IIRSA Northern Amazon Hub

Active

On June 17 2005, Concesionaria Eje Vial Norte signed a 25 year concession to rehabilitate and expand the Northern Amazon Hub which included 955 kilometers of roads and served as an integration corridor between the Pacific Ocean and the Peruvian Amazon. It included the following roads: (a) Yurimaguas- Tarapoto with 127.20 Km, (b) Tarapoto-Rioja with 133,00 Km., (c) Roja-Corral Quemado with 274,00 Km., (d) Corral Quemado-Olmos with 196,20 Km; (e ) Olmos-Piura with 168,90 Km.; and (f) Piura-Paita with 55.80 Km. The Northern Amazon Hub (tramos viales del eje multimodal Amazonas Norte) was part of the South America infrastructure integration initiative (IIRSA). ProInversion, Peru's Investment Promotion Agency under the Ministry of Economics and Finance, carried out the public tender for the project contract. Two bids were submitted in May of 2005, and ProInversion awarded the contract to the consortium of Concesionaria Eje Vial Norte which requested bidding the lowest present value amount of PAO and PAMO payments (at a 10% discount rate). The Concesionaria Eje Vial Norte consortium was formed by Grana y Montero SA and the Brazilians Odebrecht SA and Construtora Andrade Gutierrez. Under the contract, there were two types of payments that the concessionaire received from the government: 15 annual payments for construction (PAO - Pagos Anuales por Obras) and 25 annual payments for maintenance and operation (PAMO - Pagos Anuales por Mantenimiento y Operacion). Expected toll revenues were subtracted from the government payments. The values of the annual payments were stated in the economic offer and contract as US$29,450,963 for PAO and US$15,290,534 for PAMO. The contract stated that this amount could change depending on the cost of construction materials, and upon approval from OSITRAN, the Peruvian public road regulator. Under the concession contract, the concessionaire committed to the following works: Preparatory Works (180 days) included maintenance of unpaved road between Tarapoto and Yurimaguas making possible to drive in 3.5 hours. First phase (2 years) included the construction of 114 km road between vías Yurimaguas and Tarapoto; and rehabilitation and improvement of the stretches of Olmos to Piura (169km) and Piura to Paita (56km). Second phase (2 years) included (a) rehabilitation and improvement of streches from Tarapoto to Rioja (133km) and from Naranjitos to Corontochaca, (b) reinforcement of Bolivia and Cumbaza bridges, (c) construction of Ponazapa Bridge. The estimate cost of the project was US$205 million which was to be invested in the first four years of the concession. The concession became effective in April 2006 and the assets were transferred to the concessionaire after the concessionaire secured short term financing for the project. The financing consisted of a US$60 million short term credit from the Andean Development Corporation (CAF) whose payment were guaranteed by the Peruvian government and a US$60 million partial credit guarantee from the Inter-American Development Bank (IADB) to cover the government annual payments for construction. The concession contract was amended in July 2006 to facilitate long term financing for the project by establishing that based on the certification of works progress issued by the regulator, the granting government would issue in favor of the concessionaire certificates acknowledging the annual payments accrued. The long term financing included primarily proceeds from a series of bond offerings. The bond offerings were to be securitized by future PAO obligations of the Government of Peru. Concessionaire IIRSA Norte hired Astris Finance as the financial advisor to structure the bond offering. Astris announced that the financing was set to be structured as a securitization of the capital payments through a bankruptcy remote issuer, and raised in the US private placement market. financial closure 2006 Vicente Campodónico Delgado 5357+9 612-1200 x1291 vcampodonico@proinversion.gob.pe 2006: To guarantee financial conditions, the Government of Peru obtained a US$60 million guarantee from from CAF and a US$60 million partial credit guarantee from IADB to cover the annual payments for construction.