Nuevo Necaxa - Tihuatlan Highway

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On August 17, 2007, the Mexican Secretary of Communications and Transport (SCT) signed a 30-year concession contract for the Nuevo Necaxa - Tihuatlan highway with a consortium of Ingenieros Civiles Asociados SA de CV (ICA); Controladora de Operaciones de Infraestructura SA de CV (an ICA subsidiary); and FCC Construccion SA. The Nueva Necaxa - Tihuatlan highway concession entitled the consortium to operate an existing 48km toll road from Avila Camacho to Tihuatlan and build, operate and maintain an additional 36km “shadow toll” road from Nuevo Necaxa to Avila Camacho. The initiative was part of the new Public-Private Partnership (PPP) program began in 2005 to improve the quality of public services through long-term partnerships between the government and private sector companies. SCT awarded the contract through an international competitive tender which started on May 11, 2006. To participate in the public tender, each bidder had to calculate and submit a requested payment as a function of construction, maintenance and operating costs, rate of return on equity, estimated annual traffic and duration of contract. The concession was awarded to the bidder who presented a proposal that complied with the technical, legal and financial requirements established in the bidding documents, and requested the lowest net present value of periodic payments. Two consortia originally presented offers: ICA, Controladora and FCC; and another one made up of French and Mexican companies. The latter withdrew from the competition at the last minute for unknown reasons. By default, on June 27, 2007, the ICA led consortium was formally awarded the public bid for the project. ICA (Mexico) controlled 50% of the consortium directly and indirectly while FCC (Spain) controlled the other 50%. Total investment commitments for the project were estimated at US $650 million. The ICA led consortium was to recoup its investment through tolls on the existing 48 km section of highway from Avila Camacho to Tihuatlan starting in August 2007. Under the PPP model for highways, the new 36km “shadow toll” road from Nueva Necaxa to Avila Camacho was to provide revenues from two types of periodic payments: a minimum payment for the availability of the road according to the standards set by the contract; and a “shadow toll” or payment linked to traffic levels. The concessionaire had the right to charge tolls on the existing 48km section from Avila Camacho to Tihautlan. Construction of the new section started in September 2007 and was expected to be completed by March 2010. Construction works were concluded in September 2014.