Mobilizing Capital to Fortify InfrastructureTue, 11/01/2016 - 13:37
Q: What role is EXI destined to play in facilitating infrastructure investment and optimizing its impact?
LV: Mexico has an immense backlog of infrastructure projects and an even bigger one in the energy sector. The key element that will facilitate and accelerate the country’s development is the participation of the private sector in the industry, which is why the government began implementing new reforms. EXI’s role in the country’s development is in mobilizing capital through the private sector and integrating projects so that the adequate capital can be raised to make these plans a reality. EXI’s leading investors are the Mexican workers through pension funds.
MB: Since the opening of the system in 1995, the investment of pension funds has been limited to infrastructure debt, but now it is open to investment in other sectors, including energy. EXI is an intermediary between resources that have accumulated over time and the development of infrastructure projects with these assets. Pensioners will greatly benefit from these investments because it will help build necessary infrastructure that cannot be financed by the government, allowing for increased growth of the Mexican economy.
Q: What kind of added value can EXI offer to investors and operators?
MB: EXI’s team has worked in the infrastructure industry for more than 25 years, participating in more than 100 projects in 18 countries across the globe, totaling about US$100 billion. Half of those projects were carried out in Mexico. Our accumulated experience here provides us the advantage of knowing the regulatory framework, as well as how to work in the different industries. By fully understanding the market and sectors, we recognize the main players and risks in both the national and international market. When a fund plans to enter a new market it can be complicated and it must collaborate with locals to gain knowledge on how to assess risks and negotiate. Having more than 50 million Mexicans as stockholders provides a natural protection to the assets to be developed.
LV: A couple of years ago, we looked into the infrastructure industry and realized that there was an opportunity in the energy sector for which we designed action plans. We are a private equity fund with a long-term perspective on our investments. Our fund has a term of 12 years, but we can hold it as long as 14 years. Another added value EXI offers is that we are an independent fund with no conflicts of interest. We like to work together with investors and developers to discover the most promising opportunities in the industry. Finally, we see ourselves as integrators by offering project and risk management, which also represents a value add in this market.
Q: How do you ensure cash flow and the adequate allocation of resources?
MB: We successfully deployed our investments and within a record time of 18 months have invested 100 percent of the EXI 1 fund. We established a balanced portfolio combining brownfield assets and a project under construction close to the operation date. The existing assets have a long operating period and are not subject to demand risk as they have contracted revenues. They also have a high-credit quality future cash flows, reflecting a combination of the credit quality of the counterparty and credit enhancers.
LV: We are increasing EXI 1 with the establishment of reopening Series B to allow our investors additional investments in our existing projects. We also are launching EXI 2 and expect to reach closing before year-end.
Q: What requirements must be met and what processes do companies have to carry out to gain access to funding through EXI?
MB: EXI has an accelerated decision-making process due to our straightforward company structure. Our structure is composed of three elements: an internal investment committee, a technical committee and an assembly of investors. During the first stage, the investment committee analyzes the proposal and makes sure the objectives of the project are aligned with the objectives of the fund and if they do then it undergoes a due diligence process. When the proposal is approved by the committee, it is transferred to the technical committee, which will then decide if it is approved or not.