Queretaro-Irapuato Highway

Active

In June 2006, the Mexican Secretary of Communications and Transport (SCT) signed a 20-year contract of the Queretaro-Irapuato highway to Ingenieros Civiles Asociados SA de CV (ICA). The Queretaro-Irapuato project was a 108 km highway in the states of Guanajuato and Queretaro. 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. The Irapuato-Piedad highway, also run by ICA, was the first such venture. Responsibilities of ICA included: increasing 45.1 km of highway from two to four lanes; reconstructing 47.9km of highway; and building 8 pedestrian overpasses, 15 bridges, 3 overpasses, and one railway overpass. SCT carried out the public tender for the project. 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. Four consortia presented offers: ICA-Controladora; FCC Acciona; IDEAL; and Construobras, a consortium of four Tamaualipas state firms. SCT required bidders to confirm credit lines from their banks to make a decision. ICA-Controladora presented the lowest tariff of 1 peso per kilometer compared with 3.3 pesos per kilometer presented by FCC-Acciona and IDEAL. Although the tariff was not the only factor, SCT awarded the contract to ICA in May 2006. ICA established Concesionaria de Vias Irapuato Queretaro, S.A. de C.V. as a special purpose vehicle to hold the contract. The contract established an association between the SCT and the private participant to design, finance, build, rehabilitate, maintain and operate a highway. In exchange for those services, the private participant received periodic payments from SCT. Periodic payments come from two parts: a minimum payment for the functioning of the road according to the standards set by the contract; and a “shadow toll” or payments linked to traffic levels as determined by the SCT. The Queretaro-Irapuato highway was divided into ten sections, and SCT was to pay ICA for each section built. ICA received financial backing from Banco Santander Serfin, through a 14-year credit that was to account for US $61 million. The rest of the projected US $128 million was to be financed through equity. Banco Santander Serfin also financed ICA’s other PPP, the Irapuato-Piedad highway earlier in 2006. The Queretaro-Irapuato highway reached financial closure when the contract was signed in June as it already had significant financial support. Works were to begin in July of 2006 and end in 2009.