News & Analysis

IDEAL wins $1.3bn roads concession

Mexican developer IDEAL submitted the only bid for the 30-year Pacifico Sur concession, which involves the construction of about 140km of new highways and the operation of 169km of existing roads. IDEAL has pledged to invest Ps.$16bn in the project, including an upfront payment of Ps.$4.3bn.

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Mexican developer Impulsora para el Desarrollo y el Empleo en América Latina (IDEAL) has won the concession to build and operate the Pacifico Sur roads package with an estimated investment of Ps.$16 billion (€901 million;  $1.3 billion), following a failed bid earlier this year.

IDEAL’s investment includes an initial payment of Ps.$4.3 billion, according to a statement. IDEAL, the publicly-traded infrastructure developer spun out from billionaire Carlos Slim’s holding company Grupo Financiero Inbursa, had also submitted a bid for the concession earlier this year, but Mexico’s transport ministry rejected the proposal because it did not meet the government’s price expectations.

Seven groups – three international and four domestic – showed interest in the project, according to a statement from the Secretaría de Comunicaciones y Transportes (SCT), but IDEAL was the sole bidder.

The 30-year Pacífico Sur concession involves new construction of about 140 kilometres of highway bypasses as well as the operation of 169 kilometres of existing roads near Guadalajara Sur and Tepic in central-western Mexico.

Total investment for the construction phase of the project is expected to be Ps.$8.2 billion, entirely financed through private capital, according to the SCT statement. IDEAL will have two years to finish construction and begin operating the new roads.

The Pacífico Sur roads were previously part of a concession known as FARAC II, which also included another set of roads known as the Pacífico Norte package.  The FARAC II concession was cancelled in 2009.

FARAC stands for Fideicomiso de Apoyo para el Rescate de Autopistas Concesionadas, or the Trust for Supporting the Recovery of Licensed Highways. The trust, which is now part of FONADIN, Mexico's national infrastructure fund, took over Mexico's private toll roads in the 1990s and was charged with the task of re-privatising them. 

Following this concession, IDEAL will operate nearly 1,300 kilometres of toll roads in Mexico, according to a statement.