2013-09-20 09:05:49 - New Construction market report from Business Monitor International: "Central America Infrastructure Report Q4 2013"
Construction sector growth remains on the whole unattractive across the region. Growth is expected to slow in Nicaragua and Costa Rica in the near term, whilst we believe Panama's current industry boom as a limited time horizon. El Salvador, Guatemala, Belize and Honduras are all struggling to post positive growth, and considering their small industry sizes are significant underperforming. Consequently, we see high risks, small scale and limited growth opportunities across the region as a whole. That said, we do see potential growth in a number of sub-sectors, including social housing, renewables and hydropower, gas conversion, and airports and ports. Local and regional companies, as well as Chinese construction companies, will be most likely to benefit.
Central America presents a range
of small scale opportunities across the infrastructure and wider construction sectors as infrastructure deficits across the region are addressed. However, it also poses significant risks. Home to deep-run corruption, high crime rates and unsophisticated institutions, the generally small industry sizes offer little to make those risks palatable. However, we do see sporadic growth opportunities, and highlight ports, airports, power and social infrastructure as key areas of growth.
Full Report Details at
- www.fastmr.com/prod/684652_central_america_infrastructure_report ..
These opportunities are most likely to be picked up by a combination of smaller domestic players, regional players from Mexico and Brazil, Spanish companies which have a strong presence in the region already, and Chinese companies, which can provide their own financing and have higher tolerances for risks. Broadly speaking, opportunities can be found across the region, with a handful of sectors having a positive medium-term growth outlook:
* Public-Private Partnerships: A number of countries in the region are pursuing public-private partnerships (PPPs) to develop infrastructure. In addition to Guatemala, which established a PPP agency in November 2011 is hoping to launch its first concession for Line 1 of the Guatemala City passenger railway in 2014. El Salvador announced in December 2012 that a PPP will be used to develop the Cuscatlan International Airport, and in May that one would be used for a wind farm. In April 2013, Honduras' public-private promotion agency, Coalianza, released the tender for construction and operation of the Palmerola Airport, with a contract hoped to be awarded in September 2013. However, on the whole, regulations across the region are largely in their infancy, and the longer-term policy environment does not instil enough confidence to attract long-term commitments from investors. Securing financing for investments in the region would also be a tall order. However, if we see a couple of projects move forward successfully, an encouraging precedent would be set.
* Power: New electricity generating capacity is seeing considerable investment in Central America. Hydropower is the dominant source of electricity and will remain so, given the number of projects being developed across the region. Key hydropower projects include the US$300mn Patuca III in Honduras, the US$700mn Tumarin project in Nicaragua, the Reventazon project in Costa Rica - the region's largest hydropower project, the Tres Ninas project in Guatemala, the 138MW Paz and Chaparral hydropower plants in El Salvador and the 223MW Changuinola in Panama. Nicaragua's long-delayed US$1.1bn 235MW Tumarin Dam, is also finally progressing, with construction now due to begin in 2013. The Central American Electrical Interconnection System (SIEPAC) is also nearing completion, after a number of sections became operational over 2012.
* Renewables: Indigenous wind and geothermal potential in the region are both attracting investors that are desperately seeking new markets for renewables. The completion of Gamesa and Iberdrola's 100MW Cerro de Hula Wind Farm in Honduras is the first of many projects planned in the region. Honduras will continue to lead the way, with two more wind farms boasting a combined 100MW capacity seeking government approval. El Salvador is hoping to start its first commercial wind farm in 2016/17, the US$120mn project will be structured as a PPP, the country is also planning a 14MW PV solar project, the US$51mn power plant is due to come online in 2014. In Costa Rica, the state-owned utility announced plans in June 2012 to develop 100MW of wind by 2014, already Acciona is building a 49MW project. Geothermal potential is also being explored, Panama has called for companies to register interest in geothermal concessions and Ram Power has completed the first phase of expansion of its San Jacinto-Tizate geothermal plant, with the second phase due to have been completed in December 2012. Nicaragua announced an ambitious renewables target in January 2013, with the country aiming to source 94% of its electricity from renewable technologies by 2017.
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