Monday, May 12, 2008

Pennsylvania Gets Offers For Turnpike

The Wall Street Journal reports:

At least two bidding groups submitted undisclosed cash offers late Friday for
the 75-year lease of the Pennsylvania Turnpike, in what could represent one
of the largest deals in the coveted U.S. infrastructure sector.

One of the bidding groups is led by Spanish toll-road operator Abertis
Infraestructuras SA and includes undisclosed financial partners, a company
official said Saturday. A person familiar with the situation said another
binding bid was filed by Spain's Cintra Concesiones de Infraestructura de
Transporte SA in partnership with Australia's Macquarie Infrastructure Group.

Investment bank Morgan Stanley advised Pennsylvania's government that a
long-term lease of its Turnpike can cover the $1.7 billion for its annual
highway and transit needs, estimating the value of the 500-mile highway at
$12 billion to $18 billion.

Disclosed terms of the proposed 75-year lease of the Pennsylvania Turnpike are
similar to the privatization of Chicago's Skyway and the Indiana Toll Road.
The city of Chicago raised $1.83 billion in 2005 by leasing its Chicago
Skyway for 99 years. Indiana, in turn, obtained $3.85 billion in 2006 through
the 75-year lease of the Indiana Toll Road. Both deals allow significant toll
hikes over the long run, and both were won by Cintra and Macquarie.

The proposed formula for toll increases at the Pennsylvania Turnpike includes
a 25% hike set for next year. Tolls can then match inflation or rise annually
by at least 2.5%. Pennsylvania's government believes such a tolling formula
benefits drivers, as it won't be required to toll other highways.