CPPIB, OTPP team up to invest in Mexican infra

The two Canadian pension funds have partnered with Mexican developer IDEAL to launch Newco, a company whose first investment will be in one of the largest toll road concessions in the country.

Two of Canada's largest pension funds and Mexico-listed infrastructure company Impulsora del Desarrollo y el Empleo en América Latina have joined forces to establish Newco, a company that will invest in Arco Norte, one of the largest toll road concessions in the country.

According to a joint statement issued on Thursday, IDEAL will own 51 percent of the new entity, while the Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan will invest a total of M$19.4 billion ($1.1 billion; €936.3 million) for a combined 49 percent stake. CPPIB will own 29 percent, while OTPP will own the remaining 20 percent.

Under the terms of the agreement, IDEAL will contribute its 99 percent equity interest in Autopista Arco Norte, the concessionaire of the Arco Norte toll road. A 223km toll road bypass that surrounds Mexico City in the north and connects the states of Mexico, Puebla, Hidalgo and Queretaro, it is one of the largest federal toll road concessions in Mexico. The concession term has more than 30 years left before expiration, according to the statement.

While Arco Norte is Newco's initial investment, the aim is for the new entity to continue investing in Mexico's infrastructure.

“This strategic partnership provides us the opportunity to consider future infrastructure investments in Mexico alongside IDEAL, an experienced infrastructure partner, and Ontario Teachers', a like-minded investor,” CPPIB told Infrastructure Investor through a spokesperson. Newco and Arco Norte mark the pension fund's first infrastructure investment in the country.

For Ontario Teachers', the investment “provides a strong foundation for continued growth of our infrastructure portfolio in Mexico and the rest of Latin America,” said Andrew Claerhout, OTPP's senior vice president for infrastructure and natural resources.

Ontario Teachers' has been focusing on Latin America for some time. It already has several infrastructure investments in Chile and last February promoted Dale Burgess as head of its Latin American infrastructure team . It has also invested in renewable energy in Mexico but Newco is Ontario Teachers' first investment in a Mexico-headquartered company.