Mexico Infrastructure Opportunities Presentation to AMIS

Transcription

1 Mexico Infrastructure Opportunities Presentation to AMIS Juan Alberto Leautaud April 2016

2 Table of Contents Infrastructure Market Outlook 2. The Mexico Opportunity 3. Key Success Factors Appendix A. Disclosures 2

3 2016 Infrastructure Market Outlook

4 Infrastructure Investment A Broad Investment Opportunity Set Characteristics of Infrastructure Real assets Essential services Capital intensive Long life span Sectors of Infrastructure Power Energy Transport Social/Waste/Water/Others Investor benefit: Access to real assets with stable cash flows from long-term contracts, high barriers to entry or regulatory position Notes: Stable cash flows reference the contractual nature of infrastructure investments generally. Even contractual payments carry risk of loss and there is no guarantee that all payments will consistently be made. 4

5 Return Investing for Outcomes Income Driven Return Driven Investment Considerations Income vs. growth Infrastructure Equity Value Add Opportunistic Risk tolerance Inflation protection Liquidity needs Leveraged vs. unlevered Infrastructure Debt Below Investment Grade Debt Core Core Plus Buy & Hold vs. Buy to Sell Investment Grade Debt Risk Investment Grade Debt Below Investment Grade Debt Core Core Plus Value Add Opportunistic Contracted revenue Yes No Yes Yes No Sometimes Income or appreciation Income Income Income Income Appreciation Appreciation Notes: For illustrative purposes only. There are no guarantees the segment return range will be met in any given investment in future. 5

6 Seek Outcomes Infrastructure Illiquidity premia reward for patience Infrastructure offers a combination of income, return, diversification and inflation protection benefits to investors Capital preservation Stable cash flows Return enhancement Inflation linkage Diversification effects A defensive asset class that can preserve capital High and stable bond-like income Equity-like upside potential for capital appreciation Implicit or explicit inflation protection Low correlation with traditional assets and broader economic cycles Strategy Senior Debt Junior / Mezzanine Debt Core Core Plus Value Add Opportunistic Income Return Inflation Protection Diversification Address Long- Duration Liabilities Source: BlackRock as of January For illustrative purposes only 6

7 A strong case for infrastructure investing 1 Why infrastructure? A rapidly growing asset class that can provide attractive income and returns to investors Infrastructure returns are uncorrelated to other asset classes and therefore provide diversification 2 Why now? Secular shift in financing of infrastructure Convergence of demand (governments seeking capital) and supply (investors seeking yield) is underpinning the surge of infrastructure as an asset class 3 How to invest in infrastructure? Find a partner with deep expertise in infrastructure assets and broad sourcing network, within a fiduciary framework and best-in-class risk-management solutions Momentum is creating tailwinds in certain areas but these need to be sorted and properly assessed for risk/ return trade off 7

8 In $ trillion In $ trillion Massive growth in global infrastructure spending provides opportunities We expect continued growth in infrastructure spending, coupled with the secular shift in financing of infrastructure Investment banks increasingly providing originate-to-distribute financing opportunities for institutional investors Traditional lenders are constrained by heightened regulatory capital requirements Annual infrastructure spending forecasted to increase from $4tn in 2012 to $9tn by 2025 Forecasted infrastructure spending by sector 10 Forecast 10 9 CAGR Annual infrastructure spending Transport Social Extraction Utilities Manufacturing Source: PwC, Jun

9 Number of Funds Raised The Rise of an Asset Class Infrastructure provides an opportunity for investors who are seeking to increase returns and enhance income while matching long-term liabilities The search for return has elevated infrastructure investing into a distinct asset class amid institutional investors over 50% growth rate in the past five years Ten Year Global Growth in Infrastructure Funds under Management Factors motivating investors to invest in infrastructure Aggregate Capital Raised (Bn USD) Macro environment considerations Increase return Address long-duration liabilities Replace or enhance current income Portfolio rebalancing Inflation protection Diversify overall portfolio 41% 31% 35% 39% 35% 26% 31% 22% 14% 17% 45% 13% 23% 28% 13% 23% EMEA Americas APAC 55% 54% 54% 74% 87% Aggregate Capital Raised ($Bn) No. of Funds Sources: BlackRock, January 2016; Preqin; Aggregate capital raised (right scale) is cumulative, while number of funds raised (left scale) is incremental Results based on BlackRock Ascent of Real Assets survey data, October 2014, with 65 participants (35% Americas, 45% EMEA; Company sizes: 32% $1B-$9.9B, 29% $10B-$75B, 38% $75B: You indicated that your company expects to increase its infrastructure investment allocation. Please indicate the most important factors motivating this change participants answered by selecting up to three of the options listed above). 9

10 The Mexico Opportunity

11 Mexico Economy Overview Leader in Latin America and a significant participant in North America s economic development Population (millions) Nominal GDP ($US bn) 19% No. 5 Ratio of Mexican government revenue to GDP By 2050, Mexico is expected to be the 5 th largest economy in the world Mexico 319 USA ,000 30,000 20,000 10, Mexico USA % Total exports of manufactured goods % Mexico s share of total exports from Latin America 3.00% 2.50% Exports of goods and services (% GDP) 2.40% 3.00% 2.50% Imports of goods and services (% GDP) 2.60% No. 2 2 nd largest economy in Latin America (after Brazil) 2.00% 1.50% 1.00% 0.50% 0.00% 1.50% Mexico 1.10% USA 0.90% 2.00% 1.50% 1.00% 0.50% 0.00% 1.50% Mexico 1.30% USA 1% Source: White & Case Spotlight on reforms in Mexico, *IMF projection as of December

12 % of GDP Industrial Production Index %YoY %YoY Mexico s Moment Positive Macroeconomic Environment Mexico has the 15th largest economy in the world and 4th largest in the Americas behind US, Canada and Brazil Sustained Low Inflation 1 Steady Economic Outlook Historical and Projected CPI Mexico USA Projections 10 Historical and Projected GDP Growth Mexico USA Projections (5) (5) Sound Public Finances 3 Positive Geographic Positioning 4 Overall Government Balance (% of GDP) Manufacturing Production (Jan 2007=100) (2) 105 (4) 100 (6) (8) (10) Mexico USA Projections Mexico United States Source: 1, 2, 3: IMF World Economic Outlook Database; 4) INEGI and Federal Reserve. September

13 Mexico s Moment Comprehensive Reform Agenda President Peña Nieto and opposing parties have united and agreed on one of the most ambitious infrastructure development programs in Mexico s history termed the Pacto Por Mexico Energy Telecom and Broadcasting Anti-Trust Financial Sector Labor Education Political Revolutionizes the energy sector by ending a 75- year state-run CFE and Pemex monopoly and opens door for private investment Redefines the communications sector previously dominated by local conglomerates and incentivizes competition Creates competition authorities to promote competition even outside the telecomm sector Allows greater integration of small businesses into the economy by expanding credit and improves competition among banks Creates incentives for workers to enter the formalized labor sector Improves quality of education by implementing performancebased teacher assessment and creates regulator Permits reelection of congress members to create accountability Source: IMF, The Economist, Nov

14 Mexican Infrastructure Outlook Breakdown of Investment Pipeline per Sector Total Investment: MX$596.2 bn Large Opportunity 27% 17% 8% Communications and Transport (C&T) Electricity Energy Upstream Evolving to grow even more in a structurally changing environment 5% 9% 3% 5% 26% Energy 43% Energy Midstream Energy Downstream Energy Other Water Social Early success that enhances credibility Well distributed by sector 63% 37% Specific credible story by sector Public Investment Private Investment Source: Mexico s National Infrastructure Program as of December

15 Upstream Sector Perspective Round One Set of international public tenders for the award of contracts for the exploration and extraction of hydrocarbons, carried out by CNH Call1: Shallow Water Exploration (14 contractual areas); Estimated investment of 2.7 billion USD Call 2: Shallow Water Production (5 contractual areas) Estimated investment of 3.1 billion USD Call 3: Onshore Production (25 contractual areas) Estimated investment of 1.1 billion USD Call 4: Deep Water (10 contractual areas) Call 5: Unconventionals (6 contractual areas) 70,095 Mmboe Prospective Resources / Remaining (34,074 km2) Blocks considered for Bidding Round One Source: Plan Quinquenal de licitaciones para Exploración y Extracción de Hidrocarburos , SENER 15

16 Expected 2016 timeline C4. DeepWater Data Room Access Prquall / Docs Submission Prequal Approval Bid Date Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec C5 PX R2 R1-Call 5 Unconventionals Pemex Farm-outs R2- Call 1 Exploration and Extraction?? Deepwater Bid date for deepwater end of October companies interested; 7-8 have paid for the data; and 3 have started prequalification process (CVX, RDSA and TOSA) Round 1-Call 5 Tampico-Misantla focused A mixture of unconventional areas plus Brownfield clusters to be put on offer (to increase materiality) Announcement expected around March / April Pemex farm-outs SHCP is awaiting from Pemex for tax calibration purposes before T&C are released Expected to include 8 areas / fields: 4 offshore and 4 onshore No agreement on extra-heavy oil areas, so mostly not included Round 2-Call 1 (shallow water) Will be announced / launched on 2016 with a bid date in 2017 Exploration as well as exploitation assets will be included Source: CNH web page; PEMEX web page, March

17 GW Opportunity in the Mexican Power Sector Mexico will require 60 Gigawatts of new installed capacity (USD$90 bn) in the next 15 years New Generation Capacity Expected New Capacity Combined Cycle (NG) Wind CoGen 12.6% 19.9% 44% 60.0 Hydro 9.1% 40.0 Nuclear 6.8% 20.0 Solar 3.0% 0.0 Existing Retired New Private CFE PPP CFE Competitive Geothermal Other 2.7% 1.9% Power in Mexico poses a highly credible investment opportunity in the long term BlackRock positioned to seize Power Sector Opportunity Solid drivers for electricity demand Transition of the generation mix towards Renewables (from 17% in 2013 to 35% in 2024) Right incentives and regulation to anchor investments Improved regulatory framework after the Energy Reform Industry expertise Risk Management & Underwriting capabilities Origination capabilities Innovative financial structure Scale, replicability, relationships Source: CFE, Secretaría de Energía ( SENER ), March

18 Mid-Stream sector perspective Gas Pipeline quinquennial plan 10 new strategic pipelines 2 social coverage pipelines 7 crossing points with USA One connection to Central America 9,030 MMpcd import capacity Source: Secretaría de Energía ( SENER ), Nov

19 Transport sector perspective Project Examples Description New Highway Locations Tapachula Talismán Expansion Cancún Tulum Expansion Northeast Monterrey Highway Rest Areas, access 58 km - A4 134 km - A2 Tijuana Bypass Uruapan Zamora La Piedad 160 km - A2 Tijuana Bypass La Raza Indios Verdes Santa Clara 8 km elevated 6 km elevated Northeast Monterrey Highway Las Varas Vallarta 90.5 km La Galarza Amatitlanes Puebla La Piedad Manuel Doblado 15 km A2 90 km A2 La Raza Indios Verdes Santa Clara Cancún Tulum Expansion Ministry of Transport (SCT) has announced: 3 Unsolicited proposals Las Varas Vallarta 10 expressions of interest to develop unsolicited infrastructure works One approved unsolicited proposal La Piedad Manuel Doblado Uruapan Zamora La Piedad La Galarza Amatitlanes Tapachula Talismán SCT is willing to explore PPP alternatives given the $30bn budget cut for 2016 Source: SCT, Jan

20 Social Infrastructure perspective Facility Description Evolution of the Traditional PPP Hospital Regional (HGR) García, Nuevo León 260 beds 31 medical specialties 10 OR s 31,836 m2 Traditional Objectives Extended Scope Hospital General de Zona (HGZ) Tapachula, Chiapas Hospital General de Zona, Bahía de Banderas, Nayarit Hospital General Regional, Tepotzotlán, Estado de México 180 beds 22 medical specialties 6 OR s 26,813 m2 144 beds 33 medical specialties 8 OR s 22,301 m2 260 beds 36 medical specialties 12 OR s 32,035 m2 Transform an asset into a service Off-balance sheet financing Effective risk transfer Design Execution Financing Accelerated execution Hospital General Dr. Gonzalo Castañeda, D.F. Hospital Mérida, Yucatán 120 beds 35 medical specialties NA OR s 3,311 m2 66 beds 6 medical specialties N/A OR s 25,000 m2 Long term cost and performance predictability Improved service standards New Project identification: unsolicited proposals ( PNS ) Hospital General Dr. Daniel Gurría Urgell; Villahermosa, Tabasco 90 beds 29 medical specialties N/A OR s 18,994 m2 Source: SHCP, Jan

21 Recent Developments in Infra Challenging Environment Recent developments in Infra Early Wins Foreign Exchange adjustments Federal Government Budget reduction 0.7% GDP budget adjustments + more to be announced Pemex Budget Cut $100bn + more to be announced CFE Energy Auction First Unsolicited Proposal assigned Opening of gasoline imports Round 1 success Upcoming rounds to bid Deepwater, shallow water and farm-outs Successful pipelines announced Oil Prices 21

22 Key Success Factors

23 Platform Philosophy Origination Strategy Strong origination and sourcing capabilities through deep industry relationships Deep industry relationships combined with BlackRock s market presence has generated proprietary investment opportunities with advantageous terms Establish partnerships with credible and experienced market participants leading to exclusive repeat business opportunities Differentiated investment opportunities Deep Expertise Technical expertise resulting in efficient deal valuation and selection Deep expertise provides thorough review and identification of optimal transactions Leading expertise and capabilities that ensure accurate valuation assumptions and optimum operational performance Disciplined underwriting Project Management Ensure transparency and performance Close to the ground monitoring allows teams to correctly assess and allocate project risks Hands-on approach ensures rapid reaction and feedback, enhancing project de-risking Transparency from unbundling risks Fiduciary Responsibility Focused on investors' best interest Strategy focuses on risk/return outcomes to avoid chasing returns with outsized risk Strong, repeatable investment process supported by BlackRock s robust risk management analytics Client Focus 23

24 Origination Strategy and Deal Access Advantage BlackRock s Global Network Provides Access to Proprietary Deal Flow C-Suite Relationships Partnering with Policy Makers Demonstrated Proprietary Deal Access Relationships with Finance Community Preferred Partner to Sponsors and Fund Managers 24

25 Deep expertise and local knowledge drives global investment strategy North America Investing since 1981 Europe Investing since 1982 Asia Pacific Investing since 1999 San Francisco New York Pittsburgh Boston Frankfurt Paris Copenhagen Warsaw London Kuala Lumpur Hong Kong Beijing Shanghai Tokyo Dublin Sydney 100+ professionals 90+ professionals 60+ professionals Newport Beach Zurich Singapore Local investment teams in 14 countries Source: BlackRock 25

26 BlackRock Infrastructure At a Glance BlackRock Infrastructure - $9.0 billion AUM 1-93 professionals Infrastructure Executive Team 21 Professionals Debt Equity Separately Managed Accounts $4.6 bn AUM 1 16 Professionals Renewable Power $2.1 bn AUM 23 Professionals Infrastructure Solutions $1.5 bn AUM 1 7 Professionals Latin America $752 m AUM 26 Professionals Individual managed accounts to meet investor risk/return goals, seeking robust yields with low correlation to traditional asset class Capital deployment into renewable power sector across different geographies, parts of the capital structure and different technologies Customized portfolios to meet target client outcomes; benefit of BlackRock scale: access, diversification, terms, diligence, services Investment focused on taking advantage of the sweeping Mexican reforms across all sectors Offerings: Separately managed accounts Offering: Commingled Funds (Global Renewable Power I & II, Renewable Income EU & UK) and co-investments Offering: Commingled funds, Separately managed accounts with direct investments and fund investments Offering: Closed-end 10-year vehicle. Anticipate launching fund by year end 2016 Underpinned by BlackRock Global Investment Teams Risk Analytics BlackRock Solutions BlackRock Investment Institute +1,600 investment professionals with specialties across all asset classes +500 professionals partner with investment teams to monitor and analyze risk Proprietary Aladdin platform integrates portfolio management, risk analytics, trading and operations Internal forum facilitates idea sharing and debates economic implications All data as of 1 April 2016 unless otherwise noted. 1) A portion of the total investor commitments remains subject to drawdown and final approvals. 26

27 Project Management through investment cycle Investment Operations Project Management Objectives Assessment of key factors with inherent variability, driving the economic performance of a project Routine Monitoring of events at Asset Level to ensure opportune actions Example / Type Financial Interest rates Inflation Operating Traffic Deductions Asset Availability Disaster Monitoring of ongoing operations Reaction to unforeseeable events Economic Operational Security Reputational Legal Tools (examples) Hedging through swaps/caps Contractual Performance bonds Insurance Policies Monitoring of recurring events Reporting Asset specific operating manuals 27

28 Fiduciary Responsibility Put our investors interests first Checks and Balances Institutional Decision Making Alignment of Interests Unparalleled Risk Management Highest Ethical Standards 28

29 Appendix Disclosures

30 Disclosures Risks associated with an investment in the Strategy include, but are not limited to, the following: Operational and technical risk. Infrastructure assets may be subject to operating and technical risks, including the risk of mechanical breakdown, spare parts shortages, failure to perform according to design specifications, labour strikes and disputes, work stoppages and other interruptions and other unanticipated events which adversely affect operations. While the strategy may seek investments in which creditworthy and appropriately insured third parties bear' much of these risks, there can be no assurance that any or all such risks will be mitigated or that such third parties will perform their obligations or that insurance will be available on commercially reasonable terms. An operating failure of the kind described above may result in a material adverse effect on the strategy s investment in the relevant project. Environmental risks. Investments may be affected by deleterious substances and other environmental problems. The strategy may therefore be subject to all the risks arising under applicable environmental laws and regulations from the acquisition, holding and disposal of contaminated projects, including loss and reduced returns resulting from environmental claims, related occupational safety issues and claims and the performance of requisite clean-up work. An owner of an infrastructure asset may be liable for past and future damages caused by environmental pollutants located on or emitted from or otherwise attributable to the asset, as well as for the costs of remediation and in some circumstances, fines or other penalties. Insurance risks. Investments are generally expected to maintain insurance in accordance with industry practices, including liability and fire and extended coverage, on commercially reasonable terms. However, there are certain types of losses such as acts of war, terrorism or other unforeseeable catastrophic events, which now or in the future may be uninsurable at all or upon acceptable terms. Lack of market economy. Businesses in the lesser developed countries where the strategy may invest may only have a very recent history of operating within a market-oriented economy or under the pressures imposed by developing countries generally. In general, relative to companies operating in developed economies, companies in these lesser developed countries are characterised by a lack of (1) experienced management, (2) modern technology and (3) a sufficient capital base with which to develop and expand their operations. Ability to enforce legal rights. The strategy may invest in countries with judicial systems of varying effectiveness. As a consequence, the strategy may have difficulty in successfully pursuing claims in the courts of certain countries. Regulatory risk. The issuers or instruments in which the underlying funds invest may be or may become subject to unduly burdensome and restrictive regulation affecting commercial freedom and this in turn may have an adverse impact on the value of the Fund Investments. Certain information contained herein has been obtained from published sources, agencies of the U.S. government and from third-parties, including without limitation, market forecasts, internal and external surveys, market research, publicly available information and industry publications. In addition, certain information contained herein has been obtained from companies in which investments have been made by entities affiliated with BlackRock. Although such information is believed to be reliable for the purposes used herein, BlackRock assumes no responsibility for the accuracy or completeness of such information. Similarly, internal surveys, forecasts or market research, while believed to be reliable, have not been independently verified and BlackRock makes no representation as to the accuracy or completeness of such information. All information is provided on an AS IS basis only. By using this information, the Reader agrees that BlackRock shall not have any liability for the accuracy of the information contained herein, for delays or omissions therein, or for any results based on your use of the information which are not consistent with your objectives. WITHOUT LIMITING THE FOREGOING DISCLAIMERS, THE INFORMATION PROVIDED HEREIN IS NOT GUARANTEED TO BE ACCURATE OR COMPLETE, NOR DOES BLACKROCK TAKE RESPONSIBILITY FOR IT. THE INFORMATION CONTAINED HEREIN HAS NOT BEEN AUDITED AND BLACKROCK DOES NOT GUARANTEE ITS SUITABILITY FOR ANY PURPOSE. ALL INFORMATION IS SUBJECT TO CHANGE AND/OR WITHDRAWAL AT ANY TIME WITHOUT NOTICE. Certain information included herein may refer to published indices. Indices that purport to present performance of certain markets or the performance of certain asset classes or asset managers may actually present performance that materially differs from the overall performance of such markets, asset classes or asset managers due to issues of selection and survivorship bias. For use with Professional Clients and Qualified Investors Only - Proprietary and Confidential (MX /16) 30

31 Disclosures Certain information contained in this presentation constitutes forward-looking statements, which can be identified by the use of forward looking terminology such as may, will, should, expect, anticipate, project, estimate, intend, continue, target, believe, the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties inherent in the capital markets or otherwise facing the asset management industry, actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. The opinions expressed are as of February 2015 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. MX /16 For use with Professional Clients and Qualified Investors Only - Proprietary and Confidential (MX /16) 31