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.

Poland's heavy vehicle national toll system

From 3 July 2011, Poland became the sixth country in Europe to implement a national heavy vehicle tolling system based on distance travelled. The system, branded as viaToll, applies to all vehicles over 3.5 tonnes (not just trucks). Tollroadsnews has a good article about the system here.

The system replaces a sticker based vignette system, which charged domestic and foreign vehicles weighing over 12 tonnes on the basis of prepaid access to the network based on a year, a month, week or a day.  800 Euros for a year (US$1,095) down to 9 Euros for a day (US$12.32).  The fundamental problem with vignettes being that revenue does not increase based on usage, but rather on the number of vehicles on the road.  The vignette system also only applied to vehicles 12 tonnes and over, the viaToll system applies to all vehicles down to 3.5 tonnes, so captures most of the freight and all of the bus market.

While Poland's economy has been one of the most buoyant in Europe during the economic downturn (in part because it does not use the Euro, has kept its public finances in a good state and has enjoyed substantial repatriation of funds from expat Poles working elsewhere in the EU), it has substantially grown its truck sector exponentially.  It has entered the German and other neighbouring country road freight markets, undercutting local competition and keeping prices low.  As a result, the Polish government sees this system as a way of getting the thriving (though very low margin and competitive) truck sector to make a fairer contribution to the costs of the network it depends on (given Polish truck operators are paying such tolls in neighbouring Germany, Czech Republic and Slovakia).  

In addition, Poland is now a primary road transit route for freight between Russia and the EU.

Official network map

1,565km of motorways and selected major highways have been tolled, using a DSRC based system (with the 5.8GHz EU standard). The system has distinct parallels with the systems in place in Austria and the Czech Republic, having been installed by Kapsch. As a result it is rather different from the GPS based systems in place in Germany and Slovakia, and the tachograph/GPS system in place in Switzerland. 

With its 5 billion PLN (US$1.58 billion) DSRC based system, it relies on gantries to detect vehicles passing underneath with the viaToll tags. The intention is to receive about PLN913 million (US$289 million) in the first year. About 430 have been installed. Whilst reliable and cheap to operate, it is far from cheap to install and it is far from cheap or quick to expand the geographic scope of the network, unlike GPS systems. Indeed, the DSRC based systems in Austria, Czech Republic and Poland perhaps all stretch the capability of such technology being deployed in an economically viable way on a national scale by only charging motorways and selected major highways.

ViaToll DSRC tag

For all vehicles over 3.5 tonnes the DSRC tag is mandatory, with no option to pay by other means. The tags are expected to have an operational life of five years on average before needing replacement because of battery life.   Tags require a PLN120 (about US$38) which is fully refundable on return of a working tag and cancellation of an account with no outstanding debts.   Deposits for stolen viaToll boxes will not be returned, incentivising drivers to keep their vehicles locked!

17 tag distribution points and 16 customer contact points (one in each province) were established, with pre-registration available one week in advance.

The preferred way to register is online on the viaToll website, it has interestingly been noted that scam websites had been set up seeking registration and payment details. A development that is bound to be a risk in the future with fully electronic toll systems.

Payment options include a wide selection of fleet and fuel payment cards, with credit and debit cards also possible online, and with cash through selected outlets.  Pre and post pay options are available.  Prepaid accounts can have a maximum of PLN1000 (US$316.54) per vehicle in top up, indicating some interest in the system NOT having very large amounts of currency. Minimum top up is PLN120 (US$38).  Post pay accounts need credit, bank or insurance guarantees.

350,000 tags have been distributed for 112,000 customers (some customers have fleets).  They use a system of beeps to inform the driver about the account status:

A single beep means that the user has sufficient funds in the account;
Two beeps indicate that the user has funds in the account, but not enough; and
Four signals indicate no funds in the account or a malfunction of the viaBOX.

Curiously, although built to the EU standard, the viaToll DSRC tag has not been subject to interoperability agreements with other EU tolling systems.  This may simply be for contractual purposes for now, but it would not seem to be complicated to consider interoperability with at least the similar Czech and Austrian systems.   However, as much as there is strong policy interest, European attempts at promoting interoperability between toll operators have been fraught with difficulties.  The tags cannot be swapped between vehicles because they are linked to the vehicle number plate, but multiple tags can be placed on a single account making it ideal for fleet operators.

The system is enforced using Automatic Number Plate Recognition (ANPR) cameras on gantries and on board 94 roaming mobile enforcement vehicles. The cameras and vehicles will interrogate vehicles detected to be of a size liable for the toll, and attempt to interrogate a tag. If no tag is found, the number plate will be recorded and a mobile enforcement vehicle has the right to request the suspect vehicle to stop. Offences include not having a tag,  entering incorrect data in order to obtain a tag and having insufficient funds in a prepay account to undertake a trip (post pay accounts do not face this issue).  The mobile enforcement unit undertakes a report, and if it is a Polish vehicle, the fine will be sent by post to the owner.  If a foreign vehicle, the fine appears to look like it is to be paid instantly, an issue for some as it holds the risk of corruption.  However, as Poland is a member of the Schengen Area (which abolished border controls between EU Member States that signed up to that agreement), it is otherwise difficult to enforce against vehicles travelling to Germany, the Czech Republic, Slovakia or Lithuania (but there are still border controls with Ukraine, Belarus and Russia).

The toll tariff schedule is complex, with lower rates for lighter vehicles and for vehicles with cleaner burning engines (e.g. Euro V or better).  The rates are different for motorways compared to national roads, based on both infrastructure costs and in the interests of traffic management.

Toll rates on motorways range from:

PLN0.20 per km (US$0.039 per mile) for trucks between 3.5 and 12 tonnes and all buses with a Euro V rated engine or better; to

PLN0.53 per km (US$0.104 per mile) for trucks over 12 tonnes with a Euro II rated engine or worse.

Toll rates on national roads range from:

PLN0.16 per km (US$0.031 per mile)  to PLN0.42 per km (US$0.082 per mile) on the same basis.

Poland is curiously charging more to use motorways even though such roads probably have lower long run capital costs and there being policy reasons to encourage traffic off of other roads and onto motorways. 

I’ve been told there have been some teething problems with the system in terms of traffic diversion, as some trucks in particular choose to avoid the tolled roads. If you look at the rather sparse network, the scope to do so is clear, but alternative routes in Poland are not great, and the country is trying to catch up with other EU Member States of the east in completing a nationwide motorway/grade-separated highway network.

Given the time, cost and effort involved in installing new tolling points, a flexible response to such cases is not easy, unless it involves reducing the toll, which I suspect is not on the cards.

Clearly the long term solution for national road pricing is to not have a system dependent on gantries for regular users to be charged. However, Poland has now signed up to an eight year contract, so has bought into a DSRC solution for the medium term. There is little doubt that many costs are lower for this system than for a GPS based system (and the contract prices offered indicate that), but it is a trade off. Lower risk, lower in vehicle costs (and no need for a second solution for non-users because of the low cost of tag), but higher infrastructure costs and lack of flexibility to expand or alter the charging network quickly.

ViaToll has reported that it has generated PLNl80 million (US$25.3 million) in the first 54 days of operation. However, while this only includes collection from heavy vehicles, it is worth noting in parallel to the heavy vehicle system, manual toll collection applies on a handful of motorways for vehicles under 3.5 tonnes only. These have PPP concessions applying and include the A1, the Konin - Stryków section of the A2 and the Bielany Wroclaw - Sośnica section of the A4 (from January 2012).