Pass GO, collect billion$
Big spenders battle for public assets in high stakes game
By David Tanner, staff writer, and Sandi Soendker, managing editor
In the ’30s, Parker
Brothers introduced the
most uncompromising – if not the most addictive – game of blatant capitalism ever contrived. Americans have played it heartlessly for decades.
But now, there’s another popular competition sweeping the nation. It’s even more high rollin’ and more ruthless – one that puts our highways up for grabs like they were Park Place or Boardwalk. The scary part is, it’s not a game.
The famous Parker Brothers game must have been among George W. Bush’s favorite pastime activities, because the Bush White House has rolled out the red carpet to help public-private partnerships into the new game of who ends up with the most public assets. Even with the administration’s position well-documented, it was still a surprise when U.S. Transportation Secretary Mary Peters announced Jan. 8 that the DOT would assist states with model legislation on how to privatize infrastructure.
Who are these mega-corporations that now essentially own the Indiana Toll Road, the Chicago Skyway and Canada’s 407 Express Toll Route? Who are these powerful big spenders now rolling the dice for dozens of other major highways? Pay attention.
Here are some of the top players:
Macquarie Bank – Doing business as Macquarie Infrastructure Group and dozens of subsidiaries. This Australian banking giant is the No. 1 power player, having produced some big numbers in the past couple of years.
As the U.S. DOT began encouraging and supporting privatized infrastructure, Macquarie gobbled a couple of key projects. The company landed the Chicago Skyway lease with a $1.83 billion bid in 2005 and the Indiana Toll Road lease with a $3.85 billion bid in 2006. Macquarie partnered with another high roller – Cintra out of Spain – to swing the Indiana deal.
Macquarie also has 100 percent interest in the South Bay Expressway in San Diego and the Dulles Greenway in Virginia near Washington, DC, and 30 percent control of the 407 Express Toll Route in Ontario, Canada.
The Australian giant has expressed interest in possible private leases of both the New Jersey Turnpike and the Garden State Expressway in New Jersey, as well as the Pennsylvania and Ohio turnpikes. Macquarie is also bidding to build and operate four private toll roads near Dallas, and a private toll road near Montreal, Canada.
And in a strategic move, Macquarie’s media division recently purchased 40 newspapers in Texas and Oklahoma for $80 million. That’s almost as good as buying up all of the utilities in the old Parker Brothers game.
Cintra Concesiones de Infrastructuras de Transporte, S.A. – “Cintra” for short. This Spanish company partnered with Macquarie in Illinois and Indiana and has a 53-percent stake in the 407 ETR in Canada.
Google up “Cintra” and you’ll learn even more about this big board player, like how the company has a $1.2 billion contract to develop the proposed Trans-Texas Corridor of multi-lane, intermodal transportation networks linking Mexico with middle America and beyond.
The controversial Texas network is expected to include truck-only toll lanes, high-occupancy vehicle lanes, railways and utility lines in a corridor up to a quarter-mile wide. Cintra is also a bidder on several projects to build and operate private toll roads in Texas, and is a bidder for a private toll road near Montreal, Canada.
Transurban Group – Being the third major foreign investor to land a road lease contract in the U.S. makes this Australian company a formidable player. Transurban leased the Pocahontas Expressway in June 2006 in the Richmond, VA, area for $548 million.
Transurban is also bidding on several projects to build and operate privately built toll roads in the Dallas area. In Australia, Transurban recently gobbled up another toll road investor, Sydney Roads Group.
Abertis – This Spanish company attempted a merger in 2006 with Italian toll road company Autostrade. That merger would have created the world’s biggest toll road company, according to European media reports. Although both boards of directors approved the merger, the companies announced in December 2006 that the deal was off.
Abertis is still hungry for the U.S. infrastructure market, but it has yet to play a game on U.S. soil. It’s ready to get into the game though and has submitted a proposal to privatize the Pennsylvania Turnpike.
SNC Lavalin – A Canadian engineering and construction company with a 17-percent stake in the 407 ETR in Ontario and a bid to build a private toll road to bypass Montreal. SNC Lavalin is currently doing work in 100 countries, according to its Web site.
Others ready to take their turn – You may not know their names yet, but there are more players ready to enter this lucrative game. Some are funded by foreign consortiums and will be controlled by foreign management.
Some of them are on the long list of companies that filed proposals in Pennsylvania, and are among the stream of bidders for privatized toll roads in Texas. It’s clear that companies like Credit Suisse, Iridium of Spain, OHL Concesiones of Mexico, Deutsche Bank, Arcadis of the Netherlands, Skanska of Sweden, and Grupo Ferrovial – which owns Cintra of Spain – are ready to play.
On the list of 47 private companies submitting letters to Pennsylvania Gov. Ed Rendell in support of privatizing the state’s turnpike, U.S. financial companies were well represented as well. They have the tools to broker some major toll road deals.
Sounds of rattling dice are already emanating from outfits like Morgan Stanley, ING Group, Bear Stearns, J.P. Morgan, KPMG, Wachovia and others. The Carlyle Group is a cagey veteran and must not be discounted as a major grabber upper.
The lawyers and brokers
Where would any of these deals be without the lawyers? The Ice Miller law firm successfully defended Indiana officials in 2006 against a constitutional challenge on the Indiana Toll Road lease. The state paid Ice Miller $1.3 million in legal fees for that defense.
And then there are law firms such as Mayer, Brown, Rowe & Maw, which brokered the Chicago Skyway deal for Macquarie. It has 1,400 attorneys in the U.S. and Europe specializing in corporate law and private equity.
And don’t overlook Goldman, Sachs & Co. This financial mogul pocketed $20 million in the role of financial advisor for the Indiana Toll Road deal in 2006. By that year’s end, the company had amassed a $6.5-billion infrastructure investment fund to show the world it will be a big board player.
Anybody challenging these big spenders?
In recent months, the Pennsylvania Turnpike Commission made news, going up to bat against 47 companies that submitted proposals to Gov. Ed Rendell to privatize the state turnpike. Commissioners suggested the state itself should add tolls to Interstate 80 to help fund transportation, rather than leasing or selling the turnpike to private, for-profit businesses.
State lawmakers around the nation who are proposing legislation to keep public-private partnerships in check are getting some attention, too. For additional details on that trend, see State Legislative Editor Keith Goble’s report “It’s a private matter” in this issue.
Say what? Opinions abound across the board Plenty of people are keeping a close eye on the privatization game. Many of them – perhaps even you – are choosing to get directly involved to try to keep private investors from passing GO and to keep lawmakers from selling and leasing U.S. highways. Truckers, taxpayers and lawmakers are on the front line, speaking out about these high-stakes deals. Here is a sampling of what they are saying. We also included a view from one of the companies involved in this big-money game, so you can learn a bit about their motivation – profit. Privatization cripples the system What are public roads worth? Headaches in Indiana Macquarie follows the money And then they bought the press If you can’t beat em... A bird’s-eye view |
