1、Autopista Central,David Keller Belisario Galarcep Massimo Paone Javier Vilardell,Agenda,Chile Autopista Central The Deal Valuation Process The Damodaran Modified World CAPM Model EHV Cost of Capital Model What Happened?,Declared independence from the Spanish on September 18, 1810After the War of 187
2、9 vs Bolivia and Peru, Chile entered into a period of economic expansion led by mining and manufacturing industries1900s flat economic growth and high inflationFollowing an acute recession Chile elected the socialist Salvador Allende of the Popular Unity Party (UP) in 1970 = NationalizationOn Septem
3、ber 11, 1973, a military coup led by General Augusto Pinochet = crack down on political activitiesAll post-Pinochet presidents affiliated with a center-left party known as the Concertacion,Chile: a Brief History,Chile: Economy,GDP Chile averaged 4.4% GDP growth (2002 and 2006) Increased global deman
4、d and commodities prices boosted growth Most dynamic economic sectors (2006): c communications, financial services, agriculture, and forestry Monetary Policy Banco Central de Chile (BCC) : International degree of credibility Inflation target of 3% (with 1% margin of error) 6.5% nominal rate improved
5、 monetary policy which is now better,Chile: Transportation Infrastructure,Increasingly good infrastructure and a large highway coverageSince 1990, privatization of the construction and maintenance of commercially viable roads through BOT concessions: Modern motorway network between La Serena and Pue
6、rto Montt (over 90% of Chileans covered by this network) Also used to build urban toll roads in Santiago, Valparaso and ConcepcinChiles Ministry of Public Works aims to increase the network of paved roads to 25,000 Km by the end of 2010,Chile: Santiago,Largest city in the country with population of
7、7 millionThe area contains approximately 40% of Chiles total populationAccounts for nearly 43% of domestic GDPIs home to a number of foreign and Chilean multinational companies who often use the city as a base for other South American operationsAround 800K vehicles use the roads on any given workday
8、 in Santiago (43% of all of the total number of vehicles registered in the country),Autopista Central: Fast Facts,Concession contract: Granted on 01/04/2001 Concession period: 30 years Construction started: 07/26/2001 Construction costs: US$ 680M Funding:Bonds : US$ 603 min NY: 250 m(6.33%, 23 yrs)i
9、n Chile: 353 m (5.69%, 23yrs)Shareholders equity: US$ 208M,Main Shareholders,Strong presence in 15 countries in Latin America Revenues 2006: $18.3 billion Net income 2006: $1.6 billion Market cap (12/31/2006): $19.6 billion Listed on the Madrid Stock Exchange,Operates in South America, Africa, the U
10、.S., and Asia Revenues 2006: $17.0 billion Net Income 2006: $0.7 billion Market cap (12/31/2006): $18 billion Listed on the Stockholm Stock Exchange (OMX),Autopista Central,Autopista Central: Business Model,Toll collection: Electronic free Flow Tolling (100%) Toll fees:Vary according to vehicles cla
11、sses, traffic conditions and heavy commercial vehicles routes Adjusted in accordance with the annual change in CPI Autopista Central is allowed to increase toll fees at 3.5% real annually Main outsourced services Payment collection agents Call centre Printing & mailing of invoices Day Pass vending c
12、hannels Debt collection agents Tags warehouse & logistics Photos verification,11,Toll lane,VDC Sensor,Transceiver,Gantry,Transceiver,Imaging Sensor,VDC Sensor,Imaging Illumination,1. DETECTION,2. TRACKING,3. VEHICLE IMAGING,4. COMMUNICATION,5. CLASSIFICATION,6. ENDING,Imaging Sensor,Shoulder,Toll la
13、ne,Why the Business Model Works?,Motorists have the obligation to report any changes of personal details to Government Vehicle RegistrationFailure to pay toll and / or traffic fines results in: Owners listed in Debtors Database Vehicle listed in Traffic Offenders Database Law (2002) makes it mandato
14、ry to have valid Tag or alternative means, when entering toll roads. Otherwise trespassers are exposed to prosecution for Law EnforcementToll equipment are Certified Means for collecting Enforcement dataTwo ways to carry out Law Enforcement: Traffic Regulation Enforcement by Local Police. US$ 50 fin
15、e paid to Police Toll Payment Enforcement by Court: up to US$ 85 compensation paid to concessionaire,Historical Performance: P&L,Expected strong operating growth 70 % of 900,000 regular urban toll roads users are using Autopista Central 39% of urban toll roads revenues are collected by Autopista Cen
16、tral,Capital Structure Balance Sheet,High leverage all the years, on 2007:BV Total liabilities / Equity = 4.8BV Debt / Equity = 3.8 (aprox. 20% Equity / 80% Debt),Deal Parties: Buyers,Specializes in the management and operation of toll roads and airports. Listed on the Madrid Stock Exchange Revenues
17、: $4.2 billion Net income of $0.7 billion Operates 6,500 km of toll roads in Europe Chile: Operates two large toll roads: highways Operates the Santiago airport and parking lots and logistics parksAutopista Central is highly complementary to its infrastructure portfolio in LATAM.,The worlds 12th lar
18、gest bank by market cap (2007)In Chile, Santander is the largest bank in terms of total assets, loans, and shareholders equityRevenues of $69.4 billion Net income of $7.9 billion Santander Private Equity (SPE) is the private equity unit of Santanders Asset Management group. In 2004 SPE raised a $228
19、 million infrastructure fund called Santander Infraestructuras IGiven its knowledge of the Chilean market, Autopista Central was a perfect fit to Santander portfolio,Valuation,How Did We Value the Project?,Financial Projections,Financial Projections,Financial Projections,Financial Assumptions,Revenu
20、es: increase, but in a decreasing manor, during the first years (until 2010) because of the new highway opening. From 2015 onward revenues have a stable growth of 5%, which is the Y/Y increase in the toll rate. Gross margin: 80% which is the management target for the concession. SG&A expenses: 17% o
21、f sales based on management input and historical data. Other operating income / expense: We used historical and target data and management input. Depreciation Schedule: The concession project is fully depreciated during the life of the project. The Chilean law allows full depreciation of the concess
22、ion before the assets control is returned to the local government.,Financial Assumptions,Dividends: No dividends paid to the equity holders until completion of the concession. Equity partners have a mezzanine credit facility that is use to extract cash flows at a better tax rate. Shares: No shares r
23、epurchased or issued during the concession period. Debt: For simplicity we use a linear repayment schedule. As the agreement was structured, the concession pays interest to debt holders as well as accounts payable holders.,The Beta of a project is primarily affected by three factors: i. Business: in
24、 terms of business risk: medium level Stage Risk: The toll road is in its post-completion stage, the toll road has been completely operational since 2006 Revenue Risk: The implementation and use of an electronic payment system has been done successfully thus, Revenue Risk is expected to be low Traff
25、ic Risk: Santiago represents 32% of the overall Chilean population, the GDP of the zone encompasses approximately 40% of the total Chilean GDP ii. Operating Leverage: The project has high fixed costs compared to variable costs and thus represents a higher operational risk. The major costs are deprec
26、iation and administrative expenses which is normal in the public infrastructure sector iii. Financial Leverage: The project has a highly leveraged structure which increases the risk. The book value of interest bearing liabilities divided by the Stockholders Equity between 2006 and 2007 has been high
27、er than 4 (4.9 and 4.2 respectively). International Commercial Partners: Kapsch Group SICE Q-Free ASA Involvement of Multilateral Agencies: none,Model Inputs: Beta,Model Inputs: Beta,Morgan Stanley Beta Adjustment Formula: = Estimate x (2/3) + 1 x (1/3) Where: : Beta of project Estimate: Estimated b
28、eta of project from comparables or other method,Autopista Central Beta Calculation = Estimate x (2/3) + 1 x (1/3)= 0.85 x (2/3) + 1.00 x (1/3)= 0.90,Well use a range of 0.90 to 1.00,Equity Capital: Damodaran World Modified CAPM,Equity Capital: EHV Model,Equity Capital: EHV Model,Equity Capital: EHV
29、Model,Currency risk: very low as the fluctuation range against the US dollar in the past five years has been moderate. The stability of the Chilean Peso has also been helped by a more than reputable Chilean Central Bank and its monetary policy dedicated to control inflation levelExpropriation Risk:
30、very low based on the high level of democracy reached in Chile, a direct expropriation or a diversion seem to be improbable to happen while a creeping type of expropriation could actually be implemented by the government though the use of fiscal leverageSensitivity of the Project to Wars and Strikes
31、: very sensitive to a war or to a terrorist attack but with very low probability to happenNatural Disasters: the project is very sensitive to natural disastersProbability of Default: moderate as in mid-2007, Autopista Centrals credit rating was raised by Standard & Poors (from BBB- “stable” to BBB-
32、“positive”) and Moodys (from Baa3 to Baa2)US Equity Risk Premium: based on the Global CFO Outlook Survey published by Professors John Graham and Campbell Harvey of Duke University, in 2007 the Equity Risk Premium over the 10-Year US Treasury Bond was estimated to be 4.58%,Capital Structure,Bonds: 23
33、-year, fixed-rate bonds were placed in both the local market as well as in the US Local bonds: equivalent to USD 353 million (2003) were issued in an inflation indexed currency (Unidades de Fomento ) the exchange rate of which was published relative to the Peso (CLP) on a daily basis by the BCC. Bon
34、ds placed in the US: USD 250 millionCommon Equity: CLP 58 billion (aprox. USD 87M)Subordinated Debt (2007): USD 125M,WACC: Damodaran World Modified CAPM,WACC: EHV Model,Recommended Asking Price,We believe that ACS should ask for the highest value obtained in the Damodaran Modified World CAPM model o
35、r $685 million.We believe that Abertis and Santander should pay a control premium of 10 20% given the macro economic conditions of the time and the strategic value that the Autopista Central asset means for each prospective buyer.By applying the 20% control premium to the highest range of the EHV ba
36、sed valuation of $556 million, we obtain a value of $667 million.This value is within range that ACS will be pressing to use under the more favorable discount rate that using the Damodaran Modified World CAPM provides them.,What Happened?,In December 2007 ACS agreed to sell both its 48% stake in Aut
37、opista Central as well as its 50% ownership in another Chilean toll road to a consortium owned 57.7% by Abertis and 42.3% by Santander .As part of the deal Abertis took over operational control of the day to day activities of Autopista Central. In total, Abertis and Santander paid $1.08 billion for
38、the 50% stake in Autopista Central (48% stake from ACS and 2% stake from minority shareholder) and the 50% stake that ACS controlled in the additional toll road.,What Happened?,We estimate that the ACS 48% stake in Autopista Central was valued at just over $620 million.This value is within range that ACS will be pressing to use under the more favorable discount rate that using the Damodaran Modified World CAPM provides them.,Autopista Central,Q & A Session,
