Revising Up Medium-Term Outlook As Project Pipeline Expands
BMI View : With a number of projects and concessions going to tender from 2013, a s well as strong growth reported in H 1 12, we have revised up our medium - term outlook for Chile ' s construction sector. We anticipate strong interest in a number of airport concessions due between 201 3 and 2015, given Chile ' s well regulated and low risk business environment. At the same time, tenders for a range of transport projects should bolster value creation for the overall construction sector.
Chile ' s construction industry has reported strong growth in 2012 , prompting us to revise up our real growth outlook for the year to 7%. With a number of new projects going to tender from 2013 , we have also revised up our growth outlook for the period 2013 - 2015, with upside potential thereafter.
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Government Investment Stepping Up
In mid-2012, the Chilean government announced that projects worth a combined US$14bn were to be tendered in the near term. In addition, plans to invest US$830mn into airport infrastructure in Chile come at a time when concerns are growing about Chile's economic outlook in light of a slowdown in Chinese demand for copper. The projects join an existing list for a combined US$14bn worth of tenders that were to be released over 2012.
Two of the biggest projects in the pipeline are:
Two new subway lines (3 and 6) for the Santiago metro, at a cost of US$2.8bn. The consultancy contract was awarded to Arcadis, WorleyParsons and Sener Ingeniería y Sistemas in July 2012.
The Aconcagua Corridor (previously the Transandino corridor), which is to be a replacement for the Los Libertadores Pass between Argentina and Chile. The project, estimated to cost US$3.5bn, is hoping to enter construction in 2013 and be completed in 2022. However, final feasibility studies are still being assessed.
In total, including all projects both under construction and in the pipeline, we have registered projects worth around US$70bn in Chile in our Infrastructure Key Projects Database.
We are also seeing a number of contracts related to support projects at mining sites being awarded that will help bolster the construction outlook. With rising concerns over Peru's business environment, copper projects are likely to be favoured in Chile. Therefore, despite slowing Chinese demand, we do not expect devastating capital investment cuts on mining projects and anticipate this to continue to boost the construction sector.
Concessions Ready For Take Off
A number of airport concessions are expected to go to tender from 2013. We anticipate strong interest, given Chile's stable business environment and relatively robust economic growth outlook. Chile's infrastructure assets are highly sought after, as they offer developed market regulations and security whilst offering emerging market returns. Whilst return on investment is not expected to match that of Brazil or Peru - which are both also in the process of concessioning transport assets - the risks are also significantly lower.
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|Project Finance Ratings (LHS) And Risk/Reward Ratings (RHS)|
The biggest asset up for auction is Arturo Merino Benítez (AMB) International Airport in Santiago. The current concession ends in 2015 and the new tender is expected to be released in 2013, in order for the second concession to come into effect immediately after. The airport will be awarded on a build-operate-transfer (BOT) basis, although the concession period is yet to be decided. The concessionaire will also be responsible for an expansion at the airport worth an estimated US$500mn, including increasing the terminal from 823,000 square metres (m 2) to 1.2mn m 2, with work to be completed in 2018. The airport is hoped to handle 29mn passengers per year by 2030 from 12mn in 2011.
Three more airports are also due to be concessioned between 2013 and 2015: Carriel Sur International Airport in Concepción (Region VIII) - Chile's second largest airport, El Tepual Airport in Puerto Montt, Los Lagos (Region X), and Tongoy Airport in Coquimbo (Region IV). The government is currently assessing the tenders, meaning that investment estimates are not yet certain.
There are also a number of other concessions in the pipeline, including five hospitals to be tendered on a BOT basis, worth a combined US$1bn.