Mexico’s largest infrastructure companies have waited more than two years to get a piece of the capital’s new $13 billion airport project. Now as bids get under way, most are in poor position to compete. Enter billionaire Carlos Slim.
Slim’s Grupo Carso SAB has the global reputation and healthy finances to win contracts over competitors including Empresas ICA SAB and OHL Mexico SAB’s parent company, according to Mexico City-based Vector Casa de Bolsa and consultant Boyd Group International.
Rushing to meet a 2020 deadline to open a Mexico City facility that’s already behind schedule, tenders for major work such as terminal construction are set to start in coming weeks. That’s bad timing for ICA, saddled with ballooning debt amid concern that it may need to restructure liabilities, and OHL, the target of a regulatory review that found alleged accounting violations.
“But Carlos Slim — he’s got an impeccable reputation, he’s one of the wealthiest people on earth and his name is synonymous with Mexico,” said Michael Boyd, president of Evergreen, Colorado-based Boyd Group. “Hey, is there a question there?”
Mexican companies will play a crucial role in the airport work because the government is setting aside work for local operators. While Grupo Carso is smaller than either ICA or OHL, it would be a candidate to work with international firms to bid for the largest contracts.
“We believe we have the experience, trustworthiness, seriousness and financial capacity to be a very serious competitor in these projects,” Grupo Carso said in an e-mailed response to questions. The company said it’s participating in the first round of bidding and is interested in the majority to come.
ICA’s experience building airports means it can’t be discarded as an option to team with smaller and international companies for contracts, according to Monex Casa de Bolsa. “The airport is a huge pie,” said Monex analyst Roberto Solano. “These are not just a few projects, where it’s either ICA or someone else. The investment needed for the project is very big.”
OHL Mexico, a unit of Spain’s Obrascon Huarte Lain SA, said in an e-mail Wednesday that it has the ability to participate in infrastructure projects in the country. If the new airport presents opportunities for concessions, they would be evaluated in a timely manner, the company said.
External audits commissioned by the company found no irregularities, according to OHL Mexico, which said it will present its response to the regulator next week.
ICA declined to comment on the bidding or on the speculation about the restructuring of its debt.
During the bidding process every proposal is reviewed to ensure the company complies with all technical and administrative requirements, such as being up to date on tax payments and not having left previous projects incomplete, the new airport authority said in an e-mailed response to questions.
The airport will be the biggest public works project of President Enrique Pena Nieto’s administration, and the bid process starts next month for construction of a terminal that can handle 50 million passengers a year. Companies have expressed interest since at least 2013, with Grupo Carso and ICA joining a group of nine Mexican companies jockeying for the work. The coalition disbanded this year amid lack of support by the government.
Grupo Carso, and another Slim-owned company building roads and waste-treatment plants known as IDEAL, will be attractive to international bidders seeking local partners, according to Marco Montanez, a Mexico City-based analyst at Vector. Slim can also pull funding for projects from his Grupo Financiero Inbursa SA bank. His son-in-law, Fernando Romero, won a bid to design the airport with U.K. architect Norman Foster.
“For any company in the world, merely having a partner such as Carlos Slim is a guarantee,” Montanez said in a telephone interview.
ICA’s credit rating was cut two levels to CCC+ by Standard & Poor’s on Nov. 13 after a weakening peso hurt chances of paying back $1.35 billion in dollar bonds and the company reported its biggest net loss in 14 years in the third quarter. The builder’s hiring of Rothschild & Co. helped spark speculation that it may restructure bonds.
“ICA is in a very delicate financial situation and will find it difficult to participate in a project of this magnitude,” Montanez said.
OHL Mexico, meanwhile, has been reeling since May, after executives were heard in audio recordings allegedly discussing ways to inflate tolls and pay hotel stays for public officials. The toll-road operator filed suit against a company for allegedly distributing illegally taped and “maliciously” edited recordings on YouTube.
External audits concluded that all of the recordings had been “manipulated,” OHL Mexico said Wednesday.
OHL Mexico has tumbled 31 percent this year, dragged down most recently in October when Mexico’s securities regulator announced alleged violations in the company’s accounting practices. ICA has plummeted 67 percent. Grupo Carso’s 4.1 percent rally outperformed the 3.2 percent advance for Mexico’s benchmark IPC index.
The airport project has sustained minor delays, with a contract for dirt-leveling being pushed back to December from this month. Government budget cuts due to falling oil prices have also been a concern.
“This is something the globe is going to be looking at,” said Boyd, the consultant. “You can’t take a chance when this is the future of air transportation in Mexico, not just Mexico City. Therefore you have to make sure any vendors or contractors involved have no baggage they can bring to the table.”
–With assistance from Patricia Laya.
This article was written by Nacha Cattan from Bloomberg and was legally licensed through the NewsCred publisher network.