Abertis let $12.8 billion offer for Penn Pike expire

September 30, 2008

Abertis board of directors decided today to let their joint bid with Citi for the Pennyslvania Turnpike lease expire. They had twice previously extended the bid of $12.8 billion from the initial expiry date of June 20 in the hope of getting legislative approval for their deal with Governor Rendell. The deal which would have given the Abertis-Citi group a 75 year toll concession formally expired for lack of enabling legislation 5pm eastern time (09/30 17:00).

The official announcement was couched in terms of a possible revival of the proposal in the future, at least on the part of the Governor.

Governor Rendell, the statement said remains committed to "pursuing legislation to allow a lease of the turnpike."  He said that "should such legislation be enacted, it would be my hope to execute a lease with the Abertis/Citi team.

"Your team has worked very hard over the last year to prepare your offer and make the case for it. I want you to know how much I appreciate your hard work, and how much I look forward to the day when we can become true partners in financing and managing Pennsylvania's transportation network."

The joint statement by the Governor and the Abertis-Citi 'Pennsylvania Transportation Partners' project venture continued:

"Governor Rendell noted that the recent denial of tolling along Interstate 80 creates a funding gap of nearly $500 million per year in Pennsylvania's transportation investment plan, and it is now likely that hundreds of road, bridge and transit projects will need to be postponed or cancelled unless action is taken to fill this gap."

"PTP  Senior Advisor Jim Courtovich thanked the Governor for his national leadership on transportation infrastructure, noting that a turnpike lease could serve as a model for large-scale public-private partnerships across the country.

"We firmly believes that the Turnpike Concession and Lease initiative presents a compelling opportunity for the Commonwealth and its citizens,"  Courtovich is quoted. "The lease would eventually give Pennsylvania the opportunity to address its serious and immediate needs for infrastructure investment, while allowing best practices in managing the Turnpike to improve its safety and customer service."

"It is for these reasons that we have been willing to extend our bid twice beyond the original June 20th deadline for legislative action, notwithstanding a decline in traffic, a deteriorating economic environment and the most difficult financial markets in nearly 80 years."

"While there are a number of other opportunities to pursue elsewhere," the statement said, "Pennsylvania Transportation Partners wants to continue working with the administration and legislature on Pennsylvania's infrastructure needs."

"Governor Rendell remains committed to pursuing legislation to allow a lease of the Turnpike,'' Chuck Ardo, a Rendell spokesman, said in an e-mailed statement.

"Should such legislation be enacted, it would be his hope to execute a lease with the Abertis/Citi team."

Pointedly there is no commitment to revive the project in the future on the basis of the $12.8b bid.

Abertis-Citi officials insist privately that their $12.8b offer was a strong one, saying it was as high as they could possibly justify to investors. One senior official told us last week he doubted they would make a similar offer again.

The would-be concessionaires were particularly annoyed by legislators' repeated claims that the amount was insufficient - a "fire sale" in the words of one. The amount was determined in a competitive procurement open to international bidding with the top two bidders in the first round given a chance for best and final offers. It was several billion above a reserve price set by the state.

If there was anything that discouraged bids it was skepticism about the chances of enabling legislation being passed - skepticism that proved well-founded.

TOLLROADSnews 2008-09-30

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