MIAMI - Public-private partnerships (PPPs) have arrived in Mexico and players at Euromoney's Securitization in Latin American Summit said they will provide fodder for ABS.
PPPs are expected to cover a broad range of infrastructure projects, including hospitals, prisons, and universities. The financing strategy envisioned by Empresas ICA is a case in point, according to Alonso Quintana, director of administration and finance at the construction and engineering behemoth. A year ago, ICA snagged a concession under the PPP scheme - the first of its kind - to make improvements to a 73-kilometer road between two cities in the states Guanajuato and Michoacan, northwest of Mexico City. So far, total investment of slightly over $70 million has been funded with a mix of 80% debt from Banco Santander and 20% equity.
A securitization of the government subsidies to the project will eventually take out the loan. "Once it's up and running, then it will be less risky [for bondholders]," Quintana said. He added that the company is bidding on other PPPs in Mexico, but declined to comment on a rumor that they recently won the bidding for a new project just last week.
Akin to the U.K. model, Mexican PPPs are focusing on those infrastructure projects that might not be commercially lucrative on their own, and which the government has identified as providing an important public service. While PPPs entail a concession granted by the government, they differ from traditional infrastructure concessions in Mexico in that the flows to the concessionaire come directly from the government and not from fees charged to users.
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