• Canadian pension funds team up with IDEAL for toll road
  • Funds will contribute C$1.35 billion to new toll road company

Two of Canada’s largest pension funds are teaming up with Mexican infrastructure company IDEAL to create a toll road partnership.

The investment is the first in Mexican infrastructure for both Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan, and opens the door for future acquisitions in the country.

"The Mexican theme is not one we’re alone in recognizing," Cressida Hogg, Canada Pension’s global head of infrastructure, said in an interview. "There are some very strong dynamics in the Mexican economy and investing in toll roads is a way of getting exposure to that growth."

Canada Pension and Ontario Teachers’ will contribute C$1.35 billion ($1.1 billion) to form a new company with the Mexican infrastructure company, formally called Impulsora del Desarrollo y el Empleo en America Latina SAB, according to a statement Thursday. IDEAL will contribute its 99 percent equity interest in toll road operator Autopista Arco Norte SA in exchange for 51 percent of the new company, while Canada Pension and Ontario Teachers’ will hold 29 percent and 20 percent, respectively.

Infrastructure Plan

Mexico represents a unique opportunity for the Canadian pension funds, which have a long history of investing in infrastructure assets around the globe. The Mexican government recently implemented a four-year 7.7-trillion peso ($420 billion) plan for infrastructure investments targeting energy, transportation and other projects.

The 223-kilometer (139 mile) Arco Norte is one of the largest federal toll road concessions in Mexico and connects the Mexican states of Puebla, Hidalgo and Queretaro, the companies said.

The decision to invest in the country follows on a partnership forged in September by the Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund, with a group of Mexican institutional investors to acquire assets there.

Canada Pension, for its part, is more interested in investing in more mature assets, like Arco Norte, than greenfield projects, Hogg said.

U.S. Link

"If you look at the way that Mexico’s macro situation had developed over the last five years, it’s political situation has stabilized and it has become a more attractive investment destination for people like ourselves," Hogg said. "Added to that, clearly Mexico’s economic future is closely linked with the U.S. and the U.S. is growing more rapidly than many other countries in the world."

For Ontario Teachers’, the new toll road company opens the door for future investments in Mexico, said Deborah Allan, a spokeswoman.

Credit Suisse Securities acted as financial adviser to IDEAL, while Macquarie Capital acted on behalf of Canada Pension and Ontario Teachers’.

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