TEMI: Mexico’s New Interurban

Written by William C. Vantuono, Editor-in-Chief
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For many years, Mexico’s only rail transit systems have been Mexico City’s rapid transit network, Sistema de Transporte Colectivo (STC); the Sistema de Transporte Colectivo Metrorrey (STCM) hybrid LRT/rapid transit in Monterrey; and the Sistema de Tren Eléctrico Urbano (SITEUR) LRT in Guadalajara. Planning is under way, and investors are sought, for a fourth: TEMI (Tren Estatal Metropolitano e Intermunicipal), an interurban system for the State of Guanajuato.

TEMI is expected to consist of two double-track lines encompassing 144 km (89 miles) and 17 stations that will connect the cities of León, Guanajuato, Silao, Irapuato, Salamanca Villagrán, Cortazar and Celaya. Orlando, Fla.-based Americas International Capital LLC (AICC) “is approaching select investors and contractors to determine their interest in financially participating in the pre-development stage of the project,” according to Founding partner Bruce Brandt. “AICC has signed an exclusive agreement with the State of Guanajuato Secretary of Economy to bring the project known to an investor who will finance the pre-development and development stages in exchange for possible participation in a 30-year concession, as lead sponsor or in a minor position. It is expected that the investor will sign a joint public works contract for the development of the final design, construction, delivery and commissioning of track, rolling stock, equipment, systems and other components.“

AICC estimates development stage costs could total between US$2.0 and $2.5 million, “inclusive of the studies required to determine the financial feasibility of privately financing he project once again,” Brandt says. “We will work on behalf of the investor in managing the process throughout the development period, negotiate contracts with those companies looking to participate, and be hands-on with all State of Guanajuato relationship. AICC will also arrange for debt and equity arrangement to close the financing.”

TEMI traces its roots to a precursor project known as TRIG (Tren Rapido Interurbano de Guanajuato). “In September of 2008 there was a meeting at the lead bank’s headquarters in New York City with the lead equity investor to finalize financial closing,” Brandt recalls. “In total they represented US$1.4 billion of debt and equity that would privately finance the TRIG project.” That transaction ultimately did not close,  due to the financial crisis hitting the same week with the collapse of Lehman Brothers.

Fast-forward to 2022: TEMI “is proposed to mirror the TRIG project,” Brandt explains. “Throughout the development stages of 2006 to 2008, the studies proved that the TRIG project was financially viable. Major contractors were on board for rolling stock, construction, EPC (engineering, procurement and construction) and O&M (operations and maintenance) contract, etc. Now, difficult financial and budgetary conditions in which the State of Guanajuato (and all other States in Mexico) finds itself, stemming from the COVID-19 pandemic, has greatly limited the State’s ability to execute large high-impact investment projects beneficial to the community.”

As such, TEMi was placed on hold. But now, Brandt says, conditions have significantly improved that warrant its revival, albeit under a revised financial structure. “On behalf of the State, AICC has agreed to take on this opportunity due to its history with the project and with the full understanding of the ongoing financial challenges,” Brandt says. “TEMI will be 100% privately financed. Our previous work has included obtaining an investment grade rating from one of the major ratings agencies for the previously privately financed project.” 

“The demographics supporting this project are significantly stronger today than in 2007-2008 when considering population growth, significant increases in the number of industrial parks throughout the Bajio region, and a considerable increase in the number of foreign and domestic companies that have been established in the region.” Explains Brandt. “Since 2007-2008, Guanajuato State has attracted 531 companies representing an investment of more than US$21.5 billion and includes more than 183,000 direct jobs. Also, 36 industrial parks have been established employing thousands of workers. TEMI will be located along Guanajuato’s El Bajio industrial corridor. Guanajuato State is the 6th most populated state with 6.1 million inhabitants and a labor force of 2.68 million. Leon, the biggest city in the State and 5th largest in Mexico has a population of almost 1.8 million. Leon has 28.5% of the population in the State with the remaining 70%+ spread throughout the Industrial Corridor of Highway 45 which is where the TEMI will run.”

The most recent ridership study showed an average trip length of approximately 40 km (25 miles). “This alone sets the proposed TEMI system apart from most any other interurban system in the world,” says Brandt. “The real estate development rights in and around stations will also provide a significant source of revenue. TEMI will be an economic engine that ignites significant further growth in new companies looking to come to Mexico and most especially the Bajio corridor. The State of Guanajuato is one of the most business friendly in the country, and the addition of the TEMI project can only significantly enhance its ongoing success.”

AICC’s history with this project and its predecessor “is significant and encompasses many years of developing, structuring and arranging debt and equity financing,” notes Brandt. “We worked throughout the development phase with the State, the concessionaire, the companies providing all of the market studies, law firms, contractors, lenders and equity sponsor. We arranged for both the debt and equity commitments totaling US$1.4 billion.” TEMI, he says, “will closely mirror TRIG but will be even more favorably impacted by the significant positive demographic changes that have occurred over the past 14 years.”

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