Goldman Sachs and Abertis lease Puerto Rico toll roads

| 6/21/2011

Goldman Sachs and Spain’s largest toll road operator, Abertis, have agreed to pay $1.08 billion to lease two busy toll roads in Puerto Rico. It’s the fourth-largest public-private partnership involving an existing toll road in North America and the first to occur since 2007.

Abertis stated on its website on Tuesday, June 21, that the deal leaves the European toll road giant “poised for future public-private partnerships in the United States.”

As the winning bidder in Puerto Rico, the Goldman Sachs-Abertis partnership will operate and collect the tolls on Puerto Rico’s 52-mile Route 22 and four-mile Route 5 for the next 40 years. The partnership consists of Goldman Sachs Infrastructure Partners II with a 55 percent share, and Abertis with 45 percent.

Under the agreement, the partnership has also agreed to spend $300 million on upkeep for the two roadways over the lifespan of the agreement.

Foreign investment in the U.S. rose 49 percent in 2010 but still falls below the 2008 level. President Obama and his Council of Economic Advisors said in a recent statement that “promoting foreign direct investment is an important opportunity to accelerate our economic recovery.” 

Toll operators around the world have seemed happy to oblige in recent years.

The deal for Puerto Rico’s toll roads ranks fourth in size in North America behind the $3.85 billion Indiana Toll Road lease in 2006; the $2.2 billion 407 Express Toll Route lease in Toronto in 1999; and the $1.85 billion paid for the Chicago Skyway in Illinois in 2005. Each of the top three toll projects involved a partnership between Cintra of Spain and Macquarie of Australia.

Domestic companies have also set up infrastructure funds. In 2006, New York-based Goldman Sachs established an infrastructure investment fund, which currently stands at $10 billion according to the company’s website.

Under long-term leases that the companies seek, the concessionaire pays a state or local government a large upfront sum in exchange for decades’ worth of toll revenue. Many times, the private firm is guaranteed a profit in the form of toll increases that outpace inflation.

The poster child for deals of this sort remains the Indiana Toll Road. In 2006, Gov. Mitch Daniels leased the 157-mile tollway to Cintra and its Australian partner, Macquarie. The 75-year lease guaranteed tolls would rise from $14.85 for trucks to $32 by 2010 and that’s precisely what happened. Future toll increases – i.e., the consortium’s profit margins – are guaranteed to outpace the rate of inflation through the end of the lease in 2081.

This is one of the many reasons why highway user groups including OOIDA oppose the lease or sale of public infrastructure to for-profit companies.

“OOIDA adamantly opposes the sale or lease of existing roads and efforts to convert non-tolled roads into toll facilities,” Association leadership states in its position on highways.

OOIDA does not categorically oppose new roads built with tolls or tolled lanes that add highway capacity as long as users have a choice to use non-tolled lanes. And tolls should be removed once a project is paid off, OOIDA says.

More about Abertis
Abertis, which owns parking facilities and toll roads on four continents, was nearly part of the largest toll road takeover in U.S. history in 2008 – a $12.8 billion offer for the Pennsylvania Turnpike that included partner Citi of New York. Luckily for highway users, a state legislative committee blocked the turnpike deal from happening and Abertis-Citi withdrew its offer.

Abertis already does business in Puerto Rico. The company operates and collects tolls on the Teodoro Moscoso Bridge.

In 2006, Abertis attempted to merge with Autostrade of Italy. The merger would have created the world’s largest toll road operator, but the governments of those countries did not approve it.

Editor’s note: Land Line Magazine first wrote about Abertis in a July 2006 story called “Toll Hogs.” Click here to read the online version.