Infrastructure opportunities in Argentina Infrastructure January 2017 kpmg.com.ar 2 Contents KPMG Global Infrastructure 4 Introduction to Argentina 8 Concession & public works 11 projects summary 3.1. Roads 3.2. Rail 3.3. Ports and airports 3.4. Water supply, drainage system and flood control 3.5. Waste disposal 3.6. Entertainment and other projects 3.7. Energy 3.8. Telecommunications 3.9. Urban and industrial developments 3.10. Other projects Financing market in Argentina 40 Contact 44 1. KPMG Global Infrastructure Infrastructure is one of the great global challenges of the 21th century Drivers Unprecedented global transformation 1950-2050 – Population boom to 9.2bn by 2050 – Rapidly growing wealth of emerging economies driving greater consumption – Rising living standards causing dramatic increase in life expectancy Opportunity At global tipping point – Mature markets suffering decades of underinvestment – Emerging economies looking to shape the future – Translates into $57 trillion+ investment need up to 2050 Challenges – Urbanisation – 3bn people moving into cities by 2050 – Energy – supply, sufficiency and sustainability of energy needs to cope with increased demand from urbanisation – Water – water usage and management, and the energy intensity of our consumption – Public services – how will we finance the cost of more people, living longer and having fewer children, and provide public services society expects KPMG’s Global Infrastructure Team • Infrastructure is one KPMG’s focus areas • We specialise in infrastructure and aim to bring insights and innovation through our deep sector expertise • We operate across all aspects of an infrastructure asset’s lifecycle • From strategy and development, through to procurement, financing, development, operations and investment Integrated advice across Client focus the asset lifecycle – Public sector Integrated advice Client – Strategy and development – Developers across the asset focus – Procurement and financing lifecycle – Asset owners – Delivery and construction – Capital projects – Operations and performance Global – Investment Team – Tax Sector specialisation Sector Global Global network specialisation network – Transport – Taking clients to new – Energy markets – Resource-related – Bringing global expertise to infrastructure a domestic problem – Water – Ability to pull together a virtual global team at pace – Social Infrastructure – Integrated products, client – Cities focused – Digital 5 Sector specialization • We have deep sector specialization and experience across infrastructure • We truly understand the issues that are relevant and have experience in proactively driving positive solutions Transport Social infrastructure – Urban transit – Healthcare – Government – Rail – Education accommodation – Roads – Leisure – Prisons – Airports and aviation – Housing – Major Games – Ports and logistics – Urban regeneration Energy and natural resources Digital – Power generation, – Oil and gas – Telecommunications transmission and extraction, storage infrastructure distribution and transportation – National broadband – Water and – Solid waste wastewater management – Mining Cities Client focus Our clients are evenly split from the This gives us insight across client peer groups and enables private and public sector. us to understand all points of view. We provide truly independent advice. This is particularly We bring this global perspective to our clients when faced useful when assisting our clients in new sectors or with local needs and challenges in infrastructure. geographies. Capital Projects Our clients are evenly split from the Asset ownersThis gives us insight across client peer groups and enables private and public sector. us to understand all points of view. We provide truly independent advice. This is particularly We bring this global perspective to our clients when faced useful when assisting our clients in new sectors or with local needs and challenges in infrastructure. geographies. 6 Global network • We help our clients move into new markets, and bring global expertise to a domestic problem • We operate truly globally – We are active in 110 countries with 2,500 dedicated professionals • Our advice is independent and locally based drawing on global experience Russia UK Canada US Middle East Hong Kong/ China India ASEAN Latin America Africa Australia Key: KPMG infrastructure presence Infrastructure regional hubs and capitals KPMG Infrastructure in Argentina In Argentina we have a senior infrastructure dedicated team the project risks by performing compliance assessments, with solid experience in the most relevant infrastructure sectors construction project controls, contract compliance, project and also a wide experience in working with the Government. support, identification of potential cost recoveries on complex We have relationships with all the relevant entities and will and troubled projects. consider each of the alternatives within the context of a project. KPMG in Argentina provides real-time, objective feedback to KPMG recommends a financing strategy based on our owners and contractors to facilitate proactive decision making knowledge of the local and regional financial markets, considering to mitigate cost, schedule, quality, and other project risks. the particularities of the expected cash flow of the project. Clients get help with the identification of process improvement We provide independent advisory since we are not associated opportunities to increase the likelihood of success and realize to any financial entity. Therefore we are in a position to offer to the expected benefits of the investment. our clients the most appropriate structure of financing and the We also have the support from tax and accounting senior most favorable conditions that the market can offer. professionals with large experience in infrastructure projects, to We also provide technical advice to the projects, with in- adjust the structure to the local legislation and to the available house engineers assisting clients in identifying and mitigating options in the market. 7 2. Introduction to Argentina Why invest in Argentina? 1. Sustained Economic The economic growth experienced over the last ten years (2005-2015) at an average rate of 4.7% makes Growth Argentina rank above the average regional growth (3.2%) and it is featured as one of the most dynamic economies. 2. Attractive Business Argentina offers profitable business opportunities in a wide range of sectors. The flow of direct foreign Profitability investment (DFI) accounted for 1% of GDP in 2015 and 1.8% of GDP on average over the last ten years. Earnings stated as a percentage of DFI stock accounted for 10.0% on average in 2006-2009, remaining around this figure over the last five years (2010-2015). Earnings as a percentage of sales accounted for more than 13% for the leading 500 non-financial companies of our country in the period 2006-2010. More than 2000 multinational companies operating in diverse sectors share a long-term vision and renewed investment commitment. The highest investment rate in the last 30 years was fueled by the diversity and profitability of all existing investment opportunities. 3. A Globally and Regionally Member of the G-20, founding member of the World Trade Organization (WTO) and Full member of Integrated Economy MERCOSUR (Argentina, Brazil, Paraguay and Uruguay). Preferential access (0% tariff) to a regional market of 250 million inhabitants and a combined GDP of more than US$ 2.5 billion. 4. A Diversified Economy Growing producer of technological and differentiated goods and services. Dynamic industry with a longstanding tradition, a diversified structure and the skills and knowledge to innovate. World’s fourth largest exporter of original television formats. Dynamic software and IT services industry (18% growth in sales and 27% growth in exports per year since 2003). World’s third-largest producer of GM crops granting producers considerable advantages in terms of production and profit levels, while offering consumers a safe option. Ranked second in the world in terms of certified surface area for organic production. Key producer and exporter of commodities, raw materials and food products that match global consumption trends. 5. Skilled and Talented Internationally renowned for the quality, creativity and versatility of its human resources. Highest ratio of Human Resources researchers to the economically active population in Latin America. English level among the highest in the developing world. Highest level of patents registered at the U.S. Patent Trademark Office in the region (as total number per million inhabitants for a 40-year period). 6. Abundant and Diverse Second largest country in Latin America and eighth in the world (3.8 million square kilometers). Agricultural Natural Resources productivity among the highest worldwide as reflected by superior yields in the production of soy beans, wheat and corn, among others. Endowed with extraordinary fertile agriculture lands, forest resources, mining deposits and rich fisheries. 7. A Remarkable Quality of Life Ranked 4th among developing countries in the Quality of Life Index (International Living, 2010). Ranked first (40th) in Latin America (globally) in the UN Human Development Index (2014) and in the UN Gender-related Development Index (2014). 8. A Vibrant Culture Vibrant cultural life and dynamic entertainment sector. Fast growth of creative industries which are increasingly supplying regional and global markets. 9. Quality