November, 2006
Chilean Infrastructure Industry Chilean Infrastructure Industry OverviewOverview
Fernando ZavalaFernando Zavala
1Brief Overview of the Brief Overview of the Chilean Toll Roads Chilean Toll Roads IndustryIndustry
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
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
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
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
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
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
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
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
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
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
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)
2Costanera Norte & Costanera Norte & Transelec Case StudiesTranselec Case Studies
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
– 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
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
3Brief Overview Infrastructure Brief Overview Infrastructure M&A worldwide M&A worldwide
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
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
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
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
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
4New generation of potential New generation of potential investorsinvestors
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
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
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
5Final Remarks – Final Remarks – Infrastructure Industry Infrastructure Industry Pending Issues Pending Issues
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
Chilean Infrastructure Industry Chilean Infrastructure Industry OverviewOverview
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