ICON - a consortium comprising FCC Construccion, Itinere Infraestructuras and Irish contractor PJ Hegarty - has reached financial close on the project financing of the N6 Galway-Ballinasloe PPP motorway project in Ireland

Ireland's National Roads Authority (NRA) brought the 57.6km N6 project to market in November 1999 and reached financial close in the middle of last week.

Financial close of the N6 follows swiftly after the February close of the M3 Clonee Kells road scheme which connects the end of the dual carriageway near Clonee with the N3 north of Kells. This deal was won by the Cintra-led EuroLink consortium.

This latest deal sees the sponsor win the concession for the motorway that starts in Galway and terminates in Roscommon at a roundabout on the existing N6 at Beagh, east of Ballinasloe.

The scheme comprises 56km of dual carriageway with 1.6km of single carriageway at its eastern end and 7km of a single carriageway link to the Loughrea bypass and is being built by the consortium which breaks down:

• FCC - 45 per cent
• Itinere - 45 per cent
• PJ Hegarty - 10 per cent

The work includes four grade-separated junctions at:

• Glennascaul, on the N18
• Newford, south west of Athenry
• Carrowkeel, north of Loughrea
• Brackernagh, south west of Ballinasloe

The new N6 provides direct access to Athenry and allows traffic to bypass:

• Oranmore
• Craughwell
• Loughrea
• Kilreekill
• Aughrim
• Ballinasloe

The design of the N6 Galway to East Ballinasloe scheme began in late 1999 with the appointment of MCOS Consulting Engineers to undertake the constraints study, route selection, preliminary design and environmental impact statement (EIS) for the scheme.

In July 2000 the constraints study was published with five 'broad'. The route selection report was published in July 2001 which followed the first public consultation in June 2000.

The preferred route was presented to Galway County Council in January 2001 and a second public consultation was held in February 2001.

The road reached preferred bidder in January 2007  and raced on to financial close in early April.

ICON beat off competition from three shortlisted other consortia:

• Celtic Roads Group - Dragados, NTR, BAM PPP
• EuroLink - Cintra and SIAC 
• Hibernia Roads - Acciona, Mota-Engil, McNamara, Banco Espirito Santo and Coffey Construction

This road scheme comes as part of the Irish government's National Development Plan (NDP) 2000-2006 that identified PPP as essential in delivering infrastructure required on the national road network.

At that time, the NRA set a target of securing €1.27 billion of private financing for national roads - representing 23 per cent of the total road investment programme.

This reflects the importance Ireland set on securing private finance to accelerate the delivery of the public capital programme to remedy Ireland's infrastructure deficit.

Without private investment, the programme would be substantially incomplete and current deficiencies not be addressed.

In June 1999, the government announced these pilot PPP schemes:

• Waterford By-Pass
• Limerick Southern Ring Road Phase 2
• construction of a second bridge at West-Link on the M50 in Dublin

Eight additional projects were announced by the Authority in June 2000.

However, the market has moved on dramatically since then - to the extent that Ireland is seen as a mature market, commanding the pricing that this allows and securing a pipeline of deals that makes the UK envious as its market stagnates and - in some cases - dries up.

Take Dublin Metro  for an excellent example that underpins the confidence that Ireland has in PPP and the reflected confidence that the market feels in Ireland.

Financing the N6

European Investment Bank (EIB) stepped in and took €70m of the €282 million senior debt, leaving the four mandated lead arrangers to share the rest evenly.

The EIB Loan was in turn subject to an EIB L/C facility provided by the four MLAs until such time as the release conditions have been satisfied.

The MLAs are:

• Banesto 
• Fortis Bank 
• Mediocredito Centrale 
• RBS

RBS subsidiary Ulster Bank is also involved as a participant bank - but not at the MLA level.

It has a complicated pricing structure with five step-up stages taking the pricing from Euribor +90bp rising to 100bp.

There is also a six-year €110 million construction bridge facility (CBF) that is repaid solely by construction payment subsidies received during the first three years post completion.

This has also been shared evenly among the four commercial banks and has a pricing of around 60bp.

The equity tranche is valued at €30 million, giving the project an 83:17 debt:equity ratio. The CBF is excluded from the gearing calculation.

RBS also acted as financial adviser to the consortium while KPMG acted for the NRA.

Legal

Lovells acted for the sponsor (ICON) with local advice provided by A&L Goodbody - which also acted as legal adviser to the banks alongside Norton Rose. McCann Fitzgerald acted for the NRA.

Lovells projects partner Jason Radford said: 'We are delighted to have helped ICON in closing their first deal in the Irish roads market and look forward to continuing the relationship on the M50 project.

'The Irish market provides significant growth opportunities for ourselves and our clients both in the transport sector and in other accommodation-based sectors.

'The Galway project is also an excellent demonstration of how efficient procurement processes and PPP can exist together - a maturity of approach and clear timetabling allowed the project agreement to be finalised in a day and for ICON to progress from preferred tenderer to financial close in three months.'

Conclusion

Roads projects in Ireland have built a head of steam over the past few years, to the extent that projects of the like of Dublin Metro - which, until recently was little more than a pipe dream - are moving forward with a confident industry following in its wake.

This means a healthy pipeline of projects for the construction industry which is being headed up by the usual suspects, with particular success being enjoyed by the Spanish giants and local support companies.

On the advisory side, it is good news for the Irish law firms that are partnering with international players to work on deals. In time, this could see Irish firms work alone on deals - without support from the likes of Lovells and Norton Rose (as in this deal) - though it is more likely that the international players will retain their mandates. The scale of deals requires bigger hitters with the teams to fall back on in case of problems. And with the best will in the world the local players will not be able to staff up to handle what effectively is a spike in the market.

For now, it is welcome news for the industry to see continued confidence in a market where it is worth competing.

The project at a glance