Toll hogs
World's biggest toll company hungry for U.S. market

By David Tanner
staff writer

The dinner bell is ringing and private companies are headed to the trough.

If you haven’t heard by now, the main course is America’s infrastructure.

Gracious hosts have already included Illinois and Indiana, whose governors leased toll roads to private investors for up-front cash, cash to make up for growing gaps in their road budgets.

And why wouldn’t the states be gracious hosts, with the Bush administration paving the way in August 2005 with the federal highway funding legislation known as SAFETEA-LU?

And in May of this year, Transportation Secretary Norman Mineta, in a plan to take pressure off congested highways, called for private investors to take more interest in alternate routes, toll routes, airports and railways.

“Private capital will give those communities willing to embrace it an opportunity to augment public funds in order to complete critical transit and highway projects,” Mineta said in a press release.

Mineta has also said that the U.S. won’t succeed in making today’s traffic problems a thing of the past without involvement from the foreign private sector.

The toll hogs are amassing huge portfolios and accepting the invitation to seats at the dinner table.

The recent private leases of the Chicago Skyway and the Indiana Toll Road – both to Spanish-Australian consortium Cintra-Macquarie – now look like they could just be the appetizer.

During the bidding process and legislative action in Indiana that paved the way for Cintra-Macquarie to collect tolls for the next 75 years on the 157-mile Indiana Toll Road, another important business deal was brewing in Europe, that soon could impact things to come in North America.

The deal, not widely publicized so far in North America, could give a new private investor a spoon to dip into the great melting pot.

Merger would create mega toll company
Two large European infrastructure companies, Abertis of Spain and Autostrade of Italy, announced a planned merger April 23 that would create the world’s largest private toll-road operator.

The reason for the proposed merger: the U.S. infrastructure market, according to a posting on the Abertis Web site,

“The objective is to set up a large European infrastructures operator with the volume and critical mass necessary for tackling operations in strategic markets such as the USA, Latin America and Asia,” Abertis officials stated on the site.

As of press time, Autostrade shareholders were scheduled to vote on the merger June 30. If approved, the merged company will operate under the Abertis name and be based in Barcelona, Spain.

In the event of the merger, the new Abertis would have a market capitalization of $30 billion, with an annual revenue of $6 billion, according to The Wall Street Journal.

The merged Abertis would operate 4,130 miles of toll roads in Spain, Italy, France, the United Kingdom and several other countries. The company would also employ more than 20,000 people in 16 countries.

Part of Abertis’ portfolio is paid parking spaces. A subsidiary called Saba manages 91,400 parking spaces in Europe, South America and Africa.

The Italian government is not happy with the announced Abertis-Autostrade merger, according to the country’s top newspapers.

Italian infrastructure minister Antonio Di Pietro told the Italian media that he opposed the merger because it appeared to be an Abertis takeover of the Italian company. But Autostrade shareholders seemed to favor the merger even before the vote in late June, according to BBC News.

Autostrade shareholders bumped a board executive, Vito Gamberale, to a powerless position for reportedly opposing the merger, BBC News reported.

Skyway was first domino to fall
The proposed Abertis-Autostrade partnership, much like the group that’s already operating in North America – Cintra-Macquarie – has every intention of making a profit in the U.S. infrastructure market.

The merged Abertis, according to Forbes, will have a projected cash flow of $19.8 billion by 2014.

Even before the announcement of the merger, Abertis and Autostrade were actively seeking new toll roads to invest in.

Together, and with eyes set on the U.S. market, the new Abertis could well become a major stakeholder in state road building and tolling.

Cintra-Macquarie has led the way as the first foreign consortium to buy into the infrastructure buffet with a $1.83 billion lease of the Chicago Skyway that will last 99 years.

Tolls on the Skyway are expected to increase with the rate of inflation.

That has not been the case so far in Indiana.

Cintra-Macquarie plans to raise truck tolls on the Indiana Toll Road from $14.85 to $32 by 2010.

State lawmakers saw an increase as being inevitable, so they struck a deal with the Spanish/Australian consortium to phase in the increases instead of allowing the company to take it all in one mouthful.

Macquarie, with roots in the Australian banking industry, promises big returns for its investors, particularly once the U.S. market opens up to more privatization.

Goldman, Sachs & Co. officials in May told a House transportation panel that the U.S. infrastructure market could open up $50 billion to private investors.

Waiter, there’s a fly in the soup
But there’s a stigma attached to being a “foreign” investor in the U.S., despite the fact that numerous U.S. entities and about 80 percent of the country’s port terminals already operate under foreign leadership.

Macquarie may soon list itself as a U.S. company to shed the stigma attached to “foreign” investment in U.S. infrastructure, according to The Australian newspaper.

And, it remains to be seen how easy it will be to lease infrastructure state-by-state. For example, a group of Indiana residents decided they didn’t want to see U.S. infrastructure being leased, so they filed a lawsuit to challenge the constitutionality of the “Major Moves” transportation plan and the lease of the Indiana Toll Road to Cintra-Macquarie.

That lawsuit had made it to the Indiana Supreme Court at press time.