october 2015 infaestructura energética s.a.b de c.v
TRANSCRIPT
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securities mentioned.
October 2015
Infaestructura Energética S.A.B de C.V.
IENOVA* / BMV
Initiating coverage: Pioneer with a solid position in the Mexican Energy Sector and stable cash flows
Recommendation: Market Outperform
Price: $78.85 MXN IPC (MEXBOL INDEX): 44,364.16
We issue a Market Outperform recommendation on IENOVA, with a 12-month target price of
MXN $87 using the Sum-of-the-parts (SOTP) methodology for its operating assets, and a base case
optionality for upcoming proyects. This offers a 10.3% upside from its closing price of MXN $78.85 on
October 16th 2015 and a 2.5% dividend yield, giving a total expected return of 12.8% assuming the new
share issuance
Infraestructura Energética Nova S.A.B. de C.V. (IENOVA) is the first and only company listed in the
Mexican Stock Exchange that develops and operates energy infrastructure. The Company was founded in 1996
and on March 21st 2013, conducted its IPO. IENOVA has presence in Mexico´s Northwest, Northeast, and
Central regions as seen in Figure 1 and has 603 employees.
A substantial amount of the long-term company’s contracts are under the take-or-pay USD
denominated modality, which bind its customers to cover the whole price stated on the contract, regardless of
the capacity utilization. This helps the Company assure constant and predictable cash flows in the long term,
empowering IENOVA to capture new investment opportunities in the gas transportation business.
In the last 12 months, IENOVA won two out of the four legal tenders in which they bid. As a result,
the Company will be investing approximately US$ 400 million over the next two years.
There are 6 tenders still to be completed in which the Company has shown interest, with an estimated
investment of US $4,500 million to be held throughout the 4Q15 and 1Q16. The pipeline network is expected
to grow 45% through 2019 according to the Plan Quinquenal SENER 2015-2019, giving the Company an
opportunity to boost its EBITDA and market share.
TARGET PRICE: $87 MXN
Valuation 2014 2015E 2016E
EPS $0.12 $0.22 $0.25
P/E 42.26 23.81 21.66
EBITDA per share 0.24 0.44 0.37
EV/EBITDA 22.31 15.36 15.95
With the Company public information and team estimations
Stock Data
52-Week Range $ 68.50 – 92.34 Shares Outztanding (Millions) 1,154
Return LTM -0.01% Market Capitalization (MXN Millions) $90,993
Average Daily Volume (Millions) 1.14 Float (%) 19%
BV per Share $1.95 Beta 0.56
Fuente: Bloomberg a excepción del estimado de flotación proporcionado por la empresa
Company Overview
Location: The headquarters are located in the following address: Paseo de la Reforma No. 342 Floor 24 Col.
Juárez México, D.F. 06600, Tel. (55) 9138-0100
Sector: Utilities
Sub Industry: Cas Utilities
Employees: 603
Internet webpage: http://www.ienova.com.mx
Analysts: Research Advisors:
Cesar Rubalcava Ma. Concepción del Alto Hernández
César Garza Alejandro Wassiliu, CFA
Jessica Garza
Óscar Pérez
Cuauhtémoc Treviño
Source: Capital IQ
Adjusted EBITDA 14-19 CAGR (USD MM)
Source: Company data and Team Estimates
Investment Thesis
We issue a Market Outperform recommendation on IENOVA, with a
12-month target price of MXN $87 using the Sum-of-the-parts (SOTP)
methodology for its operating assets, and a base case optionality for
upcoming proyects. This offers a 10.3% upside from its closing price of
MXN $78.85 on October 16th 2015 and a 2.5% dividend yield, giving a
total expected return of 12.8% assuming the new share issuance.
IENOVA’s main strength is its expected increase in EBITDA (15.9%
CAGR 14-19) attributed to the start of operations of its new gas
pipelines (Sonora, Ojinaga-El Encino, and San Isidro-Samalayuca), as
well as the recently announced acquisition of the remaining 50% stake
in Gasoductos de Chihuahua (GdC), owned by Petróleos Mexicanos
(Pemex).
Pioneer with a solid position in the Mexican Energy Sector
IENOVA being the first and only company listed in the Mexican Stock
Exchange that develops and operates energy infrastructure, has
established a strong relationship with the biggest national gas
costumers: Comisión Federal de Electricidad (CFE) and Pemex,
enabling the Company to take advantage of Mexico’s recent Energy
Reform.
Investment in long-term energetic infrastructure In the last 12 months, IENOVA won two out of the four legal tenders in
which they bid. As a result, the Company will be investing
approximately US$ 400 million over the next two years. There are 6
tenders still to be completed in which the Company has shown interest,
with an estimated investment of US $4,500 million to be held
throughout the 4Q15 and 1Q16. The pipeline network is expected to
grow 45% through 2019 according to the Plan Quinquenal SENER
2015-2019, giving the Company an opportunity to boost its EBITDA
and market share.
A constant focus on stable cash flows generating assets A substantial amount of the long-term company’s contracts are under
the take-or-pay USD denominated modality, which bind its customers to
cover the whole price stated on the contract, regardless of the capacity
utilization. This helps the Company assure constant and predictable cash
flows in the long term, empowering IENOVA to capture new
investment opportunities in the gas transportation business.
Market Profile Closing Price MX$78.85
52 Week high/low $92.34/$68.50
Average daily volume 1.14 MM
Shares Outstanding
/Float
1,154.0 MM
/ 218.1MM
Market Capitalization MX$90,992.9 MM
Dividend Yield 2.5%
LTM Basic EPS $1.94
LTM P/E
LTM EV/EBITDA
40.6x
18.8x
YTD Return 6.0%
Target Price Break Down (MXN)
Consolidated Pipelines 26.0
Gasoductos Chihuahua 25.2
Los Ramones Norte 6.3
LNG Terminal 18.2
Ecogas 3.1
TDM 1.4
ESJ 3.7
Net Debt (5.2)
Optionalities 8.1
12m Base Case Target Price $87
Future Pipelines Tenders
Target Price Scenarios (MXN)
Source: Plan Quinquenal 2015-2019
Figure 1. IENOVA’s Presence in Mexico
USD Millions
Business Description Infraestructura Energética Nova S.A.B. de C.V. (IENOVA) is the first
and only company listed in the Mexican Stock Exchange that develops
and operates energy infrastructure. The Company was founded in 1996
and on March 21st 2013, conducted its IPO. IENOVA has presence in
Mexico´s Northwest, Northeast, and Central regions as seen in Figure 1
and has 603 employees. It is currently involved in the following business
segments: (i) Gas transportation through pipelines (either conducted
directly or through joint ventures with Pemex); (ii) Gas Storage; (iii)
LNG terminal and regasification facility named Energía Costa Azul
(ECA), (iv) Gas distribution (Ecogas) and (v) Power generation from a
combined cycle plant fueled by natural gas (Termoeléctrica de Mexicali,
TDM), and a wind park (Energía Sierra Juárez, ESJ) that recently began
operations in August 2015. IENOVA is controlled by multinational
energy group Sempra Energy (NYSE:SRE), which currently holds 81.9%
of the company (Figure 2). The Company’s shareholder structure has not
experienced significant changes, as of October 2015. Nevertheless, a
follow-on offering of ~330 million shares is expected in the next 12M.
In 2014 the natural gas segment represented 59.6% of total revenue, out
of which natural gas sale accounted for 28.0%, regasification and storage
for 11.4%, distribution for 13.3% and transportation for 7.0%. Power
segment and other revenue (Sempra payments to ECA for coverage of
costs require to keep continuing operations) represented 27.0% and
13.4%, respectively. By 2019 the gas transportation segment is estimated
to increase its share in the Company´s consolidated revenues as seen in
Figure 3.
IENOVA’s presence in the energy utilities sector
Gas segment: the Company wholly owns 580 km of natural gas
pipelines, three compression stations, more than 3,500 km in its
distribution network, a liquefied natural gas (LNG) terminal, a
regasification facility in Ensenada, Baja California, and 888 km of
natural gas pipelines under construction. (Figure 4)
Power segment: IENOVA owns TDM, a combined-cycle plant located in
Mexicali, Baja California, with a 625-Megawatts (MW) capacity.
Joint Ventures (JV): The company holds 50% interest in a JV with
Pemex Gas (GdC), sharing ownership of four gas pipelines; a liquefied
petroleum gas (LP gas) storage terminal in Guadalajara and a 224 km
ethane pipeline (Segment 3 still remains under construction) in Veracruz
and Tabasco. The company recently agreed to acquire Pemex´s 50%
equity interest in GdC for US $1,325 million. IENOVA also holds a joint-
venture with Intergen in ESJ, a wind generation project along the Sierra
Juárez Mountains in Baja California with a capacity of 155 MW.
Figure _. Revenue by segment
Figure 2. Shareholder’s structure
Figure 3. Revenue Breakdown
Figure 4. IENOVA´s Infrastructure
Figure 1. IENOVA’s Presence in Mexico
Source: Company data
Source: Company data
Source: Company data
Source: Company data and Team Estimates
Corporate Governance and Social Responsibility
IENOVA complies with the standard requirements and best practices in
corporate governance stated by the Mexican Exchange Authorities.
However, the company´s CEO, Carlos Ruíz Sacristán, former member of
the Board of Directors of Sempra Energy, is also president of the Board of
Directors. We believe this may cause a concentration of power; separating
these roles provides a healthier governance structure.
In 2014 IENOVA became part of the IPC Sustentable Index, which is
comprised of 34 stocks that reflect the performance of companies
committed with issues regarding the environment and social responsibility.
The Company has invested a total amount of USD $4.6 million in
community, security, health and the environment, which encompasses the
creation of the Ensenada Trust and the Sásabe-Guaymas Trust.
Industry Overview and Competitive Positioning The recent fall in oil prices has tilted the development of Mexico’s energy
sector towards natural gas-related businesses, as the operating margins are
more attractive than those of oil-related projects. The current volatility in
the oil market does not represent a threat on IENOVA’s gas segment
revenues because of the nature of the contracts; however, the power
segment remains vulnerable to this uncertainty.
Mexican Natural Gas Distribution/ Transportation Sector In Mexico, private companies have been allowed to participate in gas
storage, transportation, and distribution since the 1995 gas legal reform.
Natural gas transportation in Mexico works through an integrated pipeline
system consisting of approximately 11,500 km. The Mexican government
has established the following short, mid and long-term strategies in order
to fulfill the internal demand:
The Plan Quinquenal SENER 2015-2019 estimates that towards 2019,
Mexico’s pipelines extension will increase approximately 5,000 km via
tender offers, following the mid-term strategy mentioned above. The
network is expected to reach at least 20,000 km in 2018 (Figure 5), which
represents a 20.2% CAGR. The shift in the country’s natural gas balance
will allow Mexico to become an exporting country, and a well-developed
pipeline network will be required to fulfill this long-term goal.
The majority of the country´s natural gas imports come from the USA
because of its geographical proximity. In 2014, there was an 18.4%
increase in the amount of natural gas imported due to a drop in production
from Pemex (exploration and extraction in Mexico still lack dynamism),
coupled with a constant growth in demand from the Mexican electric and
oil sector (Figure 6).
Plan Term Strategy
Short-term Increase LNG importing by sea and from USA
Mid-term Extend natural gas pipeline infrastructure
Long-term Augment natural gas domestic production; become a net exporter
Source: Prospectiva de Gas Natural y Gas
LP 2014-2028
0
2,000
4,000
6,000
8,000
10,000
12,000
National Production
Import
National Demand
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Oil Industrials
Power Generation Others
CAGR 2.8%
Figure 5. Mexico National Pipeline
Network
Figure 7. Natural Gas Expected
Demand Breakdown (MMcfd)
Source: Plan Nacional de Infraestructura
Figure 6. Mexico Gas Balance (MMcfd)
Source: Plan Nacional de Infraestructura; Seminario México-Argentina sobre Gas Natural:
Perspectivas de negocios en el sector energético en Nuevo León, Coahuila y Tamaulipas
Source: Prospectiva de Gas Natural y Gas
LP 2014-2028
Figure 8. Mexican Regasification
Market Share
According to SENER, it is expected that the natural gas demand will
continue growing in the next 14 years at a CAGR of 2.8% (Figure 7) driven
by new consumers and higher gas consumption in the power sector. In 2028
the electricity sector will be the largest consumer of natural gas, followed
by the industrial sector.
CFE is responsible for managing the energy infrastructure growth in
Mexico via tender offers.Taking advantage of this situation, IENOVA has
won two out of the four legal tenders carried out in the last 12 months.
Therefore, the Company will be investing approximately US $400 million
over the next two years, which will translate into an increase of 38.2% in
gas volume transportation. There are 6 tenders still to be completed in
which the Company has shown interest, with an estimated investment of
approximately US $4,500 million which will be held throughout the 4Q15
and 1Q16.
Mexican Gas Storage Sector
As of 2013, there were 3 national operating permits of liquefied natural gas
storage. One of these permits belongs to ECA, which has a storage capacity
of 320,000 m3 and a regasification capacity of 1,000 MMcfd. The total
storage capacity for all 3 plants is 920,000 m3. According to Prospectiva de
Gas Natural y Gas L.P. 2014-2028, there is an expansion permit for ECA
plant (additional investment of US $1,000 million) which accounts for an
added regasification capacity of 1,000-1,300 MMcfd. This extension will
increase IENOVA’s share from 50% to 67% of the Mexican regasification
capacity as seen in Figure 8.
Mexican Electricity Generation Sector
According to SENER, the energy generation demand is expected to
continue increasing for the next 14 years at a CAGR of 4.0% (Figure 9)
driven by an increasing demand in the industrial sector.
The Mexican Law of the Electric Industry, together with the Energetic
Transition Law, define the national goals in clean energy generation as a
percentage of total generated energy: 25% in 2018, 30% in 2021, and 35%
in 2024. In 2013, the capacity of clean energy generation worldwide
exceeded those of fossil fuels. Additionally, the costs of generating wind
energy have converged towards the costs of combined cycle energy
generation. This goal is in line with the 33% global average of energy
generated via renewable sources.
The Mexican government’s aim for 2024 requires capacity to generate an
additional 70 Terawatts (TW), being 47% provided by wind energy, 19%
from cogeneration, and 13% from hydroelectric plants. This presents an
opportunity for IENOVA, given that ESJ has the potential to expand up to a
capacity of 1,300 MW from the 155 MW currently installed.
Increasingly intense competition in bidding processes Even though the energy utilities industry requires high capital intensity and
entry barriers are significant, the recent tenders held for pipeline projects
have resulted to be aggressively competed. The competition that arises
when a new government tender is in place is intense. Please refer to
Porter’s 5 Forces Analysis in Figure 10.
-
100
200
300
400
Tho
usa
nd
s
Exportation Service sector
Agricultural sector Comercial sector
Residencial sector Industrial sector
CAGR 4.0%
Figure 10. Porter 5 Forces Analysis
Source: Prospectiva de Gas Natural y Gas
LP 2014-2028 Figure 9. Electricity Expected
Demand Breakdown (GWh)
Source: Prospectiva del Sector Eléctrico
2014-2028
Source: Team Elaboration
Investment Summary We issue a Market Outperform recommendation on IENOVA, with a 12M
target price of MXN $87 using the Sum-of-the-parts (SOTP) methodology
for its operating assets and a base case optionality for upcoming proyects.
This offers a 10.3% upside from its closing price of MXN 78.85 on October
16th 2015 and a 2.5% dividend yield, giving a total expected return of
12.8% assuming the new share issuance.
Increase in EBITDA Margins
The EBITDA margin is estimated to increase from 34.2% in 2014 to 60.5%
in 2019 (Figure 11), attributed to the start of operations of new gas
pipelines (Sonora, Ojinaga-El Encino, San Isidro-Samalayuca), as well as
the recently announced acquisition of the remaining 50% stake in GdC. The
main driver is the change in the sales composition, increasing pipelines
segment revenues as percentage of consolidated revenues, being this the
most profitable business segment with an ~80.0% EBITDA Margin.
Flexibility to engage in diverse formats despite increasing competition
The country’s Energy Reform will attract new competitors in future bids
for new projects. Nonetheless, the Company is well positioned against
existing and upcoming competitors. We believe IENOVA will not lower
the internal rate of return required for the projects in which they bid, in part
because they have flexibility to participate in diverse formats (i.e.
acquisition of joint ventures, expansion projects of existing assets, etc.).
This prioritization of profitability over growth sustains the assumptions
taken in arriving to the target price.
Prudent Management and Healthy Balance Sheet
We expect the company’s current Net Debt/EBITDA of 1.7x to rise in the
short-term, and although the company does not have any formal
convenants, rating agencies have suggested a limit of 3.0x (current S&P
credit rating of mxAAA). Therefore, in order to keep up with new
investments and maintain the ratio below 3.0x, the Company will be forced
to issue equity, diluting current shareholders. We forecast that the
Company will return to current levels of Net Debt, reflecting a 30% Debt
and 70% Equity capital structure, as shown in Figure 12.
Future Pipeline Tenders in the Gas Transportation Business
In order to continue growing, IENOVA needs to be able to access new
projects tendered by CFE. Given the Company’s solid portfolio of future
projects and the country’s planned pipeline expansion, we expect a solid
increase in revenues.
Long-term opportunities in the Mexican Energy Sector
Currently IENOVA is analyzing a liquefaction project in ECA which
would allow the Company to export natural gas. Additionally, due to
growing interest in renewable energy, ESJ could have a capacity expansion
from 155 MW to 1,300 MW. Also, the new investment vehicle, Fibra E,
could lead the Company to capitalize mature projects and invest in new
ones, as long as it generates value to the shareholders. Furthermore,
IENOVA stated their interest in participating in the upcoming electricity
Figure 12. IEnova´s Capital Structure
Table 1. Possible Partners for
Electricity Segment Tenders
Figure 13. Sources of Financing
(USD MM)
Source: Company Data and Team Estimates
Source: Company Data and Team Estimates
Source: Team Assumptions
Figure 11. EBITDA Margins
Source: Company Data and Team Estimates
transmission lines projects tendered by CFE together with important Latin
American players in the electricity segment (Table 1).
Future dividend payments assumed at a 4% growth
Even though there is no official dividend payout policy, Company’s
guidance indicates that they look forward to pay dividends annually, with a
growth rate between 4% and 5%. This translates into a constant ~45.0%
payout ratio (Figure 14), already taking into account the dilution that will
occur due to the follow-on in stock issuance.
Financial Analysis Increase in gas transportation volume after GdC acquisition
The acquisition of Gasoductos de Chihuahua (GdC) boosts IENOVA’s
volume, as the pipeline volume that was previously recorded as part of the
joint venture will now become 100% of the Company. This translates into
higher sales and higher EBITDA, which behave steadily throughout the
projected periods. Revenues grew 21.4% from 2013 to 2014, above the
13.1% growth that peer companies had in average for the same period. We
expect a 6.8% revenue CAGR for the period of 2014-2019. Previous
periods have recorded EBITDA margins of ~35.0%, and projected years are
expected to average 59.0% (Figure 15), mainly due to GdC acquisition and
the start of operations of new pipelines. These internal inflows will back up
future capital expenditures, and together with a flexible debt issuance
capacity, will allow for a well-rounded financial structure when bidding for
upcoming projects.
Highly liquid and solvent, with reasonable leverage metrics
IENOVA’s liquidity ratios show its capacity to maintain higher current
assets compared to their current liabilities, which keep them from falling
short in fulfilling their short-term obligations. Nevertheless, negative net
operating cycles (both for the the past and projected years) explain the
recurrent revolving credit lines IENOVA requests, intended to cover this
gap between cash received and cash spent. Net Debt/EBITDA (Figure 16)
maintains levels below 3.0x, which result in a stable capital structure of
70% equity - 30% debt, as we believe this structure is sustainable in the
long-term.
Net profit margin as the main driver for Return on Equity
DuPont Analysis (Figure 17) indicates that leverage has been an average of
1.5, and we estimate it to persist in the projected years. Total asset turnover
stays in ranges between 0.15 and 0.25, as property, plant, and equipment is
not replaced very frequently in the utilities industry. The projected net profit
margin is superior than historically, mainly due to the increase in exposure
to the gas transportation segment (new pipelines start operations and GdC
become 100% owned). The profitability of this business segment results in
higher projected ROE.
Valuation ratios at premium, but with solid foundations
We estimate IENOVA will normalize their P/E and EV/EBITDA,
diminishing the current premium at which it trades. This will be mainly
caused by the increase in earnings per share, as well as the increase in
EBITDA as a result of the acquisition of GdC and the start of operations of
Guaymas-El Oro, Ojinaga-El Encino, and San Isidro-Samalayuca pipelines.
Figure 15. EBITDA and Net Income
vs. Sales (USD MM)
Figure 16. Net Debt/ EBITDA (USD MM)
Figure 17. Du Pont Analysis
Figure 14. Dividends (USD MM)
Source: Company Data and Team Estimates
Source: Company Data and Team Estimates
Source: Company Data and Team Estimates
Source: Company Data and Team Estimates
Source: Team Estimates Source: Team Estimates
High margins maintained in the long-run
As mentioned throughout the report, IENOVA has most of its capacity
compromised by means of long-term, take-or-pay USD denominated
contracts. Consequently, from 2016 through 2019, net profit margins and
EBITDA margins stay at averages of 39.0% and 59.0%, respectively. The
capacity to invest in arising opportunities can be backed up with the quality
of earnings these margins show, as well as the implied company
profitability.
Valuation
DCFF and Sum-of-the-parts (SOTP) Valuation
The Discounted Free Cash Flow to the Firm was the methodology used to
calculate an intrinsic value for each of the Company’s assets, which were
grouped as shown in Table 3. Due to the different nature of each business
segment, mainly in EBITDA margins (Table 2), we decided this was the
most adequate approach in order to reflect the behavior of each business
segment. SOTP methodology was done afterwards, arriving at an equity
value per share of MXN $87, adjusted by net debt and a base case
optionality for upcoming projects. Three scenarios were considered for
optionalities: Bull case, where IENOVA wins 80% of the tenders the
Company plans to bid; Base case, with a 50% of tenders awarded to
IENOVA, as seen in the last 12 months; and Bear case, where no
optionalities are granted to the Company (Table 4).
For this methodology we accounted 50% ownership for Energía Sierra
Juárez (ESJ), 25% of Los Ramones Norte and 100% of the existing assets of
the Company. We also considered full ownership of the assets of
Gasoductos de Chihuahua (GdC) and the new share issuance, as we
consider the acquisition will be completed by the end of this year.
Different assumptions were made for each of the Company’s assets. In the
gas transportation segment, for each pipeline, we forecasted the cash flows
for the life of their contracts, taking into account a terminal value (Table 5)
of the asset, calculated as the total investment adjusted by accumulated
depreciation. For Ecogas, we modeled the NPV in two phases: a detailed
year-to-year forecast of its FCFF up to 2025, and a perpetuity growth of
2.8% derived from a compound growth of the long-term gas demand in
Coahuila, Chihuahua, and Baja California, and the long-term growth of the
natural gas price, assuming the likeliness of continuing operations after that
Table 4. Target Price Scenarios
Base Case Target Price Breakdown
Table 3. Intrinsic Asset Value
Table 2. EBITDA 2016E
Table_5. Valuation Assumptions
Source: Team Estimates
Source: Team Estimates
period. The value of its LNG plant was derived from three revenue streams:
(i) natural gas storage and regasification, (ii) natural gas sale and (iii) other
revenues (Sempra payments for coverage of costs required to keep
continuing operations). These revenue streams were forecasted for the
remaining life of the contract, which ends in 2028; after that period a
terminal value of the asset was considered, following the same methodology
as with pipelines. In the electricity generation segment, for Termoeléctrica de Mexicali (TDM),
we modeled a 10-year DCF and assumed a perpetuity growth of 1.8%,
derived from a compound growth of the long-term electricity demand in
California and the long-term growth of electricity prices in the USA. For
ESJ, we followed the same methodology valuation as for TDM, except that
the perpetuity growth for this asset was 2% (USA long-term inflation, as
seen in Figure 18) given the fact that the capacity generated is compromised
with San Diego Gas & Electric (SDG&E) at a fixed price for the life of the
contract.
We considered an optionality for IENOVA’s share price of MXN $8, given
the future pipeline tenders to be held by CFE in the following years, taking
into account only the ones IENOVA is planning to participate (Table 6).
Starting from the CAPEX estimated by CFE, an internal rate of return of 9%
was used to obtain cash flow annuities for a 25 year period; then we
discounted them at the Company’s gas segment WACC of 6.0% and divided
the Net Present Value among the total shares outstanding after the issuance
to arrive to an added value per share. Keeping an operating cash of 3.0% to
total assets as shown in previous years and maintaining a 3.0x Net
Debt/EBITDA, the company could afford to bid for 82% of the total
investment amount.
Gas segment
Transportation. According to members of the Board of Directors, the
company seeks an internal rate of return (IRR) ranging between 9% - 11%,
set above its WACC.
Volume. It is fixed due to the fact IENOVA has compromised it with CFE,
Pemex and other clients, adding stability to future cash flows.
Price and EBITDA. IENOVA charges to its customers a fare lower than the
maximum established by Comisión Reguladora de Energía (CRE). The
Company’s guidance suggests a multiple of 7.0x - 8.0x CAPEX/EBITDA
and an EBITDA margin ~80.0%. From that, for the first year we solved for
the price that must be charged and then we modeled it growing in line with
US inflation.
Natural Gas Sale, storage and regasification (LNG Terminal) Volume and Price. For the natural gas sale, in order to estimate the behavior
of the volume, we based our forecasts in the expected year-to-year demand
of natural gas from CFE. Natural gas prices were estimated in line with the
expected performance of the natural gas sale index the Mexican government
publishes in Programa de Desarrollo del Sistema Eléctrico Nacional
(PRODESEN) (Figure 19).
For storage and regasification, given the fact that the fare and volume were
initially agreed since inception, we decided to maintain flat cash flows for
this segment for the remaining life of the contract. For other revenue, we
Figure 19. Natural Gas Price Index
Figure 18. US long-term Inflation
Table 6. Optionality Analysis
Source: Team Estimates
Source: PRODESEN
Source: Euromonitor
obtained an average figure of what it represented as a percentage of sales in
the last three years, and maintained that proportion for the forecasted period.
EBITDA. Historical performance of these segments suggests a steady
behavior of its EBITDA margin.
Gas Distribution (Ecogas) Volume. Sales volume grows in line with the corresponding annual demand
forecast per state (Figure 20).
Price. Fares were estimated with the natural gas sale index the Mexican
government publishes in PRODESEN (Figure 19), which has proven to be
accurate, having a high historical correlation with the prices IENOVA has
transacted.
EBITDA. It behaves steadily due to a constant EBITDA margin, regardless of
the sale price that is offset by its respective cost of sales.
Electricity segment
Termoelétrica de Mexicali. IENOVA exports electricity to California in the
spot market, attributing high volatility in the earnings of this segment.
Volume. Taking a conservative approach, we considered the volume of MWh
sold in 2013 as the base year to forecast the sales in the following years. To
do this, we broke down the electricity sold in California in 2013 in the main
segments: industrial, commercial and residential (Figure 21), then we
forecasted the volume with the estimated 1.2% CAGR for the period 2012-
2024, based on the USA Energy Outlook 2015.
Price. Since plants fueled with natural gas generate two thirds of the
electricity consumed in California, we calculated a correlation of 0.6 between
historical average wholesale electricity prices in California with historical
natural gas prices (Figure 22). Next, we modeled electricity prices as if they
followed the same movement of the natural gas index adjusted by the
correlation previously mentioned. We obtained a CAGR of 2.2% for the
period 2016-2024, which is similar to the 2.0% CAGR estimated by the
California Energy Commission for the same period.
EBITDA. For the forecasted EBITDA in 2015, we estimated the margin for
this year with the YTD EBITDA margin IENOVA has reported in order to
reflect the current drop in prices. For the rest of the forecasted period, we
based our assumptions on the EBITDA margin of 2013, taking a conservative
approach, expecting a recovery of this business segment.
Energía Sierra Juárez
Volume. The Company’s guidance suggests the wind farm will be operating
at a factor between 34.0%-36.0% of the total capacity of 155 MW for the
following five years, giving an estimated annual volume sold of 475,230
MWh.
Price. IENOVA holds a fixed-price contract with San Diego Gas and
Electricity (SDG&E) for the total of MWh generated ($106.50) which grows
in line with US inflation.
EBITDA. Company’s insights suggest ~30.0% margin.
Weighted Average Cost of Capital
The cost of equity was calculated using the CAPM, with an adjustment for
country risk (Table 7). We calculated different betas for each segment in
sd
0
50
100
150
200
250
300
200
9
201
0
201
1
201
2
201
3
Residential Commercial Industrial
Figure 22. Historical performance of
electricity prices in California vs Henry
Hub index levels
Table 7. WACC Computation
Figure 20. Total Consumption in
Coahuila, Chihuahua and BC (MMcfd)
Source: Prospectiva de Gas Natural y
Gas LP 2014-2028
Figure 21. Historical California
electricity consumption by
sector. (TWh)
Source: U.S. Energy Information
Administration (EIA)
Source: U.S. EIA
Source: Team Estimates
which the company operates considering the asset-weighted average unlevered
beta of 19 US Companies operating in the gas segment and 29 operating in the
power segment. The market risk premium considerd was 5.5%. The risk-free
rate of 3.0% was based on the historical average rate of the US 10-Y Bond for
the last ten years (2.5%) plus a 50 bps spread, considering an expected
increase in interest rates. The cost of debt obtained before tax is 3.3% based on
a currency interest rate swap of the average mid-term YTM of IENOVA’s 10-
Y Bond since issuance. Finally, we obtained two different WACCs: 6.0% for
the gas segment and 6.6% for the electricity segment.
Investment Risks Operational risk. | Customers’s credit risk (OR1) Five customers (Table 8)
accounted for 66% of the income of IENOVA in 2014. If one or more of these
entities presented financial struggles, they could impose a threat on
IENOVA’s revenue.
Operational risk. | Lack of human capital (OR2) Due to the high
specialization required to operate energetic infrastructure, the company might
face difficulties in finding and retaining the appropriate human capital to
operate their assets and to broaden horizons.
Operational risk. | Renewal of contracts (OR3) Approximately 80% of
IENOVA’s revenues derive from ‘take-or-pay’ terms established with
customers in which the company has compromised 100% of the capacity.
Almost half of these contracts expire by 2030 (Figure 23). When expiring, the
company might be able to obtain better fares with private customers, yet the
full capacity may not be contracted with customers, presenting difficulties to
maintain the same levels of volume sold; hence, revenues might fall.
Regulatory risk. | Permissions (RR1) Licenses, permits and regulatory
requirements established by CRE to operate certain assets are vital; failure to
comply with this would hinder the company’s operations.
Regulatory risk. | Delays on COD (RR2) Suppliers of pipelines, construction
services, rights of way, demands, among other factors may cause delays on
Commercial Operational Date, affecting the company’s budgeted capital
expenditures, diminishing its expected rate of return.
Market risk. | MXN appreciation. (MR1) Mexican peso depreciation
contributes to an increase in the operation margins of the company, while an
appreciation of the Mexican currency has the contrary effect.
Market risk. | Follow-on. (MR2) The current volatility surrounding the
Mexican market does not present an attractive moment for the company to
proceed with a follow-on offering, which could impose limitations on the
company to participate in next years in the six tenders to be carried out
representing a total of 6,075 USMM.
Market risk. | New participants. (MR3) Despite IENOVA states no interest in
projects below an IRR of 9%, the company might be forced to accept a lower
IRR in case intense competition affect the market, lowering the IRR of the
future tenders.
Market risk. | Power segment volatility. (MR4) In spite of the fact the state of
California ranks second total electricity demand, it has one of the lowest per
capital total energy consumption in the USA. California state policy promotes
energy efficiency and the state’s extensive efforts to increase energy efficiency
and the implementation of alternative technologies may restrain demand,
contributing to volatility in the spot prices of electricity.
After enlisting the Company’s risks, we believe the trade-off between
expected return and risk is adequate, meaning there is no risk that could
substantially put at stake IENOVA’s intrinsic value.
Table 8. IENOVA’s Main Customers
Figure 23. IENOVA’s contract
maturities
Source: Team Estimates
Table 9. Risk Matrix
Source: Company data
Source: Company data
Balance Sheet (USD thousands) 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Cash & eq 103,880 83,637 90,744 172,553 184,302 196,610 207,885
S.T. investments 207,027 30,020 34,311 52,535 57,050 61,944 62,786
Accounts receivable & other Acc. Rec 64,035 66,401 51,466 78,802 85,575 92,916 94,179
Accounts receivable to related parts 24,860 26,601 23,941 21,547 19,392 17,453 15,708
Natural gas inventory 3,836 9,375 8,578 13,134 14,262 15,486 15,697
Other assets 94,490 109,585 109,585 109,585 109,585 109,585 109,585
Current Assets 498,128 325,619 318,624 448,155 470,167 493,994 505,840
Accounts receivable to related parts 331 146,775 146,775 146,775 146,775 146,775 146,775
Investments in joint ventures 366,288 401,538 12,998 12,998 12,998 12,998 12,998
Goodwill 25,654 25,654 558,316 558,316 558,316 558,316 558,316
PPE (net) 2,213,837 2,377,739 3,691,484 3,940,879 4,182,564 4,078,318 3,971,004
Cash Surplus intended for Investing 540,501 669,009 1,159,444 1,630,738
Other assets 137,670 102,893 103,720 104,127 103,580 103,809 103,839
Noncurrent Assets 2,743,780 3,054,599 4,513,293 5,303,596 5,673,242 6,059,660 6,423,669
TOTAL ASSETS 3,241,908 3,380,218 4,831,918 5,751,750 6,143,409 6,553,654 6,929,509
S.T. Debt - 195,089 35,064 181,306 86,101 111,931 123,124
Accounts payable 49,459 59,575 42,888 65,668 71,312 77,430 78,483
Accounts payable to related parts 3,655 14,405 10,804 8,103 6,077 4,558 3,418
Other liabilities 139,975 98,481 92,557 88,113 84,781 82,281 80,407
Current Liabilities 193,089 367,550 181,312 343,190 248,271 276,200 285,432
L.T. Debt 394,656 350,638 1,813,055 861,008 1,119,311 1,231,242 1,354,366
Account payable to related parts 38,893 38,460 136,385 71,246 82,030 96,554 83,277
Other Long Term Liabilities 298,858 374,282 374,282 374,282 374,282 374,282 374,282
Noncurrent Liabilities 732,407 763,380 2,323,722 1,306,537 1,575,623 1,702,078 1,811,925
Common stock 762,949 762,949 762,949 2,349,565 2,349,565 2,349,565 2,349,565
Additional paid-in capital 973,953 973,953 973,953 973,953 973,953 973,953 973,953
Other comprehensive income - 24,273 - 64,331 - 64,331 - 64,331 - 64,331 - 64,331 - 64,331
Retained earnings 603,783 576,717 654,312 842,837 1,060,328 1,316,189 1,572,965
Equity 2,316,412 2,249,288 2,326,883 4,102,024 4,319,515 4,575,375 4,832,152
LIABILITIES AND EQUITY 3,241,908 3,380,218 4,831,918 5,751,750 6,143,409 6,553,654 6,929,509
Income Statement (USD thousands) 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Sales 677,836 822,796 626,171 958,759 1,041,162 1,130,482 1,145,848
COGS (328,817) (443,298) (260,484) (324,580) (346,835) (360,690) (362,045)
S&GA (99,685) (98,384) (65,121) (81,145) (86,709) (90,172) (90,511)
EBITDA 249,334 281,114 300,565 553,034 607,618 679,620 693,292
Depr/Amort (61,164) (61,943) (55,862) (89,571) (96,140) (104,246) (107,314)
Interest income 1,372 3,299 2,509 2,722 5,177 5,529 5,898
Other gains (losses) 1,951 2,401 2,115 1,901 1,740 1,620 1,529
Earnings before taxes and participation in
joint ventures 191,493 224,871 249,328 468,086 518,395 582,523 593,406
Taxes (83,792) (111,283) (74,798) (140,426) (155,518) (174,757) (178,022)
Participation in earnings from joint ventures,
net 34,689 23,346 73,626 38,247 39,092 39,952 40,924
Net income 142,390 136,934 248,155 365,908 401,968 447,718 456,308
Cash Flow (USD thousands) 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Net income of the year 142,390 136,934 248,155 365,908 401,968 447,718 456,308
Adjusments for:
Income tax expense 83,792 111,283 74,798 140,426 155,518 174,757 178,022
Participation in joint venture earnings, net (34,689) (23,346) (73,626) (38,247) (39,092) (39,952) (40,924)
Non Cash Transactions (7,634) 9,276 101,529 (68,686) 27,897 24,172 45,532
(Gain) loss subsidiary participation transactions - (18,824) - - - -
Depreciation and amortization 61,164 61,943 55,862 89,571 96,140 104,246 107,314
Movements in working capital: - - - - - - -
(Increase) decrease in Acc. Rec. and other Accounts
Receivable 19,066 (4,020) 17,595 24,942 4,618 5,402 (482)
(Increase) decrease in inventories 5,437 (5,539) 797 (13,134) (14,262) (15,486) (7,119)
Decrease (increase) in other assets (54,057) 14,308 (827) (406) 547 (229) (30)
Increase (decrease) in Acc. Payable and other Accounts
Payable 18,241 49,393 (16,687) 22,780 5,644 6,118 1,052
(Decrease) increase in provisions (28,512) (19,873) - - - - -
Increase (decrease) in other liabilities 32,219 17,895 (5,925) (4,443) (3,333) (2,499) (1,875)
Cash generated from operations 237,417 329,430 401,672 518,709 635,645 704,246 737,799
Income tax paid (74,657) (166,213) (111,283) (74,798) (140,426) (155,518) (174,757)
Net cash generated from operations 162,760 163,217 290,389 443,911 495,219 548,727 563,042
Net cash for sale of participation in subsidiary - 24,411 - - - - -
Effects of the combination of Sempra Gasoductos Mexico - - - - - - -
Interests received -
4 - - - - -
PPE Acquisitions (369,672) (325,484) (1,369,607) (338,966) (337,825) - -
Cash Surplus intended for Investing (540,501) (128,508) (490,435) (471,294)
Loans to non-consolidable related parts net. (100) (143,902) - - - - -
S.T. Investments (207,027) 177,007 4,291 (18,224) (4,515) (4,894) (842)
Change in Goodwill - - (532,662) - - - -
Disinvestment in JVs 388,540
Net cash (used) in investment activities (576,799) (292,375) (1,897,978) (509,151) (470,849) (495,329) (472,136)
Cash flow from financing
Interests paid (11,557) (18,872) - - - - -
Financing from related parts net (375,659) (437) 94,324 (67,840) 8,759 13,004 (14,417)
Issue of ordinary stocks through IPO 598,812 - - 1,586,616 - - -
Costs of stock issue (24,627) - - - - - -
Cash flows received by bank loans and bank financing - 278,432 1,302,392 (805,805) 163,098 137,761 134,317
Cash flows for L.T. debt issue 408,278 - - - - - -
Costs of L.T. debt issue (3,003) (11,184) - - - - -
Dividends paid (156,000) (164,000) (170,560) (177,382) (184,478) (191,857) (199,531)
Net cash generated by Financing acts. 436,244 83,939 1,226,156 535,588 (12,621) (41,091) (79,630)
(Decrease) increase in cash and cash eqs. 22,205 (20,371) 7,107 622,309 140,258 502,742 482,570
Cash and cash eqs. At beginning of the year 85,073 103,880 83,637 90,744 713,053 853,312 1,356,053
Effects for change in the value of cash held in foreign
currency (3,398) 565 - - - - -
Cash and cash eqs. At end of year 103,880 84,074 90,744 713,053 853,312 1,356,053 1,838,623
Balance Sheet as % of Total Assets 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Cash & eq 3.2% 2.5% 1.9% 3.0% 3.0% 3.0% 3.0%
S.T. investments 6.4% 0.9% 0.7% 0.9% 0.9% 0.9% 0.9%
Accounts receivable & other Acc. Rec 2.0% 2.0% 1.1% 1.4% 1.4% 1.4% 1.4%
Accounts receivable to related parts 0.8% 0.8% 0.5% 0.4% 0.3% 0.3% 0.2%
Natural gas inventory 0.1% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2%
Other assets 2.9% 3.2% 2.3% 1.9% 1.8% 1.7% 1.6%
Current Assets 15.4% 9.6% 6.6% 7.8% 7.7% 7.5% 7.3%
Accounts receivable to related parts 0.0% 4.3% 3.0% 2.6% 2.4% 2.2% 2.1%
Investments in joint ventures 11.3% 11.9% 0.3% 0.2% 0.2% 0.2% 0.2%
Goodwill 0.8% 0.8% 11.6% 9.7% 9.1% 8.5% 8.1%
PPE (net) 68.3% 70.3% 76.4% 68.5% 68.1% 62.2% 57.3%
Cash Surplus intended for Investing 0.0% 0.0% 0.0% 9.4% 10.9% 17.7% 23.5%
Other assets 4.2% 3.0% 2.1% 1.8% 1.7% 1.6% 1.5%
Noncurrent Assets 84.6% 90.4% 93.4% 92.2% 92.3% 92.5% 92.7%
TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
S.T. Debt 0.0% 5.8% 0.7% 3.2% 1.4% 1.7% 1.8%
Accounts payable 1.5% 1.8% 0.9% 1.1% 1.2% 1.2% 1.1%
Accounts payable to related parts 0.1% 0.4% 0.2% 0.1% 0.1% 0.1% 0.0%
Other liabilities 4.3% 2.9% 1.9% 1.5% 1.4% 1.3% 1.2%
Current Liabilities 6.0% 10.9% 3.8% 6.0% 4.0% 4.2% 4.1%
L.T. Debt 12.2% 10.4% 37.5% 15.0% 18.2% 18.8% 19.5%
Account payable to related parts 1.2% 1.1% 2.8% 1.2% 1.3% 1.5% 1.2%
Noncurrent Liabilities 22.6% 22.6% 48.1% 22.7% 25.6% 26.0% 26.1%
Common stock 23.5% 22.6% 15.8% 40.8% 38.2% 35.9% 33.9%
Additional paid-in capital 30.0% 28.8% 20.2% 16.9% 15.9% 14.9% 14.1%
Other comprehensive income -0.7% -1.9% -1.3% -1.1% -1.0% -1.0% -0.9%
Retained earnings 18.6% 17.1% 13.5% 14.7% 17.3% 20.1% 22.7%
Equity 71.5% 66.5% 48.2% 71.3% 70.3% 69.8% 69.7%
LIABILITIES AND EQUITY 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Valuation Ratios 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Price of share 52.17 73.80 83.97 87.58 87.74 86.43 84.95
FX Rate 13.08 14.72 16.40 16.40 16.40 16.40 16.40
P/Share
EBITDA p/share* 0.22 0.24 0.44 0.37 0.41 0.46 0.47
Cash Flow p/share 0.14 0.14 0.25 0.30 0.33 0.37 0.38
Sales p/share 0.60 0.71 0.54 0.65 0.70 0.76 0.77
Book Value p/share 2.06 1.95 2.02 2.76 2.91 3.08 3.26
Earnings p/share 0.13 0.12 0.22 0.25 0.27 0.30 0.31
Dividends p/share 0.14 0.14 0.15 0.12 0.12 0.13 0.13
Dividend Payout Ratio 109.6% 119.8% 68.7% 48.5% 45.9% 42.9% 43.7%
Retention Rate -9.6% -19.8% 31.3% 51.5% 54.1% 57.1% 56.3%
Margins
Net Profin Margin 21.01% 16.64% 39.63% 38.16% 38.61% 39.60% 39.82%
EBITDA Margin* 36.78% 34.17% 57.64% 57.68% 58.36% 60.12% 60.50%
CFO Margin 24.01% 19.84% 46.38% 46.30% 47.56% 48.54% 49.14%
Management Efectiveness
Return on Assets 4.39% 4.14% 6.04% 6.91% 6.76% 7.05% 6.77%
Return on Equity 6.15% 6.00% 10.85% 11.38% 9.55% 10.07% 9.70%
DuPont
Net Profin Margin 21.01% 16.64% 39.63% 38.16% 38.61% 39.60% 39.82%
Total Asset Turnover 0.21 0.25 0.15 0.18 0.18 0.18 0.17
ROA 4.39% 4.14% 6.04% 6.91% 6.76% 7.05% 6.77%
Leverage 1.40 1.45 1.79 1.65 1.41 1.43 1.43
ROE 6.15% 6.00% 10.85% 11.38% 9.55% 10.07% 9.70%
Sustainable Growth -0.59% -1.19% 3.39% 5.86% 5.17% 5.75% 5.46%
Income Statement As % of Sales 2013A 2014A 2015E 2016E 2017E 2018E 2019E
Income Statement
Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
COGS (48.5%) (53.9%) (41.6%) (33.9%) (33.3%) (31.9%) (31.6%)
S&GA (14.7%) (12.0%) (10.4%) (8.5%) (8.3%) (8.0%) (7.9%)
EBITDA 36.8% 34.2% 48.0% 57.7% 58.4% 60.1% 60.5%
Depr/Amort (9.0%) (7.5%) (8.9%) (9.3%) (9.2%) (9.2%) (9.4%)
Interest income 0.20% 0.40% 0.40% 0.28% 0.50% 0.49% 0.51%
Other gains (losses) 0.3% 0.3% 0.3% 0.2% 0.2% 0.1% 0.1%
Earnings before taxes and participation in joint
ventures 28.3% 27.3% 39.8% 48.8% 49.8% 51.5% 51.8%
Taxes (12.4%) (13.5%) (11.9%) (14.6%) (14.9%) (15.5%) (15.5%)
Participation in earnings from joint ventures, net 5.1% 2.8% 11.8% 4.0% 3.8% 3.5% 3.6%
Net income 21.0% 16.6% 39.6% 38.2% 38.6% 39.6% 39.8%
Activity Ratios
Inventory Turnover 111.71 82.00 37.96 37.37 31.65 30.31 29.03
Receivables Turnover 6.52 4.59 2.64 3.85 3.94 4.20 4.22
Payables Turnover 3.63 4.28 1.33 1.91 2.27 2.13 2.11
Days Inventory Turnover 3.22 4.39 9.48 9.63 11.37 11.88 12.40
Days Receivables Turnover 55.20 78.39 136.14 93.60 91.30 85.68 85.31
Days Payables Turnover 99.09 84.07 271.64 188.48 158.51 169.23 170.99
Net Operating Cycle -40.68 -1.29 -126.01 -85.25 -55.84 -71.67 -73.28
Working Capital Turnover 2.22 6.25 4.56 2.45 1.36 1.00 0.71
Fixed Asset Turnover 0.25 0.28 0.14 0.20 0.19 0.19 0.18
Total Asset Turnover 0.21 0.25 0.13 0.18 0.18 0.18 0.17
Liquidity Ratios
Current Ratio 2.58 0.89 1.76 2.88 4.59 5.99 7.49
Quick Ratio 2.56 0.86 1.71 2.84 4.53 5.93 7.43
Cash Ratio 1.61 0.31 0.69 2.23 3.67 5.13 6.66
Solvency Ratios
Debt-Assets 0.29 0.33 0.52 0.29 0.30 0.30 0.30
Debt-Capital 0.29 0.33 0.52 0.29 0.30 0.30 0.30
Debt-Equity 0.40 0.50 1.08 0.40 0.42 0.43 0.43
Leverage
Net debt/EBITDA 0.51 1.73 3.69 1.62 1.73 1.74 1.87 Net debt/Equity 0.05 0.22 0.80 0.22 0.24 0.26 0.27
CAPEX/Depreciation 6.04 5.25 24.52 2.25 2.18 4.70 4.39
CAPEX/CFO 2.27 1.99 4.72 0.45 0.42 0.89 0.84
Valuation ratios
P/E 31.47 42.26 23.81 21.66 19.75 17.47 16.85 P/BV 1.93 2.57 2.54 1.93 1.84 1.71 1.59
EV/EBITDA 18.48 22.31 15.36 15.95 14.80 13.25 12.95
EV/Sales 6.80 7.62 8.86 9.20 8.64 7.97 7.84
The Latin America Burkenroad Reports from ITESM are financial analysis of companies listed in the
Mexican Stock Exchange, and capital budgeting of medium and small companies. They are elaborated by
students of both the Master in Finance program of EGADE Business School, and the Bachelor in Finance and
Accounting; under the supervition of recognized professors.
The Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM), Instituto de Estudios Superiores
de Administración de Venezuela (IESA), and Universidad de los Andes from Colombia, along with Tulane
University, started the Latin America Burkenroad Program with the support of Multilateral Investment Fund
of the Interamerican Development Bank in 2001. Actually it has been expanded to other countries, to
Guatemala by the Escuela Superior Politécnica Litoral, to Perú by the Universidad Catolica de Perú, to
Colombia by the EAFIT, ICESI, and the Universidad Del Norte, as well as Argentina by the Universidad de
Belgrano, and soon to Brazil and Chile.
This program enriches human capital by providing training in financial analysis and valuation techniques, and
also intends to facilitate access of companies to financing sources by providing financial information to
investors and financial institutions.
The reports prepared by this program, evaluate financial conditions and investment opportunities in Latin
American companies. Financial reports of listed companies are distributed to national and foreign investors
through publications and financial information systems such as Reuters, Infosel Financiero and Finsat, among
others. Investment capital budgeting reports are distributed only to beneficiary companies for future private
presentations to financial institutions or potential investors.
Investment plans and financial situation of the analyzed companies are presented to the financial community
in an Annual Meeting.
For more information about the Burkenroad Latin America Program please visit the following websites:
http://burkenroad.wix.com/pagina-hpstr www.latinburkenroad.com
María Concepción del Alto Ph.D.
Research Director
Burkenroad Reports, Mexico
Departamento Académico de Contabilidad y Finanzas
EGADE Business School
Tel +52 (81) 86256000 ext. 6050