Vinci eyes deeper LatAm equity investments
The French constructor turns to emerging market opportunities in a bid to satisfy hunger for yield
France's Vinci Concessions is banking on Latin American
equity investments for growth as the construction unit turns to
emerging markets for higher yields.
Speaking recently at LatinFinance's Project &
Infrastructure Finance Summit in New York, Pablo Aramburo said
some of the company's European assets were generating cash, but
warned that this avenue would soon run out.
"Our assets in Europe are maturing and we need to recycle
our assets," Aramburo, the head of LatAm project finance at
Vinci Concessions said.
He said the company viewed LatAm as "core" for its emerging
market endeavors, but stressed the importance of economic
stability driving further infrastructure investment.
"We will want to think about other countries in the future
but we need to have stable economies that also conform to
standards when it comes to investing in infrastructure",
Jurisdictions and institutions, for example, that do not
necessarily invite long-term financial support made it harder
for the likes of Vinci to bet subsequent refinancing
"We would be able to provide better economics for the
project if we could tap into long-term loans," he said. "We can
use all equity but at the end of the day it is always better to
use some leverage."
One instance where this is seemingly panning out is in
Brazil. The company was the sole bidder on a 30-year operating
contract for the Salvador International Airport. Vinci
Concessions snapped up the deal after bidding BRL1.59bn
($502m), a 113% premium.
Brazil's national development bank BNDES is likely to fund
up to 40% of the investments for the airport and provide
guarantees to any debenture issues from Vinci. The bank may
even lend 10-year loans at market rates for another 40% of the
investments after the first year of the contract.
At the other end of the spectrum, Vinci found room to print
cross-border bonds for investments in the Dominican Republic,
but Amburo laments that not everywhere was conducive to such a
financing package. In Colombia, for example, bank lending posed
as the only realistic way of raising low-cost capital.
"Banks facing Basel III and IV will soon start shortening
tenors even more", Aramburo added. He also hinted that
institutional investors' pools of liquidity needed to deepen in
order to make project investments more viable.
Vinci Concessions' first investment in the region, the
Santiago Airport, created a sweet spot for greenfield
opportunities. Since then, the company has injected equity into
six airport concessions, all in the Dominican
The company has also turned to "yellow" assets, or projects
midway through construction as a means of equity
In Peru, Vinci Concessions grabbed the Linea
Amarilla toll road concession from Brazil's Invepar for
€1.5bn ($1.77bn) and is eyeing assets in Colombia. Last
year, it bought into Colombian construction firm
Conconcreto’s 50% stake in the Bogota-Girardot
highway widening project.