New pipeline for infrastructure projects under ppp law and law 5074

Recently, economist Jorge Vergara, head of the Direction of Strategic Projects (DIPE) of the Ministry of Public Works and Communications (MOPC), announced a new pipeline of infrastructure projects to be tendered under the public-private partnership modality, governed by Law No. 5102/13 (PPP Law) and under the turnkey regime, governed by Law 5074/13 and amendments. He also announced expected investments of USD 370 million in PPP projects, and tender works that represent financing of approximately USD 1,140 million in turnkey projects.

It is important to note that under both contracting modalities the private party provides the financing of the project. Nevertheless, there are important distinctions between the two regimes. In contracts under public-private partnership modality, the private party, not only designs and builds the work, but is also in charge of the operation and maintenance of the works performed. Therefore these contracts are long term, and they are generally funded with the project’s cash flow and collateral under the non-recourse Project finance scheme .

In contracts of public works with private financing (Law 5074), the contractor designs and builds the works, but payment by the State is deferred to 10 years approximately after the completion of milestones. Once the works are completed, the State operates and maintains the works. Payment obligations by the State to the contractor are implemented through “Certificates of Recognition of Payment Obligation” (“Certificado de Reconocimiento de Obligación de Pago in Spanish), unconditional and irrevocable payment certificates, that once issued, are independent to the work’s contract, and are backed by sovereign guarantee of the Paraguayan State. These certificates can be assigned by the contractor to third parties prior authorization of the State .

As announced by DIPE’s representative, the bidding package consists of 7 projects that are to be tendered in the period between 2019 and 2021.
Projects to be tendered under the PPP modality:

  • Implementation of a ferry system in the Paraguay River to transfer passengers from the capital to various cities in the metropolitan area. This is a private initiative presented by the company Somarco and is currently being analyzed by the Technical Secretariat for Planning. If the project is approved, its execution would be tendered during commencement of the following year. Estimated investment amount: USD 40 million
  • Duplication of Ruta No. 1 in the section San Lorenzo – Itá – Quiindy, and the improvement of the southern access area until the connection to Ruta No. 1 (110 km). Foreseen to be tendered next year. Estimated investment amount: USD 200 million
  • Duytu5 brplication and improvement of Ruta No. 6 from Encarnación until the cross with Pirapó (65 km). Currently in stage of project development. Estimated investment amount: USD 130 million
  • Projects to be tendered under the turnkey regime:
  • Duplication of the section Falcón – Cerrito and asphalt pavement Ruta No. 12 until General Bruguez (200 km). Foreseen to be tendered between July and August of this year. Estimated investment amount: USD 150 million
  • Second and third stages of the Bioceanic Corridor, that will consist on asphalt pavement the section Cruce Centinela – Mariscal Estigarribia – Pozo Hondo (573 km that are to be divided in two parts). This work is in design stages and the call for tender is foreseen for the year 2021. Estimated investment amount: USD 800 million
  • Asphalt pavement of the section Puerto Indio – Mbaracayú and connection to the superhighway (65 km). Foreseen to be tendered in the second semester of this year. Estimated investment amount: USD 80 million
  • Costanera Sur construction and coastal defense for the city of Pilar. Estimated to be tendered next year. Although to be tendered under the turnkey regime, the government is still analyzing the contracting modality. Estimated investment amount: USD 110 million
  • In the years 2017 and 2018 BKM|Berkemeyer has assisted the bidders that have been awarded and signed the first contracts under the PPP and turnkey modalities. To date, the firm counsels on financial closure, both in the PPP project of Ruta No. 2 and Ruta No. 7 (of USD 500 million approx.) and the bioceanic corridor (USD 445 million approx.). The contracts are in full execution, an explanation to the Paraguayan State’s decision to betting on tendering the largest infrastructure projects through these contracting regimes.