched a Public-Private Partnership (PPP) Program mainly aimed to encourage and facilitate private investment in infrastructure.

The PPP Program is divided into 4 areas, (i) Energy and Mining; (ii) Transportation, Communications and Technology; (iii) Water, Sanitation and Housing; and (iv) Health, Justice and Education. The PPP Program comprehends 60 projects for an aggregate investment of more than US$ 26,000 MM until year 2022.

Within the Transportation area, the Highways and Safe Roads PPP Program provides for the construction of 1,600 km of highways, 3,300 km of safe roads and 26 city bypasses involving an aggregate investment estimated in US$ 17 billion.


Please find below the main bankability aspects of the Highways and Safe Roads PPP Program.

MatterDescription
Repayment NotesTPI-        TPI Notes (títulos de pago por inversión) for the repayment of investments.
-        When submitting the bid, the PPP contractor shall state the amount it requests as consideration under the TPIs.
TPD-        TPD Notes (títulos de pago por disponibilidad) for the repayment of operation and maintenance of the assets, if any.
-        When submitting the bid, the PPP contractor shall state the amount it requests as consideration under the TPDs.
-        No TPD Notes shall be issued in cases in which it is estimated that the proceeds arising from tolls collection, excess load charges and commercial exploitation of the project will be sufficient to cover the operation and maintenance of the project.
Issuer of Repayment Titles-       PPP Trust, which will operate as a single trust for the whole Highways and Safe Roads – Stage 1 PPP program.
-       The PPP Trust will be a public trust specifically established to administrate the cash flows allocated to make all payments relating to the Projects comprised in the Highways and Safe Roads – Stage 1 PPP program.
Currency of the Repayment NotesTPI-       US Dollars.
TPD-       Argentine Pesos.
FX Collar
-        For the TPI tranche, the PPP contractor may elect to enter into a currency collar with the PPP Trust, which will remain in effect during the construction period.
-        The currency collar will establish a 10% band between the US Dollar and an inflation index (the Unidad de Valor Adquisitivo, published by the Central Bank of Argentina and periodically adjusted by the National Statistics Institute) at the time of award.
-        Deviations in excess of the currency collar threshold will be paid by the PPP Trust to the PPP contractor or vise versa, as applicable.
Schedule for the issuance of the Repayment NotesTPI-       On a quarterly basis upon instructions of Vialidad Nacional, who will confirm on a monthly basis the investments made by the PPP contractor.
TPD-       On a monthly basis upon instructions of Vialidad Nacional, who will confirm on a monthly basis the investments and operation and maintenance made by the PPP contractor.
Schedule of Repayment of the NotesTPI-       Each TPI shall be paid in 20 semi-annual installments on May 15 and November 15 of each calendar year.
-       During the initial 5 years of the project there will be a maximum percentage of TPIs in relation to all the TPIs to be issued in connection with the project that can become due and payable on each of said initial 5 years.
TPD-       Each TPD will be paid within 15 business days as from the date of its issuance.
Legal Nature of Repayment Titles-       Irrevocable, unconditional and freely transferable.
Irrevocable Nature of Repayment TitlesTPI-       If the main works performance bond submitted by the PPP contractor is an on-demand bond, 100% of each TPI will be irrevocable.
-       If the main works performance bond submitted by the PPP contractor is a surety bond, only 85% of each TPI will be irrevocable. The remaining 15% of each TPI will be subject to deductions resulting from fines applicable by Vialidad Nacional and any termination penalty.
-       The early termination of the PPP contract for any reason will in no event affect the payments to be made by the PPP Trust under the TPIs, or the irrevocable portion thereof, issued prior to termination date.
TPD-       Prior to its issuance, the TPDs will be subject to discounts as a result of the application of penalties by Vialidad Nacional and termination payments.
-       Following its issuance, each TPD will be irrevocable, unconditional and freely transferable.
TPDs Amount Adjustment-      The TPDs payment will be adjusted on January 1st and July1st of each year of the contract by a formula based on the workforce, gasoil, services and equipment indexes published by the National Statistics Institute.
Cross Default With Sovereign Bonds-       The TPIs and TPDs will not be subject to cross default with Argentine sovereign bonds.
Default Interest-       Payable in case of default of any TPI or TPD.
Governing Law-       Argentine law.
Additional Compensation For PPP Contractor-       In addition to the TPIs and TPDs, the PPP Contractor will be entitled to receive all proceeds arising from tolls collection, excess load charges and commercial exploitation of the project.
Additional Compensation Adjustment-       Starting on 2021, tolls tariffs will be adjusted on January 1st and July1sr of each year of the contract by a formula based on the workforce, gasoil, services and equipment indexes published by the National Statistics Institute. The adjustments for 2018, 2019 and 2020 shall be set forth in the specific bidding documents of each road corridor.
-       Excess load charges shall be adjusted by a formula based on the gasoil index published by the National Statistics Institute.
-       Revenues arising from the commercial exploitation of the project shall be adjusted as agreed by the PPP contractor and third parties.
Funding of PPP trust-       Amounts corresponding to the tax on diesel fuel that are allocated to the Sistema Vial Integrado. The tax on diesel fuel has been effective for more than 60 years, its rate is 22% and is applied over the net sale price of diesel fuels.
-       In cases in which it is estimated that the proceeds arising from tolls collection will exceed the operation and maintenance costs of the project, the PPP contractor will be required to make a monthly payment to the PPP trust equal to the product of the tariff applicable to a specified vehicle category multiplied by a specified number of vehicles of such category, in each case, as set forth in the bidding documents. The payment will therefore vary according to the periodic adjustments of the toll tariffs.
-       Penalties applied to the PPP contractors.
-       Other sources to be determined by the Argentine government.
Top-up Guarantee Reserve Account-       Each PPP project will have its own reserve account, which will be exclusively utilized for making the payment of the TPIs in the event no other funds are available within the PPP Trust for the payment thereof.
-       On or before March 31 of each year, the reserve account of each project will be funded in an amount in US Dollars equal to the amount of the payments to be made under the TPIs of the relevant project within the next 12 months.
-       The Reserve Account may not be used for paying the TPDs.
Contingent Contribution-       The Republic of Argentina will, on an annual basis, make one or more contingent cash contributions to the PPP Trust in the amount necessary (i) for the reserve account of each project to be funded in the amounts mentioned above for the relevant calendar year, and (ii) for the PPP Trust to have, based on revenue projections for such calendar year, the amount necessary to make all payments relating to each project scheduled to become due and payable during such calendar year.
Recourse Against the PPP Trust and the Republic of Argentina-       The PPP contractor will have direct recourse against the PPP Trust for the payment of TPIs and TPDs.
-       The PPP contractor will have direct recourse against the Republic of Argentina for the fulfillment of Contingent Contribution to the PPP Trust.

Disclaimer: this briefing does not contain a full analysis of the law nor shall not be deemed as legal or any other type of advice by Allende & Brea or as including all topics of the matters described herein. 


For further information on this topic please contact Marcos PatrĂ³n Costas