Q&A > Alonso Quintana Kawage - Chief Operating Officer of ICA
| February 2nd, 2012
As COO of Mexico’s largest construction company, Alonso Quintana is at the heart of the country’s infrastructure development boom. Quintana graduated in civil engineering from the Universidad Iberoamericana, before earning his MBA from Northwestern University’s Kellogg School of Management in Chicago - a pedigree that is reflected in his professional track record.
With operations throughout Mexico and many parts of Latin America, Quintana helped steer ICA through Mexico’s 1995 financial crisis and the 2008-09 global financial crisis, to achieve the fastest growth in the company’s history with such landmark developments as the La Yesca hydroelectric project. Despite the current economic climate, ICA is flourishing under Quintana’s leadership, transforming Mexico’s transportation, communications, and infrastructure capacity for the 21st century.
The Report Company: What have been the most important decisions you have taken to shape the corporate image of the company?
Alonso Quintana: Those decisions have been as a result my background. I went through the 1995 crisis in which many construction companies disappeared due to the lack of public investment. The strategy that the Government pursued back then has brought us to where we are today. Even with the world immersed in a financial crisis, Mexico now has the tools to defend itself domestically. The Mexican government worked with the global financial sector to strengthen our external sector and keep a reasonably strong peso.
I also saw how public infrastructure projects began being carried out in the form of service contracts, or public-private partnerships (PPPs), and publicly financed works. In order to be awarded these kinds of projects, you not only needed to be the construction company with the best capabilities, but you also needed to be able to sponsor the project. The ’95 crisis left ICA with little capital, but we managed to build on that base, and proved to the markets that ICA was still a company capable of undertaking large-scale projects and making them happen.
But we did not want to attract capital at any price, so we had to make some decisions. We asked our project managers not to “fall in love” with their assets - that does not mean that we are going to sell all of our assets because we have certain commitments to the Government and to the Ministry of Communications and Transportation (SCT). But that approach allows us to see the projects as part of a wider portfolio and to attract more partners.
We are not going to wait around and see which projects we can bid on; instead, we are shaping the industry. For example, we just won an award for the most innovative financing of last year. We financed the development of two greenfield projects by raising 20-year, peso-denominated bonds. We attracted the Mexican pension funds, or AFORES, into these projects. Otherwise they could not have been done.
TRC: How can you manage to achieve this in the current global financial crisis?
AQ: With strength. When investors see that can we do much more sophisticated work than building a big hotel, for instance, they set aside their fears of construction risk. We also offer the best techniques; for example, we can achieve important efficiencies by using prefabricated structures.
TRC: As a leader, what values do you instil in the brand and in the team?
AQ: The values that we apply are teamwork and productivity, along with a very strict code of ethics. We value safety, and want to have the highest standards of security for our workers. We also value loyalty and commitment. I dedicate significant time to human resources because although it might seem that we are becoming a company of assets, we cannot forget that we are a company of people. Most importantly, we want to be recognised as a company that makes things happen.
TRC: How do you want ICA to be positioned before clients, investors, and the Mexican and international governments?
AQ: As a company that is changing society and dedicated to building infrastructure. I want ICA to be known as a company that trains engineers, as an influential company that represents the model that Mexico needs, as an institution where professionals can find career fulfilment, and as a company that takes corporate social responsibility (CSR) seriously and cares about the environment. We want to be the company that does the projects that others find impossible.
TRC: The SCT Secretary stated that the objective of this six-year government is the development of infrastructure in Mexico, which was going to be reflected in the budget. Do you agree with this statement?
AQ: Yes, and we can corroborate it. In previous years, there were periods where only dams were being built, then another for roads, and then another for Pemex, the state-owned oil company. Now everything is done at the same time. Right now we are building La Yesca, one of the most important projects in Mexico. At the same time, we are building the expansion of the Mexico City metro system, Pemex refineries, highways, urban projects, prisons, hospitals and a deep drainage system.
TRC: Which projects are shaping Mexico’s future?
AQ: Without a doubt, a hydroelectric project like La Yesca is changing the country because it represents 50 years of renewable energy. The subway expansion is also important, and the new prisons are contributing to making our society safer. Furthermore, the fact that more of our ports are going to have better highway links is going to change the country. A national grid road system is being built throughout Mexico that will transform the transportation of people and goods, and make our exports more competitive. There are also many water treatment projects for clean drinking water.
TRC: In the medium term, do you have plans for any new lines of business?
AQ: I would not consider them to be new lines of business, but rather other types of construction. We have important offshore projects with the laying of pipelines and drilling platforms. In the last four years, we have been in charge of approximately 15 platforms, carrying out all the engineering, and fabricating them in our shipyards. There is going to be a need to install more pipelines, and for greater communication between platforms, and we think that we can get major projects in this area.
TRC: Do you think that ICA can attract multinationals to participate in the growth that Mexico is experiencing?
AQ: Yes, because we initiate the project, arrange the financing, manage the process, and work together with the respective industry chambers. If they offer us an idea, we improve it, and then make it happen. We have many examples of operating in this way.
TRC: So this model could be successful with international companies?
AQ: Yes. For example, a group of investors put together a US$7 billion infrastructure fund to invest in Mexico. The Federal Government had operational toll roads in need of maintenance and conservation. There was also a need for some new capital expenditures, but mostly these were brownfield projects. So we convinced these investors to join us. We knew how to operate the highways and improve the efficiency of the capex. We created an 80/20 venture where their financial returns were higher, but we had all the operating and maintenance business, which increased our returns. This is an arrangement that has given positive results for both parties.
TRC: Do the conditions currently exist to negotiate these same kinds of deals?
AQ: Without a doubt. For example, Carlos Slim’s infrastructure fund is entering more projects through partnerships with us. We are working with Fluor Corporation, the world leader in building refineries, where the industrial process is more important than the civil construction aspect of the project, and we have a very successful permanent partnership with them. We are also partners with Veolia in water concessions.
TRC: Can this business model, which has proved so successful in Mexico, be exported to different countries? How?
AQ: Without a doubt it can be exported. When everything collapsed after the 1995 crisis, countries like Argentina, Colombia, and Peru where we had presence, were very negatively affected. We have had to relearn these markets and attract new capital. We have begun to stabilize our presence in countries that already knew us, and make good use of our experience. Our good reputation increases our opportunities for creating partnerships, because when the biggest client is the government, political risks are very important. Infrastructure is always going to be a key sector, and yes, while there are laws and regulations, the goodwill of the parties involved is vital.
TRC: Is ICA at the stage where it can aggressively invest in the international markets?
AQ: Yes we are. We want new markets, but we also take advantage of the fact that certain countries come looking for us. I would not say that our strategy is aggressive, but determined.
TRC: In recent months, your share price on the Mexican stock market has declined. Why is ICA an attractive investment for a global investor?
AQ: In these times of uncertainty, investors are looking for safety, and ICA is a very solid company. Our debt ratios sometimes seem high because we consolidate the debt of projects under construction that will later generate returns. Once investors understand that this debt is directly financing projects and concessions, they are more reassured.
For example in a project like La Yesca, which is a financed public works project and not a concession, we have to keep its debt on our balance sheet. It is a turnkey project that will be paid once construction is finalised. It can be perceived as high risk, but in reality it is not because as each stage of the project is completed, it is certified, ensuring our right to get paid. 2012 is going to be an important year for us, because the La Yesca project will be finally paid; once that happens our debt levels will be seen in a different light.
TRC: With all of these infrastructure projects underway, how is the cooperation between the SCT and ICA?
AQ: We enjoy total cooperation. ICA manages OMA, one of the three airport groups in the country, so we need to be in constant communication, analysing investments as well as the airport master plans. We also have 10 highway concessions. We are in constant dialogue with the SCT regarding their delivery by rights of way and equilibrating the concessions. There have also been cases, for example, where the original company holding a concession experienced difficulties, and the project was halted; then we entered the project to rescue it. We engage in a constant dialogue with the SCT to solve those types of problems.
TRC: How would you define your management style? How would you like to be recognised?
AQ: As a fair, approachable person, who is a team builder with a vision oriented towards profitability and corporate social responsibility.
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