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Promoting the Growth of MLPS

María Ariza - AMEXCAP
Director General

STORY INLINE POST

Wed, 11/01/2017 - 10:45

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Q: How does the private equity market prioritize projects in the infrastructure industry?

A: Internal Rates of Return (IRR) make infrastructure projects particularly time sensitive, which underlines the need to develop projects that are planned well enough to receive funding. The private equity market prioritizes projects that can deploy capital quickly. Projects need to advance at a faster rate and with the support of the government to better take advantage of the assets that are being developed. Structured, long-term projects would help unlock the potential of private capital in Mexico.

In this matter, AMEXCAP strives to connect projects with not only Mexican investors but also institutional players abroad. We collaborate with SCT to make sure projects are well-planned and ready to receive these significant investments. AMEXCAP recently traveled to Australia and found that large infrastructure investors are interested in the Mexican landscape. The idea we have with this initiative is to bring Mexico closer to private equity investors and vehicles locally and internationally. AMEXCAP is an important link between capital and projects. The trick is to properly combine these opportunities with the right partners at the right time.

We are a private equity association in Mexico with members that include over 170 funds. The association’s members have raised approximately US$51 billion since its creation in 2003. It has around 31 members in the infrastructure and energy industry alone that have raised more than US$15 billion. When it comes to dry power— cash reserves kept on hand by companies—AMEXCAP members have over US$8 billion. These numbers do not reflect the amount of capital raised in 2017, which is significant because we raise between US$5-7 billion per year. Of the capital raised for infrastructure and energy, 48 percent has been deployed into oil and gas investments, 34 percent into industrial and 5 percent to healthcare.

Q: How are financial vehicles penetrating the country and the infrastructure industry?

A: Financial tools are important because they allow private capital institutions and investors to diversify their portfolios. Mexico has around 71 CKDs that are worth US$19 billion, of which 18 are focused on infrastructure and have a capital commitment of US$6.6 billion. Other new tools like CerPIs are public vehicles that follow high standards and international best practices, such as allowing project managers to be part of the decisionmaking process. We only have one CerPI in the market as they are a relatively new tool but we expect several more to be raised by the end of 2017.

Fibra E is another vehicle that focuses on energy and infrastructure assets. PINFRA acquired one for its construction, operation and maintenance of the MexicoToluca highway. We predicte that several more should be released in the next several months, including by companies such as PEMEX.

To further diversify the tools in the market, AMEXCAP is promoting the creation of more Master Limited Partnerships (MLPs) as Mexico only has one. This vehicle facilitates capital transactions with foreign investors and helps companies reduce the need to travel abroad. The vehicle is used frequently around the world and we are collaborating with the Ministry of Finance to accelerate its growth in Mexico.

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