Autopistas del Sol: Paving the way

Autopistas del Sol, a consortium of Itinere, FCC and Soares da Costa, closed financing for its toll road concession in Costa Rica on 20 December. The project is the first PPP toll road concession in the country, which for all its political stability has been a challenging place to finance infrastructure.

The 25-year concession is to build, finance and operate a 76.8km stretch of tolled highway between San José and Caldera, and transfer the asset back to the government at the end of the period. The concession will benefit directly from toll revenues, and includes a minimum revenue guarantee from the concession awarder, the Costa Rican Ministry of Public Works and Transportation.

The $330 million project features a $261 million debt facility arranged by Caja Madrid and the multilateral Banco Centroamericano de Integración Económica (BCIE, or CABEI, according to its English initials). BCIE is providing $160 million in senior debt, as well as a $15 million standby liquidity facility, while Caja Madrid is providing the remaining $86 million in debt. The debt service coverage ratio (DSCR) is projected to be a minimum of 1.3x, but is expected to be greater than 1.5x over the 16-year maturity.

Of the BCIE debt, $40 million of the term loan carries a 20-year maturity, which includes a two-year grace period; the remaining $120 million has an 18-year maturity. The Caja Madrid portion also has a 2-year grace period but has a shorter maturity at 16 years, although it benefits from a political risk insurance policy from the Multilateral Investment Guarantee Agency (MIGA). The consortium is providing approximately $69 million in equity, and the deal is thus, at 80%, fairly heavily leveraged for an emerging markets real toll concession.

Iñigo Velázquez Prado, head of energy and environment for Caja Madrid's project finance group, highlights the minimum revenue and political risk guarantees as important aspects of the deal, and in developing the project finance market in the region. He notes that "the US-dollar financing and the involvement of the multilaterals are significant because Costa Rica is not investment grade" but, he continues, "as the first toll road contract in Costa Rica, it is a pioneer for future concessions, not only in the country, but in Latin America, excluding Mexico."

The only other infrastructure concession in the country that has closed successfully is the Caldera port deal, which also closed in 2007, but involved the transfer of existing assets and contracts in a structure more comparable to a leveraged acquisition financing, rather than a public private partnership.

The concession was originally awarded to a consortium of SNC Lavalin and Jose Cartellone Construcciones Civiles in 1998, and was re-awarded to the present concessionaire in 2005 after the original team withdrew from the contract. The government did not conduct a second tendering process, but rather approached the Autopistas del Sol consortium, which had already been awarded the other Costa Rican toll road concession, from San José to San Ramon. That deal is expected to close in 2008, but has faced a number of difficulties since the award was made, since it features significantly more traffic risk than this first deal.

The road is divided into three sections. The first is an existing, 14.2km suburban road in San José, near to the airport, which is in need of some expansion and includes bridge construction. The second section is a predominantly greenfield 38.9km route, and includes a number of existing bridges, which were built by the government as part of the originally planned concession in 1998 and 1999, and with which the new concessionaire is satisfied. The last section runs for 23.8km, to the port of Caldera, and involves extensive rehabilitation and upgrading of existing routes.

Daniel Villar, risk officer at MIGA, notes that the deal is "a vanilla road concession", but it was impressive in that it closed at all, given the debacle with the Juan Santa María airport, the problems with railway deals in the country, and the delays on the other road concessions, all of which have been hampered by what Villar calls "a series of bad luck". He continues, that public private partnerships in the country are "politically overregulated, and there is a lot of public animosity towards the concept," but that "this deal will help to dispel that notion".

Other market sources, commenting on the less successful Costa Rican deals, have been significantly less diplomatic, laying the blame for the difficulties and hold-ups with the other concessions at the door of the government. Still, the Autopista del Sol concession, which is essential to greater utilisation of the port, and growth in the surrounding region, is of sufficient economic importance, and has sufficient support throughout government, that a repeat of the airport dispute is unlikely.

However, though the banks and multilaterals remain cautious, they have shown some willingness to participate, and the deal is a major progression for the project finance market in the country. If this tentative deal can provide a model in what has been a decidedly difficult market, it will pave the way for not only future toll road deals, but may stimulate support for other, much-needed infrastructure development in the country.

Autopistas del Sol SA
Status: Closed 20 December 2007
Size: $330 million
Location: Costa Rica
Description: 25-year concession for a 76.8km toll road
Concession awarder: Costa Rica Ministry of Transportation
Sponsors: FCC, Itinere, Soares da Costa
Equity: $69 million
Debt: $261 million
Maturity: Up to 20 years
Mandated lead arrangers: BCIE, Caja Madrid
Legal counsels to lenders: Jones Day, BLP (local)
Legal counsel to borrower: Garrigues
Engineering and traffic consultant: ARUP
Insurance adviser: AON