Puerto Rico Issues RFQ for Route 22 Lease

Puerto Rico officials yesterday released a request for qualifications for a possible 50-year lease agreement on Route 22, the island's busiest roadway, with responses due June 3.

This is the first potential long-term lease transaction on an existing roadway in Puerto Rico, with Morgan Stanley serving as adviser to the Puerto Rico Highways and Transportation Authority and the Department of Transportation on toll road and mass transit concession agreements.

According to Morgan Stanley, the public-private partnership would not require legislative approval, an issue that could help officials complete the transaction in a shorter time frame.

"Consistent with the recent legal findings of the commonwealth's secretary of justice, the PR-22 transaction does not require legislative approval," according to a Morgan Stanley statement.

The Department of Justice did not return a phone call or e-mail by press time.

Route 22 is 52 miles and runs east/west on the north end of the island from San Juan to Arecibo. Of Puerto Rico's six toll roads, Route 22 brings in the most toll revenue and costs. In fiscal 2007, it generated $90.8 billion of toll revenue, up from $85.7 million the year before, a 6% increase, according to the RFQ. In addition, Route 22 has an average annual revenue growth rate of 8.2% since 2002. Operating expenses on the roadway totaled $29.6 billion and $25.4 billion in 2007 and 2006, respectively.

The total round trip toll cost on the roadway is currently $6.75, which officials increased from $4.65 in 2005, the road's first toll increase in 14 years.

Last year, Route 22's $90.8 billion of toll revenue accounted for 42% of the PRHTA's total toll revenue on its six tolled roads, according to a presentation that authority officials gave in early November at the Puerto Rico Infrastructure Forum 2007 in San Juan. Route 52, a north-south highway that extends for 67 miles from San Juan to Ponce brought in $82.8 billion of toll revenue, or 38% of the authority's toll revenue for 2007. Total toll revenue for the PRHTA totaled $217.2 billion last year.

Privatizing Route 22 will require the authority to pay down the roadway's outstanding bonds. The PRHTA has roughly $7 billion of outstanding debt. Standard & Poor's analyst Joe Pezzimenti said the authority could benefit with not having Route 22's operating expenses on its books, but depending on the details of the potential concession agreement, the PRHTA will also be losing its main revenue source.

"To what extent they do privatize this and a bulk of the toll receipts from the [PRHTA] credit, if in fact a lot of that is coming from PR-22, that could be a credit impact," Pezzimenti said. "Absent them having to somehow maybe adjust toll rates to service whatever debt remains, if in fact they divest the PR-22 and the debt associated with that the [PRHTA roadway]. It's hard to say at this point. It's still too preliminary to know, at least from our standpoint, whether or not it could lead to a change in the ratings."

 

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER