Vinci Sees Potential In Portuguese Airports

BMI View: In a surprising solo-bid Vinci has been awarded the concession for the Portuguese Airport operator ANA ; at a hefty price-tag significantly above its competitors. The company's high valuation of the assets implies it can see a potential for long term growth relative to recent earnings. However, it remains unclear how Vinci will finance the deal, especially at a time of heavy debts and little capital.

Vinci Airports, the airport concession arm of French construction major Vinci won the bidding to operate 10 Portuguese airports for a 50 year period with a bid of EUR3.08bn. The company appears to have bid alone, in contrast to its competitors which were largely grouped together in different consortia. The next highest offer, at EUR2.44bn was tabled by Fraport and Industry Funds Management, followed by Corporacion America, Tradeco and Sonae Sierra at EUR2.41bn, with Global Infrastructure Partners, CCR and Flughafen Zurich offering EUR2bn. The transfer contract is expected to be signed in January 2013, following which it will be submitted for regulatory approval.

Portuguese Airports
Airport 2008 2009 2010
Source: ANA
Lisbon 13,603,620 13,260,978 14,066,545
Faro 5,447,200 5,061,801 5,342,707
Porto 4,534,829 4,506,330 5,279,531
Ponta Delgada 921,733 896,813 930,579
Horta 196,433 191,832 189,933
Santa Maria 103,960 93,517 86,575
Flores 42,729 41,423 42,446
Total ANA 24,850,504 24,054,694 25,938,316

The price offered by Vinci, 16 * EBITDA, is at the top end of airport valuations seen since the financial crisis. The elevated price-tag implies that Vinci believes the assets to have strong growth potential compared to recent earnings. As a comparison, Gatwick Airport, which has limited growth potential, was sold for 9.5 times EBITDA whilst Edinburgh, with higher growth expectations, was sold at 16.1 times EBITDA. The price also reflects an improved outlook for the aviation sector although still significantly below pre-financial crisis valuations; where asset bubbles saw valuations of close to 30 times EBITDA.

A Hefty Price Tag
Airport Date Sale Price, US$mn EBITDA Multiple
Source: BMI
Budapest 2005 2500 29.7x
BAA (UK) 2006 19000 16.1x
Exeter 2006 120 24.8x
London City 2008 1200 27.6x
Chicago Midway Airport (failed) 2008 2520 28x
Bristol (secondary sale) 2009 243 11.7x
Brussels (secondary sale) 2011 na 13.3x
Copenhagen (secondary sale) 2011 na 15.2x
Gatwick 2011 2500 9.5x
Edinburgh 2012 1300 16.1x
ANA (Portugal) 2012 3080 16x

ANA operates 10 airports across the mainland, the Azores and Madeira. Traffic has been growing since 2010 despite continued weakness in the Portuguese economy. 2011 saw record high revenues (EUR425mn) and profits (EUR76.5mn) whilst passenger volume reached 30mn in 2012 compared to 26mn in 2010, as the country continued to attract tourists. With volumes continuing to increase moderately despite the weak European financial state, Vinci is placing a longer term bet on an even stronger growth once its economy recovers. Future revenue growth will largely be tied to a revival in the European economy, with Portugal a popular tourist destination for people across Europe.

It is unclear how Vinci will finance the deal, with no information provided in the company's press release. The submission of a solo bid is rare in the post-financial crisis infrastructure financing environment. Indeed, infrastructure companies have lately been facing tight access to financing schemes. Meaning most asset sales are currently being won by cash rich funds, rather than debt-heavy construction companies.

The sales are under the terms of Portugal's EUR78bn bailout plan. The country was targeting EUR5.5bn in revenue, but has surpassed this raising EUR6.4bn. This includes the sale of a 21% stake in Energais de Portugal, which was bought by China's Three Gorges Corporation in December 2011 for EUR2.96bn.

This article is tagged to:
Sector: Infrastructure
Geography: Portugal, Portugal, Portugal, Portugal

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