ProInversión touts transportation, education and sanitation projects worth US$2.8bn

The strength of its economy, foreign exchange stability and low levels of inflation, among other reasons, position Peru as an attractive destination for investors from different parts of the world.

A key factor to recover growth, economic and social development, especially in a situation that has impacted the world economy, is the promotion of responsible private investment committed to guaranteeing the provision of quality public services.

In this sense, private investment promotion agency ProInversión actively pushes for the development of infrastructure projects and public services. One of the goals for 2021 is to declare eight (8) projects under the co-financed private initiatives (IPC for its Spanish acronym) scheme.

Among the IPCs that ProInversión has that will be declared of interest this year are attractive projects in the transportation, education and sanitation sectors, which will represent investments in the order of US$2.8bn (not including VAT).

BELTWAY

With the firm purpose of reducing traffic congestion between Lima and Callao by improving the country's logistics competitiveness, ProInversión is structuring the AVP beltway project. It is a 34.8km long highway that will connect Callao province, where Peru's main port and airport are located, with 11 districts in Metropolitan Lima.

The beltway will allow access to national highways whose origin or destination is Lima, and will be integrated with the local road network, so as to improve traffic in Metropolitan Lima. In addition, it will include the construction of parallel and/or alternate roads for free use.

The road project will have security and monitoring in all sections through an intelligent transport system and will benefit more than 4.5 million inhabitants, greatly reducing travel time.

With this improvement in the transportation infrastructure, the connectivity, productivity and competitiveness of Lima and Callao will increase, strengthening itself as a connection center for South America. This project that requires an investment of close to US$2bn (without VAT) will be concessioned for 30 years.

It is estimated that the declaration of interest of this IPC will be approved during the second quarter of this year; therefore, after its publication, companies that wish to compete for this project will have a period of 90 days to submit expressions of interest. If expressions of interest are received from interested third parties, a selection process will begin in order to award the project in the first quarter of 2022.

EDUCATIONAL PROJECT WITH HIGH SOCIAL IMPACT

This year, ProInversión also plans to publish the declaration of interest of five (5) IPCs in the education sector with high social impact in Lima and central Peru. It should be noted that these projects do not include educational management or pedagogical services, as these will continue to be in charge of the State.

Among the educational projects, the project called high performance schools (COAR) stands out, which consists of the design, financing, construction, equipping and maintenance of the educational infrastructure of three COARs located in the departments of Pasco, Huancavelica and Cusco; as well as the provision of complementary food, cleaning, laundry and security services in order to create the right conditions so that annually 900 students with outstanding abilities can develop their academic and personal potential.

The project is in the structuring phase and requires an investment of approximately US$66mn (excluding VAT). The publication of the declaration of interest is expected for the first quarter of 2021.

The development of the Metropolitan Lima Schools at Risk IPC (CER) includes the intervention of 13 educational institutions considered at risk, located in the districts of Villa El Salvador (9 institutions) and San Juan de Miraflores (4) through the total replacement of the existing infrastructure, the provision of furniture and equipment, the maintenance of said infrastructure and the provision of complementary cleaning, surveillance and topic services.

The project, which is currently in the structuring phase, requires an investment of approximately US$227mn (excluding VAT) and the declaration of interest is expected for the second half of 2021.

In parallel, three other educational CPIs are completing the formulation stage. This is the IPC Schools at Risk (CER) in Ate and San Juan de Lurigancho (Lima), which includes the intervention of 14 educational institutions considered at risk; the IPC Schools at Risk (CER) in Comas and San Martín de Porres (Lima), which includes the intervention of 9 educational institutions; and the IPC Schools at Risk (CER) in Villa María del Triunfo (Lima), which consists of the intervention of 5 educational institutions.

Each of these projects contemplates the partial replacement of the existing infrastructure, the provision of furniture and equipment, the maintenance of said infrastructure, as well as the provision of complementary cleaning, surveillance and topic services. Investments of US$158mn, US$99mn and US$75mn are estimated, respectively, and the declarations of interest are expected to be published during the second half of 2021.

DECENTRALIZED WWTP

The sanitation sector has opted for the PPP mechanism originated by co-financed private initiatives. To date, the project portfolio has 8 projects for wastewater treatment plants (WWTP), of which 7 originated through IPC. In 2021 two projects will be declared of interest: WWTP Huancayo and WWTP Chincha, both in the interior of the country.

The Huancayo WWTP project includes the expansion and improvement of the collection, treatment and disposal services of wastewater from the towns of Huancayo, El Tambo, Chilca, Huayucachi, Huancán, Huacrapuquio and Viques, Province of Huancayo, Department of Junín, with an estimated investment of US$172mn (excluding VAT).

On the other hand, the WWTP Chincha project includes the improvement and expansion of the wastewater treatment service for final disposal and/or reuse in the Province of Chincha, Department of Ica, with an estimated investment of US $78mn (excluding VAT).

In both cases, it covers a concession period of 23 years, and seeks to ensure compliance with service levels that allow the discharge of properly treated water and contribute to the progressive decontamination of the receiving bodies of water. The declaration of interest for these projects is expected to be published in the second quarter of 2021.

WHAT IS AN IPC?

It is a proposal for a Public-Private Partnership (PPP) project that is presented to ProInversión by private companies, as proponents, and requires state co-financing. This is done within the deadlines established in Legislative Decree 1362.

An IPC must be presented considering the intervention needs and budgetary capacity previously defined by i) the National Government through Supreme Decree, ii) Regional and/or Local Governments in their multi-year PPP investment reports and iii) public entities authorized by law express, by means of the corresponding instrument according to the level of government on which they depend.

WHAT ARE THE PHASES OF AN IPC?

An IPC goes through various stages until it is awarded. The process begins with the admission for processing of the proposal, in which ProInversión verifies the minimum requirements, according to Legislative Decree 1362. In addition, it checks that it does not duplicate projects, evaluates and approves the technical and financial capacity of the proponent.

After that, the proposal is sent to the competent entities that own the projects (Ministries, Regional or Local Governments, and others authorized by express law) so that they can issue their opinion of relevance. If there is more than one IPC for the same national project, the competent entity evaluates and prioritizes with previously established parameters.

Next, the Formulation phase is entered, in which the proponent prepares the pre-investment studies and presents them to the formulating unit of the competent entity for evaluation and, if applicable, declares its viability within the framework of the Invest.pe platform.

Once the Declaration of Viability is in place, ProInversión prepares the Evaluation Report (IE) based on the pre-investment studies. The IE requires a favorable opinion from the entity that owns the project and the Ministry of Economy and Finance (MEF). Counting on these previous opinions, ProInversión incorporates the project into the promotion process and publishes the information contained in the Declaration of Viability on its institutional portal.

This step leads to the Structuring phase, which comprises the design of the project as a PPP and includes:

• Economic-financial structuring,
• Remuneration mechanism, if applicable,
• Project risk analysis; Y,
• Design of the initial version of the contract (VIC) and Integrated Evaluation Report.

With the corresponding approvals, the declaration of interest is published, which is a document through which the project proposal presented by IPC is classified as public interest, which encourages the participation of interested third parties.

The declaration of interest is published on the institutional portal of ProInversión and in the Official Gazette El Peruano. Its content includes: summary of the IPC project, prequalification requirements, competence factor, models of letter of expression of interest and letter of guarantee that interested third parties must present, initial version of the contract and technical information of the proposal and its modifications

This phase is key for interested third parties, since once the declaration of interest is published, the project is opened to the market to interested third parties that have 90 calendar days to present their expressions of interest on the project. Your request must be accompanied by the corresponding bond letter and the documentation required by ProInversión in the Declaration of Interest.

If no Expressions of Interest are received from interested third parties, the project is awarded directly to the proponent. If there is one or more interested third parties, the bidding documents are prepared to initiate a selection process, in order to award the project.

The proponent, interested third parties and potential new bidders can participate in the selection process, who will compete, in accordance with what is stipulated in the bidding documents to launch the selection process.

ProInversión awards projects based on the best offer presented, according to the selection criteria and the documentation offered.