Latin Finance - October 2008 - 21

mexican infrastructure investment Bidding Work Wasted Chico Pardo, 58, is one of Slim’s longterm right hand men. The Chicago University masters graduate and engineer has held key posts throughout the magnate’s empire, including a stint of more than a decade as director general of Telmex. Now co-president of both IDEAL and construction sister company CICSA, Chico Pardo is wildly enthusiastic about infrastructure, seeing well managed private investment in the sector as the key to pushing Mexico and the rest of LatAm into modernity. But he admits it can be frustrating when you lose a bid. “You work a lot, then the moment for awarding the bid arrives,” he says. “You can win, or you can lose and all your work goes to waste.” While Chico Pardo understands the importance of generating shareholder value, he says investors should be confident that IDEAL is aggressively pursuing new contracts. But it will not take unnecessary risks with the company’s financial stability to garner short-term gains. “We have to take a long-term view,” says Chico Pardo at the end of long day of meetings in late August, relaxing at a long boardroom table in his modest office on Mexico City’s Palmas boulevard. “Rather than watching what happens quarter by quarter, you have to look at whether the business is financially solid and professional enough to give it an advantage in the end.” “We want growth in our capital base to be permanent, not a single flash in the pan,” he says. “We’re not fretting, we’re happy – we think there are better things in the pipeline.” If all goes to plan, that pipeline will be huge. The government opened bidding at the end of August to build container port Punta Colonet on the Pacific Coast side of the Baja peninsular, a project expected to be worth at least $5 billion. IDEAL will bid in a consortium alongside New Jersey-based Ports America and Grupo Mexico. IDEAL is also bidding on the second Farac ICA Keeps Powder Dry exican construction giant ICA is working on Mexico City’s metro expansion project – funded by the government – but it is keeping its powder dry for other deals coming up later in 2008. “We are expecting some other concessions towards the end of the year where capital may be required, and we are preparing for those,” Alonso Quintana, CFO at ICA, tells LatinFinance. He adds that these include the Farac tollroad sequels and a $500 million water treatment plant in Guadalara, which should be started this year. Water treatment is typically not hugely lucrative, but Quintana says overall returns make it worthwhile, including construction and structuring. “We try to make it that overall our return is double digit, hopefully getting to the 15% area,” says the official. ICA is also focused on roads and airports. This includes a high speed road link between the capital and Veracruz port. The integrated Mexican construction Ready to invest: Quintana firm is meanwhile mulling its strategy regarding the $4 billion port at Punta Colonet in Baja California. “It’s quite important, we’re studying it, we’re looking for partners,” says Quintana in a mid-September interview. Mexico’s government opened bidding late August for the contract to build LatAm’s first greenfield port. Quintana adds that a natural partner would be Goldman Sachs Infrastructure Partners, with which ICA worked on the first Farac project. M “It’s a bit more interesting as a construction project than as the whole concession, but we would still be looking at the concession as well,” says the CFO. ICA could enter into a partnership where it only does the construction. Quintana expects the winner to use traditional project finance for the deal. “Once the cashflows are transparent enough and visible for the banks, there’s evermore creative ways of putting the money in,” says the official. The government says the project should be ready to start construction next year for completion in 2012. Some analysts say it could cost as much as $7 billion. The West Coast facility is the biggest in president Calderon’s infrastructure plan and should divert container traffic away from the congested US ports of Long Beach and Los Angeles, via a planned rail connection to the US. IDEAL has formed a consortium with New Jersey-based Ports America and Grupo Mexico. The Mexican government says it has more than 50 interested bidders. Other expected names include Hutchison Port Holdings, SSA Marine and DP World, as well as rail groups Union Pacific and BNSF. ICA has risen to prominence in Mexico, beating IDEAL to the punch on several high profile transactions. “Our objective is not to beat IDEAL. Our target is to win the big projects we feel most competitive in and where we have most advantage, where we can create more value,” says Quintana. He adds that ICA is partnering up with IDEAL in some projects. — James Crombie October 2008 LATINFINANCE 21
Latin Finance - October 2008

Table of Contents for the Digital Edition of Latin Finance - October 2008
