SAN JUAN — Puerto Rico by the end of the year may select winning bidders to operate and maintain the airport in San Juan and three different toll roads on the island.
Officials anticipate releasing, in the second quarter of this year, preliminary requests for bids on the Luis Muñoz Marin International Airport in San Juan, the busiest airport in the Caribbean, and Route 22, the commonwealth’s main east-west toll road that runs through the northern section of the island.
Of the island’s three toll roads, Route 22 brings in the most toll revenue.
After pre-qualifying potential investors, Puerto Rico’s Public-Private Partnership Authority in June or July plans to create a short list of eligible bidders that will be allowed to respond to a final request for proposals, said PPPA executive director David Alvarez. Officials anticipate selecting winning bids by the end of 2010.
“In the fourth quarter, we expect to have completed information sessions with private sector [partners] that are interested in the projects and start negotiations and closing of the projects,” Alvarez told bankers, municipal investors, and market participants at the 2010 Puerto Rico Credit Conference in San Juan on Friday.
The San Juan Airport and Route 22 are two key P3 opportunities for the commonwealth. Other projects include concession agreements on Route 66, the island’s only eastern corridor, and Route 52, a north-south roadway that connects San Juan to Ponce.
Non-transportation projects include private investment to convert energy plants for natural gas use and updating water meter systems to enhance collections.
The government first will use potential concession agreement proceeds to pay down any existing bonds associated with the entities, as is required under bond agreements.
“We are concentrating in complying with bondholder rights and all the requirements that we have in the bond indentures,” Alvarez said in an interview after his presentation. “We’ll do that first and then the next step will be paying off any central government debt, if necessary, or we can do investments in our assets.”
The San Juan airport has about $50 million of outstanding debt, Alvarez said. The Puerto Rico Highways and Transportation Authority, which oversees Routes 22, 66, and 52, has approximately $7 billion of total outstanding debt. Officials are currently working on determining which prior bonds helped finance the three toll roads and how much debt would need to be defeased on each roadway.
After bondholders have been made whole, officials are seeking to use any remaining funds to help pay down central government debt and-or finance needed capital projects. That plan could change as the island’s P3 legislation, which offers a blueprint for such agreements, does not stipulate that excess P3 proceeds must repay central government debt or support infrastructure needs and not flow into Puerto Rico’s general fund.
“There is that possibility,” Alvarez said. “Of course, we would like to put it into infrastructure assets or we put it into productive activity into the economy.”
By law, concession agreements can extend for up to 50 years, with an option to renew for another 25 years with legislative approval.
To help the private sector generate needed capital or to augment private funding, the commonwealth has three potential financing opportunities: private-activity bonds, loans and loan guarantees through the federal Transportation Infrastructure Finance and Innovation Act, and Puerto Rico’s own capital market. Alvarez and his team planned to file their TIFIA requests to the Federal Highway Administration Monday.
“Actually for P3s right now it is very common to have a financing structure that is composed of PABs, and TIFIA, and then the bank financing,” Alvarez said. “We actually have a more robust structure — we can offer PABs, we can offer TIFIA, if granted, and we can actually offer up access to the local capital markets.”
In addition, the Government Development Bank for Puerto Rico, the government’s financing arm, is another potential funding source. Alvarez said the PPA will be requesting financing assistance from the GDB for some P3 projects.
Gov. Luis Fortuño took office in January 2009 and pledged to create more public-private opportunities in Puerto Rico to help foster more private investment in infrastructure and create jobs to help combat a 15% unemployment rate. The Public-Private Partnership Authority is considering P3s for both existing structures and yet-to-be-developed infrastructure, known as greenfields.
In looking at the San Juan airport, officials said a concession agreement could expand the facility and increase enplanements, which totaled 4.27 million in 2009. The airport has an active cargo business as well, receiving 222.9 million of cargo tons in 2009, according to Alvarez’s presentation.
Proponents also say entering Route 22 or other roadways into a concession contact could expand roadway capacity and improve road conditions.
