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Sacyr’s turbo-charged push into PPPS

Sacyr has placed PPPs at the heart of its growth-focused 2021-2025 strategic plan, which includes making its concession businesses the company’s main contributor to its EBITDA. 

It wants to build a “portfolio with low-risk demand, selecting projects mainly with availability payments or risk mitigation,” Sacyr Concesiones CEO Rafael Gomez del Rio tells Infralogic. 

Its focus on PPPs also allows the developer to benefit from projects throughout the entire infrastructure value chain, involving all of the company’s units: the construction arm for building the assets, and the concession and services arms for investing equity and financing them, and for providing maintenance and operation services, according to Gomez del Rio. 

In recent months, Sacyr has sought to fast-track this expansion through asset sales – and plans to pivot billions of euros of capital towards PPPs in geographies, including the UK, where it has been less focused so far.  

Last October the Madrid-headquartered infrastructure group announced plans to sell a 49% stake in its concession-based water business, Sacyr Agua, to raise capital for growth, including in desalination projects across Australia, Europe and the Americas.  

The sale of a stake in the water business to help finance new PPPs is about to be launched. “We are already working together with our advisory bank Societe Generale and estimate that the process of finding an investor for Sacyr Water will take us through 2023,” says Gomez del Rio. The process is expected to attract significant interest from infrastructure funds. 

Sacyr declined to comment on specific bidders and valuations for Sacyr Agua, but sources say it has an EBITDA of around EUR 35m, indicating the sale might value the whole business at an enterprise value of some EUR 400m, considering multiples of around 10 times for the sector. The new investor would also need to commit additional capital for future greenfield water projects.  

Apart from water assets in Spain, where Sacyr Agua serves over 1.3m people, the company has in recent years expanded to new markets including Australia and Chile and currently operates more than 15 desalination facilities in total. 

In 2021, it bought a stake in Southern Sea Water Alliance, the concessionaire of the Binningup desalination plant in Perth – a plant with a capacity of 306,000 m2 of drinking water per day, covering 17% of the demand of the Australian city. In 2020, it acquired a portfolio of four water management companies in Chile serving 150,000.  

Besides water, in recent days Sacyr also issued teasers for the sale of a stake in its waste business in order to help pay down some of its corporate debt. This business has also grown significantly and added contracts worth EUR 1.1bn last year alone, according to recently disclosed figures.  

The company has also put in place a strict financial discipline which so far has allowed it to reduce recourse net debt from EUR 5.1bn in 2014 to EUR 836m in 2021. It has also been focusing more on project finance debt, which accounts for some 80% of the total debt compared with 20% in 2014. 

Sacyr is also considering selling minority stakes in concessions and PPPs to reinvest equity in new projects, and it is about to put on the market a stake in one of its Spanish toll roads, Infralogic reported earlier this month. 

The company wants one-third of its PPP business to be in North America, Australia, and the UK by 2025, Gomez del Rio says – compared with a previous focus which was mostly on southern Europe and Latin America. The company entered the US concession market in 2020, and last year it won its first UK PPP, the Velindre cancer centre PPP in Wales, which according to Gomez del Rio is “a great entry card into these markets”. 

In total, Sacyr is prepared to invest EUR 4bn of equity and debt in PPPs by 2025, says Gomez del Rio, adding that the focus will be on projects in sectors including transport, healthcare, water management and the circular economy, and in particular on deals with limited or no demand risk. It compares with an aggregated investment of EUR 3.2bn in concessions for the period 2016-2020, thus representing a 25% increase, according to Sacyr. 

Apart from these and other core markets such as Italy, where Sacyr operates two major road stretches jointly with local partner Fininc, the company is also scouting for greenfield deals in new markets. Gomez del Rio says the company is paying close attention to the Nordics market and depending on the opportunities that may arise, it will assess further steps. 

“Our strategic plan places great importance on raising the proportion of projects in English-speaking countries and Europe to balance our portfolio,” he says. “Scandinavian countries are on our market research list of priority European markets, and thus, we have turned our focus there. We will assess projects case by case.”

So far, the company has met a major target of its 2021-2025 strategic plan: generating at least 85% of group EBITDA from PPPs and concessions. In fact, 90% of the company’s profits already come from these types of projects, says Gomez del Rio. It compares with circa 83% in 2021 and 78% in 2020. This figure was just 26% in 2014. 

EBITDA from concessions has steadily grown also in absolute terms, from around EUR 100m in 2014 to EUR 568m in 2020 and EUR 767m in 2021 – out of a total of EUR 923m of group EBITDA.  

Sacyr now hopes to reach EUR 1.2bn of group EBITDA and EUR 5.5bn of revenues by 2025. Full-year 2022 results due to be published this month will show if these new ambitious targets are in reach and how much concessions are contributing to achieving them. But for now, a price per share at its highest in five years – although still below prices recorded a decade ago – suggests that the future looks brighter for the Spanish company.