|Carlos Fradique-Méndez||Laura Clara Loaiza|
Colombia's fourth generation of toll-road projects, which the government initially launched in 2013, has started to materialise over the past two years. At the time of writing, 18 projects have been awarded to public-private associations. Approximately 10 of these projects have already reached financial close; the remaining eight are currently negotiating the required financing. The government's investment in these projects is expected to exceed 20 billion Colombian pesos. International and local financing is expected to exceed 30 million dollars.
Although the Colombian government has lent considerable support to these toll-road projects, concessionaires and sponsors have encountered several challenges when looking to obtain enough funding to complete the projects.
Fourth generation infrastructure projects require financing for 20 years or more. This impacts the interest rates that banks will offer and may also affect the liquidity and cash flow of the local banks. Consequently, the parties involved in these projects have had to seek alternatives that will appeal to both the local and international financial institutions that have the capacity to finance these projects. This has also led to the participation of multilateral international institutions and the Financiera Nacional de Desarrollo (FDN).
Additionally, recent market fluctuations have resulted in the devaluation of Latin American currencies, among others, including the Colombian Peso. This has created a foreign exchange risk that will have to be addressed through hedging policies and other risk allocations. The increasing foreign financing element in these projects means that foreign exchange matters and hedging policies are important considerations.
Another key challenge for these fourth generation infrastructure projects will be matching the financing acquired by each concessionaire and the income that they will receive. As currently structured, concessionaires and sponsors expect to receive sufficient income from toll-road revenues and what is known as the vigencias futuras (future income) allocated by the Colombian government.
Notwithstanding the presence of this and other challenges in financing fourth generation infrastructure projects, the Colombian government and all other stakeholders are optimistic about what these toll-road projects will contribute to Colombia's development and growth.
Carlos Fradique-Méndez and Laura Clara Loaiza
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