Chilean Infrastructure Industry Overview

30
November, 2006 Chilean Infrastructure Chilean Infrastructure Industry Overview Industry Overview Fernando Zavala Fernando Zavala

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Chilean Infrastructure Industry Overview. Fernando Zavala. November, 2006. 1. Brief Overview of the Chilean Toll Roads Industry. Introduction. The urban toll road infrastructure business in Chile has been extremely active - PowerPoint PPT Presentation

Transcript of Chilean Infrastructure Industry Overview

Page 1: Chilean Infrastructure Industry Overview

November, 2006

Chilean Infrastructure Industry Chilean Infrastructure Industry OverviewOverview

Fernando ZavalaFernando Zavala

Page 2: Chilean Infrastructure Industry Overview

1Brief Overview of the Brief Overview of the Chilean Toll Roads Chilean Toll Roads IndustryIndustry

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IntroductionIntroduction

The urban toll road infrastructure business in Chile has been extremely active

Project Financing and the formation of consortiums were critical aspects during the first phase of the industry

Original investors/sponsors are looking for options to monetize the capital gains originated from investments

Groups specialised in toll roads operation becoming increasingly interested in the sector.

Specialised investment funds monitoring the evolution of the sector – difficulties to exit investments in the short term

Costanera Norte is the first successful M&A transaction where the original investors exit the company, and a global toll road operator enters into the country.

ABN AMRO has been a leader in this industry in Chile since its origins

Page 4: Chilean Infrastructure Industry Overview

Chile Macro Overview – High growth combined with moderate riskChile Macro Overview – High growth combined with moderate risk

Excellent economic performance

Investment grade status since 1992 Average 6% real GDP growth over the last 20 years Well controlled inflation-targeting regime averaging a 4.1% inflation rate over the last 10

years Chile is the most stable, most transparent and best performing economy in Latin America

Key Facts

Positive macroeconomic outlookPositive macroeconomic outlook Strong real GDP growth forecasted for 2006 (4.9%) and 2007 (5.6%) Stable inflation forecasts for 2006 (2.9%) and 2007 (3.0%)

GDP PC (US$) and real GDP growthGDP PC (US$) and real GDP growth Inflation (CPI y-o-y changes)Inflation (CPI y-o-y changes)

3.0%2.9%3.7%

2.4%

1.1%

2.8%2.6%

0.0%

2.0%

4.0%

6.0%

8.0%

01 02 03 04 05 06F 07 F

3.4% 2.2%3.9%

6.2% 6.3% 4.9%5.6%

0

2,000

4,000

6,000

8,000

10,000

01 02 03 04 05 06F 07 F

GDP per Capita Real GDP growth

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Chile Macro Overview – High growth combined with moderate riskChile Macro Overview – High growth combined with moderate risk

Key pillars of the model:

Key Facts

Balanced public accounts Independent Central Bank Solid financial system Stable & transparent politics Open and developed local capital markets Strong and diversified mix of exports; increasing imports following GDP per capita growth Free Trade Agreements: EU, USA, Korea, Canada and Mexico. Presently negotiating with China and India, among other

Sovereign Risk (EMBI)Sovereign Risk (EMBI)

142

111

172

81

218

286

0 50 100 150 200 250 300

Peru

Mexico

Colombia

Chile

Brazil

Argentina

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Concessions Awarded to Private Sector in Chile Concessions Awarded to Private Sector in Chile

20 Highways: US$3,805M

10 Airports: US$272M

9 Urban Projects

7 Highways: US$1,722M

2 Public Transportation (Intermodal Stations): US$50M

3 Prison Infrastructure Programs (8 prison precincts): US$205M

2 Dam: US$140M

4 Public Edification: US$114M

Total Concession Investments

Total awarded volume of business over US$ 6.3 Billion

Source: MOPSource: MOP

Airports4%

Urban Highways

27%

Public Transportation

1%

Penitentiaries3%

Dams2% Public

Edification2%

Interurban Highways

61%

48 Projects Awarded to Private Companies

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Concession Projects 2006 - 2008 Concession Projects 2006 - 2008

Road infrastructure projects (10): US$1,621M

Hospitals (3): US$300M

Airports (4): US$100M

Dam (2): US$390M

Penitentiaries projects (2), Railroads (1) & Others (2): US$344 M

Other road infrastructure projects under study (11): US$884M

35 Projects to be awarded totaling more than US$ 3.6 Billion in investments

Source: MOPSource: MOP

Dams11%

Penitentiaries, Railroads &

others9%

Other road infrastructure

projects under evaluation

24%

Road infrastructure

projects45%

Hospitals8%

Airports3%

Expected Concession Investments Project Portfolio 2006 - 2008

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Toll Road Concession Operators in ChileToll Road Concession Operators in Chile

Autopista Central 48%Vespucio Norte 46%

Anillo El Salto-Kennedy 50%

Vespucio Sur 50%Radial nor-Oriente 100%

Vespucio Norte 45%Anillo El Salto-Kennedy 50%

Vespucio Sur 50%

Costanera Norte 100%

Autopista Central 48%

There will be players either

divesting non-core

investments or partially

monetizing / recycling

equity investments.

URBAN TOLL ROADS OwnershipURBAN TOLL ROADS Ownership

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Toll Road Concession Operators in Chile Toll Road Concession Operators in Chile

Los Libertadores 100%Los Andes 100%

Autopista del Sol 100%

Rutas del Pacifico 50%

Elqui 72%Litoral Central 50%

Los Lagos 88%Rutas del Pacifico 50%

Autopista del Maipo 100%Ruta de la Araucanía 100%

Talca Chillan 76%Ruta de los Ríos 76%

Litoral Central 50%

Autopista del Itata 100%Autopista del Aconcagua 100%

Autopista del Bosque 100%

Melipilla 100%

Nogales Puchuncavi 100%

There will be players either

divesting non-core

investments or partially

monetizing / recycling

equity investments.

INTERURBAN TOLL ROADS OwnershipINTERURBAN TOLL ROADS Ownership

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Central Chile – Metropolitan Region Concession HighwaysCentral Chile – Metropolitan Region Concession Highways

Source: MOP, Coordinación General de ConcesionesSource: MOP, Coordinación General de Concesiones

Vespucio Sur

Acciona 50%, Sacyr 50%

23.5 Km highway

30-yr concession

Costanera Norte Autostrade 50%, SIAS 50%

42.3 km highway

30-yr concession

Autopista Valle Chacabuco

(Radial Nor-Oriente) Sacyr

21.5 km highway

40-yr concession

San Cristobal Express(Anillo El Salto-

Kennedy) Hochtief 50%, ACS 50%

Urban tunnel

30-yr concession

Vespucio Norte

ACS 48%, Skanska 48%, Belfi 2%, Brotec 2%

60.5 km highway

30-yr concession

Autopista Central

ACS 46%, Hochtief 45%, Cofide 8%

29 Km highway

30-yr concession

Vespucio Sur

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Central Chile (Excluding Metropolitan Region) Concession HighwaysCentral Chile (Excluding Metropolitan Region) Concession Highways

Source: MOP, Coordinación General de ConcesionesSource: MOP, Coordinación General de Concesiones

Rutas del Pacifico(Ruta 68)

ACS 50%, Sacyr 50%

137.5 Km highway

25-yr concession

Melipilla Besalco

8 Km toll road

25-yr concession

Sacyr 50%, Acciona 50%

79.8 Km toll road

30-yr concession

Litoral Central

San Antonio

PuchuncaviNogales

Viña del MarValparaiso

Santiago

Casablanca

Los Andes

Quintay

Embalse Rapel

Delta

27 Km toll road

22-yr concession

Nogales-Puchuncavi

San Pedro

Autopista del Sol

OHL

102 Km highway

23.7-yr concession

OHL

113 Km highway

20-yr concession

Autopista de Los Andes

Autopista Los Libertadores

OHL

88.65 Km toll road

28-yr concession

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Concesiones del Elqui

Sacyr Chile S.A. 75%, Abertis 25%

Autopista del Aconcagua

Bancomext

Tunel El Melón

Endesa Chile

Talca Chillán

Cintra 76.43%, Inversiones Sodeia Cinco S.A. 23.57%

Autopista del Maipo

Cintra

Camino de la Madera

Belfi S.A. 33.9%, Las Américas A.F.I. S.A. 33.9%, CMB Prime A.F.I. S.A. 26.5%

Ruta de la Araucanía

Cintra

Los Lagos

Sacyr 88.1%, Empresa Nacional de Autopistas 11.9%

Ruta de los Ríos Cintra 75%, Las Américas A.F.I. S.A. 25%

Autopista del Bosque Vinci

Autopista del Itata Bancomext

Regional Interurban Concession HighwaysRegional Interurban Concession Highways

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Stages of Sector DevelopmentStages of Sector Development

Toll road concessions awarded

Construction period risks:

–Expropriation

–Completion

–Cost overrun

–Licensing delays

Project financing

Negotiation of complementary agreements with MOP

New projects contemplating MDI

Second generation projects + PPIs

Stage 1 – Stage 1 – “Construction”“Construction”

Background

Trend towards concentration in fewer large operators holding a portfolio of motorway concessions

Once scale is achieved:

– M&As (consolidation / monetization)

– IPOs (partial monetization)

Stage 3 – Stage 3 – “Consolidation”“Consolidation”

Stage 2 – “Operation”Stage 2 – “Operation”

Today…

Pure constructors start seeking exit alternatives

“Construction / operation” players review portfolio alternatives

Concession operators and infrastructure funds looking for M&A transactions

Operation period risks:

–Traffic

–Price & inflation

–O&M cost overruns

–Technology

–Billing & collection

–Political & regulatory New complementary

agreements (extensions, improvements)

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2Costanera Norte & Costanera Norte & Transelec Case StudiesTranselec Case Studies

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Recent M&A Transaction: Costanera Norte Case Study - ChileRecent M&A Transaction: Costanera Norte Case Study - Chile

ABN AMRO advised Impregilo SpA in the sale of Sociedad Concesionaria Costanera Norte S.A. For an EV of USD 625 million

Deal closed in June 2006.

ABN AMRO acted as sole financial advisor to Impregilo SpA, TECSA and Fe Grande.

ABN AMRO executed this complex project leading to a successful closing in June 2006.

Costanera Norte’s deal is the largest M&A transaction in Chile in the new concession road industry up to date,

Sociedad Concesionaria Costanera Norte S.A.

USD 277,100,000

Sale of 100% of Costanera Norte to Autostrade SpA

and Sias SpA

Sole Financial Adviser to Impregilo SpAChile, June 2006

Sociedad Concesionaria Costanera Norte S.A.

USD 277,100,000

Sale of 100% of Costanera Norte to Autostrade SpA

and Sias SpA

Sole Financial Adviser to Impregilo SpAChile, June 2006

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– Valuation: using DCF, Trading and Valuation: using DCF, Trading and Transaction methodsTransaction methods

– Preparation of investment teaserPreparation of investment teaser– Selection and contact with potential strategic Selection and contact with potential strategic

and financial investors in Chile and globallyand financial investors in Chile and globally– Development of the Information Development of the Information

Memorandum for the transactionMemorandum for the transaction– Negotiation of Confidentiality Agreements Negotiation of Confidentiality Agreements

with short-listed potential bidderswith short-listed potential bidders– Guidance to Bidders to presenting a Non-Guidance to Bidders to presenting a Non-

Binding OfferBinding Offer– Selection of investors for the final phase of Selection of investors for the final phase of

the processthe process

– Negotiation with group of short listed potential Negotiation with group of short listed potential buyersbuyers

– Coordination of Management Presentations and Coordination of Management Presentations and Visits to the facilitiesVisits to the facilities

– Guidance of Bidders through preparation and Guidance of Bidders through preparation and presentation of Binding Offerspresentation of Binding Offers

– Preparation of Bid Analysis reports to facilitate Preparation of Bid Analysis reports to facilitate client decision making processclient decision making process

– Assistance in preparation of Sale & Purchase Assistance in preparation of Sale & Purchase Agreement in conjunction with the legal advisorsAgreement in conjunction with the legal advisors

– Preparation and coordination of the Due Preparation and coordination of the Due Diligence processDiligence process

– Advisory assistance through ClosingAdvisory assistance through Closing

ABN AMRO executed the whole M&A process performing several tasks that included, among others:ABN AMRO executed the whole M&A process performing several tasks that included, among others:

Recent M&A Transaction: Costanera Norte Case Study - ChileRecent M&A Transaction: Costanera Norte Case Study - Chile

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Overview of Transelec TransactionOverview of Transelec Transaction

Transelec is a regulated transmission business that owns high voltage linesTranselec is a regulated transmission business that owns high voltage lines

On June 16, 2006 Brookfield Asset Management and its partners agreed to acquire 92% of On June 16, 2006 Brookfield Asset Management and its partners agreed to acquire 92% of Transelec for $1.55 bn plus the assumption of debtTranselec for $1.55 bn plus the assumption of debt

The consortium acquired the remaining 8% of Transelec in a separate transaction from IFCThe consortium acquired the remaining 8% of Transelec in a separate transaction from IFC

ABN AMRO believed that that most bidders would have been comfortable paying up to 10.5x ABN AMRO believed that that most bidders would have been comfortable paying up to 10.5x EBITDA. This led to an IRR of approximately 11-13%. EBITDA. This led to an IRR of approximately 11-13%.

In our view, the bid for Transelec is an outlier and led to an ROE below 10%.In our view, the bid for Transelec is an outlier and led to an ROE below 10%.

Other bidders for Hydro-Quebec’s stake were: GE/First Reserve, Abengoa, ISA, Canadian Other bidders for Hydro-Quebec’s stake were: GE/First Reserve, Abengoa, ISA, Canadian pension funds (Ontario Teachers’ Pension Fund, Borealis), Terna, Celfin (Chilean investors)pension funds (Ontario Teachers’ Pension Fund, Borealis), Terna, Celfin (Chilean investors)

Key Considerations

Transaction multiplesTransaction multiplesTransaction multiplesTransaction multiples

2005 2006E

Transaction multiple 12.6x 12.2x 24.7

ABN AMRO'sestimates

10.5x 10.2x 18.3

EV / EBITDA P/E2005 2006E

Transaction multiple 12.6x 12.2x 24.7

ABN estimates

10.5x 10.2x 18.3

P/E

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3Brief Overview Infrastructure Brief Overview Infrastructure M&A worldwide M&A worldwide

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Overview of Infrastructure related transactions worldwideOverview of Infrastructure related transactions worldwide

Infrastructure M&A transactions volume 1998 - 2006 YTD

Infrastructure deals peaked at US $ 145 Bln in 2006 reflecting

increasing investor

appetite for investments

capable of generating

stable returns in the long

term

Source: ABN AMRO

0

20

40

60

80

100

120

140

160

1998 1999 2000 2001 2002 2003 2004 2005 2006

US$ Bln

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Overview of Infrastructure related transactions worldwideOverview of Infrastructure related transactions worldwide

Largest Infrastructure M&A transactions 1998 - 2006 YTD

Private equity funds showed increasing involvement in infrastructure related transactions, accounting for more than 50% of deal volumes in 2006 (comparing positively with the 2 % involvement recorded in 1998)

Source: Thomson Financial

Date Target AcquirerDeal Value

(US Bln)

Feb 8 2006 BAA (UK) Ferrovial (Spain) 30.2Apr 23 2006 Autostrade (Italy) Abertis Infrastructuras (Spain) 28.4May 29 2006 Kinder Morgan (US) Private equity consortium (US) 27.5Jan 18 2000 Coastal (US) El Paso Energy (US) 15.7Feb 27 2006 KeySpan (US) National Grid (UK) 11.9Jun 27 2002 Railtrack (UK) Network Rail (UK) 11.5Oct 2 2006 AWG (UK) Osprey Acquisitions (Canada) 10.3

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Toll road operators valuation – Trading MultiplesToll road operators valuation – Trading Multiples

International listed toll road operators are trading at 10x - 11x EBITDA on average

Note: Numbers in grey have been excluded from average

Toll Road Operators Trading Multiples

Company name Mkt Cap EV(EURm, 11/7/'06) 2005 2006 2007 2008

AUTOSTRADE 12,789 22,446 12.1x 11.5x 10.8x 10.1xAutoroute du Sud de la France 11,503 19,325 12.3x 11.5x 10.9x 10.2xAbertis 10,489 14,793 12.7x 7.1x 6.7x 6.4xMacquarie Infrastructure Group 8,243 10,942 9.6x 10.0x 12.2x 11.3xAPPR 6,059 11,170 11.5x 10.7x 10.2x 9.7xCintra 4,921 12,380 26.7x 23.9x 21.8x 18.2xBRISA 4,333 6,414 15.3x 14.6x 13.8x 13.2x

Average 12.3x 10.9x 10.8x 10.2x

EV/EBITDA

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Toll road operators valuation – Transaction AnalysisToll road operators valuation – Transaction Analysis

Toll Roads M&A Company Transactions

Note: Numbers in grey have been excluded from average

Stake Purchase EV EVacquired(%) price (EURm) Turnover EBITDA

100% 14,714 8.27x 13.19x100% 5,324 8.54x 13.26x50% 5,821 7.83x 12.35x81% 5,551 7.64x 12.33x92% 1,074 25.45x na8% 57 22.90x na

100% 3,102 11.96x na6% 219 7.34x 10.52x

14% 771 7.10x na40% 741 19.70x na

8.38x 12.33x

Stake Purchase EV EV(%) Turnover EBITDA

100% 14,714 8.27x 13.19x100% 5,324 8.54x 13.26x50% 5,821 7.83x 12.35x81% 5,551 7.64x 12.33x92% 1,074 25.45x na8% 57 22.90x na

100% 3,102 11.96x na6% 219 7.34x 10.52x

14% 771 7.10x na

Completion Target name Acquiror nameDate

Pending Autostrade Abertis25/04/2006 Abertis/ AXA / Credit Agricole09/03/2006 Autoroute Vinci20/02/2006 Eiffage20/05/2005 Transurban19/04/2004 Transurban01/01/2003 Aurea Acesa (Abertis)16/09/2002 Brisa05/04/2002 AutorouteSud Vinci16/01/2002 CintraConcesiones

Average

Acquiror

Pending Autostrade Abertis25/04/2006 SANEF Abertis09/03/2006 Sud de France Vinci20/02/2006 APRR Eiffage/ Macquarie Infr.20/05/2005 Hills Motorway Group19/04/2004 Hills Motorway Group01/01/200316/09/2002 ACESA Brisa05/04/2002 de FranceVinci16/01/2002 Macquarie Infrastructure 40% 741 19.70x na

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Toll road operators valuation – Transaction Analysis (cont’d)Toll road operators valuation – Transaction Analysis (cont’d)

Toll Roads M&A Asset Transactions

Transaction Target Name Acquirer Name Stake Purchaseacquired % Price EURm

30/06/2006 Indiana Toll Road (US) Cintra/Macquarie Infrastructure 100.0% 3,04019/12/2005 Westlink M7 (AU) Macquarie Infrastructure Group 5.0% 2929/09/2005 Dulles Greenway Toll Road (US) Macquarie Infrastructure Group 86.7% 44329/09/2005 Dulles Greenway Toll Road (US) Macquarie Infrastructure Group 13.3% 7020/06/2005 Midland Expressway Ltd (UK) Macquarie Infrastructure Group 25.0% 7322/11/2004 Mitcham- Frankston Project (AU) Investor Group 100.0% na26/10/2004 407 International Inc (CAN) Macquarie Infrastructure Group 13.9% 44323/05/2003 San Diego Expressway (US) Macquarie Infrastructure Group 82.0% 4623/05/2003 San Diego Expressway (US) Macquarie Infrastructure Group 16.0% na31/03/2002 407 International Inc (CAN) Cintra Concesiones de Infr. 6.0% 12629/11/2002 Lusoponte (POR) Macquarie Infrastructure Group 5.7% 1601/10/2002 Aucat (SP) Abertis Infraestructuras 8.8% 4829/04/2002 407 International Inc (CAN) Macquarie Infrastructure Group 16.1% 35020/12/2000 Statewide Roads Ltd (AU) Macquarie Infrastructure Group 50.6% 9320/12/2000 Airport Motorway Group (AU) Macquarie Infrastructure Group 10.5% 33

Date

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4New generation of potential New generation of potential investorsinvestors

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Three main types of potential investorsThree main types of potential investors

Local buyers

Local Investment Funds: – Clear exit strategies within 3 to 6 years. – Would require IRRs in the range of 12 to 20% depending on the risks associated to the projected cash-flows.

Local Conglomerates: – Would normally seek a strong influence position in the Board. – Would require IRRs ranging from 12 to 20%.

CMB Prime Celfin Capital Southern Cross IM Trust Independencia

Consorcio Copec Group Quiñenco Group Bancard Solari Group

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Three main types of potential investors (cont’d)Three main types of potential investors (cont’d)

International Infrastructure

funds

Specialized Infrastructure Funds:– These investors seek assets providing stable, predictable, long-term, monopoly type, inflation-linked returns

– Their investment profile allows them to avoid focusing on short-to-medium term exit strategies.

– Would normally require IRRs ranging from 11 to 18%.

Long-term Direct Financial Investors: – Seeking larger investment tickets (usually +US$100 m) in infrastructure, real estate and infrastructure type of energy assets.

– This category groups Canadian investors that invest pension funds moneys.

Macquarie Carlyle ABN AMRO GE Deutsche AM

Ontario Teachers Borealis Brookfield CPP KKR

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Other(strategic)

Concession operating holdings pursuing a portfolio strategy:

Pursue the opportunity as a way of gaining volume in the regional concession’s market

Focused on positioning the holding for an IPO in the medium term.

Three main types of potential investors (cont’d)Three main types of potential investors (cont’d)

OHLAutostrade/ Costanera

NorteAcciona ACS Abertis

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5Final Remarks – Final Remarks – Infrastructure Industry Infrastructure Industry Pending Issues Pending Issues

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Final Remarks Final Remarks

Some lessons from the Costanera Norte’s Experience:

– Authorization resolution mechanisms

– Better response time-frame to allow trading of these shares

– Change of investments rules governing local insurance companies and AFPs

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Chilean Infrastructure Industry Chilean Infrastructure Industry OverviewOverview