IIRSA Norte Tramo
Context
- The Peruvian government had an ambitious plan to rejuvenate 955km of roads connecting the fluvial port of Yurimaguas with the Pacific port of Paita
- The project is part of wider plan to better integrate infrastructure networks across South America, in this case between Peru and Brazil
Problem
- The government faced a shortage of sufficient capital and predictability its financial resources to meet the cost of realizing the project as a result of its reliance on the cyclical prices of commodities
- As such, the government was pushed to build the infrastructure in a timely manner to spark economic growth in remote areas of the country during times of high commodity prices
Innovation
- To meet the challenges, the Peruvian government created the CRPAO financing scheme to support the investment into its road network
- CRPAO is a guarantee of payment on behalf of the Peruvian government, in US dollars, on a predetermined schedule, issued to the project sponsor
- The government uses CRPAOs as backing for project bonds issued on international markets to raise capital for construction
Stakeholders Involved
- IIRSA Norte — SPV created to manage the infrastructure project for the duration of the concession (25 years)
- Odebrecht Latinvest — Owner of IIRSA Norte SPV and other PPP projects across Latin America, and part of the wider Odebrecht construction and engineering conglomerate
- Ministry of Transport and Communications (Peru) – Scheme regulator
Results/Impact
- Over USD 200M was raised to finance the construction of the IIRSA Norte Tramo artery
- Travel time from Yurimaguas to Paita slashed from approximately 36 hours to approximately 18 hours
- 2012 (first full year of operation) saw a traffic increase of 41.5% compared to the previous year
- The Peruvian government has not missed a single payment so far, building confidence in other CRPAO schemes
Key lessons learnt
- Given government guarantees of regular, scheduled payment to the project sponsor irrespective of traffic volumes, CRPAO-backed project bonds have enjoyed favourable reception with investors as they eliminated the risk that toll-income would fall short of projections
- Bonds were denominated in US Dollars and governed by the New York State Law, hence proved attractive to international investors. This allowed the concessionary to tap a larger pool of capital than that available in local markets
- Past experience with CRPAOs has allowed the Peruvian government to develop and refine the model for existing and future projects, recently shifting to a similar RPI-CAO1 (Remuneration for Investments — Certificate of Progress of Works) financing structure