2014 Global PPI1 Update - World Bank

KEY FINDINGSHigher PPI. Investment commitments in projects with private participation in the energy, transport, and water and sanitation sectors increased 6% to US$107.5 billion in real terms from 2013 to 2014—the fourth-highest level of investment ever recorded. The US$107.5 billion figure is 9% below the five-year average from 2009 to 2013, and this figure is exceeded only by levels seen in 2010, 2011, and 2012. It is noteworthy that the increase from 2013 was driven largely by activity in Brazil, which claims US$44.2 billion of the total.

Fewer but larger projects. In 2014, 239 projects reached financial close, totaling US$107.5 billion. Al-though the 239 projects were the fewest since 2004, the US$107.5 billion was the fourth highest PPI figure on record. This trend of fewer but larger projects is not new: in 2002, the average project size was US$112 million; in 2007, the average rose to US$244 million; in 2012 it rose to US$291 million. Last year, 2014, marks the highest average project size ever: US$419 million.

Brazil’s investment remains strong, particularly in transport and water. In 2014, Brazil captured US$44.2 billion of the global total (US$107.5 billion), representing a 41% share. Although this is lower than H1 2014 (57%), Brazil’s large stake is a continuation of a recent trend. The country received 24% of global investment in 2013, and 42% in 2012. Brazil’s 59% share of global transport totals—US$32.6

1 Private Participation in Infrastructure (PPI) as defined by the Private Participation in Infrastructure Database http://ppi.worldbank.org/resources/ppi_methodology.aspx.2 “Investment” refers to investment commitments at the time of financial closure or, in the case of brownfield concessions, at the time of contract signing. 3 “Infrastructure” refers to energy, transport, and water projects, excluding oil and gas extraction but including natural gas transmission and distribution.

• Totalinvestment2ininfrastructure3forprojectswithprivateparticipationintheenergy,transport,andwaterandsanita-tionsectorsincreased6%toUS$107.5billionin2014.

• BrazildrovetheincreasewithUS$44.2billionofthetotal.• Fivecountriesaccountedfor73%oftotalinvestmentand

63%ofallprojects.• New2014datashowsthehighest-everaverageprojectsize

ofUS$419million,anincreaseconsistentwithadecade-longtrendtowardlargerprojects.

• Fouroutofsixregionsexperienceddeclininginvestmentlevels.

Datacoverstheperiodfrom1990to2014andreviewsmorethan6,000projectsacross139low-andmiddle-incomecountries,providinginformationonprivateinfrastructureinvestmentinemergingmarkets.

This note is a product of the Public-Private Partnership Group of the World Bank, and the Private Participation in Infrastructure Database (PPI Database), written by Henry Kasper and edited by Alexander N. Jett.

2014 Global PPI1 Update

2014 GLOBAL PPI UPDATE • 2

billion of US$55.3 billion—stands out as the country’s highest transport total ever. Within the water sector, nine water projects totaling US$1.9 billion represented 46% of the US$4.1 billion, a significant portion of investment.

Investment declines in China and India. Chinese investment in 2014 was US$2.5 billion, its lowest level since 2010. In particular, the year-over-year decline is noteworthy as investment plunged 68% from US$7.8 billion in 2013 to US$2.5 billion in 2014. Investment in India reached a nine-year low in 2014, falling to US$6.2 billion.

GLOBAL OVERVIEWIn 2014, investment commitments to private infrastructure projects in developing countries totaled US$107.5 billion. This represents a 6% increase from 2013 (US$101.9 billion). The increase in investment totals is mainly due to Latin America and the Caribbean (LAC), which captured US$69.1 billion—much of which is attributable to Brazil, Colombia, and Peru combined (55% of global total). Following LAC is Europe and Central Asia (ECA) with 13%; East Asia and Pacific (EAP) with 11%; South Asia (SAR) with 6%; Middle East and North Africa (MNA) with 3%; and Sub-Saharan Africa (AFR) with 2% (Figure 1).

Four out of six regions registered falling investment levels in 2014: EAP, ECA, SAR and AFR. In the case of EAP, fewer projects year-over-year (97 to 46) resulted in an overall 24% decline in investment. In China, the average size of each project continues to fall: figures stood at US$277 million in 2011; US$107 million in 2013; and US$72 million in 2014. In ECA, investment declined as the number of projects fell by 22%, from 30 to 23, despite the region’s average project size of US$594 million. Within South Asia, India contin-ues to experience falling investment, and investment in AFR remains more or less at historical levels.

Among all regions, the average investment commitment in 2014 was US$419 million, making it the highest of any previous year. In fact, the only other year with a project size to rival that was in 2010, when each deal averaged US$331 million. Driven by several large scale privatizations in Turkey’s energy sector, Europe and Central Asia had the highest average project size at US$594 million. South Asia had the lowest average project size at US$144 million.

FIGURE 1: TOTAL INVESTMENT IN ENERGY, TRANSPORT, AND WATER BY REGION

EAP ECA LAC MNA SAR AFR

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Source: World Bank and PPIAF, PPI Project Database. *Adjusted by US CPI

# of projects

Number of Projects


COUNTRIES WITH THE HIGHEST INVESTMENTThe five countries with the highest in-vestment in 2014 include (1) Brazil, (2) Turkey, (3) Peru, (4) Colombia, and (5) India. Together, these countries attracted US$78 billion, representing 73% of investment commitments in the develop-ing world in 2014 (Figure 2).

In 2014, private participation in the largest PPI market—Brazil—continued to show strength by attracting US$44.2 billion, or 41% of global infrastructure investment. Of this total, investment was spread across several subsectors. For example, investment in roads reached US$15.9 billion; airports captured US$12.9 billion; rail had US$3.8 billion; and electricity generation received US$9.2 billion. By closing a record number of significant projects throughout the year, Brazil attained its second highest annual invest-ment total—only second to 2012’s US$58.8 billion.

With 17 new projects, Turkey was able to secure the second highest investment volume. Significant govern-ment reform in 2008 continued to influence energy investment in Turkey as three large-scale privatizations took place: the US$4.3 billion Kemerkoy and Yenikoy Thermal Power Plants; the US$1.1 billion Yata-gan Thermal Power Plant; and the US$350 million Catalagzi Thermal Power Plant. In addition, a pair of transport projects—the US$1.1 billion Salipazari Cruise Port and the US$2.9 billion Third Bosporus Bridge and Northern Maramara Highway Project further boosted Turkish investment. In the case of Salipazari, a Turkish-based company took over the Federal Maritime Organization as tourism continues to drive Turkey’s expansion of passenger terminals.

Eleven deals in Peru closed for US$8.1 billion. Although eight of the 11 deals were in energy, the largest project was in transport—the US$5.3 billion Lima Metro Line 2. The 35-year BOT metro line will stretch 35 kilometers and eventually connect Lima with Callao, including the international airport. Line 1 began operation in 2012, and the Peruvian government plans to launch the tender process for Line 3 late 2015. Peru also had one of the largest water deals—the US$715 million Chavimochic III Water Project. Located in the La Libertad region, the 25-year BOT concession is the third phase of a project that will irrigate 111,000 hectares of farmland in hopes of boosting agricultural production and exports.

With 12 projects totaling US$7 billion, Colombia is in the top five countries for investment in the energy, transport, and water and sanitation sectors for 2014. Of the 12 deals, three were in energy and nine were in transport. The top five deals were all road projects, including the largest deal—the US$1.4 billion Autopista

Average Investment Total Investment % Total Investment

Brazil 485 44,154 41

Turkey 735 12,489 12

Peru 677 8,123 8

Colombia 498 6,969 6

India 141 6,244 6

All other countries 240 29,574 27

Total 419 107,535 100

TABLE 1: INVESTMENT IN ENERGY, TRANSPORT, AND WATER IN COUNTRIES WITH THE HIGHEST INVESTMENT

44.2 46.6

29.6

12.517.1

24.6

3.38.1

2.47.0 7.9 6.2

20142013

Brazil Turkey Peru Colombia India All others

US$ Billion

FIGURE 2: TOTAL INVESTMENT IN PPI IN COUNTRIES WITH THE HIGHEST INVESTMENT


Rio Magdalena 2—which is the second phase of a nine-part project called Autopistas de la Prosperidad. The 25-year BOT concession consists of a two-lane highway (150KM) with numerous bridges and tunnels. Once complete, the project will stretch 1,160 kilometers and cost an estimated US$7.5 billion. Within the energy sector, all three deals were BOO greenfield hydro power plants for electricity generation.

India recorded US$6.2 billion in commitments in 2014. Since experiencing record levels of investment in 2010, commitments have fallen each year, including a 76% drop in 2013 from India’s five-year average an-nual investment of US$36.5 billion (2008-2012).

SECTOR OVERVIEWThe largest number of new projects were in energy (157), followed by transport (49), and finally water and sanitation (33). Although the energy sector had the most new projects, the sector with the greatest investment was transport, receiving US$55.3 billion, or 51% of total global investment. The energy sector accounted for US$48.2 billion, or 45%, and the water and sanitation sector had US$4.1billion, which was 4% of total investment committed (Figure 3).

Investment in transport comprised 51% of global PPI with US$55.3 billion, an increase of 43% from 2013. Greater activity resulted from several large-scale projects in Brazil, Colombia, Peru, and Turkey.

Average Investment Commitment

Total Investment Commitment

% of Total% Change from

5-yr Average

(2009–2013)

Transport 1,024 55.3 51 +40%

Energy 228 48.2 45 -36%

Water & Sewage 124 4.1 4 +19%

Total 361 107.5 100 -9%

TABLE 2: TOTAL INVESTMENT COMMITTED BY SECTOR, 2014 (US$ BILLION)

FIGURE 3: INVESTMENT COMMITMENTS IN ENERGY, TRANSPORT, AND WATER

Energy Transport Water and Sewarage

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Roads. As in previous years, roads attracted the most investment with US$28.5 billion in 33 projects, ap-proximately the same number as in 2013. The average road project, however, was much larger at US$863 million. Four out of the top five road projects are in Brazil (the fifth is in Turkey). India had 13 new road deals in 2014.

Airports. Airports captured the second highest investment totals with US$13.2 billion committed in five projects. The largest deal—Rio de Janeiro’s (Galeao) Airport—was a concession that accounted for over US$10 billion. Of this amount, US$8 billion was a payment to the government.

Rail. Three large rail projects closed in Brazil, China, and Peru—one in each country. The largest of the three projects—Lima Metro Line 2—was heavily subsidized by the Government of Peru with a US$3 bil-lion capital grant.

Seaports. Investment in seaports fell year-over-year, receiving only US$3.2 billion in eight projects. The three regions with investments include South Asia, Latin America, and East Asia.

Investment in energy amounted to US$48.2 billion, comprising 45% of global investment in 2014. Of this amount, US$41.3 billion was new investment and US$6.9 billion was capacity expansion.

Natural gas. Although a small amount of the total, US$2.7 billion was committed to natural gas. This is nearly four times the amount committed in 2013. Mexico accounted for most of the increase with three new gas pipelines reaching closure (Los Ramones 1, Sonora and Tamazunchale El Sauz). The increase in natural gas investment in Mexico is part of a larger reform in the sector.

Electricity. At US$45.4 billion and 151 new projects, the electricity subsector continued its decline with 22% lower investment and 30% fewer projects than in 2013. Electricity investment continued to wane and in 2014 was 30% lower than the rolling five-year average of US$60 billion. Generation projects accounted for US$39.9 billion of the total, while distribution and transmission projects accounted for US$3.8 billion and US$1.6 billion, respectively. Within electricity generation, approximately US$22 billion was in renew-ables. Onshore wind and Solar PV were the most common technologies for renewable energy projects.

FIGURE 4: TOTAL INVESTMENT IN TRANSPORT BY REGION


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At US$4.1 billion, investment in the water sector was 8% higher than the five-year moving average of US$3.7 billion. By subsector, three Water Transfer Systems (Aqueducts) in China, Mexico, and Peru (one in each) attracted more investment (US$1.7 billion) than utilities or water treatment plants.4 This is considered unusual.

China had the highest number of water projects with 20 (out of 33), and the country captured US$287 mil-lion of the US$4.1 billion total. Conversely, LAC captured nine out of every 10 dollars invested in the sec-

4 The PPI Database does not capture “captive” treatment plants used exclusively for industrial facilities.

FIGURE 5: TOTAL INVESTMENT IN ENERGY BY REGION


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FIGURE 6: TOTAL INVESTMENT IN WATER BY REGION


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tor. Two massive projects—the El Zapotillo Aqueduct in Mexico (US$987 million) and the Sao Lourenco Water Treatment Plant in Brazil (US$1.1 billion)—comprised more than half of all water investment.

REGIONAL OVERVIEWThe top region by volume and investment totals was LAC (Table 3). Brazil is the driving factor behind this, along with Peru and Colombia.

Latin America and the Caribbean. Latin America and the Caribbean attracted investments amounting to US$69.1 billion, comprising a robust 64% of global investment totals, by far the largest share of any region. Notably, this amount is 53% above the five-year average. LAC has shown a strong upward trend since 2010, when it captured 21% of the global total; in 2011 it grew to 32%; in 2012 it was 51%; and in 2013 it was 47% of global PPI. Overall, there were 110 projects including 72 in energy, 26 in transport and 12 in water. Most new investment was made in Brazil with 51 projects, followed by Chile and Colombia each with 12, and Mexico and Peru each with 11. An additional 13 investments were made in Guatemala (4), Uruguay (4), Honduras (3), Costa Rica (1), and Haiti (1), totaling US$1.5 billion.

Europe and Central Asia. Europe and Central Asia had 23 new investments totaling US$14.3 billion, 19% below its five-year average (2009-2013). ECA’s share of the global total was 13% in 2014—falling from 18% in 2013. Turkey had the most new projects with 17 out of the 23, and it also captured 87% of regional

Country ProjectInvestment

Commitment in US$ Million

Sponsors

Brazil Rio de Janeiro Airport $10,508 Odebrecht SA (31% / Brazil), Changi Airports International Pte Ltd (CAI) (20% / Singapore)

Peru Lima Metro—Line 2 $5,373 ACS Group (Actividades de Construccion y Servicios) (25% / Spain), Ferrovial Group (18% / Spain), Impregilo SpA (18% / Italy)

Brazil Sao Paulo Metro— Orange Line

$3,786 Odebrecht SA (20% / Brazil), Construtora Queiroz Galvao (20% / Brazil), UTC Participacoes S/A (14% / Brazil)

Brazil BR 040–116–381 Toll Road $3,369 Invepar (100% / Brazil)

Brazil BR 060–153–262 Toll Road $3,042 Triunfo Participacoes e Investimentos (100% / Brazil)

LATIN AMERICA AND THE CARIBBEAN (LAC), TOP FIVE DEALS

# of Projects Total Investment % of Total% Change from

5-yr Average (2009–2013)

LAC 110 69.1 64% +53%

ECA 23 14.3 13% -19%

EAP 46 11.5 11% -13%

SAR 40 6.7 6% -81%

MNA 13 3.3 3% +60%

AFR 7 2.6 2% -33%

Total 239 107.5 100% -9%

TABLE 3: INVESTMENT BY REGION, 2014 (US$ BILLION)


investment totals. Romania had four investments and Albania and Kyrgyz Republic each had one. The top infrastructure project was in energy (US$4.7 billion in Turkey), followed by a pair of transport deals totaling US$3.95 billion: Turkey’s third Bosporus Bridge and Northern Maramara Highway and a cruise port in Istanbul, Turkey.

East Asia and Pacific. East Asia and Pacific was the third largest destination for PPI, attracting US$11.5 bil-lion in 46 new projects. EAP’s share of global investment was 11%, which is lower than the 15% achieved in 2013. China received 35 of the 46 projects, and total investment amounted to US$2.5 billion. Following China was Thailand with five projects, and Indonesia, Lao PDR, and Vietnam each with two. Energy led the way with 23 projects; water and sanitation had 20; and transport had three. The five largest transactions comprised 65% of regional investment totals, with Vietnam’s Vinh Tan 1 Coal Plant the largest at US$1.7 billion.

South Asia. In South Asia, 40 new projects reached financial closure. This represents 6% of total invest-ment in infrastructure, below previous years. As shown below, this is due to a high number of relatively



Sponsors

Turkey Kemerkoy and Yenikoy Thermal Power Plants

$4,271 IC Holding (100% / Turkey)

Turkey Third Bosporus Bridge and Northern Maramara Highway Project

$2,900 IC Holding (67% / Turkey), Astaldi SpA (33% / Italy)

Turkey Yatagan Thermal Power Plant $1,090 Elsan (100% / Turkey)

Turkey Istanbul Salipazari Cruise Port $1,052 Dogus Holding (100% / Turkey)

Turkey ACWA Kirikkale Independent Power Project

$1,000 ACWA Power (90% / Saudi Arabia), Samsung Corporation (10% / the Republic of Korea)

EUROPE AND CENTRAL ASIA (ECA), TOP FIVE DEALS



Sponsors

Thailand Gulf TS1 Co Ltd $2,200 Mitsui (30% / Japan), Gulf Group (70% / Thailand)

Vietnam Vinh Tan 1 Coal Plant $1,740 China Southern Power Grid Corporation (55% / China), Vietnam National Coal - Mineral Industries Group (Vina-com) (5% / Vietnam), China Power Investment Corporation (40% / Hong Kong SAR, China)

Indonesia Sarulla Geothermal Project $1,541 Itochu Corporation (25% / Japan), Kyushu Electric Power Corp. (25% / Japan), PT Medco Energi International Tbk (38% / Indonesia), Ormat Turbines Ltd (13% / Israel)

Lao PDR Xe-Pian Xe-Namnoy HPP $1,043 SK Corp. (26%), Ratchaburi Electricity Generating Holding Plc (25% / Thailand)

Lao PDR Nam Ngiep 1 Hydropower Project

$980 Kansai Electric Power (45% / Japan), EGAT (30% / Thailand)

EAST ASIA AND PACIFIC (EAP), TOP FIVE DEALS


small projects in the region. Consistent with historical trends, India had the vast majority of new projects with 36, and Bangladesh had just four. Among these four is the Summit Meghnaghat Power Project—a US$320 million investment that will add 335MW of power near Dhaka to help meet Bangladesh’s chronic power shortages.5 Although Bangladesh’s projects were all concentrated in energy, India’s projects were more broadly distributed with 16 in transport and 14 in energy. None were in water and sanitation.

Middle East and North Africa. MNA rose one position from sixth to fifth; at US$3.3 billion, the region represents less than 3% of global investment. Out of 13 new projects, 11 were in Jordan and the other two were in Morocco. The largest deal by far was Morocco’s US$2.6 billion Safi Independent Power Project. Morocco’s other notable investment was a desalination plant for US$114 million. In Jordan, the largest transaction was for the upgrade of Queen Alia Airport, valued at US$167 million.



Sponsors

India South East UP Power Trans-mission Company Limited

$812 Isolux Corsan (100% / Spain)

India Bharat Mumbai Container Terminals Private Limited

$765 PSA Corp (100% / Singapore)

India Srinagar Sonamarg Tunnelway Limited

$539 Soma Enterprise Ltd (51% / India), Infrastructure Leasing & Financial Services (IL&FS) (49% / India)

India Yedeshi Aurangabad Tollway Private Limited

$525 IRB Infrastructure Developers Ltd (100% / India)

Bangladesh Summit Meghnaghat Power Company Limited

$320 Summit Industrial and Mercantile Corp. (Bangladesh), General Electric (United States)

SOUTH ASIA (SAR), TOP FIVE DEALS

5 Bangladesh Ministry of Finance, Power and Energy Report. Available at http://www.mof.gov.bd/en/budget/11_12/power/power_ energy_en.pdf



Sponsors

Morocco Safi Independent Power Project

$2,600 Mitsui (30% / Japan), SUEZ (35% / France), Nareva Holdings (35% / Morocco)

Jordan Queen Alia International Airport Phase II

$167 Abu Dhabi Investment Company (38% / United Arab Emirates), Joannou & Paraskevaides Ltd (19% / Channel Islands), National Industries Group Holding (24% / Kuwait)

Morocco Agadir Desalination Plant $114 Abengoa (100% / Spain)

Jordan Jordan Solar One PV Power Plant

$70 AMP Solar Group (67% / Canada), Evolution Solar Group (17% / United States), RAI Energy International (13% / United States)

Jordan SunEdison Ma’an Solar Power Project

$66 SunEdison LLC (100% / United States)

MIDDLE EAST AND NORTH AFRICA (MNA), TOP FIVE DEALS


Sub-Saharan Africa. Sub-Saharan Africa ranks sixth, with US$2.6 billion of investment in seven projects, which comprises 2% of global totals. The most notable deal was the Kpone Independent Power Project, a US$900 million greenfield BOO in Ghana. A lack of water and transport projects and a slowdown in South Africa’s renewable energy program (REIPP) likely contributed to the region’s low level of investment. How-ever, as South Africa realized fewer commitments in 2014, emerging countries in the region, such as Ghana, Kenya, and Senegal, offset the figures.

About the Private Participation in Infrastructure Projects Database:

The Private Participation in Infrastructure Projects Database is a joint product of the World Bank’s Public-Private Partnership Group and the Public-Private Infrastructure Advisory Facility (PPIAF). Its purpose is to identify and disseminate information on private participation in infrastructure projects in low- and middle-income countries. The database highlights the contractual arrangements used to attract private in-vestment, the sources and destination of investment flows, and information on the main investors. The site currently provides information on more than 6,000 infrastructure projects dating from 1984 to 2013 and is updated with last year’s data six months after year-end (July 2014). It contains over 30 fields per project record, including country, financial closure year, infrastructure services provided, type of private participa-tion, technology, capacity, project location, contract duration, private sponsors, and development bank support. This project represents the best efforts of a research team to compile publicly available information on those projects, and should not be seen as a fully comprehensive resource. Some projects—particularly those involving local and small-scale operators—tend to be omitted because they are usually not reported by major news sources, databases, government websites, and other sources used by the PPI Projects database staff. For more information, please visit: http://ppi.worldbank.org/.

About the World Bank Group:

The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared pros-perity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these insti-tutions provide financing, advice, and other solutions that enable countries to address the most urgent chal-lenges of development. For more information, please visit: www.worldbank.org, www.miga.org, and ifc.org.

For media queries, please contact Nadine Ghannam: [email protected], +1-202-473-3011.



Sponsors

Ghana Kpone Independent Power Project

$900 Africa Finance Corporation (42% / Nigeria), Sumitomo Corporation (28% / Japan), Macquarie Infrastructure Group (MIG) (8% / Australia), Old Mutual (8% / South Africa)

Kenya Aldwych Lake Turkana Wind Farm

$635 Aldwych International Ltd (51% / United Kingdom), Industrial Development Corporation (25% / South Africa), Others (24% )

Mozambique Ressano Garcia Gas-Fired Plant

$250 Old Mutual (32% / South Africa)

Senegal Senegal Thermal Facility $172 ContourGlobal (100% / United States)

Senegal Tobene IPP $164 Matelec (90% / Lebanon), International Finance Corporation (10%)

SUB-SAHARAN AFRICA (AFR), TOP FIVE DEALS

Documents

2014 Global PPI1 Update - World Bank