The Undersecretariat of Public-Private Partnership (the “UPPP”) published on its website an executive summary and the main aspects of the Public-Private Partnership Program (“PPP”) related to “Highways and Safe Roads Network– Stage 1” (the “Project”) and preliminary draft of the bidding terms and conditions (the “Preliminary Bidding Terms”).

This implies the first implementation of PPP under Law No. 27,328 –approved on November 16th, 2016- and it Regulatory Decree No. 118/2017 –issued on February 17th, 2017- which implies an alternative regime to Public Works Act (Law No. 13,064) and Public Works Concession Act (Law No. 17,520).

Public hearings are to be held for informative purposes on January the 8th, 10th and 12th in the City of Buenos Aires, Buenos Aires, Santa Fe and Córdoba. Prior registration is requested and can be done in the UPP´s website.

The Project implies an investment of 6 billion USD and the execution of approximately 3,000 kilometers of national highways.

The tender will result in the awarding of PPP agreement (the “PPP Agreement”) to be executed with the National Directorate of Roads and Highways (“DNV” for its Spanish acronym) for a fifteen year-term.

On December 21st, 2017, a draft of the PPA Agreement (“Preliminary Agreement”) was published on DNV´s website.

Main aspects of the Preliminary Bidding Terms and PPA Agreement

Both the Preliminary Bidding Terms and Preliminary PPA are subject to amendments to reflect suggestions that will arise on the public hearings.

Highways and Safe Roads Network included in the Project

The Project consists on the execution of five (5) Highways and Safe Roads (the “Highways”):

  • “A” NATIONAL HIGHWAY: includes parts of National Routes No 3 and 226 (706 kilometers)
  • “B” NATIONAL HIGHWAY: includes parts of National Route No 5 (538,65 kilometers).
  • “C” NATIONAL HIGHWAY: includes parts of National Routes No 7 and 33 (875,92 kilometers)
  • “E” NATIONAL HIGHWAY: includes parts of National Routes No 9, 193, 34, A012, A008 and 11 (389,41 kilometers)
  • “F” NATIONAL HIGHWAY: includes parts of National Routes No 9 and 33 (634,99 kilometers)
  • “SOUTH” NATIONAL HIGHWAY: includes parts of National Routes Riccheri Highway, Ezeiza-Cañuelas Highway, No. 205 and 3 (298,63 kilometers)


The awarding includes:

  • The design, construction, rehabilitation and improvement of the Highways (the “Main Works“) and
  • Its operation and maintenance (the “Main Services”)

The compensation for the execution of each work will be divided in order to mitigate the construction, rehabilitation and improvement risk of the Main Works.

The Preliminary Bidding Terms include the possibility to execute additional mandatory works –in terms of section 9, 1) of Law No. 27,328- (the “Additional Mandatory Works”) and additional voluntary works (“Additional Voluntary Works” together with the Additional Mandatory Works, the “PPP Contracting Party´s Works”).

Main aspects of the Preliminary Bidding Terms

  • Prequalification requirements – Strategic Partner
    Each bidder will be required to meet certain specific technical prequalification requirements, including submission of proof of having experience in the construction of road projects and/or operation of road concessions or other PPP infrastructure projects.

    Furthermore, each bidder must designate a strategic shareholder (“Strategic Partner”), which will be required to meet certain minimum solvency prequalification requirements and to maintain a minimum level of shareholding in the PPP Contractor of 30% until at least (i) 20% of the PPP Agreements has been executed or (ii) 20% of the committed investment has been made.

  • Tender process
    The PPA Agreement awarding will be subject to a multiple-stage tender process. The Ministry of Transport will call for the Tender and it will conducted with the UPPP.

    Laws No. 13,064, 17,520, its amendments and Decree No. 1023/01, its amendments will not apply to the Tender.

  • Limitations to the awarding: each bidder can only be awarded with a maximum of two (2) Highways.
  • National Component: bid submission will imply a commitment to execute the PPP Contracting Party’s Works with, at least, thirty three per cent (33%) of national component.
  • Bonds: each bidder will be required to submit a Bid Bond and, on the date of execution of the PPP Agreement, a Financial Close Bond. If the Bidder is composed by two (2) or more natural persons or legal entities, the Bid Bond shall be issued in name of the Financial Strategic Partner.

    PPP Contractor shall also submit the following bonds: (i) Main Works Performance Bond; (ii) Additional Mandatory Works Performance Bond; and (iii) Main Services Performance Bond (the “Compliance Bonds”).

  • Incorporation of the PPP Contractor:
    – Awarded bidders must incorporate, prior to the execution of the PPP Agreement, the PPP Contractor as a Corporation. Its minimum capital share will be determined by the competent authority. A breach will imply: (i) execution of the Bid Bond and (ii) an awarding of the PPP Agreement to the following bidder in merit list.
    – If one Bidder is awarded with two (2) Highways, a Corporation for each Highway must be incorporated.
  • PPP Agreement:
    – It shall be executed within ten (10) days from the awarding, term that can be extended by the Ministry of Transport.
    – It will have a fifteen-year- term.
    – Financial Close must be achieved within six (6) months from execution. Such deadline can be extended (i) three (3) months, prior to an increase of the Financial Close Bond of fifty basic points (50 bsp); and (ii) six (6) months, prior to an increase of the Financial Close Bond of one hundred basic points (100 bsp).
    – To achieve Financial Close, the PPP Contractor shall be required to submit proof of funds availability for an amount equal to the Main Works specified in the PPP Agreement. This can be through the capitalization of the PPP Contractor or a commitment issued by a financial institution. If financing will be achieved by loans, the entity providing such loans will be required to meet certain minimum credit requirements.
    – The PPP Contractor shall be required to submit proof that its shareholders have made equity contributions for, at least, ten per cent (10%) of the amount of the Main Works (“Equity Contributions”). Such Equity Contributions can be made by instalments, but no later than the date specified therefor in a schedule to be established in the PPP Agreement. If this is option is taken, the shareholders or affiliated entity shall satisfy certain financial solvency requirements.
  • Main Works’ Compensation
    – The Main Works´ Compensation shall consist on the delivery to the PPP Contractor of one or more Investment Payment Tittles (“TPI”, for its acronym in Spanish), after the compliance of works milestones.
    – The PPP Trust shall issue, every three months, one or more TPIs, in US Dollars, which will be unconditional, irrevocable and freely transferable. Each TPI shall provide for twenty (20) semi-annual payments in US Dollars and the interest rate for delayed payments. PPP Contractor can choose between fixed and unconditional TPI or a combination of fixed TBIs and variable and conditional TBIs.
  • Main Services Compensation
    – As compensation for the provision of Main Services, the PPP Contractor shall receive: (i) the incomes obtained from tolls, excess load charges and commercial exploitation of the Highway (“Compensation by Users“), and (ii) the compensation for infrastructure availability (the “Availability Compensation“), through monthly issuance and delivery of Availability Payment Titles (“TPD” for its Spanish acronym) to the PPP Contractor.
    – The TPDs shall be unconditional, irrevocable and freely transferable. The TPDs shall be issued by the PPP Trust, prior discount of applicable penalties. Interest rates for delay payment will be established.
    – Each TPD will provide for a single cash payment in Argentine Pesos, to be made within 15 business days from the date of its issuance
  • PPP Trust:
    – The parties to the PPP trust agreement (“PPP Trust Agreement“) will be the Republic of Argentina, as trustor, a financial entity to be selected, as trustee, and each PPP Contractor, as beneficiary.
    – The PPP Trust will be solely destined to administrate cash flows allocated to make all payments related to the Projects, by the issuance of TPI and TPD at the contracting entity´s request.
    – The PPP Trust will have one or more collection accounts shared by all Projects. Each Project will also have individual accounts waterfall, which will be segregated from the accounts related to other Projects.
    – The PPP Trust shall be funded with (i) amounts corresponding to diesel fuel taxes allocated to the “Sistema Vial Integrado” (“SISVIAL”, for its Spanish acronym); and (ii) the PPP Contractor´s monthly payment to the PPP Trust (“Traffic Contributions”). The National Estate will be required to make one or more contingent contributions each year for the necessary amount to cover funding shortfalls in the PPP Trust.
    – Each PPP Contractor shall execute an adhesion agreement to the PPP Trust, in order to become the beneficiary.
  • Other relevant aspects
    – A specific treatment of certain risks is settled in order to ensure the economical-financial equilibrium along the term of the PPP Agreement. For instance, under some conditions, the PPP Contractor shall request adjustments to the PPP Agreement term or the Availability Compensation.
    – Related to the rate-exchange risk, PPP Contractors may enter into a currency collar agreement with the PPP Trust, which will remain in force during the construction period of the Main Works. The currency collar will establish a ten per cent (10%) band between the US Dollar and the “Unidad de Valor Adquisitivo” (“UVA“), published by Argentinean Central Bank at the time of the awarding.
    – Early termination of the PPP Agreement will not affect payment to be made under any Fixed TPIs or TPDs issued prior to the termination date. In addition, payment of undepreciated investment is established.
    – The PPP Agreement shall provide typical protections for secured creditors, such as step-in rights or cure periods, among others.
    – Regarding dispute resolution mechanism, the PPP Agreement shall provide for an initial stage for technical or financial matters, to be submitted to a technical board. A second stage of arbitration in established, to be settled in the Republic of Argentina or in any other jurisdiction.

This Project provides answers to the strong expectations that have been in place regarding the sanction of PPP´s Act, introducing a favorable opportunity for the development of new infrastructure under this new regime that presents specific modulations, different from traditional mechanisms as Public Works and Public Works Concession.

At TRS&M, we are following these matters with great interest and are available to discuss any query regarding the above.