On March 13, 2020, the National Infrastructure Agency – ANI published the minutes of the general part of the concession contract under the public-private partnership scheme for Fifth Generation (“5G”) projects. In accordance with the ANI announcement, the structuring of these projects was based on past experiences of 4G projects in order to “ build on what is built “. Therefore, it is sought that 5G projects are based on sustainability applied at four levels: institutional, environmental, economic and social.
Likewise, on April 6, 2020, the ANI published the draft specifications for what will be the first 5G project: the New Valle del Cauca Road Network (Corredor Accesos Cali and Palmira), while announcing that The Pasto – Popayán road will also be structured as a 5G.
Below we highlight the main changes introduced by the ANI on the occasion of 5G, as well as the characteristics of the New Malla Vial del Valle del Cauca project.
Key points of the 5G contract minutes
In general terms, the bill maintains the basic characteristics of 4G projects in aspects such as compensation for differences in collection, the system of shared risks in property, environmental and network matters, as well as the need to obtain financial closure of the project.
Now, and even when 5G is not covered by a new public policy document (CONPES), important changes are introduced with respect to the most recent road concessions. Special attention requires the risk in the head of the concessionaire of the expiration of the term without reaching the VPIP, or the one that, in compliance with the provisions of the Infrastructure Law (Law 1682 of 2013), the ANI delivers studies and designs in the feasibility stage, as well as Also provide prior consultations prior to project award.
Below we highlight the main changes introduced in the 5G bill and the draft specifications for the New Valle del Cauca Road Network, with respect to what the market has already known on the occasion of the 4G concessions:
| Economic Structure of the Contract |
- Compensation to the concessionaire is suppressed in the event that the contractual term (29 years) expires without reaching the VPIP.
- Modification of the commercial risk compensation mechanism called “Collection Difference” (DR8, DR13 and DR18) of 4G projects by the so-called Income Support, which would operate annually [1] </ sup> . </ span >
- Modification in the percentage assigned to the ANI of the income from commercial exploitation of the project, which goes from 2.5% to 50%.
- For purposes of calculating the remuneration, the participation percentages of the functional units vary throughout the project.
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| Operational Aspects |
- Inclusion of the Property Acquisition Plans, Environmental Procedures and Networks, in which the concessionaire must make a description of the procedures, mechanisms and the schedule for filing the studies, documents and requests to comply with its obligations .
- The concessionaire is allowed to have several work contractors (EPC), maximum one for each Functional Unit.
- Unless the financial closing is obtained with multilateral banks, the concessionaire must implement a project to reduce greenhouse gases.
- Delivery of equipment to the Highway Police is replaced by contributions of money in a new sub-account of the autonomous patrimony.
- Inclusion of mechanisms to prove the completion of the interventions without having 100% ownership of the properties. This is done through the application of the property compliance index and terms 12 and 24 months from the receipt of the interventions to issue all the purchase offers (or start of the administrative or judicial procedures that apply) and have the ownership of the properties, respectively.
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| Financial Aspects |
- It is expected that the project may have one or more financial closings.
- In case you opt for a financial close through dIn a credit agreement, this will be credited with the statement of the lenders to grant the credit ( paper financial closing ) and there will be a period of 9 months to present the signed credit agreement. </ span>
- Inclusion of new subaccounts in the ANI accounts and autonomous heritage project, such as the Climate Change, Highway Police or Social Works accounts.
- Inclusion of new categories / characteristics of Lenders. The possibility of going to natural or legal persons holding titles is suppressed, while financing is regulated through foreign institutional investors and those controlled abroad by financial entities.
- The costs for the tax on financial movements (GMF) that are generated in the accounts of the autonomous equity must be fully assumed by the concessionaire.
- The concessionaire must keep in its accounting the duly supported income and expenses of each functional unit. Likewise, the powers of verification and inspection of the ANI and the audit are extended to the Autonomous Patrimony – Debt, if it exists.
- The remnants and returns of the project account subaccounts (Socio-environmental Compensation, Premises, Networks and Highway Police subaccounts) will be from the ANI.
- Adjustments are made to the definition of the ARh variable contained in the contract settlement formulas. The commissions related to financing that can be recognized are limited to those of availability and structuring, to which it is added that it is expressly provided that all expenses that can be recognized must have been incurred to satisfy the public interest, be associated with the object of the contract, correspond to market prices and derive from services actually provided.
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| Forces Majeure |
- Inclusion of force majeure for the passage of more than 150% additional of the maximum time established by the applicable law for procedures before any state authority.
- Inclusion of additional scenarios for property force majeure events, related to processes of expropriation, adjudication of vacant land, extinction of ownership and assignment of public use properties.
- Limitation of force majeure by networks to those that could not be identified by the concessionaire, for reasons that are not attributable to it.
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| Risks |
- Limitation of the commercial risk due to the avoidance of tolls to the ANI, to the legitimate use of new public roads that were not considered during the structuring stage.
- Inclusion of funding by the concessionaire of the Audit and Coordination Sub-account (formerly contractual support) from the Preoperative Stage and in any event that extends the term of the Construction Phase. </ li >
- Prior to the opening of the selection process, the ANI must have concluded the prior consultation process with the respective community until its formalization. The responsibility and costs derived from prior consultations with communities that are recognized after said opening, will be assumed by the concessionaire.
- ANI delivers studies and designs at the feasibility stage to the concessionaire. In the event that due to adjustments by the Concessionaire, interventions outside the corridor’s strips of land are foreseen, the latter will assume all the risks associated with the studies and designs of that portion of the road.
- ANI will be the owner of both the cost overruns and the savings derived from changes in technical specifications and the implementation of electronic tolls.
- Express mention is made of the scenarios of absolute nullity of the contract (art. 20, L. 1778/18) and unilateral assignment due to supervening disability (art. 6, L. 2014/20). </ span >
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We trust that this information will be useful. If you have questions or require more details, do not hesitate to contact us. At Gómez-Pinzón we have an expert team in advising national and international companies in public tenders, selection processes, administrative law and infrastructure.
