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AIRDEVAIRDEVAIRDEVAIRDEV conference
Airport PPPs in challenging times Airport PPPs in challenging times Airport PPPs in challenging times Airport PPPs in challenging times –––– transactions and changing business trendstransactions and changing business trendstransactions and changing business trendstransactions and changing business trends
Lisbon, April 2012
2AIRDEV Conference, April 2012 – Tiago Lopes
ALG recent transaction advice projects
Recent airport Due Diligence and Transaction Advic
Portugal and Spain
• Handling Lisboa, Porto e Faro (Aviapartner, 2011)
• Madrid e Barcelona (Ferrovial, 2011)
• Aeroporto privado confidencial (Abu Dhabi Airports Company, 2009)
• BOT Murcia (Aeromur, 2006-2010)
• Lleida ( Catalunha, 2008)
Rest of Europe
• Regionais da França (cliente confidencial, 2011)
• Abertis (fundo privado de infra-estruturas, 2010)
• Roma (fundo de infra-estruturas italiano, 2008)
• Taszár (Hungria, Sedesa Concessões, 2007)
• London City (UK, Consórcio Franco-Espanhol, 2006)
• Bruxelas (Bélgica, Ferrovial Aeropuertos, 2005)
• Bratislava (Eslováquia, Abertis, 2005)
Latin America
• BOT Porto Alegre (Brasil, cliente confidencial, 2011-12)
• concession Viracopos (Brasil, cliente confidencial, 2011)
• concession Aeroporto do Galeão (Brasil, cliente confidencial, 2011)
• BOT Natal (Brasil, cliente confidencial, 2011)
• BOT Cuzco (Peru, Proinversión, 2010-2011)
• concession Manta (Equador, Governo do Equador, 2010)
• Privatização dos do sul do Peru (Proinversión, 2009)
• Cabo Frio (Brasil, cliente confidencial, 2010)
• Regionais de São Paulo (Brasil, cliente confidencial, 2010)
Middle East
• Terminal do Kaia Hajj (Arábia Saudita, TBI, 2006)
Asia
• Aeroporto Internacional de Clark (Filipinas, Metro-Pacific Investments Corp., 2011)
ALG – Europraxis is an Indra Group company
3AIRDEV Conference, April 2012 – Tiago Lopes
Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
4AIRDEV Conference, April 2012 – Tiago Lopes
Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
5AIRDEV Conference, April 2012 – Tiago Lopes
Commercial aviation growth is strongly correlated with economic growth
and resilient to successive crises
RPK (trillion)
Source: ICAO, IMF, IATA, analysis ALG
World traffic evolution, 1960-2009
Passengers (RPKs) and Freight (RTKs) vs Economic Drivers
• The aviation industry has historically shown great resilience to crises, having grown consistently for the last 5 decades
• The growth of passenger and freight traffic is highly correlated with GDP growth and with real consumer spending (available income)
• The market has a cyclical behavior, where short periods of crisis are followed by relatively long periods of strong growth
CAGR last years
40 years 4,7%
30 years 6,7%
20 years 3,6%
10 years 3,6%
Emerging countries are the drivers of global economic growth
Cumulative growth 2008-2013 est.
6AIRDEV Conference, April 2012 – Tiago Lopes
Worldwide the air passenger traffic has recovered to pre-crisis levels.
Emerging markets are a key lever in this recovery
• In 2011 the air transport industry showed its resilience to the crisis, although with significant growth differences amongst regions
• The emerging economies are recovering at a much better pace than developed ones
• Latin America showed the highest growth in 2011Source: IATA ‘s Financial Monitor, ALG analysis
Passenger traffic – monthly ASKs Total air freight and passenger volumes
Continuous average growth of 4-5% /p.a. since the deepest point of the crisis in 2009
Approximately 2 years of cumulative losses in Europe and the US
Traffic up 5,4%4,9%
Traffic up 13,7%
Jan 2008Crash of Bear Stearns
Sep 2008Crash of Lehman Brothers
Apr 2010Iceland ash cloud (WE airspace greatly affected for almost one week)
Year on year comparison –2011 vs. 2010
RPK FTK
ASK growth rate
Passenger traffic(RPK)
Freight traffic (RTK)
-0,20%
4,50%
10,10%
14,40%
8,30%
3,50%6,40%
-5,00%
0,00%
5,00%
10,00%
15,00%
20,00%
Africa Asia/Pacific
Europe LatinAmerica
MiddleEast
N.America
TotalMarket
RPK growth rate
Monthly traffic (billions)
7AIRDEV Conference, April 2012 – Tiago Lopes
0,01
0,10
1,00
10,00
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000
GDP/capita (US$)
Latin America
Other big markets
World average
New Zealand
USA
China
India
PortugalSpain
Canadá
Brazil
Mexico
Air passengers per inhabitant (propensity to fly) vs. per capita GDP, 2010
The economic growth of developing countries will underpin future air traffic growth…
For example a 50% increase in Brazilian GDP per capita (from the current US$10.000 to 15.000) could potentially result in an additional 120 million air passengers (increase from 0,4 to 1,0 trips per
habitant)
• There is a clear correlation between the per capita income and propensity to fly, although with variations among different countries
• All emerging economies are in the region where small increases in per capita income result in significant improvements in passengers per inhabitant
• Other factors with strong influence in the expansion of aviation are the reduction of fares, the liberalization of air transport and the consequent development of supply
Source: FMI, IATA, ATI, ALG analysis
Air
pax/ in
hab
itan
t (l
og
scale
)
Emerging economies
Mature markets
Brazil 2010: 0,4 trips per inhabitant
8AIRDEV Conference, April 2012 – Tiago Lopes
Which is reflected in industry traffic forecasts showing that passenger
numbers will (still) be increasing fast …
Airbus traffic forecasts to 2029
Source: Airbus
0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500
CIS
Africa
Latin America
Middle East
North America
Europe
Asia-Pacific 2009 traffic 2029 traffic
RPK (trilion)
+4.1%
+3.3%
+6.8%
+5.5%
+5.8%
+4.7%
% of 2009World RPK
% of 2029 World RPK
27%
28%
28%
6%
5%
3%
3%
33%
25%
20%
9%
6%
4%
3%
20-year world annual traffic
growth
4.8%
+5.6%
9AIRDEV Conference, April 2012 – Tiago Lopes
Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
10AIRDEV Conference, April 2012 – Tiago Lopes
Private capital is being attracted to invest in airport infrastructure
development for a number of reasons…
• Major objectives leading governments to search for private partnership in airport
business:
• Funding infrastructure/ capacity needs with private investment
• Finding financial resources in order to fund other government projects / priorities
• Improving airports a economic performance and level of service by involving an highly experienced airport operator
• Transferring airport project development risk to a private party
• Specificity of airport business is that the traffic, construction, operations and financing
risks are usually fully transferred to the private partner within the limits of the risk
mitigation scheme provided by the government
• Private partnership solutions may apply to…
• Full airport infrastructures
• Specific airport infrastructures such as passenger terminals, cargo terminals,
runways, etc…
11AIRDEV Conference, April 2012 – Tiago Lopes
… so who is investing in airport infrastructure?
Financial institutions ContractorsAiport operators
• BAA
• Copenhagen Airport
• Fraport AG
• Schiphol Group
• AENA
• Aéroports de Paris
• YVRAS (Vancouver)
• Flughafen Zurich AG
• Singapore Changi
• Vienna Airport
• Malaysia Airports Holding
• TAV Airports Holding
• ADC & HAS
• Macquarie
• ABN AMRO Ventures BV
• Caisse des Depots
• Deutsche AssetManagement
• GE Capital
• AXA
• Citigroup
• Global InfrastructurePartners
• Goldman Sachs
• Blackstone Investment
• Advent
• Abertis
• Ferrovial Aeropuertos
• Hochtief
• Vinci Group GTM
• TAV
• Alterra Partners
Many private consortia have members of each of these groups
12AIRDEV Conference, April 2012 – Tiago Lopes
… and how much they are spending in transport (and airport)
infrastructure worldwide
CompanyInvestiment in Transport
(1985 – 2009)Of which airports
1º • R$ 135.680 Milhões• Adquire British Airport Authority por R$ 43.000 Milhões• Hoje, BAA tem um volume de negócio de R$ 7.690 Milhões e opera um volume
de passageiros de 112 MPax
2º • R$ 64.310 Milhões• Participa nos aeroportos de Sydney, Copenhague e Bruxelas, alem do Grupo
Aeroportuario del Sudeste (México), operando anualmente aproximadamente 70 MPax
3º • R$ 61.400 Milhões• Em 2007 vendeu DCA a Abertis por R$ 723 Milhões• Está atualmente no negócio através da Hochtief (com um 30%)
4º • R$ 56.260 Milhões• Gerencia três aeroportos em Camboja e oito aeroportos regionais na França, que
representam cerca de 5 MPax
5º • R$ 50.440 Milhões • Tem participações em seis aeroportos europeus, com volume de 89 MPax
6º • R$ 37.120 Milhões• Através da Abertis Airports tem investido R$ 2.500 Milhões. Hoje, administra 29
aeroportos com volume de mais de 56 Mpax e obtém receitas de R$ 697 Milhões com EBITDA de R$ 243 Milhões
7º • R$ 28.520 Milhões• Entrou no negócio aeroportuário em 2005, com a participação no consórcio
Hermes Airports, concessionária de 2 aeroportos em Chipre
8º • R$ 27.750 Milhões • Tem participação de 33% no aeroporto de Toluca, 2º aeroporto de México D.F.
9º • R$ 26.280 Milhões• Participação de 15% em SCL, concessionário do terminal de Santiago de Chile e
de 45% no BOT para o aeroporto de Castellón
13AIRDEV Conference, April 2012 – Tiago Lopes
How is private investment placed? There are four large types of private
investment vehicles in the airport industry…
Type of involvement
Description Risk profile Duration
Management contract
Private investor runs airport infrastructure or part of it. For
example: terminal or retail area. No ownership of infrastructure
Private operator brings operational and management
knowledge. Can be incentivized for good
performance
short to medium term (4 to 10 years)
BOT/ concession type
Private investor(s) is awarded concession to operate and
manage infrastructure. A number of alternatives are possible:
DBFOT, BOO, BTO,
Private investor hasmandatory investment level in
infrastructure under BOT (Build Operate Transfer)
scheme. Airport reverts to government at end of
concession
long period, usually 20 to 40 years (necessary to
make return on investment in infrastructure)
Trade saleSignificant share (minority or
majority) of airport company sold directly to private investors
Private investors usually bring operational and managerial experience and access to
capital
n.a.
Share flotation/ IPO
Shares sold on stock exchangeRisk transferred to new
shareholders depending on share of equity placed
n.a.
Type of involvement of private sector in airport transactions
Incre
asin
g r
isk level fo
r p
rivate
in
vesto
r
14AIRDEV Conference, April 2012 – Tiago Lopes
… which have been applied widely across the world
Type of involvement
Airport Investor Deal details
Management contract
Dakar, SenegalCairo, Egypt
Brazzaville, Pointe-Noire, CongoMarsa Alam, EgyptJeddah+Ryad, KSA
Damman, KSA
FraportFraport
EgisAdP Management
FraportChangi
25-year contract, operation of new airport8+2 year contract25-year contract, new airport to be builtn.a.5-year contract5-year contract
BOT/ concession type
Enfidha+Monastir, TunisiaLima, Peru
Nantes, FranceLarnaca+Paphos, Cyprus
Athens, GreeceDelhi, India
Budapest, Hungary
TAVFraport, Bechtel
VinciBouyguesHochtief
GMR, FraportHochtief
40-year concession, started 200630-year, started 200140-year, started 201130-year, started 200830-year, started 200130+30 year extension, 200675%-1 share, 75-year concession
Trade sale
ACSA, South AfricaBAA, UK (ii)
London City, UKGatwick, UK
Sydney, AustraliaDüsseldorf, Hamburg, Germany
Hannover, GermanyBrussels, Belgium
AdR (Roma airports)Ferrovial, others
GIPGIP
Macquarie, HochtiefHochtief
FraportMacquarie
Acquisition 20%-stake 1998 (already sold 2005)majority of equity, delisting, 2006100% stake100% stake, 25% later sold to investor100% stake49% stake at each airport
30% stake70% stake
Share flotation/ IPO
BAA, UK (i)AdP, France
Frankfurt, Germany
IPO majorityIPO minorityIPO minority
Listed in the London stock exchange, 1987Listed in the Paris stock exchange, 2006Listed in the Frankfurt stock exchange, 1990
Listing (non-exhaustive) of private involvement in airport infrastructure
15AIRDEV Conference, April 2012 – Tiago Lopes
… still private investors prefer taking less risk in riskier regions (or so
perceived) favoring management contracts with guaranteed returns
Type of involvement
Airport Investor Deal details
Management contract
Dakar, SenegalCairo, Egypt
Brazzaville, Pointe-Noire, CongoMarsa Alam, Egypt
FraportFraport
EgisAdP Management
25-year contract, operation of new airport8+2 year contract25-year contract, new airport to be builtn.a
BOT/ concession type
Enfidha+Monastir, Tunisia TAV 40-year concession, started 2006
Trade saleACSA, South Africa AdR (Roma airports) Acquisition 20%-stake 1998 (already sold 2005)
Example of Africa’s airport transactions
16AIRDEV Conference, April 2012 – Tiago Lopes
Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
17AIRDEV Conference, April 2012 – Tiago Lopes
Airport transactions – PPPs, trade sales, IPOs - as a business solution in
the airport industry only began in the late 80’s…
• Between 1987 and 1995, the number of “privatizations” was limited – only 13 transactions with reduced
transaction values
• Between 1996 and 2001, due to traffic increase, the number of transactions – under various schemes –
increased up to 55 transactions over the period. Transaction values were for the first time above 1 bnUSD,
although dependent on individual transactions
• After 09/11/2001 till 2004, the number of transactions slowed down significantly
Deal flow: airport transaction values per year
Source: Credit Suisse, AdPi
bnUSD
18AIRDEV Conference, April 2012 – Tiago Lopes
… but despite its sophistication airport transactions are sensitive to the industry-specific and the wider economic context
Deal flow: Number of airport transactions above 100mUSD since 2000
5
4
2 2 2
4
6
10
8
5
2
0
2
1 1
0 0
1
2
4
1
00
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
N. transactions 100% equity transfer
Source: Crédit Suisse
Sep 20019/ 11
Financial and economic crisis
• After 2004, boosted by the debt market and traffic growth, the number of transactions increased again
• 2008 onwards The economic crisis slowed the number and value of transactions
• Since 2008 there were a number of aborted transactions: HochtiefAirports, Madrid and Barcelona, French regionals, etc..
• Recovery is taking place in 2012 with processes in Brazil, Portugal (?)
19AIRDEV Conference, April 2012 – Tiago Lopes
The economic crisis also had an impact on airport valuation: EBITDA multiples have decreased significantly after 2008
Transaction valuation in large airport acquisition deals (+100 mUSD): EBITDA multiples and Financial leverage
Source: HSBC, 2010
0
5
10
15
20
25
30
35
Transaction Value /Last Twelve Months EBITDA
Transaction date 2000 2002 2004 2004 2005 2005 2006 2006 2007 2007 2009 2012 (?)
Target AdR Sydney Brussels TBICopen-hagen
Budapest BAA London City Exeter Budapest Gatwick ANA
Buyer Leonardo
Southern Cross
(Macquarie + Hochtief)
MacquarleACDL
(Abertis + AENA)
Macquarle BAA
ADI (Ferrovial +
CDPQ + GIC)
AIG + GIPRegional and city airports
Hochtlef + GIC +
CDPQ + KfW
GIP (?)
Transaction value (€m) 2,700 3,150 1,650 1,050 2,600 2,000 23,400 1,100 100 1,950 1,6502,000 to
2,400
Share (%) 52% 100% 70% 100% 41% 75% 100% 100% 100% 75% 100% 100%
PAX at acquisition (m) 27.1 26.0 15.0 18.0 19.0 7.8 122.7 2.0 1.0 8.2 32.3 30.0 +
10 to 12x
20AIRDEV Conference, April 2012 – Tiago Lopes
Airport valuation: Changing airport financing and more challenging
conditions: the fundamentals have not changed, but only the (financial)
risk perception
Source: HSBC, 2010
Transaction value
Equity funding
Debt funding
Underwritting
Minimum ICR(Interest Cover Ratio)
Maturity
Repayment
Pricing
Pre-crunch Current
• Up to 20-30x LTM EBITDA • 9-13x LTM EBITDA
• 10-14%x EBITDA• 12-14% IRR
• 4-5x EBITDA• 12-14% IRR
•Up to 100% of RAB (regulated) or 15x EBITDA (unregulated)• Junior debt up to 2X EBITDA
•Up to 80% of RAB (regulated) or 5-8x EBITDA (unregulated)• Scarce junior debt capacity
• Yes (backed by securitisation) • Yes (re-emergence of capacity)
• 1.3-1.5x for senior debt1.1-1.2x for junior debt
• 1.7-2.0x for senior debt
• Up to 7-8 years • 5 years is now the norm
• Bullet and partial cash sweep• More inerous cash sweep provisions emerging
• Margin of 60-125bps for senior debt (300-450 bps for junior)
• Margin of 150-250bps for senior debt
Note: LTM – Last Twelve MonthsRAB – Regulated Asset BaseEBITDA – Earning Before Interest Tax Depreciation and AmortizationBps – basis points (above LIBOR)
21AIRDEV Conference, April 2012 – Tiago Lopes
Long term concessions and trade sales have resulted in higher valuations than IPOs Long term concessions and trade sales have resulted in higher valuations than IPOs
Stock listed airports (IPO)
Recent market valuations
Concessions and direct sales
Unweightedaverage 8,5x
Unweihtedaverage 15x
0
5
10
15
20
Mala
ysia
AIA
VIE
BIA
C
CF
H
BA
A
AD
R
Mala
ysia
AIA
Vie
nn
a
BIA
C
CP
H
BA
A
AD
R
Bir
min
gh
am
East
Mid
lan
ds
Han
no
ver
Belf
ast
Du
sseld
orf
Pre
stw
ick
Lu
ton
Beijin
g (
AD
P)
AC
SA
Bri
sto
l
Ham
bu
rg
Wellin
gto
n
Can
berr
a
Arg
en
tin
a
Melb
ou
rne
Card
iff
Co
llan
gaza
SA
VE
Bri
sb
an
e
Darw
in A
P
Pert
h
Ad
ela
ide
Unweighted average(1) 8,2x
Despite the current negative conditions, the increased competition and the
sector’s inherent conditions (good long-term returns) have pushed
EV/EBITDA in acquisitions to higher values than those currently traded
(1) Unweighted average IPO and concession values(2) LCY: EBITDA estimated by Morgan Stanley in 2006
(EV/EBITDA) multiples
Bu
dap
est
32
LC
Y (
2)
28
Currently accepted EBITDA multiples
22AIRDEV Conference, April 2012 – Tiago Lopes
At the end of the day, how are airports valued: Moody’s global airport
rating methodology can be used as a reference for analyzing an airport
business proposition
Source: Moody’s
23AIRDEV Conference, April 2012 – Tiago Lopes
Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
24AIRDEV Conference, April 2012 – Tiago Lopes
A new paradigm is emerging with the increase of private capital in the
airport industry, the loss of exuberance in the markets and the
• Airports are becoming less of singe prized assets and more like traded commodities
• The increased capital needs and the different types of investment “architecture” and risk profile have attracted new types of investors e.g. contractors, pension funds
• There is a clear separation between airport managers and investors. For the first time in the industry you do NOT need to have expertise to own an airport
• The original goal of attracting private capital to build capacity is now becoming distorted. It is now becoming a cash source for governments in need e.g. Portugal
Source: Credit Suisse, AdPi
25AIRDEV Conference, April 2012 – Tiago Lopes
Tiago Lopes
www.alg-global.comwww.europraxis.com
LISBOATel: (+351) 21 313 90 60Fax (+351) 21 313 90 61 BARCELONA BEIJING BILBAO BUENOS AIRES CARACAS DUBÁI LIMA LONDRES MADRID MÉXICO D.F. MILÁN PARÍS RABAT SAO PAULO