AIRDEV conference
Airport PPPs in challenging times –––transactions and changing business trends
Lisbon, April 2012 ALG recent transaction advice projects
Recent airport Due Diligence and Transaction Advic
Portugal and Spain Rest of Europe • Handling Lisboa, Porto e Faro (Aviapartner, • Regionais da França (cliente confidencial, 2011) 2011) • Abertis (fundo privado de infra-estruturas, 2010) • Madrid e Barcelona (Ferrovial, 2011) • Roma (fundo de infra-estruturas italiano, 2008) • Aeroporto privado confidencial (Abu Dhabi • Taszár (Hungria, Sedesa Concessões, 2007) Airports Company, 2009) • London City (UK, Consórcio Franco-Espanhol, 2006) • BOT Murcia (Aeromur, 2006-2010) • Bruxelas (Bélgica, Ferrovial Aeropuertos, 2005) • Lleida ( Catalunha, 2008) • Bratislava (Eslováquia, Abertis, 2005)
Asia • Aeroporto Internacional de Clark (Filipinas, Metro-Pacific Investments Middle East Corp., 2011) • Terminal do Kaia Hajj (Arábia Saudita, TBI, 2006)
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) ALG – Europraxis is an Indra Group company
AIRDEV Conference, April 2012 – Tiago Lopes 2 Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
AIRDEV Conference, April 2012 – Tiago Lopes 3 Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
AIRDEV Conference, April 2012 – Tiago Lopes 4 Commercial aviation growth is strongly correlated with economic growth and resilient to successive crises Emerging countries World traffic evolution, 1960-2009 are the drivers of global economic growth Cumulative growth 2008-2013 est. RPK (trillion) CAGR last years 40 years 4,7% 30 years 6,7% 20 years 3,6% 10 years 3,6%
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 Source: ICAO, IMF, IATA, analysis ALG periods of strong growth
AIRDEV Conference, April 2012 – Tiago Lopes 5 Worldwide the air passenger traffic has recovered to pre-crisis levels. Emerging markets are a key lever in this recovery Total air freight and passenger volumes Passenger traffic – monthly ASKs Monthly traffic (billions) Jan 2008 Sep 2008 Apr 2010 Crash of Bear Stearns Crash of Lehman Iceland ash cloud (WE RPK FTK Continuous average growth of 4-5% /p.a. Brothers airspace greatly affected for almost one week) since the deepest point of the crisis in 2009 ASK growth rate
Traffic up 13,7% Traffic up 5,4% 4,9%
Passenger traffic (RPK) Freight traffic (RTK)
Year on year comparison –2011 vs. 2010 Approximately 2 years of cumulative losses in Europe and the US RPK growth rate 20,00% 14,40% • In 2011 the air transport industry showed its 15,00% 10,10% resilience to the crisis, although with significant 8,30% 10,00% 6,40% 4,50% growth differences amongst regions 5,00% 3,50% -0,20% 0,00% • The emerging economies are recovering at a Africa Asia/ Europe Latin Middle N. Total -5,00% Pacific America East America Market much better pace than developed ones • Latin America showed the highest growth in 2011 Source: IATA ‘s Financial Monitor, ALG analysis
AIRDEV Conference, April 2012 – Tiago Lopes 6 The economic growth of developing countries will underpin future air traffic growth…
Air passengers per inhabitant (propensity to fly) vs. per capita GDP, 2010 • There is a clear correlation between the per capita income 10,00 and propensity to fly , although New Zealand Mature markets Spain with variations among different Emerging Portugal Canadá economies countries USA 1,00 Mexico • All emerging economies are in the region where small increases in Brazil Brazil 2010: 0,4 trips per inhabitant per capita income result in Latin America China significant improvements in 0,10 Other big markets passengers per inhabitant India World average
Air pax/ inhabitant (log scale) (log inhabitant pax/ Air • Other factors with strong influence GDP/capita (US$) in the expansion of aviation are 0,01 the reduction of fares, the 0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 liberalization of air transport and the consequent development of supply
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) Source: FMI, IATA, ATI, ALG analysis
AIRDEV Conference, April 2012 – Tiago Lopes 7 Which is reflected in industry traffic forecasts showing that passenger numbers will (still) be increasing fast …
Airbus traffic forecasts to 2029 % of 2009 % of 2029 0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 World RPK World RPK
Asia-Pacific 2009 traffic 2029 traffic +5.6% 27% 33%
Europe +4.1% 28% 25%
North America +3.3% 20-year world 28% 20% annual traffic growth Middle East +6.8% 6% 9% 4.8%
Latin America +5.5% 5% 6%
Africa +5.8% 3% 4%
CIS +4.7% 3% 3% RPK (trilion)
Source: Airbus
AIRDEV Conference, April 2012 – Tiago Lopes 8 Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
AIRDEV Conference, April 2012 – Tiago Lopes 9 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…
AIRDEV Conference, April 2012 – Tiago Lopes 10 … so who is investing in airport infrastructure?
Aiport operators Financial institutions Contractors
• BAA • Macquarie • Abertis
• ABN AMRO Ventures BV • Copenhagen Airport • Ferrovial Aeropuertos • Fraport AG • Caisse des Depots
• Schiphol Group • Deutsche Asset • Hochtief Management • AENA • Vinci Group GTM • GE Capital • Aéroports de Paris • AXA • TAV • YVRAS (Vancouver) • Citigroup • Alterra Partners • Flughafen Zurich AG • Global Infrastructure • Singapore Changi Partners
• Vienna Airport • Goldman Sachs
• Malaysia Airports Holding • Blackstone Investment
• TAV Airports Holding • Advent
• ADC & HAS
Many private consortia have members of each of these groups
AIRDEV Conference, April 2012 – Tiago Lopes 11 … and how much they are spending in transport (and airport) infrastructure worldwide
Investiment in Transport Company Of which airports (1985 – 2009)
• Adquire British Airport Authority por R$ 43.000 Milhões 1º • R$ 135.680 Milhões • Hoje, BAA tem um volume de negócio de R$ 7.690 Milhões e opera um volume de passageiros de 112 MPax • Participa nos aeroportos de Sydney, Copenhague e Bruxelas , alem do Grupo 2º • R$ 64.310 Milhões Aeroportuario del Sudeste (México), operando anualmente aproximadamente 70 MPax • Em 2007 vendeu DCA a Abertis por R$ 723 Milhões 3º • R$ 61.400 Milhões • Está atualmente no negócio através da Hochtief (com um 30%)
• Gerencia três aeroportos em Camboja e oito aeroportos regionais na França, que 4º • R$ 56.260 Milhões representam cerca de 5 MPax
5º • R$ 50.440 Milhões • Tem participações em seis aeroportos europeus, com volume de 89 MPax
• Através da Abertis Airports tem investido R$ 2.500 Milhões. Hoje, administra 29 6º • R$ 37.120 Milhões aeroportos com volume de mais de 56 Mpax e obtém receitas de R$ 697 Milhões com EBITDA de R$ 243 Milhões
• Entrou no negócio aeroportuário em 2005, com a participação no consórcio 7º • R$ 28.520 Milhões 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.
• Participação de 15% em SCL, concessionário do terminal de Santiago de Chile e 9º • R$ 26.280 Milhões de 45% no BOT para o aeroporto de Castellón
AIRDEV Conference, April 2012 – Tiago Lopes 12 How is private investment placed? There are four large types of private investment vehicles in the airport industry…
Type of involvement of private sector in airport transactions
Type of Description Risk profile Duration involvement
Private operator brings Private investor runs airport operational and management Management infrastructure or part of it. For short to medium term knowledge. contract example: terminal or retail area. (4 to 10 years) Can be incentivized for good No ownership of infrastructure performance Private investor has Private investor(s) is awarded mandatory investment level in long period, usually 20 to concession to operate and infrastructure under BOT BOT/ concession 40 years (necessary to manage infrastructure. A number (Build Operate Transfer) type make return on investment of alternatives are possible: scheme. Airport reverts to
investor in infrastructure) DBFOT, BOO, BTO, government at end of concession Private investors usually bring Significant share (minority or operational and managerial Trade sale majority) of airport company sold n.a. experience and access to Increasing risk level for private private for level risk Increasing directly to private investors capital Risk transferred to new Share flotation/ Shares sold on stock exchange shareholders depending on n.a. IPO share of equity placed
AIRDEV Conference, April 2012 – Tiago Lopes 13 … which have been applied widely across the world
Listing (non-exhaustive) of private involvement in airport infrastructure
Type of Airport Investor Deal details involvement Dakar, Senegal Fraport 25-year contract, operation of new airport Cairo, Egypt Fraport 8+2 year contract Management Brazzaville, Pointe-Noire, Congo Egis 25-year contract, new airport to be built contract Marsa Alam, Egypt AdP Management n.a. Jeddah+Ryad, KSA Fraport 5-year contract Damman, KSA Changi 5-year contract Enfidha+Monastir, Tunisia TAV 40-year concession, started 2006 Lima, Peru Fraport, Bechtel 30-year, started 2001 Nantes, France Vinci 40-year, started 2011 BOT/ concession Larnaca+Paphos, Cyprus Bouygues 30-year, started 2008 type Athens, Greece Hochtief 30-year, started 2001 Delhi, India GMR, Fraport 30+30 year extension, 2006 Budapest, Hungary Hochtief 75%-1 share, 75-year concession ACSA, South Africa AdR (Roma airports) Acquisition 20%-stake 1998 (already sold 2005) BAA, UK (ii) Ferrovial, others majority of equity, delisting, 2006 London City, UK GIP 100% stake Gatwick, UK GIP 100% stake, 25% later sold to investor Trade sale Sydney, Australia Macquarie, Hochtief 100% stake Düsseldorf, Hamburg, Germany Hochtief 49% stake at each airport Hannover, Germany Brussels, Belgium Fraport 30% stake Macquarie 70% stake BAA, UK (i) IPO majority Listed in the London stock exchange, 1987 Share flotation/ AdP, France IPO minority Listed in the Paris stock exchange, 2006 IPO Frankfurt, Germany IPO minority Listed in the Frankfurt stock exchange, 1990
AIRDEV Conference, April 2012 – Tiago Lopes 14 … still private investors prefer taking less risk in riskier regions (or so perceived) favoring management contracts with guaranteed returns
Example of Africa’s airport transactions
Type of Airport Investor Deal details involvement
Dakar, Senegal Fraport 25-year contract, operation of new airport Cairo, Egypt Fraport 8+2 year contract Management Brazzaville, Pointe-Noire, Congo Egis 25-year contract, new airport to be built contract Marsa Alam, Egypt AdP Management n.a
BOT/ concession Enfidha+Monastir, Tunisia TAV 40-year concession, started 2006 type
ACSA, South Africa AdR (Roma airports) Acquisition 20%-stake 1998 (already sold 2005) Trade sale
AIRDEV Conference, April 2012 – Tiago Lopes 15 Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
AIRDEV Conference, April 2012 – Tiago Lopes 16 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 bnUSD
Source: Credit Suisse, AdPi
AIRDEV Conference, April 2012 – Tiago Lopes 17 … but despite its sophistication airport transactions are sensitive to the industry- specific and the wider economic context
• After 2004, boosted by the debt Deal flow: Number of airport transactions above 100mUSD since 2000 market and traffic growth, the number of transactions increased again 12 Financial and economic crisis • 2008 onwards The economic Sep 2001 10 10 9/ 11 crisis slowed the number and 8 value of transactions 8 • Since 2008 there were a number 6 6 5 5 of aborted transactions: Hochtief 4 4 4 Airports, Madrid and Barcelona, 4 French regionals, etc.. 2 2 2 2 2 2 2 • Recovery is taking place in 2012 1 1 1 1 0 0 0 0 with processes in Brazil, Portugal 0 (?) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
N. transactions 100% equity transfer
Source: Crédit Suisse
AIRDEV Conference, April 2012 – Tiago Lopes 18 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 Transaction Value / Last Twelve Months EBITDA
35 30 25 20 15 10 to 12x 10 5 0 Transaction date 2000 2002 2004 2004 2005 2005 2006 2006 2007 2007 2009 2012 (?)
Copen- AdR Sydney Brussels TBI Budapest BAA London City Exeter Budapest Gatwick ANA Target hagen
Southern ADI Hochtlef + ACDL Regional Cross (Ferrovial + GIC + Leonardo Macquarle (Abertis + Macquarle BAA AIG + GIP and city GIP (?) Buyer (Macquarie CDPQ + CDPQ + AENA) airports + Hochtief) GIC) KfW
2,000 to 2,700 3,150 1,650 1,050 2,600 2,000 23,400 1,100 100 1,950 1,650 Transaction value ( €m) 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 +
Source: HSBC, 2010
AIRDEV Conference, April 2012 – Tiago Lopes 19 Airport valuation: Changing airport financing and more challenging conditions: the fundamentals have not changed, but only the (financial) risk perception
Pre-crunch Current
Transaction value • Up to 20-30x LTM EBITDA • 9-13x LTM EBITDA
• 10-14%x EBITDA • 4-5x EBITDA Equity funding • 12-14% IRR • 12-14% IRR
•Up to 100% of RAB (regulated) or •Up to 80% of RAB (regulated) or Debt funding 15x EBITDA (unregulated) 5-8x EBITDA (unregulated) • Junior debt up to 2X EBITDA • Scarce junior debt capacity
Underwritting • Yes (backed by securitisation) • Yes (re-emergence of capacity)
• 1.3-1.5x for senior debt Minimum ICR • 1.7-2.0x for senior debt (Interest Cover Ratio) 1.1-1.2x for junior debt
Maturity • Up to 7-8 years • 5 years is now the norm
• More inerous cash sweep Repayment • Bullet and partial cash sweep provisions emerging
• Margin of 60-125bps for senior • Margin of 150-250bps for senior Pricing debt (300-450 bps for junior) debt
Note: LTM – Last Twelve Months RAB – Regulated Asset Base EBITDA – Earning Before Interest Tax Depreciation and Amortization Bps – basis points (above LIBOR) Source: HSBC, 2010
AIRDEV Conference, April 2012 – Tiago Lopes 20 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 32 (EV/EBITDA) multiples 28
20 Concessions and direct sales
Unweihted Stock listed Recent market average 15x 15 airports (IPO) valuations
Currently accepted EBITDA multiples
10 Unweighted average(1) 8,2x Unweighted average 8,5x
5
0 VIE AIA AIA ADR ADR BAA BAA CFH CPH BIAC BIAC Perth SAVE Luton ACSA Bristol Cardiff Vienna Belfast LCY(2) Malaysia Malaysia Brisbane Adelaide Hamburg Canberra Prestwick Hannover Argentina Budapest DarwinAP Melbourne Wellington Dusseldorf Collangaza Birmingham (1) Unweighted average IPO and concession values Beijing(ADP) East Midlands East (2) LCY: EBITDA estimated by Morgan Stanley in 2006
Long term concessions and trade sales have resulted in higher valuations than IPOs
AIRDEV Conference, April 2012 – Tiago Lopes 21 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
AIRDEV Conference, April 2012 – Tiago Lopes 22 Contents Market overview
Private investment in airport infrastructure
Transaction trends
Conclusions
AIRDEV Conference, April 2012 – Tiago Lopes 23 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
AIRDEV Conference, April 2012 – Tiago Lopes 24 Tiago Lopes [email protected] www.alg-global.com www.europraxis.com
LISBOA Tel: (+351) 21 313 90 60 Fax (+351) 21 313 90 61 BARCELONA BEIJING BILBAO BUENOS AIRES CARACAS DUBÁI LIMA LONDRES MADRID MÉXICO D.F. MILÁN PARÍS RABAT SAO PAULO
AIRDEV Conference, April 2012 – Tiago Lopes 25