Deal of the week – South african national road agency Ashursts drives South African toll-road project

Ashurst Morris Crisp has advised the South African National Roads Agency on a major toll-road project for the first time, after acting opposite the government body on its previous scheme.
The latest £160m toll-road project will link Pretoria with the Botswana border. A 30-year concession for the construction, upgrade and operation of the N4 toll road was awarded to Bakweba Platinum Corridor Concessionaire (Proprietary), advised by South African firm Webber Wentzel Bowens and Freshfields Bruckhaus Deringer.
This is South Africa's third project financed toll road and the second in which Ashursts has been involved. The firm advised the winning consortium on the £210m N3 toll road, while White & Case advised the South African National Road Agency. The project reached financial close in October 1999.
Ashursts head of projects Mark Elsey said: “They liked us so much they wanted us to act for them.” His team consisted of international finance partner Thomas Wexler and senior solicitor David Nelligan. South African firm Werksmans advised the agency on South African law.
A key objective for the Ashursts team was to develop a standard form of contract for toll road projects. “We came up with documentation heading towards something that will form a sound footing for future projects,” said Elsey.
The team also helped devise the competition and took part in the evaluation process before finalising the documentation. Their involvement has lasted almost two years.
This project presented a number of challenges not present in the country's previous toll-road schemes. This is the first scheme with a significant suburban commuter element, which in turn will subsidise more remote stretches of the road used by heavy vehicles. As a result, the project has become particularly controversial among South Africans.
Nelligan said: “A vast amount of revenue will come from commuters. That brings its own risks in terms of commuter sensitivities.”
There are also alternative, albeit less direct, roads available to commuters, so the concession contract had to address how these alternative routes should to be dealt with. South Africa's previous toll roads are arterial routes, so have not involved such a high risk of toll avoidance.
The team also had to consider a new framework of environmental laws which have just been introduced in South Africa.
Elsey said: “The South African Roads Agency should be congratulated in many ways because bringing these projects to fruition isn't easy. They've now got three away, which is a credit to their ability to persevere. People are inherently nervous about change and the agency has done very well in not getting caught up in politics.”
The project is financed by three tranches of debt. Straightforward bank debt was provided by a bank syndicate led by Nedcor; a consumer price index-linked debt facility was arranged by Investec; and a term loan was arranged by the European Investment Bank (EIB).
Bell Dewar & Hall and Clifford Chance advised the lenders, excluding EIB, which was advised by Deneys Reitz.