A consortium led by Goldman, Sachs & Co. will pay a total $1.43 billion to maintain and operate Puerto Rico’s busiest toll road for 40 years.
Puerto Rico officials Monday announced the government will receive an upfront payment of $1.08 billion from Autopistas Metropolitanas de Puerto Rico LLC, which includes Goldman Sachs Global Infrastructure Partners II LP and Abertis Infraestructuras, based in Spain. Abertis also operates the Teodoro Moscoso Bridge, a tolled span in San Juan.
The commonwealth will retain ownership of Route 22, a toll road that runs for 52 miles through the north side of the island, and Route 5, a four-mile toll road that connects to Route 22 and runs south of San Juan. Officials expect to sign the long-term lease agreement early next week and close the deal within 90 days.
At least 90% of the upfront payment will be used to pay down outstanding Puerto Rico Highways and Transportation Authority debt, said David Alvarez, executive director of the Puerto Rico Public-Private Partnership Authority. The highways authority has roughly $7 billion of outstanding bonds.
“We have taken the position that it’s better to defease as much debt as possible,” Alvarez said in a telephone interview. “We plan that probably 90% or more of the upfront payment might be directed to debt.”
Any remaining funds would help pay down accumulated interest the highways authority has acquired on lines of credit it receives through the Government Development Bank for Puerto Rico. The GDB is the commonwealth’s fiscal agent.
Under the long-term concession agreement, Autopistas Metropolitanas during the next three years will spend $56 million for roadway safety improvements. The consortium must also invest another $300 million over 40 years for additional infrastructure needs on Route 22 and Route 5.
“This P3 project will benefit hundreds of thousands of drivers who will enjoy better paved, better lit, more secure toll roads on a daily basis, and will also have an extraordinarily positive effect on our economy,” Gov. Luis Fortuño said in a statement.
Goldman beat out a second bid, for $960.4 million, from Morgan Stanley Infrastructure Inc. and OHL Concesiones, according to the P3 authority’s partnership report for the Route 22-Route 5 project. Puerto Rico officials declined to ask for best-and-final-offers from the two consortiums as Goldman’s proposal was more than 5% higher than Morgan Stanley’s bid.
Route 22 connects San Juan to the island’s western region. The highways authority collected $85.1 million of toll revenue in 85 million traffic transactions on Route 22 in fiscal 2009, according to the request for qualifications for the concession proposal. Route 5 generated $4.2 million of toll revenue in eight million traffic transactions that same fiscal year.
Puerto Rico plans to enter other toll roads into concession agreements. Alvarez anticipates releasing a request for proposals on Route 52, which runs between San Juan and Ponce, in late 2011 or early 2012.
The Route 22-Route 5 transaction does not require action from Puerto Rico’s Legislature as lawmakers in 2009 passed a major public-private-partnerships bill that serves as the commonwealth’s blueprint for privatization of existing facilities, or brownfields, and new infrastructure developments, called greenfields.
Earlier notable brownfield toll-road concession agreements include the 157-mile Indiana Tollroad and the 7.8-mile Chicago Skyway. Macquarie Infrastructure Group of Australia and Cintra Concesiones de Infraestructuras de Transporte SA of Spain formed a partnership that paid $3.8 billion in 2006 to operate the Indiana Tollroad for 75 years. The Macquarie-Cintra consortium also won the 99-year Chicago Skyway lease with a $1.83 billion bid in 2005.
Pennsylvania in 2008 received a $12.8 billion offer from Citi and Abertis Infraesturturas to operate the 530-mile Pennsylvania Turnpike for 75 years. That deal fell through when the state Legislature failed to pass an initiative to enter into the long-term agreement.