First FARAC Highway Concession Package

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In October 2007, Red de Carreteras de Occidente, a subsidiary of ICA and Goldman Sachs, signed a 30 year concession contract to rehabilitate, operate, maintain and expand four Mexican toll roads with Secretaria de Comunicaciones y Transportes (SCT). The four roads spanned 558 km and were titled: Guadalajara-Zapotlanejo; Maravatio-Zapotlanejo; Leon-Lagos de Moreno-Aguascalientes and Zapotlanejo-Lagos de Moreno. Together they formed the Bajio-Centro-Pacifico highway. Under the contract, the concessionaire commited to constructing specified works on the four highways and investing approximately US $137 million (1.5 billion pesos). These works included: construction of the Encarnación de Díaz-San Juan de los Lagos highway section, expansion of the Guadalajara-Zapotlanejo highway to six lanes, modernization of an access ramp to the Maravatío-Zapotlanejo highway, and re-pavement of the El Desperdicio-Lagos de Moreno route. The contract was awarded through an international competitive tender launched on June 18, 2007. Five consortia submitted satisfactory technical proposals and were therefore qualified to submit financial bids. The winning consortium was selected based on the highest payment to the government. On August 6, 2007, the consortium of Goldman Sachs Infrastructure Partners (USA, 80%) and Constructoras ICA (Mexico, 20%) won the tender. The bids were submitted as follows: • Constructoras ICA (Mexico) and Goldman Sachs Infrastructure Partners (USA), 44,051 million pesos. • Promotora del Desarrollo de America Latina -IDEAL- (México) and Macquarie (Australia), 43,430 million pesos. • Abertis Infraestructuras (Spain) y Banco Invex (Mexico), 42,000 million pesos. • Globalvia (Spain) / FCC Construcción (Spain) and Caja de Madrid (Spain), 41,907 million pesos. • Obrascon Huarte Lain -OHL- (Spain), 39,147 million pesos. • Compañía de Concessoes Radioviarias –CCR- Brasil / Brisa Internacional (Portugal) / Grupo Hermes (Mexico), 29,066 million pesos. On October 3, 2007, Red de Carreteras de Occidente paid the Mexican treasury US $4.03 billion (44.051 billion pesos) for the concession. On October 4, 2007, the consortium officially took possession of the highways. To facilitate financing for the project, the Inter-American Development Bank (IADB) issued a partial credit guarantee of US $400 million.Banco Santander then arranged financing through a syndication of international banks. The syndicators were: Banco Santander with Ps 4.6bn; Dexia, HSBC and Banorte with Ps 4.5bn each; NordLB with Ps 4.4 bn; Inbursa Ps 5.5bn; Banobras Ps 3.3bn; ING and WestLB Ps 3.0bn; and Scotiabank with Ps 1.0 bn. The loan had an interest rate of approximately 7.7% plus 165 basis points at the beginning of the term rising to 225 basis points over the loan’s seven year term. This was based off of the TIIE or Tasa de Interes Interbancaria de Equilibrio, Mexico’s inter-bank rate. The loan was to be disbursed in three tranches with 9 billion pesos reserved for equity making the debt to equity ratio 66% to 34%. The concession was the first road package offered by the Fideicomiso de Apoyo para el Rescate de Autopistas Concesionadas (FARAC). FARAC was formed to administer the toll road concessions taken over by the Mexican federal government in 1994. Payments to the Mexican Treasury by the private concessionaire were to be used to pay FARAC’s debt, construct the Durango – Mazatlan road and execute infrastructure projects included in the Programa Nacional de Infraestructura 2007-2012. Payments to the treasury were to be transferred to FINFRA, the infrastructure fund of the Banco Nacional de Obras y Servicios (Banobras). In July 2013, ICA sold its stake of 18.7% to Goldman Sachs for US$ 380 million. ICA continued to be the operation and management contractor for the concession. Investments in pesos converted to USD using the period rate/market average for 2007 published by the IMF.