Chile - Chilean Infraestructure Industry Overview - ABN Amro (Zavala) (2006)

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 

November, 2006

Chilean Infrastructure Industry

Overview

Fernando Zavala

Brief Overview of the Chilean Toll Roads Industry

the first phase of the industry

originated from investments

sector

to exit investments in the short term

investors exit the company, and a global toll road operator enters into the country.

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)

3.0% 2.9%

Chile Macro Overview – High growth combined with moderate risk

 Key pillars of the model:

Key

Facts

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

0 50 100 150 200 250 300 Peru

Mexico Colombia Chile Brazil Argentina

Concessions Awarded to Private Sector in Chile

 3 Prison Infrastructure Programs (8

prison precincts): US$205M

 2 Dam: US$140M

 4 Public Edification: US$114M

Total Concession Investments

Total awarded volume of business over US$ 6.3 Billion

Source: MOP

Airports 4%

Urban Highways 27%

Public Transportation

1%

Penitentiaries 3%

Dams 2% Public

Edification 2%

Interurban Highways 61%

48 Projects Awarded to Private Companies

 Other road infrastructure

projects under study (11):

US$884M

35 Projects to be awarded totaling more than US$ 3.6 Billion in investments

Source: MOP

Dams 11%

Penitentiaries, Railroads &

others 9%

Other road infrastructure projects under evaluation 24%

Road infrastructure projects 45%

Hospitals 8%

Airports 3%

Expected Concession Investments Project Portfolio 2006 - 2008

Toll Road Concession Operators in Chile

Toll Road Concession Operators in Chile

Los Libertadores 100%

Rutas del Pacifico 50%

Litoral Central 50% Rutas del Pacifico Los Lagos 88% 50%

Autopista del Maipo 100%

Ruta de la Araucanía 100%

Ruta de los Ríos 76%

Autopista del Aconcagua 100%

Autopista del Bosque 100%

Central Chile – Metropolitan Region Concession Highways

Source: MOP, Coordinación General de Concesiones

 29 Km highway

30-yr concession

Vespucio Sur

Central Chile (Excluding Metropolitan Region) Concession Highways

Source: MOP, Coordinación General de Concesiones

Rutas del Pacifico

Puchuncavi Nogales Viña del Mar

Valparaiso

Santiag o Casablanca

Los Andes

Quintay

Embalse Rapel

 OHL

 88.65 Km toll road

28-yr concession

Belfi S.A 33.9%, Las

Américas A.F.I S.A

33.9%, CMB Prime A.F.I S.A 26.5%

Ruta de los Ríos

 Cintra 75%, Las Américas

Stages of Sector Development

 Toll road concessions

a portfolio of motorway concessions

 Once scale is achieved:

– M&As

(consolidation / monetization)

– IPOs (partial monetization)

Stage 3 –

“Consolidation” Stage 2 – “Operation”

Today…

 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)

Costanera Norte &

Transelec Case Studies

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

Norte to Autostrade SpA

and Sias SpA

Sole Financial Adviser to

Impregilo SpA

Chile, June 2006

– Valuation: using DCF, Trading

and Transaction methods

– Preparation of investment

teaser

– Selection and contact with

potential strategic and

financial investors in Chile

– 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

 ABN AMRO executed the whole M&A process performing several tasks that included, among others:

Recent M&A Transaction: Costanera Norte Case Study - Chile

Overview of Transelec Transaction

 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)Key Considerations

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 2005 2006E Transaction

multiple 12.6x 12.2x 24.7 ABN

estimates 10.5x 10.2x 18.3

P/E

Brief Overview Infrastructure M&A worldwide

Overview of Infrastructure related transactions worldwide

Infrastructure M&A transactions volume 1998 - 2006 YTD

US$ Bln

Overview of Infrastructure related transactions worldwide

Largest Infrastructure M&A transactions 1998 - 2006 YTD

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)

Source: Thomson Financial



Apr 23 2006 Autostrade (Italy) Abertis Infrastructuras (Spain) 28.4

May 29 2006 Kinder Morgan (US) Private equity consortium (US) 27.5

Toll road operators valuation – Trading Multiples

International listed toll road operators are trading at 10x - 11x EBITDA on average

Note: Numbers in grey have been excluded from average

Toll Road Operators Trading Multiples

Toll road operators valuation – Transaction Analysis

Toll Roads M&A Company Transactions

Note: Numbers in grey have been excluded from average

20/05/2005 Hills Motorway Group

19/04/2004 Hills Motorway Group

01/01/2003

Toll road operators valuation – Transaction Analysis (cont’d)

Toll Roads M&A Asset Transactions

acquired % Price EURm

Date

New generation of potential investors

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%.

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 medium term exit strategies

short-to-–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.

Ontario

(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.

Three main types of potential investors (cont’d)

Final Remarks – Infrastructure Industry Pending Issues

Final Remarks

shares

insurance companies and AFPs

Chilean Infrastructure Industry Overview