News Briefs - Australia, Brazil, China, India

Australia - Melbourne's car park congestion tax to stay despite low impacts

Public broadcaster ABC reports that the Victorian Government is likely to keep the tax on inner city car park spaces intended to reduce congestion, despite a study that claims it has had little effect on congestion.

Inner city parking taxes are often cited as low cost alternatives to implementing congestion pricing.  50,000 car park spaces in downtown Melbourne are subject to such a tax which is either A$650 (US$682) or A$910 (US$956) a year depending on the location.  The tax was introduced in 2006 and raises A$46 million (US$48 million) a year in revenue for the Victorian State Government.

A Monash University study indicated that part of the tax was being absorbed by car park operators and that there was minimal impact on congestion, it suggested that a better option would be a cordon based congestion charge, although motorist lobby group the RACV (Royal Automobile Club of Victoria) rejected that in a report in the Herald-Sun newspaper claiming motorists are already over taxed, preferring more money to be spent on transport projects.

Brazil - Expiring toll road concessions to be retendered

Nasdaq reports that according to the Estado de S Paulo newspaper, the Brazilian government has decided that when the first toll road concessions expire in 2015 it will re-tender them with the intention that rates of return should be lower.   It will also specify that tolls can only be charged after a certain proportion of improvements to highways have been undertaken by a concessionaire.

"To ensure that 5,700 kilometers of two-lane highways are expanded into four-lane highways by 2018, the government will stipulate that operators start charging tolls only after 10% of the lane-duplication process is already executed" ..."As part of a package to improve transportation infrastructure, the federal government plans to license 7,500 kilometers of highways to private operators for a 25-year period".

Concessionaires have expressed concern that environmental licencing imposes a cost on development that will slow down the period between when they start work on a project and can start charging tolls.

China - Beijing traffic plan includes concept of congestion pricing

Global Times reports that Beijing is to get congestion charging included in its latest traffic plan, although there are no details about what congestion pricing will look like for the city.  The article has comments from an academic who says Beijing also needs more rail and congestion is inevitable with fast growth, but also a local resident who uses public transport and supports the idea.  I wrote some time ago about potential options for congestion charging in Beijing.

India - Macquarie SBI buys into Indian concessionaire

According to NetIndian News Network, Australian/Indian joint venture Macquarie SBI Investment Fund (MSIF) (comprising Macquarie Capital Group and the State Bank of India) has announced it is investing US$150 million into Ashoka Concessions Ltd (ACL) of India, along with SBI Macquarie Infrastructure Trust.  It would appear likely that the reason for the MSIF (and SBI Macquarie Infrastructure Trust) is that Macquarie Capital is restricted from investing in its own right in Indian infrastructure because of foreign ownership limit laws (and the State Bank of India is keen to use foreign capital and expertise).

ACL is a 100% subsidiary of Ashoka Buildcon Ltd (ABL), an Indian engineering and construction firm.  ACL reportedly owns 7 concession toll roads comprising 3,018 lane km (630 length km). ABL itself has a portfolio of 12 Build Own Transfer (BOT) road projects in India (with 6 under construction) excluding its portfolio of footbridges.  Not all of these projects are tolled.

ACL's projects have a construction cost of US$1.5 billion.  78% of the traffic is commercial.  Average remaining concession period is 22.7 years.  This is MSIF's first road investment and will comprise 13% of MSIF's portfolio value.

Macquarie SBI published a presentation with more detail about the investment.

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.

Brazil to have compulsory toll tags by July 2014 (SINIAV)

In the past week, Austrian-based toll system supplier Kapsch published a press release announcing it had won a contract to supply tags to Brazil.

Not particularly significant for anyone beyond Kapsch on first appearance, but in fact it is something a little different from simply supplying tags for a toll road. The press release alludes to Brazil's programme for a national compulsory electronic vehicle ID system that, in effect, means all vehicles in Brazil having what is equivalent to DSRC based toll tags.

The press release states:

SINIAV (Sistema Nacional de Identificação Automática de Veículos) is organized by the Ministry of the Cities (MC) and the National Traffic Committee (CONTRAN) in Brazil and foresees the mandatory electronic registration for all vehicles in the country, including passenger cars, trucks and motorbikes. 

All very well, and let me be very clear.  The press release does not claim Kapsch is the supplier of tags for all vehicles in Brazil or even part of them, but it also does not link them to toll roads, so the impression is that Kapsch is at least a partial supplier of tags for vehicles in Brazil.

So what is SINIAV about? Well the allegedly official website for the programme (it was on the Kapsch press release but I am unconvinced given the content on the website) has rather limited information.   I am unconvinced that the site is official because it contains language (admittedly in Portuguese) that raises some of the privacy concerns around the system.
 

It claims:

The SINIAV tag will include data on the number of the chip, board, chassis and vehicle identifier (registration number). 

The programme was authorised by law in 2006 with the primary motivation being to address vehicle related crime, a secondary one to help in fleet management of commercial vehicles It also claims that the system will mean the “end of auto theft” because the Police will be able to identify through triangulation the location of the vehicle (presumably the Police will be “polling” vehicles constantly for a particular ID or will have fixed transceiver stations to “poll” passing vehicles). 

The website from the Federal Transport Ministry indicates that the tags can be passive or active RFID, indicating either a basic sticker tag or a more sophisticated "beeping, lights" type unit being available.

A lot more useful information came from a presentation at an IBTTA conference in 2011 by Dario Sassi Thober of the Wernhervon Braun Center for Advanced Research.  The Wernhervon Braun Center appears to have been contracted to develop security and data protocols and design for the standards used for SINIAV.   The key points from Thober's presentation are:

- SINIAV is linked to state and national vehicle databases, as it is states that manage vehicle registration, but the national agency DENATRAN manages the exchange of such data. The system is designed to be seamless with the creation (and presumably change and destruction) of vehicle number plates.   It will facilitate states requesting data about vehicle owners related to traffic and criminal law enforcement.

- SINIAV is also intended to provide a platform for electronic free flow tolling across Brazil, reducing and ultimately eliminating the need for manual tolls and automatic number plate recognition systems.  This will greatly facilitate more tolling and ease the difficulties in implementing urban congestion charging in cities such as Sao Paulo;

- 30 June 2014 is the deadline for all vehicles to have tags installed, including motorcycles.  The SINIAV website suggests that by the end of August 2013 all new vehicles sold in Brazil will have to be equipped.

- SINIAV has a centralised national back office retaining data not only of vehicles but also violations and other irregular activities which may be legal or financially related (e.g. tax or debts). Thober’s presentation has a good representation of the data flows for the initiation of a vehicle into the system.

Related to SINIAV are two other programmes.  

One called Brasil-ID will use SINIAV technology for cargo tracking, both based on the vehicle and on the cargo itself (by attaching RFID tags to containers and pallets). Brasil-ID is about truck cargo identification, tracking and authentication, and appears to be related to tracking goods for tax compliance purposes (e.g tariffs or local sales taxes) and deterring theft of cargo. 

The other is called SINRAV and includes GPS and GPRS systems to enable real time vehicle tracking.  This would theoretically allow for nationwide distance based tolling (VMT), but is currently subject to judicial review in the federal courts for fear of privacy infringements.   SINRAV appears to be a far longer term programme as it involves more expensive equipment on board vehicles, although it would be necessary to deliver the promise of seriously addressing vehicle theft.

Conclusion

Brazil is adopting an ambition programme that will make it ever easier to introduce tolling on major highways and urban congestion pricing, but it is driven by security.  The one thing SINIAV will do is make it difficult to swap number plates and raise the level of sophistication needed to change vehicle ID, essentially putting out of business a lot of petty theft of vehicles and leaving it to the serious professional vehicle thieves who can afford to spend serious money on replicating SINIAV tags to fool Police checks.

The bigger question is whether such electronic identification of vehicles, which seems like it would be the norm nowadays, could easily be rolled out in developed countries without privacy fears essentially halting it.  Meanwhile, identifying vehicles by a set of letters and numbers on a plate that needs to be visually read looks increasingly anachronistic.  Having that information recorded electronically makes sense, but what matters is how to link that data to the essential vehicle owner information and to protect that.  

SINIAV obviously will be useful in addressing vehicle theft, but could also be used for traffic infringement enforcement (e.g. speeding and traffic signals).  However, its limitations for tolling are essentially the extent to which roadside infrastructure exists to detect vehicles passing certain points on the network.

The logistics of the Brazilian programme are considerable, and I would bet it will be some years before all vehicles are caught.  Just because SINIAV will be compulsory does not mean that it will be universal, and I suspect a good 5-10% of all vehicles are likely to be outside the system for some time, unless Police are incentivised to identify, persuade and compel the outliers to join.

If anyone who is part of the SINIAV programme has anything to add, please feel free to contact me as I am happy to clarify or add more information as it comes available.

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.

Series of toll road investor results: Ferrovial, Atlantia, Transurban, Metro-Pacific

Ferrovial

Construction News reports Spanish infrastructure investor Ferrovial reporting a 312 million euro in net profit in the first half of 2011, contrasting with losses of 164 million euro in the same period of 2010. Notable was how the EBITDA on the Toronto 407 ETR rose by 8% in part due to higher tolls and lower operating costs. The Airports division contributed 62% of EBITDA, Services 14%, Toll Roads 14% and Construction 10%.

Ferrovial owns its toll roads through its subsidiary CINTRA.  Its highway assets (whole and partial) are:

- 407 ETR Toronto, Canada;

- Santiago-Talca Highway, Chile;

- Talca-Chillan Highway, Chile;

- Forest Route Highway, Chile;

- Collipulli-Temuco Highway, Chile;

- Temuco-Rio Bueno Highway, Chile;

- M-203 Madrid (Alcala-O'Donnell), Spain;

- AP36 Madrid-Levante, Spain;

- AP7 Costa del Sol Highway (Malaga-Guadiaro), Spain;

- Autema C16-E9 Highway (San Cugat del Vallés to Manresa), Spain;

- R4 Madrid-Ocana, Spain;

- Chicago Skyway, Illinois, USA;

- Indiana Toll Road, USA;

- LBJ Express Toll Lanes, Dallas, Texas, USA;

- North Tarrant Express toll lanes and road, Dallas-Forth Worth, Texas, USA;

- SH130 Austin-San Antonio, Texas, USA;

- E65 Central Greece Motorway;

- Ionian Roads (Antirio to Ioannina, Athens to Skarfia), Greece;

- M3 (Dublin-north of Kells), Ireland;

- M4 (Kilcock-Kinnegad), Ireland;

- A22 (Portimao - Vila Real de Santo Antonio), Portugal;

- Euroscut Azores Highway, Sao Miguel Island, Portugal; and

- A27-A28 North Coast Highway, Portugal.

Atlantia

Reuters reports that the Italian toll road investor company had a 41% increase in profit for the first six months of 2011 compared to 2010. This reflected sale of a stake in one road and increased toll revenue, despite declining traffic volumes (with a 0.5% decline in volumes on Italian toll roads).

"Excluding the sale of an investment and charges related to impairments, profit rose 12 percent over the period."

Atlantia's highway assets are:

- Autostrade per l'Italia SpA (2854.6 km of network of Italian motorways);

- Società Italiana per Azioni per il Traforo del Monte Bianco (5.8 km), which manages the Italian section of the Mont Blanc Tunnel;

- Raccordo Autostradale Valle d'Aosta SpA (32.3 km), which manages the road linking Aosta and the Mont Blanc Tunnel (Italy);

- Autostrada Torino-Savona SpA (130.9 km), which manages the motorway linking Turin and the Ligurian coast (Italy);

- Società Autostrada Tirrenica SpA, which holds the concession for the entire length of the Livorno-Civitavecchia motorway (240 km) and currently manages the Livorno-Rosignano section (36.6 km) (Italy);

- Tangenziale di Napoli SpA (20.2 km), which manages Naples' orbital motorway (Italy);

- Società Autostrade Meridionali SpA (51.6 km), which manages the Naples-Pompei-Salerno motorway (Italy);

- A4 Krakow-Katowice motorway (Poland);

- Pune Solapur Expressways (50%) in India, which holds the concession (expiring 2030) for 110 km motorway in the state of Maharashtra;

- 135 km toll motorway serving the cities of Rio Bueno and Puerto Monttt in Chile;

- 442 km toll motorway in the state of San Paulo in Brazil;

- 23.5 km southern section of the orbital toll motorway serving the city of Santiago del Chile;

- 79 km toll motorway serving the cities of Algarrobo, Casablanca and Cartagena in Chile;

- 43 km of road network in the city of Santiago in Chile;

- 21.5 km north-eastern bypass in the city of Santiago del Chile; and

- Urban motorway linking the city of Santiago with Arturo Merino Benitez International Airport.

Transurban

The Herald Sun reports that Australian toll road company Transurban has reported a 90% increase in full year profit.  An 8.8 per cent rise in traffic on Melbourne CityLink, which netted A$434.6 million (US$424 million) in revenue, was a key contributor to total toll revenue of A$891 million (US$870 million) - up 10 per cent.  It carries a reported A$5.8 billion of debt behind its assets. 

The Australian reports an interview with Transurban chief Chris Lynch who said "Our roads are very robust ... There's not a lot of discretionary travel on our roads, it's largely people getting to work or the airport."

It was also noted that the Melbourne CityLink, it gained from an additional lane on the western approach to the toll road network allowing for greater use of its capacity.

The Australian also noted that:

"The acid test of an infrastructure company is the ability to pay generous distributions funded by real cash rather than debt. The "wedge of free cash" -- $390 million in all -- enabled Transurban to declare a 27c per security full-year payout, with management promising "at least" a 29c distribution this year."

Adelaide Now reports that Melbourne Citylink grew faster than the average 10% "with an increase of 12.8 per cent to contribute $434.6 million. Transurban said the completion of the upgrade on its southern link, adding lanes on CityLink between both tunnels and Toorak Rd, had been important in boosting traffic."

Transurban said traffic growth on the Lane Cove Tunnel, purchased nearly a year ago, had initially risen 6 per cent but had declined to 2.8 per cent this calender year due works on the M2.

Transurban's highway assets are:

- Melbourne Citylink (Australia);

- Hills M2 motorway, Sydney. Australia;

- Lane Cove Tunnel, Sydney, Australia;

- Eastern Distributor, Sydney, Australia;

- Westlink M7, Sydney, Australia;

- M5, Sydney, Australia;

- Pocahontas 895, Virginia, USA; and

- Capital Beltway HOT lanes, Virginia, USA

Metro Pacific Tollways Corporation (Philippines)

The Filipino toll operator was reported by the Business Inquirer as saying:

earnings slipped 4 percent in the first half of the year to P725 million (US$17 million) due to lower-than-expected traffic growth and higher tax payments during the period. “Though traffic demand could be lower given sharp increases in fuel prices and the expiration of MNTC’s (Manila North Tollways Corp.) income tax holiday, MPTC still expects a strong financial performance this year with the increase in toll rates and modest traffic volume growth,” MPTC president Ramoncito Fernandez said in a statement.

The company's latest road is the Subic-Clark-Tarlac Expressway. Its portfolio also includes the North Luzon Expressway.