FARAC I Traffic and Revenue Studies

Between 1989 and 1994, the Mexican Government granted 52 concessions to private entities to build approximately 5,000 kilometres of toll roads, considering 50-year tenors. The concessionaires faced financial problems due to lower-than-expected initial levels of traffic and higher costs caused by 1994-1995 economic recession and the Mexican Peso devaluation, as most financing was done in Dollars.  In 1997, the Government rescued 23 of these concessions creating a trust fund named “FARAC” in order to administer the rescued roads and absorb the incurred indebtments.

In 2006, the Mexican Government launched the first international bid to privatize a bundle of assets from FARAC through 30-year concessions (“FARAC I”). Goldman Sachs Infrastructure Partners (“GSIP”) and Empresas ICA (“ICA”) formed a consortium and presented the winning bid on FARAC I, offering over MXN 50bn, including a consideration of MXN 45bn. Once the concession was awarded, GSIP (80%) and ICA (20%) established Red de Carreteras de Occidente (RCO) as the concessionaire. FARAC I is the largest single road concession in Mexico and its financing was possible due to largest peso-denominated syndicated loan in the infrastructure sector in Latin America.

Steer was appointed in 2007 as the traffic and revenue advisor to GSIP, to prepare the traffic and revenue study on which the bid for FARAC I was based. Since then, Steer has been the traffic advisor for RCO delivering traffic forecasts for several debt and equity transactions, updating the original forecasts to incorporate most updated macroeconomic variables as well as changes in the road network infrastructure and operating configuration.

Steer has been the traffic advisor to RCO delivering traffic and revenue forecasts that supported RCO’s successful debt and equity transactions, including the original syndicated loan, the largest of its type in the infrastructure sector in Latin America, and more recently the only Mexican Peso denominated international bond issuance.

FARAC I concession comprises a 664-km road network (the largest single private concession in Mexico) located in one of the most dynamic regions, experiencing burgeoning industrial development, and provides services to some of the major cities and industrial centres of Mexico.