News Briefs - Brazil, China, India, Indonesia, Philippines, Portugal

Brazil - Canada's Brookfield and Spain's Abertis invest in Obrascon

The Globe and Mail reports that Brookfield Infrastructure Partners LP and Spain's Abertis have formed a joint venture (49/51) to buy a 60% shareholding in Obrascon Huarte Lain Brasil SA.  The price for the consortium is around US$1.72 billion, and the consortium is willing to purchase the remaining 40% if required.  Canadian Business reports:

OHL Brasil is one of the largest owners and operators of toll road concessions in Brazil with more than 3,200 kilometres of roads in states that account for approximately 65 per cent of Brazil's gross domestic product and are home to nearly two-thirds of the country's 70 million vehicles.

The deal means that Obrascon's Spanish shareholders, Obrascon Holdings Ltd, acquire 10% of the stock of Abertis (it already has 5%) raising its shareholding to 15%.  Obrascon effectively maintaining an indirect interest in the Brazilian toll road business.  OHL Brasil has nine toll road concessions.

 

China - public holidays to be toll free

The Wall Street Journal reports that the Chinese Government has announced that cars should be able to drive toll-free on public holidays.  This includes all privately owned toll roads.   The measure is designed as a popularity move as car ownership soars, but most car trips are relatively localised as car owners baulk at paying tolls to travel long distances.  The report says:

Moody’s says the decision will knock up to 5% off toll income this year at Shenzhen International Holdings, a Hong Kong-listed operator of 17 Chinese toll roads.

What will be curious is whether it results in congestion on those days, and whether it will impact on the viability of some future projects.  Another report implied that this was a politically driven move, designed to win favour with the growing middle-upper classes, indicating that regardless China's one-party system, the government is sensitive to public opinion given the ease by which people can express concern or dissent via the internet.
 

India - Taj Mahal toll road opens

I don't typically report on the opening of toll roads, because there would be far too many to report.  However, this report from travel website Wanderlust caught my eye as it is about a new toll road from Delhi to Agra, effectively connecting the capital to the Taj Mahal.  The private expressway is 165km long, six-lanes wide, cost US$2.17 billion to build and the toll is around US$9 as it halves travel time on the route.

 Indonesia - Jasa Marga buys part of PT Translingkar Kita Jaya

The Jakarta Post reports that Indonesia's large state owned toll road company, Jasa Marga, has bought a 21.24% shareholding in private toll road consortium PT Translingkar Kita Jaya for the equivalent of US$14.6 million (Rp137.9 billion).  The company operates the 14.64km Cinere–Jagorawi toll road which is divided into three sections. The first section is 3.7 km from Jagorawi to Raya Bogor, the second is 5.5 km from Raya Bogor to Kukusan, and the third is 5.4 km from Kukusan to Cinere.  The first section is operational, the second to open later this month and the third in May 2013.  33,215 a day are expected on the road by the end of 2012, growing to 47,816 in 2014.

"The acquisition of Translingkar is a part of the company’s plan to maintain sustainable business expansion,” Jasa Marga said in a written statement.

The report notes that Jasa Marga operates 545km of toll roads in Indonesia, estimated to rise to 738km by 2014.

It continues by saying:

The company explained that Indonesia’s toll road development is lagging behind neighboring countries such as Malaysia, which currently has around 4,000 kilometers of toll roads. Meanwhile, Indonesia — the largest economy in Southeast Asia — only has around 750 kilometers of toll roads.

No doubt this is in part due to the fact Indonesia is an archipelago, although the bulk of economic activity is on Java, the main island which has the majority (60%) of the national population (and congestion).

Philippines - Metro Pacific Tollways to be delisted, minority shareholders bought out

Business Mirror (Philippines) reports that  Metro Pacific Investments Corporation (MPIC) is to delist its subsidiary Metro Pacific Tollways. It intends to do so by the end of the year because only 0.15% of Metro Pacific Tollways is floated, a proportion considered inadequate by the Philippine Stock Exchange.  The Stock Exchange has warned companies with less than 10% floatation that it would suspend trading in their stocks from 2013 before compulsorily delisting them.  MPIC intends to buy out the minority shareholders, which at current market prices would only come to around US$1.2 million.  MPIC Chief Financial Officer David Nicol said the strategy would then be to consider strategic partners to invest in Metro Pacific Tollways. 

Metro Pacific may generate considerable interest given the roads it owns and the concessions it has rights to, given the prospects for potential growth in Philippines as its roads are significantly superior to the untolled alternatives.

Portugal - Abertis sells its shareholding of Brisa to Tagus

Following a report in July that Abertis no longer considers its investment in Portuguese toll road operator Brisa, as strategic, Bloomberg now reports that Tagus has acquired that stake (15% of the operator).  Tagus’s partners are family-owned holding company Jose de Mello SGPS SA and London-based Arcus Infrastructure Partners LLP, and already own a combined 49.6% of equity in Brisa, but 53.8% of the voting rights. Bloomberg seems to indicate that Tagus is seeking to raise its stakeholding to 90% so it can delist Brisa.

The report says that :

The disposal of Abertis’s entire stake in Brisa will generate 312 million euros ($386 million) in cash flow.

Tagus, a venture formed by Brisa’s two biggest shareholders, offered 2.76 euros a share in July .

This followed an offer in March 2012 of 2.66 Euros per share, and Abertis noting a distinct lack of interest in buying the shareholding, no doubt reflecting concerns over Brisa's exposure to Portuguese toll roads in the current recessionary climate in that country.   Abertis appears to have decided to take what it can as it effectively exits the Portuguese toll road market.   The Tagus bid compares to a share price of currently 2.09 Euros following the deal.

Tagus noted that it wasn't obliged to buy more shares after the deal with Abertis, so that many shareholders now indicate that they think there are unlikely to be any significant buyers for the Abertis shares now that Tagus has 85% of the shares in Brisa.

News briefs - Florida, Pakistan, Virginia, Chile, Indonesia

Florida talks about tolling a flyover

Tolling a bridge, tunnel, new highway or new lanes is considered to be feasible and worth considering. What about a simple flyover over a junction? Well Florida DoT is considering just that between the I-95 and SR 202 according to WOKV. The idea is that it could be tolled with free flow electronic tolling, but this certainly would test willingness to pay for a relatively small time saving. Certainly outside peak periods I’d be surprised if many paid at all. However, it is consistent with Florida’s policy of resisting increases in fuel taxation in favour of tolling to the extent practically possible. The bigger question is the extent to which tolls could recover capital costs for such a project when the alternative is so readily available (and the price would have to be very low to attract users).

Pakistan isn't ready for congestion pricing yet

Ahmad Rafay Alam in The Tribune of Pakistan, writes about the chronic condition of traffic congestion in major cities in the country.  He notes how the surfeit of road building has not sustained reductions in congestion as vehicle numbers grow and more people drive.  He also notes the lack of support for pedestrians, cyclists and public transport.  Whilst slightly off topic for this blog, I'll particularly note that pedestrians are typically the poorest relation in urban transport policy in developing countries.  It can be a dominant "mode", but it is seen as a mode of the poor and a way of commuting that shouldn't be encouraged.  Wrong.  Since most trips in cities are short trips, it is a perfectly good way of getting around for distances of less than 1km.  It is a key to avoiding traffic congestion and tying up public transport networks with such trips.  It means ensuring footpaths are adequate and clear of too much obstruction. It means having crossing places on roads, including traffic signal crossings for pedestrians, that are enforced and clear.  Building roads or metro lines or bus rapid transit without recognising that everyone is a pedestrian, is going to start a trend that is harder to reverse.  A trend that major modern cities are now trying to reverse. 

The article notes that congestion charging could be a possible solution.  Indeed it could, but without good reliable means to enforce against vehicles that refuse to pay, it is impossible.  Pakistan is still some way away from having the basic information systems and regulatory requirements across vehicle (and vehicle owner) identification, before it can implement congestion pricing.  The first step should be a national vehicle ID programme., with reliable updates of ownership details and means to enforce failures to register or update details.

Virginia announces Transurban to extend I-95 toll lanes

The Washington Post reports that the state of Virginia "has made a formal agreement with private partners to build 29 miles of high-occupancy toll lanes along Interstate 95. Construction is scheduled to begin very soon and should be done by the end of 2014."

"the agreement with 95 Express Lanes LLC, a joint venture between Transurban DRIVe and Fluor Enterprises Inc., covers construction and operation of 29 miles of express lanes on I-95 from Garrisonville Road in Stafford County to Edsall Road in Fairfax County."

The full press release is here.   Key facts from the press release are:

The key components of construction include:

• Extending nine miles of existing HOV lanes from Dumfries to Garrisonville Road in Stafford County, which alleviate one of the region's worst traffic back ups
• Expanding existing HOV lanes from two to three lanes for 14 miles between Prince William Parkway to vicinity of Edsall Road on I-395
• Making operational improvements to the existing two HOV lanes for six miles from Route 234 to Prince William Parkway
• Adding eight new or improved access points to and from HOV/HOT network at key interchanges
• Expanding and adding commuter parking lots

Financial and tolling highlights:

• Project will cost $925 million with 95 Express providing $854 million in funding. This includes an anticipated TIFIA loan of $300 million, which is expected to be available in November 2012
• VDOT will provide $71 million in public funds, a lower amount than the original estimate of $97 million, due to lower-than-expected financing costs at closing.
• Tolls will be collected electronically using E-ZPass, including the new E-ZPass Flex, eliminating the need for toll booths
• HOV-3+, vanpools, motorcycles and buses travel free. Vehicles with one or two people will pay a toll to use the express lanes or ride the general purpose lanes for free. Tolls will vary based on real-time traffic conditions to manage the number of toll-paying customers who choose to enter the express lanes. Most customers are expected to pay to use express lanes only a couple of times a week when they need a faster trip, with a typical trip during rush hour costing between $5 and $6.
• Project will fund a safety and enforcement program including crews to assist disabled vehicles, incident detection technology and more Virginia State Police. The program is expected to significantly reduce HOV violators. 

 Maps are available here.

Brookfield Infrastructure buys part of Chilean toll road

Canadian Business reports that Canadian firm Brookfield Infrastructure  "and its institutional partners have signed a deal to pay C$590 million (US$589 million) for the 45 per cent stake in the Autopista Vespucio Norte toll road in Chile that they do not already own."  It raises the shareholding to 51%.

Commenting on the road, the firm said   "This Chilean toll road is a key artery in the ring road network surrounding Santiago, and it benefits from an attractive revenue framework whereby tolls escalate annually at inflation plus 3.5 per cent".  In addition it has had compounded annual growth in traffic of around 8% for each of the past three years.

The highway is essentially Santiago's primary northern ring route and is considered by tolling specialists to be very efficiently run, with electronic free flow tolling, and maintained to a very high standard.

RTT News claims that Brookfield is in discussions with Abertis to "create a joint venture to acquire a 60% interest in Obrascon Huarte Lain Brasil S.A. for approximately $1.7 billion, comprised of $1.1 billion of equity and $600 million of assumed liabilities."  Obrascon being a major Spanish toll road concession holder, with roads in Spain, Brazil, Mexico, Chile, Peru and Argentina.   Abertis and Brookfield are already bidding for Obrascon's Brazilian toll road assets. 

Bakrie wants out of toll road business in Indonesia.

Long standing Indonesian business consortium Bakrie Group has announced it is seeking to sell its toll roads business according to the Jakarta Post.

The report states the firm:

"wanted to sell its PT Bakrie Toll Road subsidiary for at least Rp 1.3 trillion (US$137.8 million), an amount equal to the subsidiary’s equity, to settle debts"

Its prime assets include the 35-km Kanci-Pejagan toll road between Cirebon, West Java, and Brebes, Central Java which has been criticised by the Public Works Minister Djoko Kirmanto for being of "poor quality".  Revenues are not particularly good, but the report concludes that this is largely an effort by the large investment firm, that has ties going well back into the Suharto era, to realise assets to pay down its debt burden and refocus the company (which is predominantly a property development firm) on its core business.

Indonesian state toll road company Jasa Marga has start to the year

The Jakarta Globe reports that state owned toll road operator Jasa Marga had a 30% increase in revenues in the 6 months to July 2012.   Part of this is due to an increase in traffic, with an over 11% increase compared to same period last year attributable to rising car ownership in Indonesia.  It also increased toll rates in Jakarta and Surabaya in response to inflation of around 5% per annum.  However, the result is distorted by Jasa Marga's sale of its shareholding in private toll road operator Citra Marga.  Jasa Marga is responsible for 13 toll roads listed here, plus another eight of which it has a partial shareholding.

Jasa Marga's corporate profile describes it as follows:

Founded on 01 March 1978, Jasa Marga is the pioneer in the development of toll road in Indonesia. With 32 years of experience, the Company remains the market leader in the country's toll road industry. Jagorawi (Jakarta-Bogor-Ciawi) Toll Road is the Company's toll road that marks the milestone in the historical development of Indonesian toll road industry. To date, the Company has operated 531 km toll road representing 72% of the total operating toll roads in the country.

Abertis sees credit rating drop due to Spanish toll road demand

Spanish toll road investor Abertis and its French subsidiary SANEF have both had their credit ratings cut to BBB by Standard & Poors according to Reuters.

Abertis has a network of 1500km of toll motorways in Spain via 8 subsidiaries (59% of toll roads in Spain by length), and a minority stake in another 200km of toll roads in Spain. It also has a nearly 15% share of Portuguese toll road operator Brisa, and 25% ownership of RMG (company holding non-tolled concessions on two UK roads). It also owns or partly owns companies responsible for around 700km of Chilean toll roads, has a part share in concessions over 89km of roads in Puerto Rico and has a controlling stake in the concession of one road in Argentina.

SANEF has a network of 17570km of almost entirely toll motorways in France, in the north and east.

The reason given for the downgrade is “of volatility in traffic volumes experienced by its Spanish toll road network operators”

Interesting statistics from the press release:

- Average daily traffic declined by 24% between 2007 and 2011 on Abertis's Spanish toll roads;
- In 2012, S&P forecasts a further contraction by 9% on Spanish toll roads;

- This is driven by very high unemployment, weak economy;

- Abertis's Spanish toll roads have greater exposure to competition from untolled roads than similar roads in France or Italy.

- 80% of dividends in past three years originated from Spanish toll roads, with concessionaire Acesa (541km of road) contributing 70% of that. This decline will be partly offset by good performance on toll roads elsewhere, and expected tariff increases and cost savings.

However, S&P sees risks in the proposed acquisition of the Brazilian and Chilean toll road operators of Obrascon Huarte Lain (OHL) which includes over 3100km of roads in Brazil and around 340km of roads in Chile because it Brazil is:

-- An emerging economy, with a soft currency that could suffer  depreciation vis-a-vis the euro. 
-- A relatively dynamic regulatory environment in Brazil, where the bulk of the operations to be integrated are located. Unilateral changes to concessions are allowed in Brazil, although appropriate remuneration must be provided to the toll road operator to restore the concession's economic
balance.
-- A greater proportion of heavy vehicle traffic, which we view as more volatile than light vehicle traffic. Heavy vehicle traffic volumes account for more than 30% of total traffic volumes on the roads to be integrated, compared with 15% on average on Abertis' network.

On SANEF, S&P says:

Sanef operates the third-largest interconnected toll road network in France. Although the company is exposed to variations in traffic volumes, it benefits from a strong competitive position; favorable concession agreements, including yearly inflation-linked tariff increases; high profitability, and positive free cash flows. We consider the risk of acquisitions and diversification to be low. These strengths are partly offset by Sanef's high indebtedness, and its relatively rigid dividend policy.

Conclusion

Even a casual observer of Spain's economy can see the crash of property and construction dramatically affecting overall demand, and it appears far too many concessions were predicated on forecasts of demand that now look unattainable in the medium term.  Abertis may be big enough to hold onto most of what it has, but it is likely this sector will remain tough for some time, and there is pressure to have consolidation and refinancing so that such roads can be on a sustainable footing.  There is rumour that the Spanish government is considering how to address these problems, and it may even think about having some form of charges on existing roads.

News briefs - Canada, Italy, Namibia, Spain, Uganda, USA (3 states)

Connecticut

Tri-State Transportation Campaign reports that Connecticut is engaging a US$1.4 million study of congestion pricing along the I-95 corridor between Greenwich and New Haven. An additional US$800,000 study will examine road pricing along I-84 in Hartford. Both studies, funded by the federal government, will take approximately 18 months to complete and will look at congestion pricing in the two corridors, which is expected to focus specifically on the feasibility of high-occupancy tolling (HOT) lanes.

The Milford-Orange Bulletin reports on some interesting background to tolling this stretch of highway:

Connecticut abolished its tolls in the 1980s, in part as a result of a horrific 1983 crash on I-95, in which a truck plowed into a line of cars at the Stratford toll station, killing seven people. The federal government also threatened to withhold transit money if the state did not remove the tolls.

Commuters who pass through the Interstates 91 and 95 interchange in New Haven experience a total of 5.7 million hours of delay per year, while commuters who pass through the Bridgeport-Stamford corridor suffer 16 million hours of delay per year, (Bureau of Policy and Planning Bureau Chief Thomas J.)Maziarz said.

The average length of the southbound I-95 traffic congestion at 8:30 a.m. on a weekday, which the DOT has identified as the peak time for traffic, is 20.3 miles, he said. Congestion is defined as an area where traffic moves at 30 mph or less. 

 

Just another Interstate highway which might get tolls introduced to provide a congestion free option, with additional revenue.

Italy

Dow Jones reports that toll road operators Atlantia has said that highway traffic on its Italian toll-road network declined 8.7% in the first three months of the year from the same period in 2011.

Namibia

The Namibian Economist reports that the Namibian government now has the facilities to collect road user charges at its national border crossings.   Why is this interesting?  Because Namibia has a VMT (vehicle mileage tax) system, or rather a weight-distance road user charge for all vehicles over 3.5 tonnes.  The rates are here.   Starting at N$0.07 per km (US$0.009) it appears to work by prepaying in 100km increments, correlated to odometers.  All of the revenue is dedicated to a roads fund which is required to prioritise spending on maintenance and renewals above everything else.

Nevada


The Las Vegas Sun reports that the state is considering options to allow toll lanes and roads. This includes "added lanes in Clark County on Interstate 15 from Sahara Avenue to Rancho Drive at an estimated cost of $400-$500 million".  These would be toll lanes, with existing lanes remaining untolled. Bill Hoffman, assistant director of engineers for the Nevada State Transportation Department said "allowing a private firm to do this project could cut the cost by $100 million, create 4,100 construction jobs and get the project completed more quickly. He said firms that design, build and maintain projects due a better job since they know they are on the hook for the maintenance costs."

Orange County, California

The LA Times reports that operators of toll roads in Orange County are planning to convert to fully electronic free flow tolling in the next 16 months.  The plan is for all users to have accounts, either with tags or number plates, with occasional users having to pay within 48 hours of usage or face being fined.   The roads affected are route 73, 261, 241 and 133 toll roads.

Toll prices were increased on 1 July already, and the drive to eliminate manual tolls is intended to reduce operating costs, as well as improve flow by eliminating stopping at tolling points.

Spain

Spanish toll road operator Abertis is interested in new PPPs with the Spanish government as the latter seeks private sources of finance to kickstart new infrastructure projects due to a lack of public funding. An article from Reuters make a number of interesting points about the presence of Abertis in the tolling market:

- There appears to be low interest in refinancing debt stricken toll roads in Spain as “Chairman Salvador Alemany played down the possibility of extending its Spanish motorway concessions -- two of which expire in 2019 and 2021 -- in exchange for helping the government resolve highly indebted Spanish toll roads”;

- The US, Brazil and Mexico are key target markets for growth;

- Portuguese operator Brisa is no longer a strategic asset, but Abertis will “not sell at current market prices”.
It is undoubtedly a difficult time for any investor in toll roads in the south of Europe, but also an opportune time to diversify, as long as there are decent prospects for growth, a steady core business and a stable business environment.

Toronto

The Star reports that the Toronto City Council has voted to “develop a long-term funding strategy" that would outline “a diverse array of public and private revenue tools” to finance rapid transit expansion.” This includes the role of tolling including options to introduce road pricing on existing roads.

In parallel, “Metrolinx, the province’s regional transportation authority, is also working on a strategy to pay for a massive public transit expansion throughout the Greater Toronto Area and Hamilton… Metrolinx has until June next year to develop a funding framework. Options under study include road tolls and other forms of congestion pricing, a levy on commercial parking spaces, a regional fuel tax, express lane fees and a regional sales tax.”

Here is hoping that it takes a wide strategic view of how to proceed, because for people to accept any form of road pricing on existing roads, they tend to need to see that at least part of the money goes on roads or offsets other taxes.  However, it's clear that one big issue will be governance.  What happens if the city and Metrolinx want conflicting approaches?

Uganda

China Daily reports that the Chinese Government is providing a four year loan for a 37km highway (with a 13km spur) from Entebbe Airport to Kampala that is estimated to cost US$350 million to build. It is described as a “world class superhighway”, and will have manual tolling. One criticism has been the condition that construction contracts be granted exclusively to Chinese companies. The existing route is regularly congested.
Vancouver


According to North Shore Outlook North Vancouver District Mayor Richard Walton supports introducing road pricing as a sustainable source of future income to replace property taxes:

Tolling stations, Walton said, could be located every five kilometres — not just at bridges — or at highway onramps and offramps. And incentives can be built into such plan. For instance, trucks transporting goods over the Port Mann Bridge after 10 p.m. could be exempt from any charges, therefore making night travel more attractive and lessening traffic congestion during the day.

It would take, Walton admits, some time to implement a comprehensive road-pricing arrangement and motorists would need time to make any alternate plans.

But it could mean a move away from using property taxes as a way of funding transit shortfalls, a crutch mayors are clear they will not entertain any longer.

Of course it raises the wider political issue as to whether motorists are happy paying a charge which is used to subsidise alternatives. I would argue strongly that if it is about replacing existing taxes and also helping to fund at least maintenance of the roads concerned, then it will be far more acceptable.