Mexico road deal ‘logical’ for Goldman

Reacquiring an additional interest in Red de Carreteras de Occidente (RCO), a toll road concessionaire in Mexico, amounted to a “logical transaction,” for Goldman Sachs Group, a managing director with the Wall Street firm said.

“RCO is a business we know very well, in a country where we really like the long-term macroeconomic outlook,” said Jonathan Hunt, who is in charge of transportation in North and Latin America for the Goldman infrastructure investment group.

Goldman Sachs Infrastructure Partners (GSIP) in a MXN5 billion ($380 million; €290 million) deal acquired just under 19 percent of RCO, a joint venture (JV) involving Goldman and developer Empresas Ingenieros Civiles Asociados (ICA).

GSIP and ICA in 2007 teamed to open RCO, today private operator to 558 kilometres worth of thoroughfare in Mexico.

But between 2009 and 2011, infrastructure fund operator Goldman actually reduced its exposure to RCO.

In 2009, GSIP, until then 80 percent owner of RCO, “took our stake [down] to 53 percent,” noted Hunt, recalling a MXN6.55 billion offering via certificados de capital de desarrollo (CKD), a newly created listed structure enabling institutional and pension plan investment in infrastructure.

By 2011, GSIP had chiseled its interest in RCO to 51 percent. The deal with ICA, announced last Thursday, put Goldman back to a 70 percent stake.

Hunt extolled the relationship between shareholder GSIP and RCO.

“We have been in the business since 2007, we know it incredibly well,” explained Hunt. “Not only have we been an investor but we have been a controlling investor – very involved with the project, the company and the management team”.

Mexico, Hunt continued, is “on a par with Brazil and Chile as far as ambition and execution” in infrastructure investment.

“We also like the regulatory environment,” he said. “The current administration and the SCT [the Mexico ministry of transportation] act like a partner to facilitate investment from the private sector”.