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Chilean Infrastructure Industry Overview
Fernando Zavala November, 2006
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1 Brief Overview of the Chilean Toll Roads Industry
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Introduction 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
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Chile 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 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$) and real GDP growth Inflation (CPI y-o-y changes) 3.4% 2.2% 3.9% 6.2% 6.3% 4.9% 5.6% 2,000 4,000 6,000 8,000 10,000 01 02 03 04 05 06F 07 F GDP per Capita Real GDP growth 3.0% 2.9% 3.7% 2.4% 1.1% 2.8% 2.6% 0.0% 2.0% 4.0% 6.0% 8.0% 01 02 03 04 05 06F 07 F
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Chile Macro Overview – High growth combined with moderate risk
Key Facts Key pillars of the model: Balanced public accounts Independent Central Bank Solid financial system Stable & transparent politics Open and developed local capital markets Strong and diversified mix of exports; increasing imports following GDP per capita growth Free Trade Agreements: EU, USA, Korea, Canada and Mexico. Presently negotiating with China and India, among other Sovereign Risk (EMBI) 142 111 172 81 218 286 50 100 150 200 250 300 Peru Mexico Colombia Chile Brazil Argentina
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Total awarded volume of business over US$ 6.3 Billion
Concessions Awarded to Private Sector in Chile Total awarded volume of business over US$ 6.3 Billion 48 Projects Awarded to Private Companies Total Concession Investments 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$114M Airports 4% Urban Highways 27% Public Transportation 1% Penitentiaries 3% Dams 2% Edification Interurban 61% Actualizar, ademas puente chacao Source: MOP
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Concession Projects 35 Projects to be awarded totaling more than US$ 3.6 Billion in investments Project Portfolio Expected Concession Investments 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 Dams 11% Penitentiaries, Railroads & others 9% Other road infrastructure projects under evaluation 24% Road projects 45% Hospitals 8% Airports 3% Actualizar, ademas puente chacao Source: MOP
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Toll Road Concession Operators in Chile
URBAN TOLL ROADS Ownership There will be players either divesting non-core investments or partially monetizing / recycling equity investments. Autopista Central 48% Anillo El Salto-Kennedy 50% Vespucio Norte 46% Vespucio Sur 50% Radial nor-Oriente 100% Vespucio Norte 45% Anillo El Salto-Kennedy 50% Vespucio Sur 50% Costanera Norte 100% Autopista Central 48%
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Toll Road Concession Operators in Chile
INTERURBAN TOLL ROADS Ownership There will be players either divesting non-core investments or partially monetizing / recycling equity investments. Los Libertadores 100% Autopista del Sol 100% Los Andes 100% Rutas del Pacifico 50% Elqui 72% Los Lagos 88% Litoral Central 50% Rutas del Pacifico 50% Nogales Puchuncavi 100% Autopista del Maipo 100% Talca Chillan 76% Ruta de la Araucanía 100% Ruta de los Ríos 76% Litoral Central 50% Autopista del Itata 100% Autopista del Aconcagua 100% Autopista del Bosque 100% Melipilla 100%
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Autopista Valle Chacabuco (Anillo El Salto-Kennedy)
Central Chile – Metropolitan Region Concession Highways Autopista Valle Chacabuco (Radial Nor-Oriente) Vespucio Norte ACS 46%, Hochtief 45%, Cofide 8% 29 Km highway 30-yr concession Sacyr 21.5 km highway 40-yr concession San Cristobal Express (Anillo El Salto-Kennedy) Autopista Central Hochtief 50%, ACS 50% Urban tunnel 30-yr concession ACS 48%, Skanska 48%, Belfi 2%, Brotec 2% 60.5 km highway 30-yr concession Costanera Norte Vespucio Sur Autostrade 50%, SIAS 50% 42.3 km highway 30-yr concession Vespucio Sur Acciona 50%, Sacyr 50% 23.5 Km highway 30-yr concession Source: MOP, Coordinación General de Concesiones
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Autopista Los Libertadores
Central Chile (Excluding Metropolitan Region) Concession Highways Nogales-Puchuncavi Delta 27 Km toll road 22-yr concession Rutas del Pacifico (Ruta 68) ACS 50%, Sacyr 50% 137.5 Km highway 25-yr concession Autopista de Los Andes Puchuncavi Nogales OHL 113 Km highway 20-yr concession Los Andes Viña del Mar Valparaiso Litoral Central Autopista Los Libertadores Sacyr 50%, Acciona 50% 79.8 Km toll road 30-yr concession Quintay Casablanca OHL 88.65 Km toll road 28-yr concession Santiago San Antonio Melipilla Autopista del Sol Besalco 8 Km toll road 25-yr concession OHL 102 Km highway 23.7-yr concession Embalse Rapel San Pedro Source: MOP, Coordinación General de Concesiones
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Autopista del Aconcagua
Regional Interurban Concession Highways Autopista del Aconcagua Concesiones del Elqui Bancomext Sacyr Chile S.A. 75%, Abertis 25% Tunel El Melón Autopista del Maipo Endesa Chile Cintra Talca Chillán Cintra 76.43%, Inversiones Sodeia Cinco S.A % 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% Autopista del Itata Bancomext Ruta de la Araucanía Cintra Autopista del Bosque Vinci Los Lagos Ruta de los Ríos Sacyr 88.1%, Empresa Nacional de Autopistas 11.9% Cintra 75%, Las Américas A.F.I. S.A. 25%
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Stage 1 – “Construction” Stage 3 – “Consolidation”
Stages of Sector Development Background Today… Stage 1 – “Construction” Stage 2 – “Operation” Stage 3 – “Consolidation” 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 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) Trend towards concentration in fewer large operators holding a portfolio of motorway concessions Once scale is achieved: M&As (consolidation / monetization) IPOs (partial monetization)
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2 Costanera Norte & Transelec Case Studies
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Recent 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 SpA Chile, June 2006
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Recent M&A Transaction: Costanera Norte Case Study - Chile
ABN AMRO executed the whole M&A process performing several tasks that included, among others: Valuation: using DCF, Trading and Transaction methods Preparation of investment teaser Selection and contact with potential strategic and financial investors in Chile and globally Development of the Information Memorandum for the transaction Negotiation of Confidentiality Agreements with short-listed potential bidders Guidance to Bidders to presenting a Non-Binding Offer Selection of investors for the final phase of the process Negotiation with group of short listed potential buyers Coordination of Management Presentations and Visits to the facilities Guidance of Bidders through preparation and presentation of Binding Offers Preparation of Bid Analysis reports to facilitate client decision making process Assistance in preparation of Sale & Purchase Agreement in conjunction with the legal advisors Preparation and coordination of the Due Diligence process Advisory assistance through Closing
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Overview of Transelec Transaction
Key Considerations Transelec 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 Transelec for $1.55 bn plus the assumption of debt The 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 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%. 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) Transaction multiples 2005 2006E Transaction multiple 12.6x 12.2x 24.7 ABN AMRO's estimates 10.5x 10.2x 18.3 EV / EBITDA P/E
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3 Brief Overview Infrastructure M&A worldwide
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Overview of Infrastructure related transactions worldwide
Infrastructure deals peaked at US $ 145 Bln in 2006 reflecting increasing investor appetite for investments capable of generating stable returns in the long term Infrastructure M&A transactions volume YTD US$ Bln 160 140 120 100 80 60 40 20 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: ABN AMRO
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Overview of Infrastructure related transactions worldwide
Largest Infrastructure M&A transactions YTD Deal Value Date Target Acquirer (US Bln) Feb BAA (UK) Ferrovial (Spain) 30.2 Apr Autostrade (Italy) Abertis Infrastructuras (Spain) 28.4 May Kinder Morgan (US) Private equity consortium (US) 27.5 Jan Coastal (US) El Paso Energy (US) 15.7 Feb KeySpan (US) National Grid (UK) 11.9 Jun Railtrack (UK) Network Rail (UK) 11.5 Oct AWG (UK) Osprey Acquisitions (Canada) 10.3 Source: Thomson Financial 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)
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Toll road operators valuation – Trading Multiples
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 10.1x Autoroute du Sud de la France 11,503 19,325 12.3x 10.9x 10.2x Abertis 10,489 14,793 12.7x 7.1x 6.7x 6.4x Macquarie Infrastructure Group 8,243 10,942 9.6x 10.0x 12.2x 11.3x APPR 6,059 11,170 10.7x 9.7x Cintra 4,921 12,380 26.7x 23.9x 21.8x 18.2x BRISA 4,333 6,414 15.3x 14.6x 13.8x 13.2x Average EV/EBITDA Note: Numbers in grey have been excluded from average International listed toll road operators are trading at 10x - 11x EBITDA on average
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Toll road operators valuation – Transaction Analysis
Toll Roads M&A Company Transactions Stake Purchase EV acquired (%) price ( EURm ) Turnover EBITDA 100% 14,714 8.27x 13.19x 5,324 8.54x 13.26x 50% 5,821 7.83x 12.35x 81% 5,551 7.64x 12.33x 92% 1,074 25.45x na 8% 57 22.90x 3,102 11.96x 6% 219 7.34x 10.52x 14% 771 7.10x 40% 741 19.70x 8.38x Completion Target name Acquiror name Date Pending Autostrade Abertis 25/04/2006 / AXA / Credit Agricole 09/03/2006 Autoroute Vinci 20/02/2006 Eiffage 20/05/2005 Transurban 19/04/2004 01/01/2003 Aurea Acesa (Abertis) 16/09/2002 Brisa 05/04/2002 Sud 16/01/2002 Cintra Concesiones Average SANEF de France APRR / Macquarie Infr. Hills Motorway Group ACESA Macquarie Infrastructure Note: Numbers in grey have been excluded from average
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Toll road operators valuation – Transaction Analysis (cont’d)
Toll Roads M&A Asset Transactions Transaction Target Name Acquirer Name Stake Purchase acquired % Price EURm 30/06/2006 Indiana Toll Road (US) Cintra/Macquarie Infrastructure 100.0% 3,040 19/12/2005 Westlink M7 (AU) Macquarie Infrastructure Group 5.0% 29 29/09/2005 Dulles Greenway Toll Road (US) 86.7% 443 13.3% 70 20/06/2005 Midland Expressway Ltd (UK) 25.0% 73 22/11/2004 Mitcham- Frankston Project (AU) Investor Group na 26/10/2004 407 International Inc (CAN) 13.9% 23/05/2003 San Diego Expressway (US) 82.0% 46 16.0% 31/03/2002 Cintra Concesiones de Infr. 6.0% 126 29/11/2002 Lusoponte (POR) 5.7% 16 01/10/2002 Aucat (SP) Abertis Infraestructuras 8.8% 48 29/04/2002 16.1% 350 20/12/2000 Statewide Roads Ltd (AU) 50.6% 93 Airport Motorway Group (AU) 10.5% 33 Date
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4 New generation of potential investors
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Three 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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International Infrastructure funds
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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Autostrade/ Costanera Norte
Three main types of potential investors (cont’d) 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. OHL Autostrade/ Costanera Norte Acciona ACS Abertis
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5 Final Remarks – Infrastructure Industry Pending Issues
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Some lessons from the Costanera Norte’s Experience:
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 Overview
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