Client Alert

Toll Road Update

April 2008

Recent developments in the toll road industry are summarized below. These developments are based on our April 2008 research.

In the United States:

1. Jacksonville’s Outer Beltway. FDOT has delayed its announcement of a shortlist of teams for the approximately $1.8 billion First Coast Outer Beltway project until May 2, 2008. The four proposer teams are: (i) ACS Dragados Macquarie Team (ACS Infrastructure Development/ Macquarie Infrastructure Group/ Dragados USA/ HNTB); (ii) Tri County Connectors (Itinere Infrastructure/ TTC Constructors-Sacyr SAU/ Somague/ Parsons Transportation Group); (iii) First Coast Development Partners (Cintra/ Skanska Infrastructure Development/ Ferrovial Agroman/ Anderson Columbia/ Lochner MMM Group); and (iv) FCOB Development Partners (OHL Concesiones/ Goldman Sachs Global Infrastructure Partners I/ Global Via/ Meridiam Infrastructure Finance/ Community Asphalt/ FCC Construccion/ Jacobs). Currently, responses to the RFP are scheduled to be due September 24, 2008, with a winning bidder currently scheduled to be chosen on November 25, 2008.
   
   The project is envisioned as a new four-lane limited access toll facility with approximately 13 interchanges, involving the St. Johns River Crossing segment in St. Johns and Clay Counties and the Branan Field-Chaffee Road segment in Clay and Duval Counties. It includes a major bridge structure across the St. Johns River for a total length of approximately 46.5 miles and the partial removal of the existing two-lane Shands Bridge across the St. Johns River.
   
   
2. Alligator Alley. FDOT is considering granting a concession for the Alligator Alley toll road and is holding an industry forum on April 24, 2008 in Orlando to explore "monetization, including leasing" to gauge interest in a PPP of the four-lane tolled road, which constitutes the 78 mile southern end of I-75 that runs from Weston (near Miami) to Naples. This is part of a larger transportation monetization plan, for which enabling legislation was passed in 2007. P3Americas.com reports that estimates of the valuation of the project are anywhere from $350 million to $1 billion, driven by future toll rates and possible revenue sharing with FDOT. While Florida legislation limits the length of PPP concessions to 50 years, these are extendable in certain circumstances to up to 75 years. Alligator Alley's concession term is rumored to be for over 50 years.
   
   
3. Pennsylvania Turnpike Bids Due in April. Pennsylvania Governor Ed Rendell has extended the deadline for bids on the PPP for the concession of the Pennsylvania Turnpike I-76 (the “Turnpike”) to April 24, 2008. Governor Rendell continues to support the privatization of the Turnpike, which would require further enabling legislation. Bids are rumored to be expected from three consortia: (i) Goldman Sachs, Ontario Teachers' Pension Plan and Transurban, (ii) Cintra and Macquarie, and (iii) Abertis and Babcock & Brown.
   
   Privatization of the Turnpike faces opposition from the Pennsylvania Turnpike Commission ("PTC"), which currently runs the Turnpike and would be dissolved if a PPP went through. Its CEO nevertheless has stated that the PTC is cooperating and making information available for the bids. He has also stated that a PPP "would lead to stiff toll increases," though any concession awarded would likely have toll caps, unlike the current PTC contracts. 
   
   
4. PPPs Moving Ahead in Texas. Despite the two-year moratorium on PPPs, certain projects are moving ahead in Texas.
   
   
   1. SH 130. The Cintra-Zachry consortium reached financial close on the $1.36 billion concession of Sections 5 and 6 (a 40-mile segment) of SH 130 on March 10, 2008. The concession is for 50 years and starts at the opening of Sections 5 and 6 for operations and use by the public, at the end of the construction phase. Sections 5 and 6 complete the route between Texas' capital, Austin, and San Antonio.
      
      
   2. North Tarrant Expressway. On March 3, 2008 the Texas Department of Transportation ("TxDOT") issued a Final Request for Proposals for the North Tarrant Expressway to the shortlisted consortia. The deadline for the submission of a proposal is July 16, 2008. Market participants anticipate that selection of the best-value proposal will take place in late August. The North Tarrant Expressway is a 36-mile project along the I-35W/ I-820/ SH-121/ SH-183 corridor. The improvements will reconstruct and add lanes on I-35W, I-820 and SH-121/ SH-183, including express toll-managed lanes. The project has a construction cost of roughly $2 billion. The project is structured through a comprehensive development agreement ("CDA"), but is exempt from the state's current moratorium. 
      
      
   3. I-69. TxDOT has received proposals for the TTC/ I-69 project from the Zachry / ACS consortium and from a Cintra-led consortium. The upgrade of US-77 to interstate standards between I-37 near Corpus Christi to US-83 at Harlingen is a high priority project and has been identified as the first near-term facility to be developed under the TTC/ I-69 CDA. 
      
      
   4. DFW Connector. TxDOT finally issued on March 31, 2008 requests for detailed proposals to the shortlisted teams competing to develop, design and construct (with the potential for maintenance elements) the DFW Connector SH 114/SH 121 project. Detailed proposals are due by June 13, 2008 and selection of a best value proposer is expected by the third quarter of 2008. The DFW Connector will reconstruct and expand SH 114 and SH 121 including five interchanges across seven highways (i.e., FM 1709, FM 2499, I-635, SH 26, SH 114, SH 121 and SH 360) and will add tolled managed “express” lanes and additional general purpose lanes on SH 114. 
      
      
   5. SH 161. P3Americas.com has reported that TxDOT accepted the $1.2 billion valuation proposed by the North Texas Tollway Authority's ("NTTA") for the SH 161 toll road project. It appears, however, that certain issues still need to be decided. The SH 161 project is a four-phase project consisting of tolled main lanes and tolled managed lanes using existing TxDOT corridors along portions of SH 161, I-20, SH 360 and US 287SH 161 that is expected to relieve congestion on SH 360. 
      
      
   6. LBJ Freeway. In spite of the activity, not all is moving as quickly as planned. TxDOT has moved the date for the submission of final proposals for its I-635 (LBJ Freeway) Managed Lanes Project to June 23, 2008. The LBJ project involves improvements to the existing I-635 in the Dallas-Fort Worth metropolitan area and is part of a corridor that is approximately 21 miles long from Luna Road to US 80. The project includes a portion of the I-35E facility that extends south of I-635 to the Loop 12/ I-35E Interchange. 
      
      
5. P3 to Close Denver Beltway Loop. Reports indicate that a new public highway authority is being formed in Colorado to close the beltway loop around the Denver metro area between the Northwest Parkway and C-470 (the southwestern portion of the Denver Metro area's beltway). The new public highway authority, which reports indicate would be established by officials from Jefferson County, Arvada and Broomfield, would be proposing a 20-mile partly tolled link that could potentially be financed through a P3 concession. Estimates of valuation of this greenfield project are anywhere from $500 million to $1.5 billion.
   
   
6. North Carolina Turnpike Authority to Hold Industry Forum for the Mid-Currietuck Toll Bridge. The North Carolina Turnpike Authority (the "NCTA") has chosen to utilize a Predevelopment Agreement ("PDA") procurement method for the Mid-Currietuck toll bridge project. NCTA is searching for a partner for the design, build, finance operate and maintain ("DBFOM") concession agreement in the coming months consisting of investors, designers and construction contractors. NCTA anticipates a two-step procurement process. Step one will involve a Request for Qualifications requesting a Statement of Qualifications from interested teams. After a three to four team shortlist is determined from the SOQs, NCTA will issue a Request for Proposals to the short listed teams for Detailed Proposals. NCTA anticipates completing procurement and selecting a Pre-Development Agreement partner by December 2008. Construction of the Mid-Currituck Bridge is slated to begin in late 2009 and open to traffic in Fall 2013. The process will begin with a conference on May 7 for interested parties prior to the initiation of the formal RFQ and RFP process (interested parties should register by April 25). The greenfield project is for an approximately 7.0 mile tolled roadway including a bridge over the Currituck River from Coinjock on the mainland to Corolla. A free alternate route for this project is US 158 across the Wright Memorial Bridge going on to NC 12. The preliminary cost is estimated to be between $335 million to $720 million. Final costs will be determined during design. 
   
   
7. California and Iowa Continue to Push for PPP legislation. 
   
   
   1. California. In California, Governor Arnold Schwarzenegger presided over an infrastructure forum on March 11, 2008 restating his interest in the British and Canadian P3 models. Governor Schwarzenegger outlined a $9.95 billion bond allocation for the 800-mile High Speed Train ("HST") project scheduled for the November 2008 ballot. The HST project is envisioned to provide rail services for between 93 million and 117 million passengers annually by the year 2030, generating annual revenue of between $2.6 billion and $3.9 billion for the base-case scenario. 
      
      
   2. Iowa. Iowa Governor Chet Culver has suggested a partnership between the Federal government, the states and the private sector as an alternative to fund future infrastructure projects and help offset Iowa’s funding deficit, which is reported to be estimated to reach $30 billion by 2028. According to reports, it seems to be the view of Iowa DOT that most opportunities for PPP in Iowa would be in the form of bridge maintenance and repair.
      
      
8. NYC's Congestion Pricing Not Approved. On April 7, 2008 New York's state legislature abstained from voting on Mayor Michael Bloomberg's proposal to charge drivers a $8 fee to enter Manhattan south of 60th street during peak hours, also known as "congestion pricing". If approved, the plan would have allowed New York City to retain a $354 million Federal grant for traffic mitigation and mass transit aid. The Assembly had to vote for the approval of the congestion pricing plan before midnight on April 7, in order to avoid losing the grant, but less than one-fourth of the Democratic ruling party were in favor of the plan. The plan was strongly opposed by a broad array of politicians from Queens, Brooklyn, and New York’s suburbs.
   
   
9. E-ZPass Bidding Announced. The E-ZPass Inter Agency Group ("IAG") has initiated a call for bids for one of the world's largest and most complex electronic toll systems. IAG was formed in 1990 with three states (New York, New Jersey & Pennsylvania) and seven agencies (Pennsylvania Turnpike, Port Authority of New York & New Jersey, New Jersey Turnpike, Garden State Parkway, MTA Bridges & Tunnel, New York State Thruway, and Atlantic City Expressway). IAG currently includes public transportation agencies and authorities and private operators that offer electronic toll collection ("ETC") known as E-ZPass to their customers. RFP documents were released in late March, 2008 and the deadline for submission of proposals is July 18, 2008. The solicitation is formally by the Triborough Bridge & Tunnel Authority of New York ("TBTA") on behalf of IAG to Furnish and Provide Electronic Toll Technology and Associated Subsystem Components and Services for the Operation of an E-ZPass System. IAG currently has over 10 million account holders who utilize more than 17 million transponders operating electronic toll collection for 23 agencies in 12 states.

Outside the United States:

10. PPP Projects in Mexico.
    
    
    1. FARAC (currently FONADIN). After the success of the first package (the "Centre-West Highways Package") of Mexico's road re-privatization program (formally known as "FARAC", now referred to as Fideicomiso Fondo Nacional de Infraestructrura or simply " FONADIN"), the Mexican Ministry of Communications and Transportation ("SCT") released on March 7, 2008 the second FARAC (FONADIN) package known as the “Pacific Highways Package”. The Pacific Highways Package offers a 30 year concession for the operation, exploitation and maintenance of three existing toll roads (i.e., San José del Cabo-Los Cabos Airport (20.2 km), Culiacán-Mazatlán (181.5 km) and Guadalajara-Tepic (168.6 km)) in addition to a concession for the construction, operation, exploitation and maintenance of 400km of new road. Although SCT’s official estimate for the required investment required for this project is approximately $1 billion, officials from SCT have recently indicated to the market that the figure is probably closer to $1.5 billion. A third package comprising the Reynosa-Matamoros, Monterrey-Nuevo Laredo, and Cadereyta-Reynosa toll roads, together with the Reynosa-Pharr International Bridge, is being structured and may be put out for tender later this year.
       
       
    2. Road linking Oaxaca, Puerto Escondido and Huatulco. The SCT has also announced a new road PPP project linking the city of Oaxaca to Puerto Escondido and Huatulco (two important tourist destinations in Mexico). Investments in this project are estimated to be in the range of $467 million. 
       
       
    3. Punta Colonet Seaport. The Mexican government is preparing to open bidding on the largest infrastructure project in the nation's history, the $4 billion Punta Colonet seaport located in Baja California, Mexico. The Punta Colonet proposal will be structured as a joint port and rail project, requiring terminal operators, railroads and construction companies to join forces for the deal.
       
       
11. ICA Buys Concessionaire for Toll Highway. Mexico's largest construction company ICA bought the owner of a toll highway concession, highway concessionaire Mayab, that serves the Caribbean resort city of Cancun for $81 million. Mayab operates and manages the Kantunil to Cancún toll road on the Yucatán Peninsula, at the very southern tip of Mexico. The 548km highway is one of the busiest and most lucrative concessions in the country. 
    
    
12. PPP projects for Canada. The mayors of Montreal and Toronto may be proposing extensive tolling of now free roads in Canada's two largest metro areas. Reports indicate that Montreal's mayor may be proposing tolls to finance a 20 year transportation improvement plan expected to be released soon. In Toronto, an advisory panel has also suggested toll concessions in the greater Toronto area as an alternative to finance transport improvements. In Montreal two new toll projects are already in procurement as concessions: (i) the Highway 25 extension (4.4 miles) north out of Montreal over the Riviere des Praires to Laval, and (ii) Highway 30, in two sections totaling 34 miles of expressway on the southern bank of the St. Lawrence River with major bridges. British Columbia also aims to expand its P3 program. Possible projects include the Skytrain project in Metro Vancouver.