PRELIMINARY DRAFT - SUBJECT TO CHANGE November...
Transcript of PRELIMINARY DRAFT - SUBJECT TO CHANGE November...
PRELIMINARY DRAFT - SUBJECT TO CHANGE
November 14, 2017
PUBLIC-PRIVATE PARTNERSHIP PROGRAM
HIGHWAYS AND SAFE ROADS NETWORK
STAGE 1
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PRELIMINARY STRUCTURAL CONSIDERATIONS
This preliminary and non-comprehensive draft sets forth the main structural considerations relating to the
contractual architecture and key features of the public-private partnership ("PPP") program for the projects
comprised in the Republic of Argentina's "Safe Highways and Roads Network – Stage 1" (the "Projects"),
with emphasis on the description of the main aspects of the model PPP contract (the "PPP Contract"). This
document has been prepared jointly by the Ministry of Finance and the Ministry of Transport of the
Republic of Argentina, acting through the Dirección Nacional de Vialidad ("DNV").
This document is not binding and has no legal effect whatsoever. It is subject to change and does not
represent the final position of any governmental authority of the Republic of Argentina.
This document is being simultaneously published in both Spanish and English. The Spanish version will
prevail in case of any inconsistencies.
1. STRUCTURE AND GOALS
(a) Purpose
The purpose of the contractual structure relating to the Projects is to improve the
infrastructure of the Republic of Argentina by promoting the interaction between the public
and private sectors and the use of PPPs as a capital mobilization tool, relying for such
purpose on specific mechanisms or contractual features that promote:
the highest number of bidders, by establishing bidding requirements aimed at
promoting partnership opportunities between national and international companies
to undertake the works efficiently and according to high quality standards; and
multiple sources of financing, by creating appropriate incentives that would allow
each category of funders, both local and international, to offer those products and
services that, based on format, currency, term, risk profile and other features, they
would be best positioned to provide;
(b) Structure
The contractual structure relating to the Projects has been designed on the basis of the most
successful PPP and project financing experiences in the region, and to achieve the following
goals:
splitting the compensation for the investment in the asset from the compensation for
the operation and maintenance of the asset, thus favoring the predictability of those
two separate cash flow sources for financial structuring purposes;
mitigating the funders' risk associated with the construction, rehabilitation and
improvement of the works being auctioned (the "Main Works") by providing for the
issuance, on a quarterly basis and against progress of construction, of freely
transferable certificates to compensate the investment made on the infrastructure
("Títulos de Pagos por Inversión" or "TPIs"). The TPIs will be unconditional (in
those instances discussed in item 6 (Works and Associated Compensation) below)
and freely transferable, and payments thereunder will be irrevocable and commence
on a date certain;
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mitigating the funders' risk associated with traffic by providing for the issuance, at
each bidder's option, of freely transferable certificates to compensate the availability
of the infrastructure ("Títulos de Pagos por Disponibilidad" or "TPDs"). The TPDs
will be issued on a monthly basis, and payments thereunder will be irrevocable. For
certain Projects with solid traffic history where the projected Compensation by Users
(as defined in item 7 (Main Services, Commercial Exploitation and Associated
Compensation) below) is deemed sufficient to cover, in whole or in part, operation
and maintenance expenses, the bidder's option to request availability payments may
be eliminated or made subject to a cap;
creating incentives for the efficient operation of the Project by allowing the PPP
Contractor to retain the Compensation by Users (i.e. the aggregate of traffic
revenues, excess load revenues and commercial exploitation revenues) in full. For
certain Projects with solid traffic history where the projected Compensation by Users
is deemed sufficient to cover, in whole or in part, operation and maintenance
expenses, the PPP Contractor will be required to make a periodic payment to the PPP
Trust for the account of the Contracting Authority (see "Traffic Contribution" in item
7 (Main Services, Commercial Exploitation and Associated Compensation) below);
mitigating the funders' risk associated with the potential discriminatory treatment of
any Project by providing for an adjustment in the PPP Contractor's compensation if
any Project, or any sector of the PPP program to which such Project belongs, is
subject to discriminatory treatment; and
mitigating the funders' risk associated with the early termination of the PPP Contract
for any reason by providing for a termination payment that, among other categories
of compensation, will automatically include an amount equal to the value of those
investments relating to the Main Works the making of which was acknowledged
pursuant to monthly investment progress acts issued by the Granting Authority (each,
a "Investment Progress Act" or "ARAI") but did not result in the issuance of TPIs by
the PPP Trust.
2. BIDDING AND AWARD CRITERIA
(a) Prequalification requirements
Each bidder will be required to meet certain Project-specific minimum technical
prequalification requirements. To satisfy such requirements, each bidder will have
to demonstrate experience in the construction of road projects and/or operation of
road concessions or road PPP projects and/or the construction and/or operation of
other type of PPP infrastructure projects. Any bidder that fails to meet such
requirements directly may still prequalify (i) through other entities that belong to its
economic group and meet such requirements, (ii) through other entities that are
shareholders and, taken as a whole, meet such requirements or (iii) pursuant to other
qualification criteria set forth in the relevant bidding documents.
Each bidder will have to designate a strategic shareholder, which will be required to
meet certain minimum solvency prequalification requirements and to maintain a
minimum level of shareholding in the PPP Contractor to be specified in the relevant
bidding documents for a period ending not earlier than the date on which 20% of the
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original term of the PPP Contract has elapsed or 20% of the required investment has
been made, whichever occurs first.
(b) Economic Proposal and Award
Each prequalified bidder will be required to bid on the following variables as part of
its economic proposal:
o the annual maximum nominal amount of compensation requested in
respect of the construction of the Main Works expressed in Dollars, which
may be subject to a cap; and
o to the extent permitted by the relevant bidding documents, the annual
maximum nominal amount of compensation for the availability of the
infrastructure expressed in Pesos, which may be subject to a cap.
The bidding documents will establish the weighting that each of these two variables
of the economic proposal will have for purposes of the award formula.
The bidder requesting the lowest amount, as determined pursuant to the award
formula, will be selected as the winning bidder for the relevant Project.
These two variables will be used to determine, respectively, the compensation for
the execution of the Main Works (the "Investment Compensation") and, where
applicable, the compensation for the availability of the infrastructure (the
"Availability Compensation") for the relevant Project.
(c) Key documentation
Main Works Schedule. The bidding documents for the relevant Project will include
the Main Works Schedule supplied by DNV, which will contemplate construction
milestones (each, an "Investment Milestone"). Investment Milestones will be used
to determine the potential assessment of penalties for delay in construction ("Delay
Penalties"). The Main Works Schedule will show the work progress curve for the
relevant Project and the proportional individual weight of each portion of the Main
Works to the aggregate of the Main Works.
Preliminary Technical Design. Each bidder will submit a proposal based on the
preliminary technical design and other specifications set forth in the bidding
documents for the relevant Project. Each bidder will be responsible for the
information contained in its proposal.
3. PERFORMANCE BONDS
Each bidder and, upon award of the Project, the relevant special purpose vehicle established by the
winning bidder to enter into the PPP Contract (the "PPP Contractor") will be required to submit the
following bonds (each for an amount to be specified in the relevant bidding documents):
Bid Bond. Together with its proposal, each bidder will be required to provide an on-
demand bond to guarantee compliance with the terms of its proposal, which will be
returned to the relevant bidder upon execution of the PPP Contract.
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Financial Close Bond. On the date of execution of the PPP Contract, the PPP
Contractor will be required to provide an on-demand bond to guarantee its obligation
to achieve financial close by a longstop date, which will be returned to the PPP
Contractor upon financial close having been achieved.
Performance Bonds Relating to Works.
o The PPP Contractor will be required to provide the following performance
bonds to guarantee compliance with its obligation to execute the relevant
works:
either an on-demand bond or a surety bond (the "Main Works
Performance Bond") to guarantee compliance of its obligation to
execute the Main Works; and
should additional works be undertaken by the PPP Contractor
under the PPP Contract (whether voluntarily or mandatorily, as
explained in item 6 (Works and Associated Compensation)
below), either an on-demand bond or a surety bond to guarantee
compliance of its obligation to execute such additional works.
o These performance bonds will be returned to the PPP Contractor upon the
definitive acceptance of the relevant works (i.e. the expiration of a period
of 48 months following provisional acceptance thereof).
Performance Bond Relating to Services. On the date of execution of the PPP
Contract, which will also be the date of commencement of the PPP Contractor's
obligation to provide operation and maintenance services in respect of the Project
(together, the "Main Services"), the PPP Contractor will be required to provide either
an on-demand bond or a surety bond to guarantee such obligation (the "Main
Services Performance Bond"). The Main Services Performance Bond will be
returned to the PPP Contractor upon the liquidation of the PPP Contract.
The consequences associated with the PPP Contractor's decision to provide the Main
Works Performance Bond and the Main Services Performance Bond as on-demand
bonds or as surety bonds are discussed in item 6 (Works and Associated
Compensation) below.
4. FINANCIAL CLOSE AND EQUITY CONTRIBUTIONS
(a) Financial Close
The PPP Contract will provide for an initial deadline of 6 months from the date of
execution of the PPP Contract for the PPP Contractor to achieve financial close.
Such initial deadline will be subject to two consecutive 3-month extension at the
option of the PPP Contractor, each against the increase of the Financial Close Bond
in an amount to be specified in the relevant bidding documents.
To achieve financial close, the PPP Contractor will be required to submit
documentation evidencing availability of funds for an amount equal to the amount
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of the Main Works specified in the PPP Contract. Availability of funds may be
evidenced by commitments from a pre-funded vehicle or by firm commitments from
financial institutions. If the financing is in the form of lending commitments to be
disbursed at a later date (or in any form other than an upfront disbursement of funds
in full or issuance of debt as of financial close), the entity providing such
commitments will be required to meet certain minimum creditworthiness
requirements.
(b) Equity Contributions
The PPP Contractor will be required to demonstrate that its shareholders or affiliates
thereof have made equity contributions for at least 10% of the amount of the Main
Works.
Such equity contributions will be required to be made in installments, and no later
than the date specified therefor in a schedule to be set forth in the PPP Contract.
The PPP Contractor may elect to demonstrate that the required equity contributions
have been made in full on or prior to the date of execution of the PPP Contract.
However, if any required equity contributions are pending as of such date, the
undertaking to make such pending equity contributions will have to be provided by
a shareholder or affiliate thereof that meets certain minimum creditworthiness
requirements.
5. PPP CONTRACT
The parties to the PPP Contract will be (i) the Republic of Argentina, represented by the Ministry
of Transport acting through DNV and (ii) the PPP Contractor. DNV will be the contracting
authority for all purposes under the PPP Contact (the "Contracting Authority"). The term of the
PPP Contract will be 15 years.
6. WORKS AND ASSOCIATED COMPENSATION
(a) Works
Works to be Performed by the PPP Contractor
o Main Works. The PPP Contractor will undertake to execute the Main
Works and will have the right to receive, as consideration for such
undertaking, the Main Works Compensation.
The average construction timeline for completion of the Main
Works will be 4 to 5 years. The PPP Contractor's obligation to
execute the Main Works will commence on the date specified
therefor in the Main Works Schedule, subject to the satisfaction
of certain conditions precedent.
o Additional Mandatory Works. The PPP Contractor may also be required
to perform, if so requested by the Contracting Authority for reasons of
public interest, additional works relating to the Project for an amount of
up to 20% of the amount of the Main Works Compensation. The amount,
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time for completion and compensation of such additional works will be
determined by mutual agreement or, alternatively, by the Technical Board
(as defined in Section 13 (Dispute Resolution) below) but any
compensation determined by the Technical Board will be in all cases
payable against work progress.
o Additional Voluntary Works. The PPP Contractor may also be required to
perform, if so requested by the Contracting Authority for reasons of public
interest, additional works relating to the Project that are in excess of the
20% threshold for mandatory additional works. The amount, time for
completion and compensation of such additional works will be determined
by mutual agreement, and the PPP Contractor will not be obligated to
perform any such additional works absent mutual agreement.
Works to be Performed by the Contracting Authority
o Ongoing Works. DNV is currently executing, directly or through
designated contractors, certain works relating to the Projects, which will
be incorporated into the scope of the PPP Contract upon completion
thereof. The description and scope of the ongoing works will be included
in the bidding documents, and each bidder will be required to make its
own assessment regarding the costs associated with the operation and
maintenance thereof following its taking over by the PPP Contractor. The
Contracting Authority will bear the cost of and the associated risk to such
ongoing works. The PPP Contractor will not receive Main Works
Compensation for the execution of such ongoing works.
o Additional Discretionary Works. The Contracting Authority may, for
reasons of public interest and at its own expense, undertake the execution
of additional works relating to the Project, whether directly or through
designated contractors, and have those incorporated into the scope of the
PPP Contract. The PPP Contractor will not receive any compensation for
the execution of such works but will have the right to be compensated for
any resulting increase in its operation and maintenance costs (as further
discussed in item 9 (Risk Allocation and Economic-Financial
Equilibrium) below).
(b) Investment Periods, Investment Milestones and Investment Progress Acts
At the end of each month, the Contracting Authority will certify the portion of the
Main Works executed during such month by issuing to the PPP Contractor an
Investment Progress Act – ARAI, which will specify the value, in Dollars, of such
Main Works.
At the end of each quarter (an "Investment Period"), the Contracting Authority will
instruct the PPP Trust to issue, and the PPP Trust will issue, one or more TPIs for an
amount equal to the progress of the Main Works during such Investment Period.
Each TPI will be issued within a certain period to be defined following the end of
each Investment Period and pursuant to a format to be attached to the PPP Contract.
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The amount of investment that the Contracting Authority has acknowledged through
the issuance of ARAIs in respect of which no TPI has been issued will be
automatically included in the resulting Unamortized Investment Payment in case of
early termination of the PPP Contract for any reason.
(c) Main Works Compensation
The Main Works Compensation will consist in the delivery to the PPP Contractor,
upon completion of each Investment Period, of one or more TPIs. The TPIs to be
issued in respect of each Investment Period will represent an aggregate amount equal
to the percentage of the Main Works Compensation corresponding to the percentage
of completion of the Main Works during such Investment Period (regardless of
whether the percentage of completion of the Main Works is lesser, equal to or higher
than the expected percentage of completion of the Main Works for such Investment
Period based on the Investment Milestones set forth in the Main Works Schedule).
Each TPI will be issued in Dollars, and will be irrevocable and freely transferable.
Each TPI will provide for 20 semi-annual payments in Dollars (each, an "Investment
Payment"). The Investment Payments for all Projects will become due and payable
on May 15 and November 15 each calendar year (each, an "Investment Payment
Date").
To give predictability to the amount of Investment Payments to be made on each
Investment Payment Date and thus facilitate the structuring of the relevant project
financing, the Investment Payments will be made as follows:
o the Investment Payments will become due and payable on each May 15
during four consecutive calendar years (each, an "Initial Investment
Payment Date");
o the bidding documents will specify, for each Initial Investment Payment
Date, a maximum percentage of TPIs (the "Applicable TPI Percentage") that
would become due and payable on such Initial Investment Payment Date;
o the Applicable TPI Percentage corresponding to each Initial Investment
Payment Date will be determined taking into account (i) the anticipated dates
of issuance of TPIs based on the expected progress of the Main Works
pursuant to the work progress curve set forth in the Main Works Schedule
plus (ii) a 12-month cushion in respect of such anticipated dates;
o the first Investment Payment corresponding to all TPIs issued prior to each
Initial Investment Payment Date will become due and payable on such Initial
Investment Payment Date (and the remaining Investment Payments will
become due and payable on each subsequent Investment Payment Date)
provided that such TPIs do not exceed the Applicable TPI Percentage;
o if the percentage of TPIs issued as of any Initial Investment Payment Date
is higher than the relevant Applicable TPI Percentage, the Investment
Payments corresponding to the TPIs falling outside the Applicable TPI
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Percentage threshold will become due and payable commencing on the next
Initial Investment Payment Date; and
o if the percentage of TPIs issued as of any Initial Investment Payment Date
is lower than the Applicable TPI Percentage, only the Investment Payments
corresponding to the TPIs effectively issued as of such date will become due
and payable (i.e. no Investment Payments will be made in respect of any
portion of the Main Works for which no TPI has been issued, whether or not
such portion of the Main Works was scheduled to be completed by such date
pursuant to the Main Works Schedule).
The TPIs will provide for the payment of delay interest in the event the Investment
Payments are made past their due date.
Each TPI will be issued by the PPP Trust upon instructions of the Contracting
Authority and in accordance with a format to be attached to the PPP Contract. The
PPP Trust will be the obligor in respect of all Investment Payments resulting from
each TPI.
Each TPI may be issued as a global certificate with registered beneficiaries or in the
name of specific beneficiaries. The beneficiary of each TPI will be the PPP
Contractor or one or more beneficiaries designated in writing by the PPP Contractor
prior to its issuance. Both the TPIs and any rights arising therefrom, including the
right to receive Investment Payments, will be freely transferable by the relevant
beneficiary (i.e. no prior consent of the Contracting Authority will be required).
The TPIs will be governed by Argentine law. Any disputes relating to the TPIs or
any rights arising therefrom will be settled as described in Section 12 (Disputes
Resolution) below.
Conditionality of Investment Payments Depending on Type of Performance Bond
The PPP Contractor may irrevocable elect to receive either TPIs that are
unconditional and not subject to any deductions (the "Fixed TPIs") or a combination
of Fixed TPIs and TPIs that are conditional and subject to certain deductions (the
"Variable TPIs"), as further explained below:
o if the PPP Contractor elects to submit the Main Works Performance Bond
and the Main Services Performance Bond as on-demand bonds, the TPIs
for each Investment Period will be Fixed TPIs in respect of 100% of the
Main Works Compensation relating to such Investment Period.
o if the PPP Contractor elects to submit either the Main Works Performance
Bond or the Main Services Performance Bond as a surety bond, the TPIs
for each Investment Period will be:
Fixed TPIs in respect of 85% of the Main Works Compensation
relating to such Investment Period; and
Variable TPIs in respect of 15% of the Main Works Compensation
relating to such Investment Period.
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The Variable TPIs will be subject to deductions as follows:
o if the PPP Contractor submits the Main Services Performance Bond as an
on-demand bond, the Variable TPIs will be subject to deductions only
during the 48-month guaranty period following the provisional acceptance
of the Main Works (the "Main Works Guaranty Period") upon:
the assessment of Delay Penalties or Defects Penalties
(together, the "Penalties"); or
the assessment of a penalty due to early termination of the
PPP Contract for reasons attributable to the PPP
Contractor (the "Termination Penalty");
o if the PPP Contractor submits the Main Services Performance Bond as a
surety bond, the Variable TPIs will be subject to deductions during the
term of the PPP Contract upon:
the assessment of any Penalties;
the assessment of fines as a result of non-compliance with
the quality standards relating to the operation and
maintenance of the Project ("Fines"); or
the assessment of a Termination Penalty; and
o the procedure described in item 8 (Penalties and Fines) below will be
followed prior to making any deductions from any Variable TPI as a result
of the assessment of Penalties or Fines.
7. MAIN SERVICES, COMMERCIAL EXPLOITATION AND ASSOCIATED
COMPENSATION
The PPP Contractor will be obligated to perform the Main Services (i.e. the operation and
maintenance of the Project) and will be entitled to undertake the commercial exploitation of the
Project by leasing the service areas and unutilized expropriated lots and by providing to the public
services other than the Main Services.
(a) Main Services
As compensation for the provision of the Main Services, the PPP Contractor will
receive the Compensation by Users and, to the extent requested as part of its
economic offer, the Availability Compensation.
The PPP Contractor will be initially obligated to provide the Main Services in respect
of the Main Works and the Ongoing Works commencing on the taking over date
(considering that the cost associated with the operation and maintenance of the
Ongoing Works will have to be assessed by each bidder at the time of submitting its
proposal).
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Should additional mandatory, voluntary or discretionary works be subsequently
incorporated into the scope of the PPP Contract, the PPP Contractor will also be
obligated to provide the Main Services in respect thereof but will be duly
compensated for the associated incremental operation and maintenance costs. The
amount, time of payment and form of payment of such compensation will be
determined by mutual agreement between the parties or, absent such agreement, by
the Technical Board.
The PPP Contractor's obligation to perform the Main Services will commence on the
taking over date of the existing infrastructure (Stage 1 of the Safe Highways and
Roads Network is entirely comprised by brownfield projects) and extend throughout
the term of the PPP Contract.
(b) Availability Compensation
Should the relevant bidding documents allow bidders to request Availability
Compensation, such compensation will consist in the delivery to the PPP Contractor,
for each calendar month on which the Main Services have been provided (each, an
"Availability Period"), of one or more TPDs.
Prior to its issuance, the TPIs will be subject to discounts as a result of the assessment
of Fines. Following its issuance, each TPD will be irrevocable, unconditional and
freely transferable.
Each TPD will provide for a single cash payment in Pesos to be made within 15
business days from the date of its issuance (the "Availability Payment").
The amount of the Availability Payment corresponding to each Availability Period
will be equal to one twelfth (1/12) of the maximum nominal annual amount of the
proposed Availability Consideration set forth in the relevant economic proposal
minus the amount of Fines that have accrued and become due and payable during
such Availability Period.
The TPDs will provide for the payment of delay interest if the relevant Availability
Payment is made past its due date.
Each TPD will be issued by the PPP Trust upon instructions of the Contracting
Authority and in accordance with a format to be attached to the PPP Contract. The
PPP Trust will be the obligor in respect of all Availability Payments resulting from
each TPD.
Each TPD may be issued as a global certificate with registered beneficiaries or in the
name of specific beneficiaries. The beneficiary of each TPD will be the PPP
Contractor or one or more beneficiaries designated in writing by the PPP Contractor
prior to its issuance. Both the TPDs and any rights arising therefrom, including the
right to receive Availability Payments, will be freely transferable by the relevant
beneficiary (i.e. no prior consent of the Contracting Authority will be required).
The TPDs will be governed by Argentine law. Any disputes relating to the TPDs or
any rights arising therefrom will be settled as described in Section 12 (Disputes
Resolution) below.
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The procedure for the adjustment of the Availability Compensation will be included
in the relevant bidding documents.
(c) Compensation by Users
The PPP Contractor will be entitled to receive (i) all proceeds from the Project's
paying traffic, (ii) all proceeds from the Project's excess load charges and (iii) all
proceeds arising from the commercial exploitation of the Project (collectively, the
"Compensation by Users").
By letting the PPP Contractor retain the Compensation by Users in full, appropriate
incentives are being put in place for the PPP Contractor to operate and maintain the
Project efficiently and to maximize revenue generation. In those instances where
bidders are permitted to request Availability Compensation, the ability to retain the
Compensation by Users in full would also allow bidders to request lower Availability
Payments.
Without prejudice to the PPP Contractor's right to retain the Compensation by Users
in full, the bidding rules for certain Projects with a solid traffic history may require
the PPP Contractor to make a monthly payment to the PPP Trust (the "Traffic
Contribution"). Such monthly payment will be equal to the product of the tariff
applicable to a specified vehicle category multiplied by a specified number of
vehicles of such category, in each case, as set forth in the bidding documents. The
Traffic Contribution will therefore vary according to periodic actual adjustments of
the tariff.
The bidding documents will include a chart setting forth both the initial tariffs and
for excess load charges and the projected adjustments thereof during the term of the
PPP Contract.
8. PENALTIES AND FINES
(a) Main Works Performance Bond and Main Services Performance Bond as On-Demand
Bonds
In the event that both the Main Works Performance Bond and the Main Services
Performance Bond submitted by the PPP Contractor are on-demand bonds, should the PPP
Contractor be assessed any Penalties (during the Main Works Guaranty Period) or any
Fines (at any time during the term of the PPP Contract) that are being challenged pursuant
to the dispute resolution procedure specified in item 13 (Dispute Resolution) below, then:
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the PPP Contractor will be required to deposit into an account of the PPP Trust an
amount equal to such Penalties or Fines upon the assessment thereof and such
amount will remain on deposit in such PPP Trust account until such Penalties or
Fines become final, at which time it will be either applied to the payment thereof or
returned to the PPP Contractor;
should the PPP Contractor fail to deposit into an account of the PPP Trust an amount
equal to the amount of such Penalties or Fines upon the assessment thereof:
o the Main Works Performance Bond may be called for the amount of the
relevant Penalties (or the portion thereof that the PPP Contractor failed to
deposit into the PPP Trust) and such amount will remain on deposit in an
account of the PPP Trust until such Fine it becomes final; and
o the Main Services Performance Bond may be called for the amount of the
relevant Fines (or the portion thereof that the PPP Contractor failed to
deposit into the PPP Trust) and such amount will remain on deposit in an
account of the PPP Trust until such Fine it becomes final.
The amount of the relevant Penalties or Fines may in no event be deducted from any
TPI.
If the PPP Contractor is assessed Penalties or Fines that are not challenged pursuant to the
dispute resolution procedure specified in item 13 (Dispute Resolution) below, the PPP
Contractor will be required to deposit into an account of the Contracting Authority an
amount equal to the amount of such Penalties or Fines. Should the PPP Contractor fail to
make such deposit, the Main Works Performance Bond or the Main Services Performance
Bond, as applicable, may be called for such amount.
(b) Main Works Performance Bond and Main Services Performance Bond as On-Demand
Bonds
In the event that both the Main Works Performance Bond and the Main Services
Performance Bond submitted by the PPP Contractor are on-demand bonds, should the PPP
Contractor be assessed any Penalties (during the Main Works Guaranty Period) or any
Fines (at any time during the term of the PPP Contract) that are being challenged pursuant
to the dispute resolution procedure specified in item 13 (Dispute Resolution) below:
the PPP Contractor will be required to deposit into an account of the PPP Trust an
amount equal to the amount of such Penalties or Fines upon the assessment thereof
and such amount will remain on deposit in such PPP Trust account until such
Penalties or Fines become final, at which time it will be either applied to the payment
thereof or returned to the PPP Contractor;
if the PPP Contractor fails to deposit into an account of the PPP Trust an amount
equal to such Penalties or Fines upon the assessment thereof:
o the amount of the relevant Penalties (or the portion thereof that the PPP
Contractor failed to deposit into the PPP Trust) may be deducted from any
pending Investment Payment to be made under a Variable TPI and, if so
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deducted, will remain on deposit in PPP Trust account until such Penalties
become firm; and
o the amount of the relevant Fines (or the portion thereof that the PPP
Contractor failed to deposit into the PPP Trust) may be deducted from any
pending Investment Payment to be made under a Variable TPI and, if so
deducted, will remain on deposit in PPP Trust account until such Fines
becomes firm; and
once the relevant Penalties or Fines become final, the amount thereof will either be
transferred to an account of the Contracting Authority or, should such Penalties or
Fines be revoked, returned to the beneficiary of the relevant Variable TPI.
9. RISK ALLOCATION AND ECONOMIC-FINANCIAL EQUILIBRIUM
(a) Project risks will be clearly allocated between the parties pursuant to a predefined risk
matrix. For instance:
the Contracting Authority will bear the risk of land acquisition in respect of all land
parcels identified in the executive design, including in respect of the declaration of
public interest, the management of the relevant expropriation procedure and the
payment of the corresponding compensation. The Contracting Authority will also
bear the risk of removal of any intruders and occupants up to the taking over date.
After the taking over date, the PPP Contractor will bear the risk of conservation of
the Project;
the PPP Contractor will bear the risk associated with the environmental and social
management of the Project (including the procurement of any relevant licenses and
authorizations from the competent governmental authorities that might be required
pursuant to the final environmental impact assessment). The following risk mitigants
are still being evaluated: (i) the Contracting Authority entering into coordination
agreements with the competent governmental authorities to standardize and
accelerate the procedure for obtaining such licences and permits and (ii) making the
failure by any governmental authority to issue such licence or permit within a certain
period a delay relief event under the PPP Contract that would entitle the PPP
Contractor to suspend the performance of its affected obligations thereunder; and
the PPP Contractor will bear the risk of relocation of networks affected by the
development of the Project up to a cap to be set forth in the relevant bidding
documents. The PPP Contractor will run a competitive private bidding process to
select and appoint subcontractors to undertake the relocation works. Should the cost
of such works exceed the cap set forth in the bidding documents, the Contracting
Authority will compensate the PPP Contractor for such excess, and payment of such
compensation will be made against progress of work. Failure by the Contracting
Authority to make such payment will constitute a delay relief event under the PPP
Contract that would entitle the PPP Contractor to suspend the performance of its
affected obligations thereunder.
(b) The original economic-financial equilibrium of the PPP Contract will be adjusted only in
the event of materialization of risks that affect the original economic-financial equilibrium,
are unforeseeable and are non-attributable to the affected party (and, then, to the extent such
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risks have no specific treatment in the PPP Contract or are not otherwise allocated pursuant
to the risk matrix). The original economic-financial equilibrium will be adjusted by
granting, increasing, removing or reducing, as the case may be, certain economic advantages
to the PPP Contractor. The adjustment of the economic-financial equilibrium will in no
event affect the pending Investment Payments or Availability Payments (except
forAvailability Payments being subject to adjustment in certain specific instances, as further
discussed below).
(c) Certain specific risks to be identified in the PPP Contract will be subject to the following
specific treatment:
Time extension
Certain events to be defined will entitle the PPP Contractor to request an extension
of the time for completion of the Main Works or the provision of Main Services. For
example:
o a Force Majeure Event;
o a breach by the Contracting Authority of its obligation to deliver the land
required for the Project when required or any other events attributable to
the Contracting Authority; and
o a breach by the Contracting Authority of any of its obligations under the
PPP Contract that would entitle the PPP Contractor to suspend its affected
obligations.
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Adjustment of Availability Compensation
Certain events to be defined will entitle the PPP Contractor to request an adjustment
of the Availability Compensation (which, for those Projects that did not initially
provide an Availability Compensation, would result in the PPP Contractor acquiring
the right to receive Availability Payments as compensation for the occurrence of such
event). For instance:
o failure by the Contracting Authority to increase the traffic tariffs or excess
load charges on the date and/or in the amount required under the PPP
Contract (which will potentially contemplate semi-annual increases of
those variables pursuant to a grid to be included in the bidding documents);
o construction of competing roads resulting in a reduction of traffic or excess
load revenues;
o change in law affecting the PPP legal framework that result in higher costs
or lower revenues for the PPP Contractor, in each case, in excess of a
percentage to be determined; and
o the operation and maintenance of mandatory, voluntary or discretionary
additional works.
Currency Risk
o As part of its proposal, each bidder may elect to enter into a currency collar
with the PPP Trust, which will remain in effect during the construction
period. The currency collar will establish a 10% band between the Dollar
and the Unidad de Valor Adquisitivo ("UVA") (which is published by the
Central Bank of Argentina and periodically adjusted by an index prepared
by the INDEC) at the time of award.
o Should the collar option be selected by the bidder, and should a variation
of more than 10% in the Dollar-UVA band occur, the following payments
will be made:
if the variation results from an UVA appreciation and 90% of the
UVA value per reference Dollar ("UVAref") is lower than the UVA
value per Dollar on any date an Investment Payment ("UVAn") is
due and payable, then the PPP Trust will pay the PPP Contractor
an amount equal to:
[UVAref x 90% - UVAn] x applicable Investment Payment
if the variation results from an UVA depreciation and UVAn is
higher than 110% of UVAref, then the PPP Contractor will pay the
PPP Trust an amount equal to:
[UVAn - UVAref x 110%] x applicable Investment Payment
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o Such payments will be separate from any Investment Payments. The
Investment Payments will remain at all times unaffected by exchange rate
variations.
10. PPP TRUST
(a) Description
The parties to the PPP trust agreement ("PPP Trust Agreement") will be the Republic
of Argentina, as settlor, a financial entity to be selected, as trustee, and each PPP
Contractor, as beneficiary.
The PPP Trust will operate as a single trust for the whole Safe Highways and Roads
Network – Stage 1 program. The PPP Trust will be a public trust specifically
established to administrate the cash flows allocated to make all payments relating to
the Projects comprised in such program.
The PPP Trust will have one or more collection accounts shared by all Projects. Each
Project will also have an individual accounts waterfall, which will be segregated
from the accounts relating to other Projects.
The PPP Trust will provide for equal payment dates for all Projects and for pro rata
application of cash flows among all Projects so as to prevent the discriminatory
treatment of any Project.
The term of the PPP Trust will be at least equal to the term of the PPP Contract.
(b) Sources of Funding
The primary sources of funding of the PPP Trust (the "Primary Sources") will be:
o amounts corresponding to taxes on diesel fuel that are allocated to the
Sistema Vial Integrado ("SISVIAL"); and
o the Traffic Contributions.
The PPP Trust may also be receive funding from any other source allocated for such
purpose by the competent governmental authorities from time to time.
(c) Project Reserve Accounts
As part of the PPP Trust, each Project will have its own reserve account (the "Reserve
Account"), which will be exclusively utilized for the making of Investment Payments
in the event no other funds are available within the PPP Trust for the payment
thereof. The Reserve Account may not be used for the making of Availability
Payments.
On or before March 31 of each year, the Reserve Account of each Project will be
funded in an amount, in Dollars, equal to the amount of the Investment Payments
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scheduled to become due and payable in respect of such Project within the next 12
months (the "Reserve Account Required Balance").
The Reserve Account of each Project will be funded as follows:
o initially, on the month immediately prior to the payment date of the first
Investment Payment for such Project; and
o subsequently, on an annual basis and to the extent any deficiency exists,
from the PPP Trust collection account (which will in turn be funded on an
annual basis through the Contingent Contribution (as defined below) to
the extent funds are needed to make such transfers).
(d) Contingent Contribution
Pursuant to the PPP Trust Agreement, the Republic of Argentina will, on an annual
basis, undertake to make one or more contingent cash contributions to the PPP Trust
(collectively, the "Contingent Contribution") in the amount necessary (i) for the
Reserve Account of each Project to be funded at least to its Reserve Account
Required Balance for the relevant calendar year and (ii) for the PPP Trust to have,
based on revenue projections of Primary Sources for such calendar year, the amount
necessary to make all payments relating to each Project scheduled to become due
and payable during such calendar year.
The Contingent Contribution for each calendar year will be included in the national
budget bill for the immediately preceding year. Upon approval of such bill (typically
in December each year), the amount of the Contingent Contribution will be paid to
the PPP Trust within a reasonable period of time but in no event later than March 31
of the calendar year for which it has been calculated.
The PPP Trust Agreement will also provide that, if the amounts on deposit in the
PPP Trust (including the Contingent Contribution) are not sufficient to make the
payments due to in respect of any Project in any calendar year, all necessary action
will be taken in accordance with applicable law to cover any such deficiency.
(e) Accession to the PPP Trust
Each PPP Contractor will accede to the PPP Trust pursuant to an accession
agreement ("PPP Trust Accession Agreement"). Upon execution and delivery of the
PPP Trust Accession Agreement, such PPP Contractor will be deemed to be a
beneficiary of the PPP Trust. The rights of the PPP Contractor under the PPP Trust
Accession Agreement, in its capacity as a beneficiary of the PPP Trust, are freely
assignable to the providers of the financing.
Each PPP Contractor (and each of its assignees) will have, in its capacity as
beneficiary of the PPP Trust, (i) direct recourse against the PPP Trust to demand
compliance with its obligation to make Investment Payments and Availability
Payments relating to the relevant Project and (ii) direct recourse against the Republic
of Argentina to demand compliance with its obligation to make the Contingent
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Contribution to the PPP Trust in the amount and on the date applicable to the relevant
Project.
Each beneficiary of a TPI or a TPD issued by the PPP Trust (whether the PPP
Contractor itself or any other person appointed by the PPP Contractor in such
capacity) will have recourse against the PPP Trust to demand compliance with its
obligation to make the Investment Payments or the Availability Payments, as
applicable, arising from such TPI or TPD.
(f) Limitation in the Incorporation of New Projects to the PPP Trust
The establishment of certain mechanics to limit the number of projects to be incorporated
into the PPP Trust based on projected revenues and payment obligations of the PPP Trust is
under evaluation.
11. TERMINATION PAYMENT
(a) Unamortized Investment Payment
The Unamortized Investment Payment will be equal to (i) the sum of (A) the
investment amount, expressed in Dollars, that has been recognized through ARAIs
but in respect of which no TPI has been issued and (B) the investment amount,
expressed in Pesos, corresponding to works that have been executed but not yet
recognized through a ARAI as of the termination date minus (ii) certain deductions,
such as the amount of any pending Penalties and Fines and the amount necessary for
any repair works that would be necessary to bring the Project to the level of
maintenance it would have been in had the early termination of the PPP Contract not
occurred.
No deductions from the Unamortized Investment Payment will be made to the extent
that the resulting amount thereof would be lower than the outstanding amount of the
debt (i.e. principal and interest, costs and expenses, fees and swap breakage costs
relating thereto) effectively used to finance the investments made by the PPP
Contractor and that is not scheduled to be repaid through TPIs or TPDs.
(b) Termination Payment
Trigger Events
o The early termination of the PPP Contract for reasons attributable to any
of the parties will result in the obligation of the Contracting Authority to
make a Termination Payment. Termination for reasons of public interest
(as to opportunity, merit and convenience) will be treated as a reason
attributable to the Contracting Authority.
o No Termination Payment will apply in case of early termination for other
reasons, without prejudice to the Unamortized Investment Payment that
would be payable in such cases .
Payment
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o Should the Main Works Performance Bond and the Main Services
Performance Bond be submitted as on-demand bonds, any Termination
Payment that is payable by the PPP Contractor to the Contracting
Authority may be deducted from the Main Works Performance Bond
and/or the Main Services Performance Bond (depending on which of the
two bonds remains in effect as of the termination date).
o Should the Main Works Performance Bond be submitted as a surety bond
and the Main Services Performance Bond be submitted as an on-demand,
or viceversa, any Termination Payment that is payable by the PPP
Contractor to the Contracting Authority will be deducted (i) first, from the
performance bond that was submitted as an on-demand bond (should such
performance bond be in effect as of the termination date) and (ii) then, if
a deficiency exists following the call on such performance bond (or if such
performance bond could not be called upon) from any pending Investment
Payments to be made under any Variable TPIs.
(c) Invariability of Fixed TPIs and TPDs; Variability of Variable TPIs
The early termination of the PPP Contract for any reason will in no event affect the
Investment Payments to be made under any Fixed TPIs issued prior to the
termination date.
Any Termination Payment that is payable by the PPP Contractor to the Contracting
Authority due to the early termination of the PPP Contract for reasons attributable to
the PPP Contractor may be deducted from Variable TPIs as described in item 6(c)
(Main Works Compensation) above. In such event, the resulting Termination
Payment may be deducted (i) from any pending Investment Payments to be made
under any Variable TPIs or (ii) if no such Investment Payments are pending, from
the Main Services Performance Bond that has been submitted as a surety bond.
The early termination of the PPP Contract for any reason will in no event affect the
Availability Payments to be made under any TPDs issued prior to the termination
date.
12. CREDITORS' PROTECTION
The PPP Contract will provide for customary protections for secured creditors under project finance
structures, such as step-in rights, additional remedy periods and creditors' consent for the validity
of certain actions by the PPP Contractor under the PPP Contract.
13. Dispute Resolution
(a) Technical Board
The PPP Contract will provide for an initial stage for dispute resolution in relation
for matters of a technical or financial nature, or related to the interpretation of the
PPP Contract, by a dispute board ("Technical Board").
The Technical Board will follow its own rules of procedure, which will comply with
the PPP regime and be aligned with best international practices.
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(b) Arbitration
The PPP Contract will provide for arbitration to settle (i) any dispute arising in
relation to the termination of the PPP Contract for convenience due to reasons of
public interest, (ii) any dispute that is not of a technical or financial nature or related
to the interpretation of the PPP Contract and (iii) any challenge to a recommendation
issued by the Technical Board.
The members of the arbitration tribunal will be selected, and the arbitration will be
conducted, in accordance with recognized international arbitration rules.
The venue of the arbitration may be located in the Republic of Argentina or in any
other jurisdiction, as specified in the relevant arbitration provisions of the PPP
Contract.
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