One year after landing the Chicago Skyway, the company is selected as preferred bidder for the 75-year Indiana Toll Road concession (253 km)
The acquisition of the toll road, which is already operational, represents a purchase price of 3,850 million dollars (3,173 million euro) with an estimated equity IRR of approximately 12.5%
The road links Chicago to the eastern seaboard and is in the main route linking the principal logistics hubs in the US: Chicago, New York and Los Angeles
Strategic coherence of the deal: large long-term investment with non-recourse financing in a stable market
In the US, Cintra operates the Chicago Skyway (99-year concession) and is planning the development of the Trans-Texas Corridor as a strategic partner of the State of Texas
With this project, Cintra manages 21 toll road concessions in Europe, North America and Chile; and also operates over 235,000 parking spaces
Cintra, an operator of toll road and car park concessions, has been selected as preferred bidder for a 75-year concession to maintain and operate the Indiana Toll Road (ITR). The project represents a purchase price of approximately 3,850 million dollars (3,173 million euro) with an estimated equity IRR (Internal Rate of Return) of approximately 12.5%. The Indiana Finance Authority (IFA) has granted the project to the consortium of Cintra (50%) and Macquarie Infrastructure Group (50%).
The project reinforces Cintra’s presence in the US, a strategic market for the company, where it has operated for the last year: it has a 99-year concession to operate the Chicago Skyway (1.83 billion dollars), which links with the Indiana Toll Road, and it is developing the Trans-Texas Corridor, one of the most ambitious infrastructure projects ever undertaken in the US, as a strategic partner.
The deal must be approved by the Indiana’s Legislative Assembly in the coming weeks. The concession agreement may be signed by the end of March and the financing completed before 30 June 2006.
Strategic coherence and greater geographical diversification
According to Juan Béjar, Cintra’s CEO, the transaction is fully coherent with Cintra’s strategic objectives for business expansion. It is a significant long-term investment (75 years) in the world’s largest economy with a stable economic and legal context.
The deal meets the company’s investment policy regarding financing: debt in local currency without recourse to the partners. The deal will be financed by the concession company with equity and debt. As expected, the funding will be provided by the concession company’s partners via capital in proportion to their stakes: approximately 770 million dollars (635 million euro). The remainder will be financed by debt without recourse to the partners.
This new investment will reinforce Cintra’s growth in the concession market and its geographical diversification strategy, aimed mainly at the US (11%), Canada (47%), Europe (34%) and Chile (8%) (based on internal valuations at 30 June 2005).
Main route linking logistics hubs in the US
Operational since 1956, the ITR is a 157-mile (253 km) toll road:
- the West section, along the line between Indiana and Illinois: 23 miles (37 km) under a barrier system (users pay a different flat tolls depending on the trip pattern);
- the East section, along the line between Indiana and Ohio: 134 miles (216 km) under a ticket system (payment on the basis of distance travelled).
The road has two lanes each way although some sections near Chicago have three lanes each way. The concession company will have to expand certain sections to three lanes in the first four years of the contract. The road is in a good state of repair after construction and improvement works in 2001-2004.
ITR links Chicago with the largest cities on the eastern seaboard and it is in the main route linking the principal logistics hubs in the US: Chicago and New York-New Jersey, as well as Los Angeles since it forms part of the corridor that links the mid-western states and the Pacific coast. The connection route with the Skyway (also managed by Cintra and MIG) is used every day by many users as the entrance route to Chicago and reduces time and distance with respect to other alternative routes, which are mainly congested and have highly variable traffic.
The road has an average daily traffic (ADT) ranging from 46,320 in the West section to 25,335 in the East section. In 2005, ITR obtained 95.8 million dollars in revenues and 60.6 million dollars in EBITDA (FYE: June 2005).
Value-generative capacity
The road has an attractive toll plan. The State of Indiana has announced the first toll increase since 1985, which will come into force on 1 April 2006: passenger vehicles +70% and commercial vehicles +27%.
The toll reviews during the lease period will be as follows:
- Until 2010: the toll will remain at 5.1 cents/mile for passenger vehicles and will increase progressively from 11.4 cents/mile to 20.3 cents/mile for commercial vehicles;
- In 2010: annual review capped at 2%, CPI or nominal per capita GDP growth, accumulated in the last four years;
- From 2011 to expiration of the concession in 2081: annual review capped at 2%, the increase in CPI, or the increase in nominal GDP per capita.
The contract requires investments to be made in the first 4 years: implementation of electronic tolling throughout the road, construction of an additional lane each way along 6.7 miles (10.9 kilometers), and other improvement works. Total planned investment (including tolling and infrastructure improvements described above) will amount to 700 million dollars over the next nine years.
1,050 million euro in investment capacity
Cintra’s investment in the Indiana Toll Road will not limit its growth capacity while it continues to bid for concessions in Europe (Spain, Ireland, Greece and Poland) and North America.
After this investment, the company has the capacity to invest more than 1.05 billion euro in the coming years to finance future growth using cash on hand and net cash flow envisaged in 2006-2010, as well as the possibility of re-leveraging its projects.
Cintra, one of the world’s largest private-sector transport infrastructure developers
Cintra, a subsidiary of Ferrovial, is one of the world’s leading private-sector developers of transport infrastructure, with committed investment of more than 2,100 million euro in concession companies’ equity. Cintra operates over 2,000 kilometers of toll road, with managed investment totaling more than 11,000 million euro.
With the Indiana Toll Road, Cintra will hold a stake in concession companies that manage 21 toll roads in Spain (10), Portugal (2), Ireland (1), Italy (1), Chile (4), Canada (1) and the USA (2). In the United States, Cintra is also strategic partner of the State of Texas in the design and planning of the Trans-Texas Corridor. In Ireland, the company has been selected as preferred bidder for another toll road project, the M3, involving an investment of 600 million euro for a 45-year concession.
Cintra is also Spain’s leading car park operator and manages over 235,000 parking spaces, most of them in Spain.
