Early indicators suggest that 2016 is to be an important year for Colombia’s 4G highway programme, as some of the initial projects procured by ANI approach financial close.

At the end of 2015 ANI announced that it would have to partially scale back the procurement of PPPs – which receive government contributions – under the 4G programme due to budgetary constraints following the drop in oil price.

Of the projects that have already been approved by the national planning department, Conpes, there has been no shortage of market discourse, and indeed scepticism, regarding the 4G's huge funding demands in a bank market that has little experience in private financing transportation infrastructure.

However, recently accomplished milestones suggest that financing is finally on track for some of these projects.

FDN funding boost

In January 2016 a consortium led by Canada's Brookfield Asset Management won a tender to purchase the Colombian government's 57.6% stake in generator Isagen. Despite being the only bidder, Brookfield’s proposals met minimum requirements and the sale was agreed for Ps6.48 trillion ($2 billion). The contentious privatisation, which has suffered numerous delays, was poignant as a significant portion of the proceeds have been earmarked for 4G. 

Local institution the Financiera de Desarrollo Nacional (FDN) expects to receive the first disbursement of funds from the sale (around Ps1 trillion) within months. FDN is expected to use these funds to provide senior and subordinate debt, as well as credit enhancements to projects under the scheme.

FDN has since approved the first loan directly following the disposal of Isagen, for Ps200 billion, to the Río Magdalena 2 highway project. Three other similar FDN facilities have been provisionally approved to the Conexión Norte, Perimetral Oriente and Pacífico 3 concessions.

Institutional investment

A key challenge for the Colombian government has been to win over the confidence of local institutional investors which could provide an alternative funding resource. New regulations which have been introduced are designed to encourage these institutions to support infrastructure indirectly, by investing in debt funds. 

It has taken longer than expected for these vehicles to gather commitments, ANI initially anticipated that debt funds would be ready to fund during 2015. But in November 2015, Latin American development bank Corporación Andina de Fomento (CAF) announced that, along with UK-based fund manager Ashmore, it had raised Ps1.4 trillion ($450 million) in a first closing of Colombia’s debut debt fund to focus exclusively on infrastructure. It has received commitments from all of Colombia’s pension funds and a local insurance company.

Last month, Sura Asset Management and Lima-based Credicorp Capital announced a Ps1.3 trillion private capital fund specifically targeted at 4G. The International Finance Corporation (IFC) is also backing the vehicle through a $48 million investment. The fund has said it will finance four or five of the already approved 4G highway projects. More are expected to follow suit.

Financing takes shape

During 2015 ANI announced that six of the nine first wave projects had achieved "cierre financiero". But advisers working on some of the first wave financings explained to IJGlobal that in their transactions these declarations were based on the submission of letters of intent, from mostly local banks, rather than hard commitments. 

"What was put to ANI resembled a letter from local banks indicating they want to finance these projects, but it was not a hard document" they said. But some of these transactions could soon be coming to market.

The first package of concessions that ANI announced had secured financial backing in August 2015 consisted of three projects initially won by a consortium led by local firm Mario Huertas and Costa Rica's Meco: Pacifico 3, the Barranquilla-Cartagena and Girardot-Puerto Salgar concessions. Goldman Sachs has been hired as global arranger and structuring agent of the financings, of which the first is expected to launch imminently.

The Ps2 trillion Pacifico 3 project, the largest of the three, is expected to tap both the local and international capital markets, in the coming weeks, as well as the domestic bank loan market. It is to be the first rated bond offering to benefit from the 4G framework, according to Fitch.

Meanwhile more international banks have made commitments to the projects. A French and a Japanese lender are understood to have joined local banks Davivienda and Banco de Bogota in the Ps2.3 trillion financing of Pacifico 1. A fund which has been eyeing the deal may also enter. Project sponsor, Corficolombiana is targeting financial close within a couple of months, IJGlobal was told.

After a slow start the concessionaires may finally be clinching the financial commitments they need to move forward.