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Peruvian Infrastructure Business Opportunities
from a Financial Point of View
XII Reunion Plenaria del Consejo Empresarial Peruano-Japones
Yasuo Takeuchi
Chief Representative - Peru
Sumitomo Mitsui Banking Corporation (SMBC)
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 1
DISCLAIMER AND CONFIDENTIALITY NOTICE
This presentation material (“Presentation”) has been prepared by Sumitomo Mitsui Banking Corporation (“SMBC”) for
informational purposes only and is being furnished by SMBC solely for use by participants.
SMBC makes no representation or warranty as to the accuracy or completeness of any information in the Presentation and
shall have no liability for any representations (expressed or implied) contained in the Presentation or any other written or
oral communications transmitted by SMBC.
Please note that this Presentation is prepared for discussion purposes only and does not constitute, and may not be
construed as, an offer or proposal to provide any financing or services.
The recipient of this Presentation agrees not to divulge or discuss the contents of this Presentation to or with anyone not
within participants, without the prior consent from SMBC. Until agreed otherwise, this Presentation shall remain the
property of, and shall be treated as confidential and proprietary to SMBC.
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Executive Summary
2
Peru has an attractive investment environment as evidenced by rapid GDP growth,
investment grade, high “ease-of-doing-business” rank, and dollar-based financing.
Peru has successfully procured many Public Private Partnership (“PPP”) projects,
created to promote foreign investment in Peru. A PPP can be accessed either
through a government or private initiative, which depends on whether the project is
born in the public or the private sector.
Current administration has the mission to further promote Peruvian infrastructure
investment and to reduce red tape. Mr. Kuczynski, Peru’s new President has
proposed projects for over $79 Bn to be financed by PPPs (~40%) and with public
resources (~60%). Therefore Japanese companies have many opportunities to
invest and export.
SMBC has extensive infrastructure finance experience and an infrastructure team
of professionals that combines outstanding project finance structuring, execution
and syndication expertise with a deep understanding of the region and a local
presence in 5 countries in Latin America, including Peru.
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects?
3
Bankable Project Finance (“PF”) framework with massive infrastructure
demands:
One of the most bankable PF environments in the region, US dollar-based project
revenues enabling international financing.
No merchant/demand risk for co-financed and strategic projects. Rating agencies
digest such projects as Quasi Sovereign Peruvian Risk.
Infrastructure gap of over USD 159 Bn. For 2016-2017, USD 25 Bn projects are
expected to be awarded through PPP.
Strong & sustainable growth with financial soundness:
Achieved 17 consecutive years of positive economic growth in 2015. One of the
lowest inflation rate in the region.
Solid financials with ample international reserves equivalent to 20 months of
import payment.
Source: Central Reserve Bank of Peru (“Memoria 2015”, “Reporte de Inflacion”, June 2016)
IMF (World Economic Outlook Database)
Rating (S&P/Moody’s) BBB+/A3
Nominal GDP (2015) USD 192 Bn
Real GDP Growth 3.3%(2015) 4.0%(2016 F)
GDP per capita USD 6,021
Foreign Reserve (Dec 2015) USD 61 Bn
Public Debt (Dec 2015) USD 42 Bn
Population 31.2 Mil
Inflation Rate (2015) 4.4%
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects? – continued
4
Key driver of bankable PF – Government Certification of Milestone Work
Completion and market acceptance of Government Backed Securities (GBS)
structure:
Peru started using GBS structures since 2000 and has been since financed:
toll roads,
transportations solutions,
airports,
metro lines,
water sanitation, irrigation facilities, and
hospitals.
Projects have been financed through project finance loans, local and international
bond issuances. International bonds have been rated one notch below Peru’s
sovereign rating and hence investment grade on the international scale.
Rating agencies like FitchRatings* appraised the innovation of a strong institutional
framework and successful execution of the Government of Peru (GOP).
The GOP plans to include social projects: Schools for high-academic achievers
(COAR) and prisons to the list of projects with certificates for milestone completion.
* Source: FitchRatings . Structrured Finance Sep. 23rd, 2014
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects? – continued
5
Retribución por Inversiones según Certificado de Avance de Obras (“RPI-
CAO”):
The Retributions for investment according to the certificate of work completion (“RPI-
CAO” have been a successful tool to finance Infrastructure Peruvian PPP projects, on
a milestone basis.
RPI-CAO are the second generation of Certificates from Peru. While the original
(CRPAOs) had a sovereign on balance obligation, RPI-CAO are budgeted annually
per each ministry in charge. The GOP has used other acronyms to certificates from
transportation lately (“CAMPI-PAMPI”). All these certificates have – unconditional
and irrevocable rights of payments from the GOP.
RPI-CAOs are designed to convert project construction and operation risks to
sovereign risk.
RPI-CAO have been historically USD denominated with the exception of Sedapal
(water projects).
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects? – continued
6
RPI-CAO framework (I):
Certificate
(CAO 1)
Certificate
(CAO 2)
Certificate
(CAO 9)
Certificate
(CAO 10)
Commercial
Operation Date
(COD) Fixed
Date under
Concession
Agreement
("CA")
1 Milestone 2 Milestone … 9 Milestone 10 Milestone
OK Regulator
Trial period
(30d)
COD
RPI CAOs
Revenue Payment Stream from the Goverment
Semi annual of payments (For X years, normally 15 years)
Source: SMBC
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects? – continued
7
Financing alternatives for RPI-CAO framework :
Noteholders
Notes Issuer
RPICAOs
Concessionaire Peruvian Trust Goverment of Peru
Ministry in charge of Project Customers
3 7
24
6
8
51
Bond Issuance Project Finance
Source: SMBC
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Why Invest in Peruvian Infrastructure Projects? – continued
8
Solid economic growth and conservative level of government debt & foreign reserves.
Source: IMF World Economic Outlook Database, International
Financial Statistics, Central Reserve Bank of Peru(Graph and Calculation by SMBC)
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
PPP Project Awards through Time
9
Awarded PPPs have been increasing on a long term basis.
PPPs awarded by ProInversion (2006 -2015)
Source: ProInversion (“Peruvian economic oultlook and investment opportunities”, 7 Sep 2015)
(Investment amounts in USD million, VAT included)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
PPP Process
10Source: ProInversion (“Investment Opportunities in Public infrastructure and Public Service”, 22 April 2015)
Peruvian PPP has 2 proposal scheme: by Public and by Private.
Direct Award might be implemented in unsolicited proposal projects.
独立採算型 コファイナンス 独立採算型 コファイナンス
落札決定
随意契約
民間主導プロジェクト
政府主導プロジェクト
落札決定
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 11
Peruvian Financial Market
Peru was ranked 7th in the Americas in 2015 in total amount of Project Finance
loans issued (at USD 1.5bn with 7 deals closed in 2015).
Source: Project Finance International (“League Tables” 2005 – 2015)
215
602
0
800
379
615759
1,083
1,741
3,531
1,501
0
2
4
6
8
10
12
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
No.
of
Deals
US
D M
M
Project Finance Deals in Peru (2005 - 2015)
Amount of Loans Closed No. of Deals Closed
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Infrastructure Business Opportunities
12
Strong pipeline of infrastructure projects to be awarded in the next 5 years.
According to Governmental plan, infrastructure projects to be awarded will be over
USD 48 Bn.
Source: President Kusczinky Government Plan.
Ministry of Economics and ProInversion 2016
Projects with certificates and hence unconditional and irrevocable rights of
payments from the Government to be financed, already announced sum up over
USD 27 Bn.
Payments from the Government for Investment, Operation and Maintenance
(“O&M”) on strategic projects and with projects that hold certificates will continue to
be bid considering US dollar payments.Sub Sector of Projects
Public
Finance
($mm)
Public
Finance
(%)
PPP
($mm)PPP (%) Total ($mm)
Airport 2,000 6% 2,000
Port 1,000 3% 1,000
Railway 8,500 27% 8,500
Road 850 2% 3,800 12% 4,650
Social 22,000 46% 22,000
Water and Sanitation 10,000 21% 10,000
Infrastructure Total 32,850 69% 15,300 49% 48,150
Mining 1,000 3% 1,000
Hidro power generation 15,000 48% 15,000
Gas pipeline and plants 15,000 31% 15,000
Total 47,850 100% 31,300 100% 79,150
MEF - Public Budget for
2016 ($mm)41,340
Public budget has nominally grew in 11% per
year on average the last 10y
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
Infrastructure Business Opportunities – continued
13
Projects with Certificates from the Government (GBS-quasi sovereign risk):
Source: ProInversion, Ministry of Justice, Ministry of Transportation and Communication, SEDAPAL
N. Sector Sub Sector Name of Project
Payments
from Gov.
(USD vs
PEN)
($mm)Awarding
Date
1 Longitudinal de la Sierra Tramo 4 USD 444 4Q 2016
2 Longitudinal de la Sierra Tramo 5 USD 500 TBD
3 Peripheral ring road in Lima USD 2,000 TBD
4 Lima Metro Line 3 USD 5,623 IIQ 2017
5 Lima Metro Line 4 USD 5,000 IVQ 2017
6 Tren Huancayo Huacavelica USD 240 4Q 2016
7 Tren de Cercania (Huacho-Lima-Ica) USD 1,500 TBD
8 Lima Metro Line 1 expansion USD 300 Awarded
9 Tren de la Costa USD 9,322 Under
revision
10 Relocation of prisons (major
penitenciary facilities)USD 760
IV 2017 -
IQ 2018
11 New penitentiary facilities USD 551 IV 2017 -
IQ 2018
12 Improvement and rehabilitation of
existing prisonsUSD 30
IV 2017 -
IQ 2018
13 Irrigation:
$550mmMajes Sihuas II USD 550 Awarded
14 Clean Water:
$600mmObras de Cabecera Lima - Drinking
water LimaPEN & USD 600 4Q 2016
27,420
Water
Expected investment for infrastructure projects with certificates for milestone
completion ($mm)
T
r
a
n
s
p
o
r
t
a
t
i
o
n
Roads:
$2,944mm
Metro
subway:
10,623mm
Rail:
$11,362mm
S
o
c
i
a
l
Prisons:
$1,341mm
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
SMBC’s Presence in the Americas
14
In the Americas, SMBC has closed over 53
Project Finance transactions for a total of
US$3.9 Billion for the year ending on
December 31, 2015.
Growing regional footprint (4 new offices in
past 4 years) and strong knowledge of
emerging markets. SMBC has presence in
LatAm’s most dynamic markets.
Resources also dedicated to very early stage
advisory work for Sponsors as financial
advisor.
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
SMBC – A Globally Recognized Leader in Project Finance
15
Notable achievements in project finance globally:
2015
2014
Best Infrastructure Bank of the Year (Latin Finance Magazine)
Global Project Finance Bank of the Year (Thomson Reuters)
Americas Project Finance Bank of the Year (Euromoney)
2013 Top 3 Global Project Finance Loans (Dealogic)
Top 4 Global MLA (Thomson Reuters)
2012 Global Project Finance Bank of the Year (Thomson Reuters)
Global ECA Coordinator for Oil & Gas (Thomson Reuters)
Global Infrastructure Bank of the Year (Infrastructure Investor)
Top 3 Global MLA (Thomson Reuter)
Top 5 Global MLA (Dealogic)
2011 Global MLA of the Year (Euromoney)
2009 Global Arranger of the Year (Euromoney)
2008 Global Project Finance Bank of the Year (Thomson Reuters)
Recent Latin American Deals
Our awards in the Americas in 2015
- Best Infrastructure Project Finance Bank of the Year (Latin Finance Magazine)
League Table #2 in the Americas as MLA
Top 5 Bookrunner in Latin America for 2015
Deals
of the Year
Latin America
Trafigura as Syndicated Loan of the Year (LatinFinance)
San Juan Wind Farm as Deal of the Year (Trade Finance
Americas)
Beta Lula Central as Deal of the Year (Trade Finance Americas)
Sapura Seadrill as Deal of the Year (Trade Finance Americas)
North America
Freeport LNG Train 3 as Deal of the Year (Trade Finance
Americas)
South Fraser Perimeter as N.A. Refi Deal of the Year (IJGlobal)
Corpus Christi as L.A. LNG Deal of the Year (IJGlobal)
Ongoing
Confidential
Financial Advisor
September 2015
US$350,000,000Senior Secured
Asset-Backed Facility
Trafigura Beheer B.V.
Joint Mandated Lead Arranger & Bookrunner
October 2014
US$280,000,000Senior Secured Facility
Terminal Internacional del Sur S.A.
Financial Advisor & Mandated Lead Arranger
October 2015
US$3,000,000,000Revolving Credit Facility
Grupo Aeroportuario de la Ciudad de Mexico
Lead Manager
January 2016
US$200,000,000Term Loan
Longitudinal de la Sierra -Tramo 2
Mandated Lead Arranger
Ongoing
US$250,000,000Senior Term Loan
Conexion Norte
Structuring Bank, Sole Bookrunner, Mandated Lead Arranger, Hedge Coordinator
Ongoing
Energy Infrastructure
Confidential
Financial Advisor, Joint Bookrunner
November 2016
US$256,000,000Term Loan
MPG La Bufa
Structuring Bank,Bookrunner, Mandated Lead Arranger, Hedge Coordinator, Admin
Agent Deal of
the Year Deal of
the Year Deal of
the Year
US$4,125 MillionTerm Loan Facility
Infrastructure Project (Energy)
Infrastructure Project (Toll Road)
Source: PFI, IJGlobal
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
SMBC’s Presence in Peru
16
Office opened in 2012.
Project Finance:
Leading bank in the region. On the ground relationship with most active
infrastructure players (foreign and local).
Local team with experience financing PPP through RPI-CAO.
Peruvian Corporate:
Providing Corporate, Trade, Structured and Supply Chain Finance to top tier
entities in various important sectors.
Japanese Corporate:
SMBC provided its 1st offshore loan to a Japanese corporate (Jan. 2008) in Peru
and continues supporting Japanese corporates in various areas.
Copyright © 2016 Sumitomo Mitsui Banking Corporation. All Rights Reserved.
SMBC’s Presence in Peru – continued
17
SMBC has relevant
experience leading
landmark transactions
in addition to an
important footprint and
local presence in Peru.
December 2014
US$311 MillionSenior Secured Facility
Puerto Bravo
Mandated Lead Arranger
October 2014
US$280 MillionSenior Secured Facility
Terminal Internacional del Sur S.A.
Financial Advisor & Mandated Lead Arranger
January 2016
US$200 MillionTerm Loan
Longitudinal de la Sierra -Tramo 2
Mandated Lead Arranger
August 2014
US$800 MilionBridge Loan Facility
Gasoducto SurPeruano S.A
Mandated Lead Arranger
July 2013
US$724 MillionSenior Term Loan Facility
BNDES Direct Loans, IDB-A Loan
Empresa deGeneracion Huallaga
Mandated Lead Arranger
June 2014
US$500 MillionSenior Unsecured Term Loan
Facility
Petroleos del Peru S.A.
Mandated Lead Arranger
March 2014
Peru
US$1,500 MillionSenior Unsecured
Credit Facility
Sociedad Minera Cerro Verde S.A.A.
Mandated Lead Arranger
December 2015
Peru
US$366 MillionSenior Secured Term Loan
Joint Bookrunner
In Market
US$4,125 MillionTerm Loan Facility
Confidential
Financial Advisor & Bookrunner
In Market
Infrastructure Project (CAO backed financing)
US$640 MillionCredit Facility
Confidential
Mandated Lead Arranger
In Market
Infrastructure Project (CAO backed financing)
US$350 MillionRevolving Credit Facility
Confidential
Mandated Lead Arranger
January 2014
US$125 MillionBridge Loan
Facility
Inkia Holdings Ltd.
Mandated Lead Arranger
August 2012
US$595 MillionSACE Guaranteed Term Loan Commercial Bank TL Facility
Mandated Lead ArrangerBookrunner, SACE Agent,
Admin Agent
July 2014
US$100 MillionSenior Unsecured Term Loan
Mandated Lead ArrangerDeal of
the Year
Deal ofthe Year
Deal ofthe Year
Infrastructure Project (Energy)
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