Bonds floated to fund Highway 2000 project

By McPherse Thompson, Staff Reporter

Patterson

THE JAMAICAN Government is to float a series of tax-free 30-year infrastructure bonds valued at US$141 million to raise part of the financing for constructing the first phase of Highway 2000, a 230-kilometre toll expressway linking Kingston with Montego Bay.

It is the first time that a 30-year instrument will be offered on the local market and subscription will be opened to all individuals and groups, including pension fund managers.

In making the announcement yesterday, Prime Minister P.J. Patterson also disclosed that the first phase of the project is to be undertaken by Bouygues Travaux of France, a diversified industrial group involved in construction and services, which won the contract over a consortium led by Dragados of Spain.

In an interview with Wednesday Business shortly after yesterday's announcement, Bouygues managing director for Latin America and the Caribbean, Albert Bernardo, said they were expected to start the project by the last quarter of this year. He said that in the construction of the project, Bouygues would be using as much local human and material resources as possible. Mr. Bernardo said the company, after signing the contract, would allow themselves some time to raise the necessary funds, while conducting much of the necessary technical and design work at their headquarters in Paris.

The first phase of the project will see the construction of 74 kilometres of a minimum four-lane expressway from Kingston to Williamsfield in Manchester, a new six-lane bridge leading from Kingston to Portmore, and improvements to a number of access roads including the Dyke Road in Portmore.

In announcing the preferred bidder during a press conference at Jamaica House, Mr. Patterson said the total cost of the first phase will be US$390 million, of which the concessionaire will finance US$283 million or about 72.5 per cent of the total cost.

He said that component of the financing, which would not require a guarantee from the Government of Jamaica, would comprise the concessionaire's equity contribution, loans obtained by the concessionaire and backed by various export credit agencies, commercial debt and loans from the private sector division of a multilateral agency.

The Prime Minister said the Jamaican Government would contribute the remaining US$107 million or 27.5 per cent of the total cost, which would be in the form a loan to the concessionaire, which would be repaid by cash flows generated by the project.

He said the 30-year infrastructure bonds, to be guaranteed by the Government, would be issued by the National Road Operating and Constructing Company (NROCC), which has been established to operate and administer the concession on behalf of the Government.

The extra US$34 million, to be raised from the bonds, will be used to finance developmental activities to be undertaken by NROCC in relation to phase two of Highway 2000 and to provide initial working capital for the company, Mr. Patterson said.

The bonds will be indexed to inflation and investors will have the option of converting the instruments into equity at maturity.

"The features of the bonds are considered attractive and should provide an opportunity to a range of investors who are interested in investing in long-term instruments," the Prime Minister said.

The stretch of roadway from Kingston to Williamsfield was chosen as the first phase of Highway 2000 based on extensive traffic surveys and analysis which show that that section provided the highest traffic volumes and was therefore more commercially viable, said Mr. Patterson.

In addition, that corridor traversed the section of Jamaica which had the highest population, and the early construction of that phase was necessary to spawn a number of projects collateral to the highway.

Those projects include the development of Vernamfield into an air cargo hub and the development of lands at Inverness, Clarendon to site free zones, industrial parks and mixed residential units.

According to the Prime Minister, the competitive nature of the bids was a sign of Jamaica's reputation in the international arena regarding the current climate for direct foreign investment, as well as an endorsement of the economic policies being pursued by the Government.

The project will be developed on the basis of a private-public sector partnership using the Build, Own, Operate and Transfer (BOOT) model under a concession agreement for 30 years.

Bouygues was scheduled to sign an appointment agreement with the Government yesterday, outlining the obligations required under the contract. Mr. Patterson said he would be personally monitoring the process to ensure deadlines set were met.

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