Benefits of the Public-Private Partnerships Legislation in Puerto Rico

Transcription

1 Benefits of the Public-Private Partnerships Legislation in Puerto Rico Mr. David Alvarez Executive Director Puerto Rico Public-Private Partnerships Authority

2 Agenda 1. Puerto Rico has adopted PPPs as a new tool to deliver infrastructure investment 2. Puerto Rico has great economic development opportunities with Priority Projects as PPPs

3 Infrastructure investments are essential for our economy: 1. Infrastructure is strongly correlated to economic growth. 2. Infrastructure investment is a highly effective job-creation tool. 3. Infrastructure investment improves competitiveness. Source: Heintz, James, Pollin,, Garrett-Peltier, How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth, Political Economy Research institute, University of Massachusetts, January

4 Infrastructure investment is a significant driver of growth Puerto Rico investment level and GNP 35% 16% 30% % Investment / GDP 11% 25% 20% 4.4% 20.8% 6% 16.0% 15% 10% 5% % Real Growth GNP -2.6% 10.0% 1% -2.5%-4% 0% % Source: Puerto Rico Planning Board. 4

5 Puerto Rico needs to rehabilitate and build updated infrastructure Core Infrastructure*: Situation Transportation Energy Water Systems Public Schools Unfinished toll road network Oil-based electric system and one of the highest cost of electricity in the US In need of more reliable metering and distribution system In need of $1.4 billion of investment to bring up to normal standard * As defined Heintz, James, Pollin,, Garrett-Peltier, How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth, Political Economy Research institute, University of Massachusetts, January Source: Puerto Rico Public-Private Partnerships. 5

6 Low credit ratings show the lack of financing capacity for infrastructure investment in Puerto Rico S&P Credit Ratings of Puerto Rico Utilities (as of Jan-2010) AAA AA A BBB+ BBB BBB- BB Junk Bonds Electric & Highways Water & Ports Public PREPA PRHTA PRASA PRPA PBA GDB GBD Central Central Govt. Govt. Power Aut. Aut. Sewer Aut. Aut. Buildings Aut. Source: Government Development Bank. 6

7 INFRASTRUCTURE PPPs are a much needed additional tool to deliver and rehabilitate infrastructure This new tool offers benefits for Government and the Private Sector Government Perspective 1. Retain ownership of public asset 2. Accelerate investment through private capital 3. Benefit from private sector innovation 4. Reduce risks of delivering infrastructure 5. Provide Value for Money to taxpayers Private Sector Perspective 1. Provides an investment opportunity 2. Allows complete management of project risks 3. Fosters technical and financial innovation 4. Projects do not proceed if not feasible 5. Competitive process and transparency 7

8 The Government approved Act No. 29 of June 8, 2009, known as the Public-Private Partnership Act ( Act ). The Act declares as public policy: 1. Favor the establishment of Public-Private Partnerships in order to complete projects that develop and maintain infrastructure, 2. Share the risk of developing, operating and maintaining PPP projects, and 3. Place responsibility on the P.R. Public-Private Partnerships Authority for implementing the public policy on PPPs. Source: Puerto Rico Public-Private Partnership Act. 8

9 PPP AWARD PROCUREMENT Puerto Rico is developing a PPP program from its base Bottom-up development PROJECT SELECTION PROJECT ANALYSIS REGULATIONS DEDICATED TEAM BOARD OF DIRECTORS PPP LEGISLATION PPP PUBLIC POLICY 9

10 States with enacted PPP legislation show higher success rate in PPPs States with approved PPP legislation States without PPP legislation Only 17 states and Puerto Rico have approved legislation OR CO WV MA MS AK Puerto Rico HI 10

11 Private investment infrastructure is widely used in other parts of the world Other countries are surpassing the competitiveness of America with new investments Global PPP Market by Region 35% 30% $61.3 Billion 20% 15% $21.4 Bn $18.4 Bn $12.3 Bn $9.2 Bn EMEA* UK Asia Pacific Americas Source: Kearsarge Global Advisors, Benefits of Private Investment in Infrastructure, October * Europe, the Middle East and Africa. 11

12 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Dec-09 There is equity capital and investor interest in infrastructure Dedicated funds for infrastructure tripled from 2006 and 2008 and investor interest remains strong Private Infrastructure Fund Growth Equity Infrastructure Rebound $ billions ~$60 Bn ~$180 Bn S&P Global Infrastructure Index S&P 500 Index Source: Kearsarge Global Advisors, Benefits of Private Investment in Infrastructure, October 2009 and Bloomberg. 12

13 Agenda 1. Puerto Rico has adopted PPPs as a new tool to deliver infrastructure investment 2. Puerto Rico has great economic development opportunities with Priority Projects as PPPs

14 PPPs PRIORITY PROJECTS IN ALL INFRASTRUCTURE AREAS FOR PUERTO RICO TRANSPORTATION ENERGY WATER AIRPORTS & PORTS SCHOOLS MODERNIZATION TOLL ROADS NATURAL GAS CONVERSIONS AUTOMATIC METERING INTERNATIONAL AIRPORT SCHOOL INFRASTRUCTURE WASTE-TO-ENERGY PLANTS COLLECTIONS SYSTEM PORTS 14

15 # 8 Immediate PPP Projects for Puerto Rico 1 Concession of Luis Muñoz Marín International Airport 2 Concession of PR-22 3 Concession of PR-66 and extension (brownfield + greenfield) 4 Concession of PR-52 (brownfield) 5 Natural gas conversion of up to 4 electric energy plants 6 Natural gas conversion of Costa Sur Plant 7 Water Automatic Metering and Collections System 8 School Modernization Program 15

16 Toll road projects that seek to improve mobility throughout the Island Aguadilla Arecibo PR -22 San Juan PR -66 Fajardo Mayagüez Utuado PR-52 Caguas Adjuntas Humacao Salinas Yabucoa Ponce TOLL PLAZA CONSTRUCTION DESIGN COMPLETED 16

17 Summary 17

18 1. Infrastructure investment is essential for our economy 2. PPPs are a needed tool to facilitate investment and improvement in infrastructure. 3. Equity and investor interest will support investment in infrastructure. 4. Puerto Rico has taken a step forward in PPPs and will focus on 8 priority projects in

19 Benefits of the Public-Private Partnerships Legislation in Puerto Rico Mr. David Alvarez Executive Director Puerto Rico Public-Private Partnerships Authority