PPP framework and project portfolio in Uruguay PPP UNIT

PPP framework and project portfolio in Uruguay PPP UNIT

Context: resilient growth Enhancing the country`s physical infrastructure is a key policy priority of the current administration. The sustained growth of Uruguay in the last 13 years has resulted in increasing needs for more and better infrastructure. Improvement of infrastructure is considered crucial for: maximizing potential output increasing social welfare Private sector involvement: complementary and crowding-in efforts with the public sector and intergenerational fiscal equity. 2

PPP Programme rests on pillars Attractive country for investment Adequate and predictable legal framework Financing options in Uruguay Pipeline and PPP portfolio 3

Rule of law Investment Grade Attractive country for investment Macroeconomic soundness Foreign Direct Investment 4

Political and Social Stability Indice de democracia (The EIU 2016) Indice de estado de derecho (World Justice Project 2016) Political Stability and Absence of Violence/Terrorism (Worldwide Governance Indicators, WB 2016) LATAM 1 st 1 st WORLD 19 th 21 st 1 st 20 th 1 st 28 th 37 th 25 th 1 st 2 nd 35 th 38 th Baja Corrupción (Transparency International 2016) Indice de Prosperidad (Legatum Institute 2016) Libertad de prensa (Reporters Without Frontier 2017) Indice Global de Paz (Institute for Economics & Peace 2017) 3 rd 3 rd Indice de libertad económica (Heritage Foundation 2017) Nota: Ranking position in LATAM and Worldwide, respectively 5

Uruguay a country of sustained growth Average annual GDP growth (%) (Annual Change, in %) 8 7 6 5 Prom. 2005-2016: 4.6 4 3 2.7% 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Spurce: BCU para datos históricos; projections from Ministry of Economy and Finance 6

Higher income and better distributed in the region GDP per Capita compared with LATAM (2017, USD ) 18.000 17,252 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 BOLIVIA PARAGUAY COLOMBIA PERU MEXICO BRAZIL ARGENTINA CHILE PANAMA URUGUAY Source: International Monetary Fund (WEO October 2017) 7

Risk rating: Improved perspective Evolution of the risk rating of Uruguay Figure 41. Latest Credit Rating Actions Baa3/BBB-/BBB- A3/A-/A- Baa1/BBB+/BBB+ 09/2017. Affirmed Uruguay's rating at BBB- with Stable outlook. Baa2/BBB/BBB Investment Grade 07/2017. Outlook raised to Stable from Negative and affirmed BBB rating. Ba1/BB+/BB+ Ba2/BB/BB 05/2017. Outlook improved to Stable from Negative and affirmed BBB rating. Ba3/BB /BB B1/B+/B+ 05/2017. Affirmed Uruguay's rating at BBB(Low) with Stable Outlook. B2/B/B Moody's S&P Fitch 12/2016. Left the Positive Outlook unchanged and affirmed Uruguay s rating at BBB- Sources: Moody s, S&P,R&I, DBRS and Fitch 8

Appropriate Legal Framework: PPP law (I) Establishes a cycle for each project. Provides guarantees for financers. Gives options for accountability treatment. Introduces the mechanism known as a competitive dialogue. Includes a dispute resolution mechanism. Sets up an institutional framework for coordination between MEF/OPP/CND. Fiscal Rule. 9

Appropriate Legal framework: PPP law (II) The PPP framework has a Fiscal Responsibility Clause embedded: Net present value of Explicit + Contingent Liabilities generated by PPP projects cannot exceed 7% of GDP Annual payments generated by PPP projects cannot exceed 0,5% of GDP Explicit and Contingent Liabilities originated in PPP contracts are included in the Accountability Act submitted to the Parliament yearly. 10

Appropriate Legal framework: PPP law (lii) Legislation allows for PPP projects to be carried out in the following areas: economic infrastructure (roads, ports, airports, railways, energy) prisons health care centers schools and other educational establishments sports complexes urban development social housing Private partners of a PPP undertaking are banned from providing: educational services health services security in jails or inmate rehabilitation services 11

Institutional framework (I) Public Administration Contracting National Development Corporation (CND) Office of Planning and Budget (OPP) MEF- Unit Public Private Partnership Court of Auditors

Institutional framework (II) Contracting Public Administrative Body: structuring and implementation of PPP contract contract management PPP Unit (Ministry of Economy and Finance): budgetary aspects assessing risks bankability approval of preliminary studies and contractual terms contract management of economic aspects 13

Institutional framework (III) National Development Corporation: promotion of PPP projects advice on identification, design, study, structuring, selection and contracting of projects Planning and Budget Office: approval of preliminary studies and contractual terms, specifically of socio-economic impact assessment 14

Project cycle Structuring Bidding Process Public Initiative Public call for bids Elegibility Prefeasibility Bid Opening º Exam of bids by the Technical Committee Interim award Assessment Document Final award Contractual Terms Signing of the contract

Financing options in Uruguay Institutional investors Infrastructure funds Commercial Banks Multilateral agencies Local retail market Foreign Investors 16

Institutional investors Pension Funds have strong appetite for infrastructure project financing Allocate their increasing resources Diversify their portfolios. These investments naturally provide a financial balance sheet that match to their liabilities: large investment at long horizons investment returns are defined in domestic inflation-indexed currency units (UI). 17

CAF Infrastructure Fund: Approximately USD 300 million 30-year horizon Senior debt fund Two types of currency returns Mainly aimed at institutional investors Retail market CAF will be the professional manager 18

PPP Portfolio (I) Project Stage Construction Stage Estimated investment Mill. USD Prison Complex Operation stage 08-2015 100 First Educational Infrastructure (44 kindergartens and 15 CAIF centers) Provisional awarding 2018 48 Second Eduactional Infrastructure (23 Schools, 10 Gyms y 9 Technological schools) Provisional awarding 2018 79 Third Educational Infrastructure (27 CAIF centers, 15 Schools) Bid Evaluation 2018 41 Four Educational Infrastructure (42 High Schools, 16 Technicals Schools) Bidding Process 2018 129 Housing complex Evaluation Studies 2019 35 Hospital pasteur Public initiative - - Central Railway Bid Evaluation 2019 825

PPP Portfolio (II) Roads Projects Stage Estimated Construction stage Estimated investment Mill. USD C0 - Road Nº 21, 24, bypass to Nueva Palmira Construction stage 2017 75 C1 - Roads Nº 12, 54, 55, 57, bypass to Carmelo Provisional awarding 2018 62 C2 - Road Nº 9, 15 Provisional awarding 2018 55 C3 - Road Nº 14 and bypass to Sarandí del Yi Provisional awarding 2018 93 C5 - Road Nº 14 East and Road Nº 15 Bidding Process 2019 127 C6 - Road Nº 6,7,12 Bidding Process 2019 76 IP - Road Nº3 and bypass Road Nº 11 Bidding Process 2019 72 TOTAL 560

Project portfolio Punta de Rieles Prison (I) Design, construction, equipping and financing of a new prison for 1,960 inmates and the provision of maintenance, feeding, laundry, cleaning and other connected services. Estimated initial investment: USD 100 million. Tender: international. Award variable: availability payment weighed by technical bid. Estimated contract term: 27.5 years. Payment mechanism: quarterly availability payment based mostly in domestic inflation-indexed currency units. 21

Portfolio of projects - Prison Complex - financial closure (II) ON issuance at the construction phase. Amount: USD 82 million. Horizon: 24 years and 11 months. Interest rate: 5.85% (annual) in real terms. Submission of biddings: 1.5 times the amount tendered. These funds will finance 79% of the total investment. 22

Project portfolio Roads 21 and 24 Type of contract: design, construction, finance, operation and transfer. Length: 179 km Estimated initial investment: USD 75 million. Tender: international. Award variable: availability payment and shadow toll. Estimated contract term: 24 years. Approximate deadline for completion of works: 36 months. Payment mechanism: quarterly availability payment and shadow toll based mostly in domestic inflation-indexed currency units. Contract regulation: by service standards. 23

Project Portfolio Circuit 1: Roads 12, 54, 55 and 57, Bypass Carmelo Type of contract: design, construction, finance, operation and transfer. Length: 260 km Estimated initial investment: USD 62 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual Availability payments (AP) in Inflation Indexed Units (UI). Contract regulation: by service standards 24

Project Portfolio Circuit 2: Roads 9 and 15 Type of contract: design, construction, finance, operation and transfer. Length: 192 km Estimated initial investment: USD 55 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual AP in UI. Contract regulation: by service standards 25

Project Portfolio Circuit 3: Roads 14, Bypass Sarandí del Yí, connection road 3 Type of contract: design, construction, finance, operation and transfer. Length: 292 km Estimated initial investment: USD 93 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual AP in UI. Contract regulation: by service standards. 26

Project Portfolio Circuit 5: Road 14 (Between R. 5 and R. 6) and Road 15 (Between R. 14 and R. 13) Type of contract: design, construction, finance, operation and transfer. Length: 191 km Estimated initial investment: USD 127 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual AP in UI. Up to 50% adjustment in USD Contract regulation: by service standards. 27

Project Portfolio Circuit 6: Road 6 and Access to Montevideo Type of contract: design, construction, finance, operation and transfer. Length: 71 km Estimated initial investment: USD 76 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual AP in UI. Up to 50% adjustment in USD Contract regulation: by service standards. 28

Project Portfolio Circuit 7 - Private Initiative: Road 3 and Bypass Road 11 Type of contract: design, construction, finance, operation and transfer. Length: 33 km Estimated initial investment: USD 72 million. Tender: international. Award variable: availability payment. Estimated contract term: 20 years. Approximate deadline for completion of works: 24 months. Payment mechanism: Annual AP in UI. Up to 50% adjustment in USD. Contract regulation: by service standards. 29

Project Portfolio First Educational Infrastructure Project Design, construction, finance and operation for 44 kindergartens and 15 CAIF. Estimated initial investment: USD 48 million. Tender: international. Approximate deadline for completion of works: 24 months. Estimated contract term: 22 years. Payment mechanism: Bimonthly AP in UI. Up to 50% adjustment in USD. 30

Project Portfolio Second Educational Infrastructure Project Design, finance, construction and operation for 42 primary schools. Estimated initial investment: USD 79 million. Tender: international. Approximate deadline for completion of works: 24 months. Estimated contract term: 22 years. Payment mechanism: Bimonthly AP in UI. Up to 50% adjustment in USD. 31

Project Portfolio Third Educational Infrastructure Project Design, finance, construction and operation for 27 CAIF and 15 schools. Estimated initial investment: USD 41 million. Tender: international. Approximate deadline for completion of works: 24 months. Estimated contract term: 22 years. Payment mechanism: Bimonthly AP in UI. Up to 50% adjustment in USD. 32

Project Portfolio Fourth Educational Infrastructure Project Design, finance, construction and operation for 42 High schools and 16 Technical schools. Estimated initial investment: USD 129 million. Tender: international. Approximate deadline for completion of works: 24 months. Estimated contract term: 22 years. Payment mechanism: Bimonthly AP in UI. Up to 50% adjustment in USD. 33

Project Portfolio Central Railway Project (I) PPP Contract: Design, finance, build and maintainance. Contracting Administration: MTOP (agreement signed with AFE). Estimated initial investment: USD 825 million. International Tender with a maximum value of economic offer. Construction term: 36 months. Estimated contract term: 18 years. 34

Project Portfolio Central Railway Project (II) Objectives at railway infrastructure level: 4.5 million ton/year. Capacity: 22.5 ton / shaft and max. 80km / h. Duplication of railway between Sayago and Progreso. Bypass in: Santa Lucía, Independencia, Cardal, Florida, Pintado and Sarandí Grande. Reconstruction and improvement of bridges. Signaling and traffic control system. Improve safety in level crossings and with the road network. 35

Project Portfolio Central Railway Project (III) Payment mechanism: Availability Payments (PPD): Subject to service, quality and availability indicators UI / USD, chosen by the contractor. Quarterly, once the infrastructure is available. PPD Advance payments: USD 60 million for the construction stage. Tax regime: Same benefits as PPP projects Uruguay. Fiscal treatment: PPD included in the National Budget throughout the life of the contract. The General Assembly will be informed annually, on the occasion of each Annual Accounts Review, the outstanding amount of liabilities. 36

Thank you! ppp.mef.gub.uy unidad.ppp@mef.gub.uy