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Lenders explore more financing options for Colombia’s 4G program

May 10, 2017

Banks advocate for the government to lift the limits on dollar-denominated loans or for development bank FDN to provide loans in Colombian pesos

Mick Bowen

Keywords: loans infrastructure project finance toll road concessions 4G BBVA ING ANI FDN

International banks are considering alternatives to press ahead with financing plans for the 4G toll road concessions program in Colombia, which has stalled in the wake of the Odebrecht bribery scandal.

According to Angel Arevalo, the global head of project finance at Spanish bank BBVA, lenders will likely finish financing the second round of 4G projects with loans in local currency but they could face constraints for later rounds, including a growing number of unsolicited proposals.

To avoid a possible logjam, Arevalo suggests the government increase the amount allowed for dollar-denominated financing to roughly 40%.

The government will have to fine-tune the concession agreements to address the increased foreign exchange risk and the overall risk allocation for the unsolicited proposals. But with limited financing for infrastructure projects in Colombia's capital markets and with local banks reluctant to allocate more money for 4G projects, a larger dollar portion could ensure all the roads get funding, he said.

"They need dollars to bring more money to the system," he told LatinFinance.

But rather than lift the limit on dollar-denominated financing, Colombia's national development bank FDN has said it could lend Colombian pesos for international lenders to provide local currency financing.

Such onlending agreements will limit the concessionaires' exposure to foreign exchange risk and also help develop the market for funding in pesos, according to Willem Sutherland, the head of infrastructure finance in the Americas for the Dutch bank ING.

"One solution is to help foreign banks get access to local currency," Sutherland told LatinFinance, "but the local banks won't like it."

Colombia understood that local banks could not handle the 4G program alone and introduced the dollar component when oil prices were higher than they are today, he said, but now that oil prices stand below $50 per barrel, taking the foreign exchange risk for 4G financing could prove costly for the government.

"It would be tough to go to 40%, but the government will do anything to make sure the projects are financed," he said.

ING is part of the international banking group for the Pacifico 2 toll road concession, alongside Itau BBA, Banco de Crédito del Peru (BCP), Santander and Canadian pension plan Caisse de depot et placement du Quebec (CDPQ). The concessionaire La Pintada, which also counts on Davivienda and Banco de Bogota for local currency financing, is tying up a bridge loan to carry on with construction on the 96.5km road.

BBVA is structuring COP1.75tn ($593m) in financing for Ruta del Cacao, a concessionaire led by Spanish developer Cintra, for the Bucaramanga-Barrancabermeja-Yondo toll road, split between an 18-year tranche in inflation-linked UVRs and a 14-year tranche in pesos.

Other foreign banks involved in financing 4G projects include Banco Sabadell and Santander from Spain, BNP Paribas, Natixis and Societe Generale from France, Intesa Sanpaolo from Italy and US lender JPMorgan.

Private investments in the 4G program are expected to reach COP5.5tn in 2017, according to the national infrastructure agency ANI.



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