Project Spotlight: Colombia's 4G highways spark foreign interest

The Colombia's Pacífico 2 highway recently became the latest project in the country's fourth generation (4G) highway program to receive the backing of foreign financiers.

This month is became known at ING Capital, a subsidiary of Dutch bank ING, and CDPQ Revenue Fixe, a subsidiary of Canadian fund manager CDPQ, would contribute over 100bn pesos (US$34mn) to the ambitious concessions program.

These are not the only foreign entities who have committed funds to the 4G program. Other lenders are Banco de Crédito del Perú (US$50mn), the New York branch of Brazil's Itaú Unibanco (US$50mn) and Spanish banking giant Santander (US$35mn). Meanwhile, on the domestic front, the highway initiative has received 510bn pesos in financing support from Banco de Bogotá and Banco Davivienda.

THE PROJECT

Demanding an investment of 1.3tn pesos, the Pacífico 2 highway project entails works on 97.8km of highways, of which 37km will be a four-lane road while rehabilitation works will take place on 54km of existing road. The works also include a 2.5km tunnel and 46 bridges.

Works are being carried out by Concesión La Pintada, which is made up of local construction firms Odinsa (78.85%) and Construcciones El Condor (21.15%).

Awarded in 2014, it was the first contract to come out of the 4G program.

Back in March, the highway's first stretch was opened, making it the first functional unit of the 4G program to be put in operation.

This section included restoration and improvements on 54km of road between La Pintana and Primavera in Antioquia department. The other section entails the Bolombolo-La Pintada highway, also in Antioquia.

FOREIGN FINANCING

The 4G concessions program entails intervention on a total of 8,170km of highways, with an estimated investment of 43.9tn pesos, according to a 2015 presentation from national infrastructure agency ANI.

The Colombian authorities have recognized the need for financing from abroad and they have taken measures to facilitate the participation of foreign lenders.

The country's financial development institution (FDN) approved a mechanism in May that will allow international banks with no presence in the country to provide peso-denominated financing for the 4G projects.

FDN is also working on new credit structures to facilitate investments from abroad.

When announcing the financing from ING Capital and CDPQ Revenue Fixe for the Pacífico 2 project, transport minister Germán Cardona called it a milestone that showed the "enormous confidence" that international banks have in Colombia and its infrastructure sector.

Three foreign fund managers are also involved in the financing of the 4G program, including US-based BlackRock, and the FDN expects a fourth fund manager to join before the end of this year.

BlackRock said it was eyeing three 4G highways, shortly after announcing in May a US$282mn infrastructure debt fund focused on Colombian highways and infrastructure projects.