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?

Chile: a Brief History

Declared independence from the Spanish on September 18, 1810

After the War of 1879 vs Bolivia and Peru, Chile entered into a
period of economic expansion led by mining and manufacturing
industries

1900s flat economic growth and high inflation

Following an acute recession Chile elected the socialist Salvador

Allende of the Popular Unity Party (UP) in 1970 => Nationalization

On September 11, 1973, a military coup led by General Augusto

Pinochet => crack down on political activities

All post-Pinochet presidents affiliated with a center-left party

known as the Concertacion

Chile: Economy
GDP

Chile averaged 4.4% GDP growth (2002 and 2006)

Increased global demand 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 monetary policy which is now better

Chile: Transportation
Infrastructure

Increasingly good infrastructure and a large highway

coverage

Since 1990, privatization of the construction and

maintenance of commercially viable roads through BOT
concessions:
Modern motorway network between La Serena and Puerto Montt
(over 90% of Chileans covered by this network)
Also used to build urban toll roads in Santiago, Valparaso and
Concepcin

Chile's 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 million

The area contains approximately 40% of Chiles total

population

Accounts for nearly 43% of domestic GDP

Is home to a number of foreign and Chilean multinational

companies who often use the city as a base for other South
American operations

Around 800K vehicles use the roads on any given workday

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 m
in NY: 250 m(6.33%, 23 yrs)
in 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

Africa, the U.S., and Asia

Revenues 2006: $17.0 billion

Net Income 2006: $0.7 billion

Market cap (12/31/2006): $18

billion

Listed on the Madrid Stock

Exchange

Operates in South America,

Listed on the Stockholm Stock

Exchange (OMX)

Autopista Central
Acceso Nor-Poniente (21)
Autopista Aconcagua

N
Vespucio Norte Express (29)

Trbol Quilicura

Enlace La Dehesa
Eje Kennedy

Costanera
Norte (42)

Av. El Salto

Airport

Tnel San Cristbal

Express (4)

Ruta 68

Rotonda Grecia

Vespucio Sur (24)

Ruta 78 Autopista del Sol

Autopista Central (60)

Ro Maipo
Autopistas del Maipo

Autopista Acceso Sur

Autopista Central: Business

Model
Toll collection: Electronic free Flow Tolling (100%)
Toll fees:

Vary according to vehicles classes, 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 channels
Debt collection agents
Tags warehouse & logistics
Photos verification

Why the Business Model

Works?
Motorists have the obligation to report any changes of personal
details to Government Vehicle Registration
Failure to pay toll and / or traffic fines results in:
Owners listed in Debtors Database
Vehicle listed in Traffic Offenders Database
Law (2002) makes it mandatory to have valid Tag or alternative
means, when entering toll roads. Otherwise trespassers are
exposed to prosecution for Law Enforcement
Toll equipment are Certified Means for collecting Enforcement
data

Two ways to carry out Law Enforcement:

Traffic Regulation Enforcement by Local Police. US$ 50 fine 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 Central

Capital Structure Balance

Sheet
High leverage all
the years, on
2007:
BV Total liabilities
/ Equity = 4.8
BV 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: $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 parks

Autopista Central is highly

complementary to its
infrastructure portfolio in LATAM.

The worlds 12th largest bank by

market cap (2007)

In Chile, Santander is the largest

bank in terms of total assets,
loans, and shareholders equity

Revenues 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
million infrastructure fund called
Santander Infraestructuras I

Given 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

Revenues: 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% of 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
concession 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 repurchased 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.

Model Inputs: Beta

The Beta of a project is primarily affected by three factors:

i. Business: in terms of business risk: medium level

ii. Operating 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 higher than 4 (4.9 and 4.2 respectively).

International Commercial Partners:

The project has high fixed costs compared to variable costs and thus represents a
higher operational risk. The major costs are depreciation and administrative expenses
which is normal in the public infrastructure sector

iii. Financial Leverage:

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
Traffic Risk: Santiago represents 32% of the overall Chilean population, the GDP of the
zone encompasses approximately 40% of the total Chilean GDP

Kapsch Group
SICE
Q-Free ASA

Involvement of Multilateral Agencies: none

Model Inputs: Beta

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

Morgan Stanley Beta Adjustment Formula:

= [Estimate x (2/3)] + [ 1 x (1/3)]
Where:
:
Beta of project
Estimate: Estimated beta of project from comparables or other method

Equity Capital: Damodaran

World Modified CAPM

Equity Capital: EHV Model

Equity Capital: EHV Model

Equity Capital: EHV 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 level

Expropriation Risk: 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 leverage

Sensitivity of the Project to Wars and Strikes: very sensitive to a war or

to a terrorist attack but with very low probability to happen

Natural Disasters: the project is very sensitive to natural disasters

Probability of Default: moderate as in mid-2007, Autopista Centrals

credit rating was raised by Standard & Poors (from BBB- stable to BBBpositive) 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-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.
Bonds placed in the US: USD 250 million

Common 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 or $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 based 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

Autopista 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 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