http://www.bloomberg.com/apps/news?pid=20601103&sid=aa7Keg1kckgE&refer=us
Pennsylvania Gets Turnpike Bid From Abertis, Citi (Update4)
By Adam L. Cataldo
May 19 (Bloomberg) -- Pennsylvania officials said a $12.8 billion bid
from Citigroup Inc. and
<http://www.bloomberg.com/apps/quote?ticker=ABE%3ASM>Abertis
Infraestructuras SA won an auction to lease the state's only toll
road in what would be the biggest agreement of its kind in the U.S.
New York-based Citigroup, the biggest U.S. bank by assets, and
Barcelona-based
<http://www.bloomberg.com/apps/quote?ticker=ABE%3ASM>Abertis, which
operates toll roads in Europe and Latin America, topped two other
offers. The next-highest bid was $12.1 billion by New York's
<http://www.bloomberg.com/apps/quote?ticker=GS%3AUS>Goldman Sachs
Group Inc. and
<http://www.bloomberg.com/apps/quote?ticker=TCL%3AAU>Transurban
Group, Australia's second-largest toll-road operator.
Pennsylvania Governor
<http://search.bloomberg.com/search?q=Edward+Rendell&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>Edward
Rendell wants to lease the 537-mile (864-kilometer) turnpike for 75
years if the U.S. government rejects the state's application to put
tolls on Interstate 80. Money from a turnpike lease would help the
state close a $1.7 billion gap in transportation funding.
``This bid will allow us to increase spending on roads, bridges and
transit above what is in the current plan, Act 44, which includes
plans to tolls I-80,'' Rendell said at a press conference in
Harrisburg. ``This is a very good deal.''
Rendell first proposed leasing the turnpike last year and dropped his
plan amid opposition from the Legislature. To fund transportation
spending, he signed into law Act 44, which allowed the state to
establish tolls on the 311-mile I-80. Those tolls are opposed by
elected officials including U.S. Representatives John E. Peterson and
Phil English, both Republicans.
Turnpike Plan
That opposition led Rendell to revive his turnpike lease plan less
than a month after signing the bill. Pennsylvania won't lease the
turnpike if I-80 tolls are approved, Rendell has said. The state is
being advised by
<http://www.bloomberg.com/apps/quote?ticker=MS%3AUS>Morgan Stanley.
If a turnpike transaction takes place, the road will be controlled by
a newly created company, Pennsylvania Transportation Partners, said
<http://search.bloomberg.com/search?q=Roy+Kienitz&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>Roy
Kienitz, Rendell's deputy chief of staff. Abertis said in a statement
it will have a 50 percent stake in the company, Citigroup will own
41.7 percent, and Criteria CaixaCorp SA, an investment company based
in Madrid, will have the remaining 8.3 percent.
Citigroup fell 13 cents today to $22.99 on the New York Stock
Exchange. Trading in Madrid on Abertis stock was suspended by
regulators just prior to today's announcement, after rising 20 cents
to 21.08 euros. Trading will resume tomorrow, according to the
exchange's regulator.
Macquarie-Cintra Bid
A bid of $8.1 billion was submitted by Sydney-based
<http://www.bloomberg.com/apps/quote?ticker=MIG%3AAU>Macquarie
Infrastructure Group and
<http://www.bloomberg.com/apps/quote?ticker=CIN%3ASM>Cintra
Concesiones de Infraestructuras de Transporte SA, based in Madrid.
Since their offer wasn't within 10 percent of the highest bid, the
companies were prevented from making a best and final offer at the
end of last week, Rendell said.
Citigroup bid on the Turnpike through Citi Infrastructure Investors,
a unit of its alternative investments group. That fund is raising $3
billion fund infrastructure investments. Last week, they announced
the purchase of a 50 percent stake in a Canadian company to invest in
airports worldwide.
``We bid on because it is precisely the sort of asset we are keen to
acquire for our investors,'' Felicity Gates, co-head of the fund,
said in an interview. She declined to comment on the expected rate of
return on the company's investment. ``Typically, our investors are
looking for very long-term, stable returns. There is much greater
predictability about the cash flows from this type of asset than one
in an earlier phase of its life.'' The Turnpike officially opened in 1940.
Gates said she expects the companies will extend a June 20 deadline
for acceptance of their bid if necessary. If the transaction does
take place it is expected to close before the end of this year, Gates said.
Deal Terms
The offer for the Pennsylvania Turnpike is more than triple the
winning bid submitted in the largest toll road deal in the U.S. In
2006, Macquarie and Cintra won a 75-year lease of the 157-mile
Indiana Toll Road after bidding $3.85 billion.
Terms of the Pennsylvania lease agreement would allow the operator of
the turnpike to raise tolls by 25 percent Jan. 1. Tolls then increase
2.5 percent annually or match the rise in the consumer price index if
it is higher. The state needs legislative approval before it can sign
a final agreement.
The driver of a passenger vehicle pays $22.75 to travel 358 miles on
the turnpike from Pennsylvania's border with Ohio to the New Jersey
state line. That trip will increase under the terms of the agreement
set by the state to at least $36.40 in 10 years.
Will Take Time
Rendell is a Democrat and his party controls the House of
Representatives. Republicans control the Senate.
Legislative approval for leasing the turnpike won't come quickly,
said G.
<http://search.bloomberg.com/search?q=Terry+Madonna&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>Terry
Madonna, a political science professor at Franklin & Marshall College
in Lancaster, who tracks state politics and government.
``I would be stunned, stunned if they got this done by June 30,''
Madonna said in an interview prior to today's announcement. The state
needs to pass a budget by then for the start of the 2009 fiscal year
on July 1. The Legislature is considering a health-care plan to
provide coverage for all state residents and energy measures proposed
by Rendell.
To contact the reporter on this story:
<http://search.bloomberg.com/search?q=Adam+L.+Cataldo&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>Adam
L. Cataldo in New York at
<mailto:[EMAIL PROTECTED]>[EMAIL PROTECTED]
Last Updated: May 19, 2008 17:19 EDT
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