In the latest Tolling Review magazine, published with Thinking Highways, there is an article authored by me about the prospects for road pricing in Australia.  In short, I think it has good prospects for being the country that can progress it the furthest in the coming decade (and that was before this speech and this report).

You can read the whole issue here, my article is on page 20, but there are plenty of interesting articles in this issue including Justin Hamilton's article on page 12 about Russia's Platon heavy vehicle road user charging system, Bob McQueen's article about how the likes of Uber and Waze would run toll roads, Pedro Pinto's piece on Portugal's successful expansion of tolling.

So just download the whole magazine and read it.

Brazil - Canada's Brookfield and Spain's Abertis invest in Obrascon

The Globe and Mail reports that Brookfield Infrastructure Partners LP and Spain's Abertis have formed a joint venture (49/51) to buy a 60% shareholding in Obrascon Huarte Lain Brasil SA.  The price for the consortium is around US$1.72 billion, and the consortium is willing to purchase the remaining 40% if required.  Canadian Business reports:

OHL Brasil is one of the largest owners and operators of toll road concessions in Brazil with more than 3,200 kilometres of roads in states that account for approximately 65 per cent of Brazil's gross domestic product and are home to nearly two-thirds of the country's 70 million vehicles.

The deal means that Obrascon's Spanish shareholders, Obrascon Holdings Ltd, acquire 10% of the stock of Abertis (it already has 5%) raising its shareholding to 15%.  Obrascon effectively maintaining an indirect interest in the Brazilian toll road business.  OHL Brasil has nine toll road concessions.

 

China - public holidays to be toll free

The Wall Street Journal reports that the Chinese Government has announced that cars should be able to drive toll-free on public holidays.  This includes all privately owned toll roads.   The measure is designed as a popularity move as car ownership soars, but most car trips are relatively localised as car owners baulk at paying tolls to travel long distances.  The report says:

Moody’s says the decision will knock up to 5% off toll income this year at Shenzhen International Holdings, a Hong Kong-listed operator of 17 Chinese toll roads.

What will be curious is whether it results in congestion on those days, and whether it will impact on the viability of some future projects.  Another report implied that this was a politically driven move, designed to win favour with the growing middle-upper classes, indicating that regardless China's one-party system, the government is sensitive to public opinion given the ease by which people can express concern or dissent via the internet.
 

India - Taj Mahal toll road opens

I don't typically report on the opening of toll roads, because there would be far too many to report.  However, this report from travel website Wanderlust caught my eye as it is about a new toll road from Delhi to Agra, effectively connecting the capital to the Taj Mahal.  The private expressway is 165km long, six-lanes wide, cost US$2.17 billion to build and the toll is around US$9 as it halves travel time on the route.

 Indonesia - Jasa Marga buys part of PT Translingkar Kita Jaya

The Jakarta Post reports that Indonesia's large state owned toll road company, Jasa Marga, has bought a 21.24% shareholding in private toll road consortium PT Translingkar Kita Jaya for the equivalent of US$14.6 million (Rp137.9 billion).  The company operates the 14.64km Cinere–Jagorawi toll road which is divided into three sections. The first section is 3.7 km from Jagorawi to Raya Bogor, the second is 5.5 km from Raya Bogor to Kukusan, and the third is 5.4 km from Kukusan to Cinere.  The first section is operational, the second to open later this month and the third in May 2013.  33,215 a day are expected on the road by the end of 2012, growing to 47,816 in 2014.

"The acquisition of Translingkar is a part of the company’s plan to maintain sustainable business expansion,” Jasa Marga said in a written statement.

The report notes that Jasa Marga operates 545km of toll roads in Indonesia, estimated to rise to 738km by 2014.

It continues by saying:

The company explained that Indonesia’s toll road development is lagging behind neighboring countries such as Malaysia, which currently has around 4,000 kilometers of toll roads. Meanwhile, Indonesia — the largest economy in Southeast Asia — only has around 750 kilometers of toll roads.

No doubt this is in part due to the fact Indonesia is an archipelago, although the bulk of economic activity is on Java, the main island which has the majority (60%) of the national population (and congestion).

Philippines - Metro Pacific Tollways to be delisted, minority shareholders bought out

Business Mirror (Philippines) reports that  Metro Pacific Investments Corporation (MPIC) is to delist its subsidiary Metro Pacific Tollways. It intends to do so by the end of the year because only 0.15% of Metro Pacific Tollways is floated, a proportion considered inadequate by the Philippine Stock Exchange.  The Stock Exchange has warned companies with less than 10% floatation that it would suspend trading in their stocks from 2013 before compulsorily delisting them.  MPIC intends to buy out the minority shareholders, which at current market prices would only come to around US$1.2 million.  MPIC Chief Financial Officer David Nicol said the strategy would then be to consider strategic partners to invest in Metro Pacific Tollways. 

Metro Pacific may generate considerable interest given the roads it owns and the concessions it has rights to, given the prospects for potential growth in Philippines as its roads are significantly superior to the untolled alternatives.

Portugal - Abertis sells its shareholding of Brisa to Tagus

Following a report in July that Abertis no longer considers its investment in Portuguese toll road operator Brisa, as strategic, Bloomberg now reports that Tagus has acquired that stake (15% of the operator).  Tagus’s partners are family-owned holding company Jose de Mello SGPS SA and London-based Arcus Infrastructure Partners LLP, and already own a combined 49.6% of equity in Brisa, but 53.8% of the voting rights. Bloomberg seems to indicate that Tagus is seeking to raise its stakeholding to 90% so it can delist Brisa.

The report says that :

The disposal of Abertis’s entire stake in Brisa will generate 312 million euros ($386 million) in cash flow.

Tagus, a venture formed by Brisa’s two biggest shareholders, offered 2.76 euros a share in July .

This followed an offer in March 2012 of 2.66 Euros per share, and Abertis noting a distinct lack of interest in buying the shareholding, no doubt reflecting concerns over Brisa's exposure to Portuguese toll roads in the current recessionary climate in that country.   Abertis appears to have decided to take what it can as it effectively exits the Portuguese toll road market.   The Tagus bid compares to a share price of currently 2.09 Euros following the deal.

Tagus noted that it wasn't obliged to buy more shares after the deal with Abertis, so that many shareholders now indicate that they think there are unlikely to be any significant buyers for the Abertis shares now that Tagus has 85% of the shares in Brisa.

Spanish toll road investor Abertis and its French subsidiary SANEF have both had their credit ratings cut to BBB by Standard & Poors according to Reuters.

Abertis has a network of 1500km of toll motorways in Spain via 8 subsidiaries (59% of toll roads in Spain by length), and a minority stake in another 200km of toll roads in Spain. It also has a nearly 15% share of Portuguese toll road operator Brisa, and 25% ownership of RMG (company holding non-tolled concessions on two UK roads). It also owns or partly owns companies responsible for around 700km of Chilean toll roads, has a part share in concessions over 89km of roads in Puerto Rico and has a controlling stake in the concession of one road in Argentina.

SANEF has a network of 17570km of almost entirely toll motorways in France, in the north and east.

The reason given for the downgrade is “of volatility in traffic volumes experienced by its Spanish toll road network operators”

Interesting statistics from the press release:

- Average daily traffic declined by 24% between 2007 and 2011 on Abertis's Spanish toll roads;
- In 2012, S&P forecasts a further contraction by 9% on Spanish toll roads;

- This is driven by very high unemployment, weak economy;

- Abertis's Spanish toll roads have greater exposure to competition from untolled roads than similar roads in France or Italy.

- 80% of dividends in past three years originated from Spanish toll roads, with concessionaire Acesa (541km of road) contributing 70% of that. This decline will be partly offset by good performance on toll roads elsewhere, and expected tariff increases and cost savings.

However, S&P sees risks in the proposed acquisition of the Brazilian and Chilean toll road operators of Obrascon Huarte Lain (OHL) which includes over 3100km of roads in Brazil and around 340km of roads in Chile because it Brazil is:

-- An emerging economy, with a soft currency that could suffer  depreciation vis-a-vis the euro. 
-- A relatively dynamic regulatory environment in Brazil, where the bulk of the operations to be integrated are located. Unilateral changes to concessions are allowed in Brazil, although appropriate remuneration must be provided to the toll road operator to restore the concession's economic
balance.
-- A greater proportion of heavy vehicle traffic, which we view as more volatile than light vehicle traffic. Heavy vehicle traffic volumes account for more than 30% of total traffic volumes on the roads to be integrated, compared with 15% on average on Abertis' network.

On SANEF, S&P says:

Sanef operates the third-largest interconnected toll road network in France. Although the company is exposed to variations in traffic volumes, it benefits from a strong competitive position; favorable concession agreements, including yearly inflation-linked tariff increases; high profitability, and positive free cash flows. We consider the risk of acquisitions and diversification to be low. These strengths are partly offset by Sanef's high indebtedness, and its relatively rigid dividend policy.

Conclusion

Even a casual observer of Spain's economy can see the crash of property and construction dramatically affecting overall demand, and it appears far too many concessions were predicated on forecasts of demand that now look unattainable in the medium term.  Abertis may be big enough to hold onto most of what it has, but it is likely this sector will remain tough for some time, and there is pressure to have consolidation and refinancing so that such roads can be on a sustainable footing.  There is rumour that the Spanish government is considering how to address these problems, and it may even think about having some form of charges on existing roads.

Florida

According to Miami New Times, tolls on all state toll roads in central Florida are rising by 25% on average, an increase intended to match inflation over several years. This has provoked considerable outrage by motorists. Ire seems to be focused particularly on the Miami-Dade Expressway Authority which is using the toll revenue to build more roads. It is responsible for five toll roads, three of which have been converted to fully electronic free flow operations. A group called RollBackTolls has set up a website opposing the strategy of the Authority. The organisation doesn’t seem to oppose tolls per se, but is more of a group supporting directing some of that revenue towards public transport subsidies. That’s an interesting variation on those who oppose tolls elsewhere, who tend to want them abolished and don’t have any interest in tolls paying for other modes of transport. However, I suspect the group will use its name to generate support from those simply opposing toll increases.

If the increase is still linked to expenditure on the tolled network it is difficult to argue against, especially if it clear that the additional capacity is economically justifiable.  Given the state tolling authorities are bound to reinvest revenue in new roads, the risk is that this continues in perpetuity, rather than generating a reasonable rate of return for the owners as an investment, because at some point it wont be worth it to make major investments in new capital.

London

Fleetnews reports that Transport for London is consulting on amending its current 100% discount for environmentally friendly vehicles, by lowering the threshold for low emission vehicles from those which emit less than 100g/km to 80g/km. The current standard is 100g/km and meeting the Euro 5 standard. There is pressure to reduce this further, in part to increase revenues, but also to keep incentives for more environmentally friendly vehicles at the cutting edge of low emission vehicles.

This discount replaced the Alternative Fuels discount in 2010, which had been criticised for not being based on objective environmental criteria. The latest ultra-fuel efficient petrol and diesel cars having lower CO2 emissions than some older hybrids. Of course an obvious solution, and complication, would be to apply a lesser discount to the vehicles above 80g/m. At the moment it is all or nothing, and if the congestion charge is to maintain this secondary environmental objective, would it not make sense to offer perhaps a 50% discount for those currently eligible that will no longer be so? Or are the administrative costs of this confusion such that it is simply not worth it?

Portugal

Now I’m an advocate, in principle, although not evangelical about, the switch of toll roads to fully electronic free flow tolls. It saves time, fuel and makes a toll road trip akin to an untolled trip, with the minimum fuss involved in payment. However, what happens when motorists are in a foreign country and face trying to find out how to pay for such a road when signage and information is not readily available. This is the situation in Portugal according to the Daily Mail.

The road in question is the A22 from Castro Marim (near the Spanish border) to Lagos on Portugal’s southern coast. The scenario is that rental car firms do not advise of the toll roads, how to pay or a facility for motorists to pay unless you leave credit card details (in which case the rental car company will pass on the tolls plus administrative charges – which risks being potentially high). However, it is clear once on the roads that there is a toll – just no obvious means to pay. Rental cars and tolls are a perennial problem. Ideally, rental car firms in locations with regular toll use should simply have accounts with tags for the toll roads, and when finally billing the customer the toll transactions can be calculated and added onto the trip. Otherwise, there needs to be clear information in advance of toll roads of ways of paying by phone, for example. No doubt incentives to do this are mixed. Toll roads may make more money from chasing up violators than spending money on information so tourists know how to pay, but I suspect in the long run it is far superior to have a relationship with rental car companies that means motorists find it easiest to use the toll roads. 

Virginia

It reported that the original deal was that Transurban contributed $US191 ($A255 million) in equity and gained 100 per cent control of the Pocahontas Parkway.  Of the $US611 million of funds for the acquisition, $US487 million was used to pay Pocahontas debt.

Construction News reports Spanish infrastructure investor Ferrovial reporting a 312 million euro in net profit in the first half of 2011, contrasting with losses of 164 million euro in the same period of 2010. Notable was how the EBITDA on the Toronto 407 ETR rose by 8% in part due to higher tolls and lower operating costs. The Airports division contributed 62% of EBITDA, Services 14%, Toll Roads 14% and Construction 10%.

Ferrovial owns its toll roads through its subsidiary CINTRA.  Its highway assets (whole and partial) are:

- 407 ETR Toronto, Canada;

- Santiago-Talca Highway, Chile;

- Talca-Chillan Highway, Chile;

- Forest Route Highway, Chile;

- Collipulli-Temuco Highway, Chile;

- Temuco-Rio Bueno Highway, Chile;

- M-203 Madrid (Alcala-O'Donnell), Spain;

- AP36 Madrid-Levante, Spain;

- AP7 Costa del Sol Highway (Malaga-Guadiaro), Spain;

- Autema C16-E9 Highway (San Cugat del Vallés to Manresa), Spain;

- R4 Madrid-Ocana, Spain;

- Chicago Skyway, Illinois, USA;

- Indiana Toll Road, USA;

- LBJ Express Toll Lanes, Dallas, Texas, USA;

- North Tarrant Express toll lanes and road, Dallas-Forth Worth, Texas, USA;

- SH130 Austin-San Antonio, Texas, USA;

- E65 Central Greece Motorway;

- Ionian Roads (Antirio to Ioannina, Athens to Skarfia), Greece;

- M3 (Dublin-north of Kells), Ireland;

- M4 (Kilcock-Kinnegad), Ireland;

- A22 (Portimao - Vila Real de Santo Antonio), Portugal;

- Euroscut Azores Highway, Sao Miguel Island, Portugal; and

- A27-A28 North Coast Highway, Portugal.

Reuters reports that the Italian toll road investor company had a 41% increase in profit for the first six months of 2011 compared to 2010. This reflected sale of a stake in one road and increased toll revenue, despite declining traffic volumes (with a 0.5% decline in volumes on Italian toll roads).

The company's latest road is the Subic-Clark-Tarlac Expressway. Its portfolio also includes the North Luzon Expressway.

BusinessWeek reports on how Brisa, the Portuguese toll road concessionaire, is facing stagnant revenues and growth, in part due to the parlous state of the Portuguese economy slowing demand.

However, the company is still in a sound position, due to sale of its shareholding in Brazilian concessionaire Companhia de Concessões Rodoviárias, it has cash reserves of half a billion Euro. It has since been diversifying its portfolio, expanding into the Netherlands, and into rail and airport concessions, as well as being strict on operating costs (aiming for higher than the 60% DSRC tag takeup it currently gets on its roads.  Having over 1500 out of the 1800km of Portuguese toll road concessions makes it a clear leader in that market

Yet a presentation of Brisa a year ago indicated that it considered the Portuguese market to be less exposed to demand risk than one may think. Reasons given include:

- Immature car ownership in Portugal (20% below EU average with scope to grow, although this is unlikely during recession);

- Low exposure to heavy vehicle traffic, which is itself highly elastic in demand according to economic conditions (as well as imposing substantial marginal costs in terms of maintenance);

- Low exposure to tourism/transit traffic.

In addition, it states that in 2009 whilst the Portuguese economy contracted 2.7% traffic only dropped 0.8%. In other words, traffic demand for Portugal is relatively inelastic.

So whilst it is exposed to a stagnant economy, it looks to be in a better position than one may otherwise assume.  

Besides its Portuguese concessions, its businesses include:

- 100% of Brisa Operations and Maintenance (providing motorway operations services including road user assistance);

- 100% of Brisa Inovação (research, design, development, production, installation, support and maintenance of the equipment, system and intelligent services related to motorway management);

- MCall (call centre operations and marketing services);

- 100% of  BEG (project management company);

- 75% shareholding in Via Verde (the Portuguese DSRC based electronic toll service provider);

- 60% of ControlAuto (a Portuguese vehicle safety inspection company);

- 36% of TIIC (a transport infrastructure investment company);

- 100% of the Northwest Parkway concession in Denver, Colorado;

- 30% of Dutch company Movenience, which is responsible for toll collection at the Westerschelde Tunnel in the Netherlands.

It has a strategy to go further afield and has been involved in an interesting project in the Netherlands using ITS to reduce traffic congestion in the Netherlands (more on that to come). 

South Devon Link Road will not be tolled: According to ThisIsSouthDevon, the Torbay and Devon County Councils have decided to use higher local property taxes rather than tolls to progress the A380 South Devon Link Road, contrary to earlier reports that tolling was being considered.  An extra £20.5 million will be contributed, and the capital cost is being reduced by scaling down the project.  The rest of the cost is to be sought, again, from central government on the basis that it is a high value project with a far lower central government contribution.

Sale of shares in Portuguese toll road company: According to Reuters, "Spanish savings bank Nova Caixa Galicia said it had sold its entire 2 percent stake in toll road operator Brisa for 68.4 million euros ($93.37 million). Brisa's other shareholders include Spanish road operator Abertis, which holds 15.2 percent of its Portuguese counterpart and has said the stake is a financial holding. Abertis recently sold its 6.7 percent stake in Italian toll road operator Atlantia".  Given the recession in Portugal, I am not surprised at the desire to bail out of toll roads when demand in that economy is deeply depressed.  Toll roads on the Iberian peninsula are likely to be

Filipino toll road network continues to expand according to major concessionaire: ABS/CBN reports that Metro Pacific Tollways Corp (MPTC) will press ahead with Segments 9 and 10 of the North Luzon Expressway Phase 2 project.  Segment 9 will connect the McArthur Highway in Valenzuela all the way to Nlex while segment 10 will link the same highway to Port Area in Manila. The cost will be 10 billion Filipino peso (US$229 million).

The two projects span 8.5 kilometers. Segment 9 aims to ease access to McArthur Highway, the old route to central and northern Luzon while Segment 10 will dramatically speed up the transport of goods to and from Manila’s North Harbor.

MPTC controls the concession to the 84-kilometer (km) Nlex and holds the contract to operate and maintain the 94-km Subic-Clark-Tarlac Expressway.

Tolling has been a key source of funding of the Filipino highway network and there appears to be little let up in the appetite for, and viability of new toll roads in the Philippines.

Manila Skyway toll restructure: Manila's major urban elevated highway, the Skyway toll road is to get its toll schedule restructured to better reflect distance travelled on its segments.  The Philippine Daily Inquirer reports that the concessionaire, Citra Metro Manila Tollways Corp, will be increasing some and reducing other tolls on the route. Last year, the company opened a new three-kilometer section of Skyway from Bicutan to Sucat. Motorists have been allowed to use the new section for free up till now.

Bloomberg reports that Portuguese toll road company Brisa is deliberately seeking new opportunities to diversify its toll road portfolio as it bids for concessions in Turkey and India.   Part of the motivation is to compensate for the expected poor performance in Portuguese toll roads as the economy is hit by recession, government austerity programme and risk of a sovereign debt crisis.  Brisa is cash positive, but sees growth opportunities elsewhere after it sold out from its investment in Brazilian toll road company Cia. de Concessoes Rodoviarias SA.